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2.
INNOVATION:
Moving toward Greater Value There’s a way to do it better-Find it
Thomas Edison
Innovation is the ability to see change as an opportunity—not a threat
Innovation distinguishes between a leader and a follower
Steve Jobs
As Dean Diehl likes to say, “If you are not innovating, you are
dying.” If creating value is at the heart of every great endeavor, innovation is about creating greater value for your stakeholders.
WHY IT MATTERS These days, organizations and companies are moving faster
than ever. If you continue to do what you have always done, you will be left behind. Whether it is small-scale sustaining innovation or larger-scale disruptive innovation, or even innovative entrepreneurship, you, your team, and your organization (for-profit or nonprofit) need to be asking questions about how to engage your world more effectively.
Part of this journey is looking at your strategy, and part of this journey is looking at your culture. Either way, keep asking your team about innovation. When you do this regularly, you are choosing a better future.
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HOW IT WORKS Innovation is a broad topic with many meanings to different
people. For example, there is an overlap between innovation and entrepreneurship. In this discussion, we will be looking at the pioneering work of Clay Christensen and others.
The late Harvard Business School professor, Clay Christensen, was for many years one of the leading voices on the topic of innovation. In this section, we will be drawing on his work and that of his colleagues:
• The Innovator’s Dilemma (1997) by Christensen. • The Innovator’s DNA (2009) by Dyer, Gregersen, and
Christensen (2009). • The Innovator’s Method: Bringing the Lean Start-up into
Your Organization by Nathan Furr and Jeff Dyer.
Starting with an Outward Focus Before we unpack the many nuances of innovation, we want to
begin with this simple proposition: Innovation is about them, not about us. Innovation begins with an outward focus.
An outward focus is consistent with the fundamentals of value creation. Value is in the eye of the beholder. We don’t decide what others value; they do. The purpose of innovation is to find ways to increase the way you and your organization create value for others.
Innovation is about them, not about us. Innovation begins with an outward focus.
Different Kinds of Innovation Innovation comes in several different forms. In the following
pages, we will explore these three types of innovation: • Sustaining Innovation • Disruptive Innovation • Innovative Entrepreneurship
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Sustaining Innovation Christensen (1997) describes sustaining innovation as having
these features:
What all sustaining technologies have in common is that they improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued.
Here are the critical concepts with sustaining innovation:
• Improve the performance: What does improvement look like with your current line of products and services?
• Mainstream customers value: What is it that your current customers value, and how can you add to that perceived value?
In his dissertation on the music business, Dean Diehl describes CDs and digital downloads as sustaining innovations over LPs and cassettes. On this, Dean writes:
As this study will later demonstrate, the core competitive dimension in music playback formats was portability with each successive innovation, from the LP to the CD, improving upon the portability of music (Albright, 2015). For digital downloads to have been a disruptive innovation, they would have been less portable than the CD, the standard playback format at the time. However, that was not the case as digital downloads were more portable than any format at the time (Lazrus, 2016).
Disruptive Innovation Christensen (1997) contrasts sustaining innovation with
disruptive innovation:
Disruptive technologies bring to a market a very different value proposition than had been available previously. Generally, disruptive technologies underperform established products in mainstream markets. But they have other features
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that a few fringe (and generally new) customers value. Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use.
Dean Diehl describes disruptive innovation in this way:
Simply stated, a disruptive innovation is one in which the innovation’s initial performance is considered to be inferior to existing options in those attributes most valued by the mainstream market, called core competitive dimensions, leading mainstream consumers to dismiss the innovation. A disruptive innovation, however, survives because it finds a place among low-end consumers of the existing market or creates a new market due to its unique business model or its superiority to existing options in one or more attributes, called secondary competitive dimensions. Over time, the innovation improves its performance in the core competitive dimensions while maintaining its unique advantages until it becomes acceptable to the mainstream, allowing the innovation to encroach upon or disrupt existing options thus shifting the competitive landscape (Christensen, 1997; Schmidt & Druehl, 2008).
Here are the critical concepts of disruptive innovation • A very different value proposition: Disruptive
innovation changes the value proposition between the customer and what is provided.
• Disruptive technologies underperform established products: This is counter-intuitive but an important distinction with disruptive innovation.
• Until it becomes acceptable to the mainstream: Disruptive innovation takes time to become mainstream.
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The Concept of Disruptive Innovation has Evolved Clay Christensen admits that over the years, the phrase
“disruptive innovation” has been abused and updated. After 20 years (1995 to 2015), Christensen (2015) writes this update.
First, a quick recap of the idea: “Disruption” describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others.
Is Uber’s Innovation Sustaining or Innovation? In his 2015 HBR article, “What is Disruptive Innovation?”
Christensen suggests that Uber is an example of sustaining innovation rather than disruptive innovation. He emphasizes that his theory of disruptive innovation has two characteristics:
• Disruptive innovations originate in low-end or new- market footholds.
• Disruptive innovations don’t catch on with mainstream customers until quality catches up to their standards. (p. 47)
Therefore, Christensen writes:
Uber is clearly transforming the taxi business in the United States. But is it disrupting the taxi business?
