What is innovation?

What is Innovation?

Innovation, in its simplest form, is a process to create value by building up an idea until it creates real value. In this process, ideas come into the pipeline, they are grown and tested, and the best ideas are transformed into marketable solutions.

Innovative companies are simply those who have a very well-developed innovation process. They are able to manage their ideas and resources well enough to consistently have well-developed products or solutions that add tremendous value to their customers and to their own bottom-lines.

What’s the difference between ideas and innovation?

An idea is a novel solution to a problem. This means that someone found an opportunity or problem and thought of a concept of how to solve it.

Innovation is the entire process of taking this intangible idea and building up towards a working and marketable solution.

A good way of thinking about this is to consider how people make beer. You start with your raw ingredients of hops, barley and water, and develop them through a well-managed process to get your desired outcome of a delicious beer. Without the brewing process, you cannot get much value from the ingredients alone. Similarly, even the greatest quality ideas will be meaningless unless there is a process to help build them into a good value-adding outcome.

Why is innovation important?

Most businesses are built around a few key products or services. The business specialises in these, and so has an in-depth and mature understanding of what they offer, and how these meet a customer’s needs. These offerings are also proven in the market (you wouldn’t be in business otherwise). However, the products and services offered were built to serve a particular market in a particular way at a particular time in a particular environment. Each of these “dimensions” are able to change and shift in unpredictable ways, and these changes can disrupt the value that your products and services offer.

For example, new technologies may be introduced to the world (think of online shopping or mobile apps), and this can shift the needs of customers, or change how your competitors offer their products.

Innovation is important because it is the system you use to address these changes in the world. If there are new customer needs, then your innovation pipeline is your tool to develop new products to address these new needs. If a new technology is brought to market, the innovation pipeline is the system that you use to embed the new tech into your operations. If there are ideas on how to change the internal ways of work in your business, the innovation pipeline helps to manage and implement these changes.

A robust innovation pipeline also helps to improve your competitiveness and your appeal to markets. As the world shifts and changes, your position in the industry changes. Innovation helps to keep you in a position of competitive advantage by:

• improving the desirability of your offerings (understanding and appealing to market demands, improving customer relationships)
• improving the feasibility of your production (continuous improvement, productivity enhancements, reduction of costs)
• Improving the viability of your business (business model changes, novel revenue and cost models)

Why is innovation challenging?

Innovation is incredibly important for a business, but there are good reasons for why it isn’t being done in every business. Innovation is challenging for 3 reasons:

There is an imbalance of ideas and products

Innovation is inherently resource-constrained. Having an idea is quick, low-cost and easy. Anyone can sit for a few minutes and write out a solution to an existing problem. However, an idea on a piece of paper does not add any value to a customer, nor does it create value for a business. It is only once the idea is converted into a commercialised outcome that it begins to offer value. Converting an idea into an outcome requires building prototypes, conducting market surveys, organising product launches, and managing people. These activities are tough, expensive, and time-consuming. That’s why we need a system that allows us to manage all of this, so that we only commit our valuable resources to our most valuable ideas.

There is considerable risk involved

Innovation is a complex aspect to manage. Most businesses have a core focus of selling their existing product or service because this is what they do and this is how they make almost all of their money. Their existing work is well-understood, easily measured, and usually quite mature within the business. Innovation is different because it introduces huge amounts of uncertainty to business. How do we know which ideas are good? What happens if we try something new and it fails? How much time and money need to be spent before we start to get the value we expect? With those questions in mind, it becomes clear that we need to be careful about our thinking when it comes to innovation. We need to select the best ideas, spend our resources wisely, and optimise our value-creating outcomes.

Innovation is difficult to measure

Many ideas sound good on paper, but it is difficult to distinguish between good ideas and great ideas before they are executed. The best kinds of innovation are also incredibly intuitive once they have been explained, and leave you wondering “How has noone ever thought of this before?”. Most ideas are based on a huge number of assumptions, and this is why most ideas\startups\products fail. The number of assumptions and their impacts are also difficult to measure. It is also why it is much easier and cheaper to simply copy someone else’s invention – they have already tested and proven their idea.

What can you do about innovation?

An innovation management system can help you to achieve a competitive advantage for your business. This system is a set of tools that helps you manage the various stages in the innovation pipeline to ensure that your resources are well-utilised and that you are much more likely to develop products and services that succeed. These tools include ways to identify problems and opportunities, ways to generate new ideas and solutions, ways to manage idea lists and identify value, ways to experiment and test assumptions, and ways to execute ideas through to commercialisation.

At Innovation Brewery, we are specialists at setting up innovation systems in businesses. Our goal is to help you capitalise on your people’s great ideas and to create great value for your customers and your business. Let us come to you for an innovation maturity assessment, and we can help you understand how to build value in your organisation.