The
diagram above is a first attempt to synthesize all of the different
'types' of innovation into an organizational 'map' that illustrates all
the ways innovation can occur in organizations. Most organizations
have, in one way or another, the nine megaprocesses shown in the centre
of this map: R&D, Sales & Marketing, a customer-facing Sales
& Customer Relationship function, Purchasing, Asset Management (the
functions that look after the organization's physical, financial, human
and intellectual resources), Production, Delivery, and the way in which
they handle the customer experience with the product or service after
it's been delivered, which I call Life Cycle Management. And then
there's the overall Business Management function, which coordinates the
other functions and makes decisions that affect the entire organization.
In
small organizations some of these megaprocesses may be combined or may
just be a part of someone's job, but they are distinct functions, and
each of them provides opportunities for innovation -- ways of doing
very different things (product innovation), or doing things very
differently (process innovation). Most innovation models layer on
additional 'types' of innovation, most commonly technology innovation (how the resources of the organization are applied to produce its products) and business model innovation ("how the organization makes money"). Some innovation models offer as many as ten
different types of innovation. I've never been terribly happy with all
these different ways of parsing the innovation 'landscape' because they
don't relate well to what people actually do.
I've concluded that the simplest way to capture the entire 'landscape'
of innovation opportunities is to describe these opportunities
according to (a) which organizational megaprocess(es) they most relate to, and (b) whether they are strategic
innovations (those that must be decided upon by management, since they
are outside the purview of front-line people in the day-to-day
operations of the organization and require organization-wide change to
implement) or tactical/operational
innovations that can be (and frequently are) introduced by front-line
people in the organization in response to an obvious or emerging
customer need.
I've marked strategic innovation opportunities
with an S and tactical/operational innovation opportunities with a T,
on the map above.
The advantage of this model is that it
provides a framework for systematically thinking about and surfacing
innovative opportunities in your organization, and also provides a
framework for assessing disruptive innovation risk -- the innovation opportunities which competitors or new entrants into your industry or sector might introduce in their organizations that could cost you customers. Here's a walkthrough of the map with some examples in brackets:
- R&D Innovations: At
a strategic level, these include the introduction of completely new
product categories (software companies going into the VoIP business),
service wraparounds (adding OnStar services to your cars), customer
redefinitions (a company that sells tools deciding to make just tools
for women), new markets (a
consultancy in Montreal deciding to offer services in Spanish and focus
on the Latin American market) and new product 'platforms' (creating a
suite of products all of which use a standard peer-to-peer data-sharing
technology). At a tactical/operational level, these innovations include
new products or substantial enhancements to an existing
product, or use an existing platform, and new product performance
attributes (biodegradable plastic bags, Smart Cars that fit sideways in
a parking space).
- Sales & Marketing Innovations:
At a strategic level these include the decision to offer single-source
buying to customers (e.g. become brokers for a complete line of
products in addition to those you make yourself, and create a catalogue
that includes them all) and new pricing and customer financing models
(offering a base product free and making money on the customization and
the services related to that product, or leasing to the customer
instead of selling). At a tactical/operational level these include
developing new sales channels (online, catalogue etc.), creating new
brands (iPod), online or self-service innovations for customers
("customers who liked that book also liked this one"), and
customization and segmentation innovations (spy thrillers
custom-printed to use your name as the hero, or offering species types
and packages of your financial services to new immigrants).
- Sales & Customer Relationship Innovations:
At a strategic level these include outsourcing sales or sales support
functions to a specialist, and innovations around the customer
experience (the Harley-Davidson customer 'communities' that increase
affinity and virally market the products). At a tactical/operational
level they include teaming sales and customer support (integrated
service instead of a 'hand-off'), customer training innovations (rock
climbing walls in sporting goods stores), and innovative complaint
resolution processes (rewarding customers as 'innovators' if their
complaint results in improvements to the product that are commercially
implemented).
- Purchasing Innovations:
At a strategic level these include new quality/cost trade-off decisions
(Japanese car-makers, and at the other end of the scale Wal-Mart's
supplier price-bullying), and insourcing or acquiring a supplier (to
eliminate supplier markup and get better assurance of reliable supply).
At a tactical/operational level they include new materials (microfibre,
light-weight, strong materials for portability), and new suppliers
(Zara's switch from offshore suppliers to closer, more loyal domestic
cottage-industry tailors and sewers for their fashions).
- Asset Management Innovations:
At a strategic level these include asset financing innovations (getting
your suppliers to finance and maintain your retail inventories, or
letting the employees own the plant) and leasing innovations (leasing
part of your largest customers' facilities instead of buying your own).
At a tactical/operational level they include 'smart' inventory
management systems that allow you to buy just in time without risking
stockouts, and RFID tagging innovations that let you track exactly
where your assets are.
- Production Innovations:
At a strategic level these include 'lean' manufacturing methods that
optimize use of your resources and people's time, and outsourcing
production (e.g. to manufacturers who have excess capacity or to
'shared' manufacturing specialists). At a tactical level they include
self-managing work teams and many of the other people-based,
peer-suggested production innovations that companies like WL Gore and
Semco have implemented.
- Delivery Innovations:
At a strategic level these include packaging innovations (industrial
shrink-wrap that melts and biodegrades in water) and the use of new
delivery channels (using eBay, or selling direct rather than through
expensive retailers). At a tactical level they include just in time
delivery methods that companies with limited inventory space will
sometimes pay big premiums for.
- Life Cycle Management Innovations: Most
companies no longer think of the delivery of the product as the end of
the 'sales cycle'; it extends to the ultimate disposition and
replacement of the worn-out product (with your company's newest
product, of course). At a strategic level these innovations include
'cradle-to-cradle' product management (Interface's strategy of
maintaining ownership of the carpets it installs at customers'
premises, maintains and replaces throughout the life cycle), and
insourcing customers' asset management (tracking, automatically
restocking and looking after a whole category of your customers'
purchases for a flat monthly rate). At a tactical level they include
repurposing and resale innovations (creating markets for customers'
used products; recycling, trade-in and trade-up programs).
- Management Innovations:
These are innovations that affect many or all megaprocesses in the
organization. At a strategic level they include vertical integration
and expansion decisions (buying out your supplier or customer and
expanding operations to include what they do), new organizational
structures (flat, decentralized, self-managed organizations with no
titles and no fixed job descriptions), business location innovations
(putting your store inside an existing store), outsourcing of
back-office functions (to companies that specialize in accounting, HR,
IT etc. and which hopefully do these jobs better than you could, until
we reach a World of Ends in which every company does just one or two
things really well), and
innovative alliances (several companies with synergistic competencies
create a joint venture and contribute their most innovative people to
it). At a tactical/operational level they include organic (internally
driven) culture changes to the organization, where the organizational
culture will permit this (each employee sets her own goals and defines
her own role, shares them with her self-selected workteam, and the team
collectively determines what they are prepared to put in and what they
need to get out of their work -- a self-motivating organization where
the only job of the small 'management' team is to offer help to improve
effectiveness and to solve problems brought to their attention.
What
do you think of this model? Does it help you, or your clients, to think
more creatively and holistically about innovation opportunities for
your/their organization? Does it help you pinpoint vulnerabilities in
the organization that could allow competitors or new entrants to wreak
havoc on your, or your clients', business? And if your organization, or
your client, is already innovative, does this provoke some ideas and
opportunities that might allow it to sustain and extend that Innovation
Advantage? |
MADE IN CANADA
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