According to the theory, the answer is no. Uber’s financial and strategic achievements do not qualify the company as genuinely disruptive—although the company is almost always described that way. Here are two reasons why the label doesn’t fit. (p. 47)
Once again, Christensen differentiates sustaining innovation from disruptive innovation:
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Disruption theory differentiates disruptive innovations from what are called “sustaining innovations.” The latter make good products better in the eyes of an incumbent’s existing customers: the fifth blade in a razor, the clearer TV picture, better mobile phone reception. (p. 47)
Netflix as an Example of Disruptive Innovation In contrast to Uber, Christensen highlights Netflix as disruptive innovation.
Netflix is a good example of disruptive innovation.
Netflix was a disruptive innovation, not simply because it led to the bankruptcy of Blockbuster, but through the means by which it disrupted the video rental market. Netflix found a fringe market that valued its online interface and its subscription business model. It then innovated its way into the core of the market through improvement in the core competitive dimensions of convenience and selection. Most importantly, it shifted the existing market to a new subscription-based business model, which the established market tried, but could not imitate without destroying their existing value network (Christensen, et al., 2015).
While sustaining innovation and disruptive innovation are central to theories on innovation. There is also an overlap between innovation and entrepreneurship.
Innovative Entrepreneurship While disruptive innovation can come from existing
enterprises, it is more common to see disruptive innovation arise through the entrepreneurial efforts of new entrants. Yes, there is a link between innovation and entrepreneurship. A term that can be used to describe this is “innovative entrepreneurship.”
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The Innovator’s DNA The discovery skills of innovation can be learned. On this,
Dyer, Gregersen, and Christensen (2009) write in their HBR article, “The Innovator’s DNA,”
We found that innovative entrepreneurs (who are also CEOs) spend 50% more time on these discovery activities than do CEOs with no track record of innovation. Together these skills make up what we call the innovator’s DNA. And the good news is, if you’re not born with it, you can cultivate it. (p. 62).
Dyer et al. outline how innovative entrepreneurs have the following skills in higher amounts than others:
• Associating • Questioning • Observing • Experimenting • Networking
Let’s look at each of these in more detail.
Associating First, we have associating. On this topic of associating, Dyer
and his co-authors write: Associating, or the ability to successfully connect seemingly
unrelated questions, problems, or ideas from different fields, is central to the innovator’s DNA.
This associating will make more sense after we cover the next four.
Questioning Second, we have questioning. Here is what some of the top
thinkers say about questioning. Peter Drucker says, “The important and difficult job is never to find the right answers, it is to find the right question.” Ratan Tata of the Tata group says, “question the unquestionable.” Lastly, Meg Whitman, former CEO of eBay and
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HP, says, “They get a kick out of screwing up the status quo” (Dyer et al., 20009, para. 14).
When I first moved to Trevecca, one staff person said, “Rick, I have a nickname for you. Wave-maker. Whenever you are in a meeting, you like to make waves.” That is probably true. While I try not to be irritating, I do see the value in asking the hard questions.
Observing Third is observing. Innovators are constantly watching people
around them. Scott Cook watched his wife struggle with keeping track of their finances. This led to the development of the innovative product, Quicken. If you listen to the podcast, How I Built This, you will hear story after story about how innovators observed what was going on around them which in turn drove their innovation.
Experimenting Fourth is experimenting. You don’t have to be Thomas Edison,
Michael Dell, or Steve Jobs to experiment. Over the my years at Trevecca, the dean of the business school and I have discussed experimenting with our MBA program. First, we moved from on- campus to online. Next, we added data analytics, and then our MicroMBA. When I was asked about doing a MicroMBA, I said, “I am not sure how it will turn out, but I hope we continue to experiment with something new each year.” Experimenting is part of the innovator’s DNA.
Networking Last, we have networking. Often, the best innovation doesn’t
come from talking to ourselves. Instead, it is as we get out and talk with others that we can come up with new innovations.
Let’s review these five skills of the innovator’s DNA. 1. Associating 2. Questioning 3. Observing 4. Experimenting
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5. Networking
The biggest problem with Innovation is You If you want to move your work and organization forward in innovation, the place to start is with you. Yes, you and I are often the roadblocks to innovation because of our conventional thinking.
Let’s take a detailed look the HBR article, “The Biggest Obstacle to Innovation? You.” as to why many of us are limited in our innovative thinking.
From even before kindergarten, we all were taught to reason in a way that works fantastically well in a predictable world: you establish a goal; you construct a number of plans to achieve that goal; you do tons of research to determine which is the best one; you gather the necessary resources to attain it; and you go out and execute on that superior plan.
We think of this as prediction reasoning, a way of thinking based on the assumption that the future is going to be pretty much like the past.
But when you are leading innovation, the world is anything but predictable. You are creating something that has never existed before and so you simply don’t know how the world is going to react. By definition, innovation deals with the unknown.
And that’s why you are the biggest problem when it comes to innovation. If you keep using prediction reasoning in situations that are simply not predictable, you’re bound to be disappointed and frustrated.
You need a different way of thinking. (Schlesinger, Kiefer, and Brown, 2012, para. 4)
Practice, Practice, Practice One of the things I like most about Dryer’s HBR article on the
Innovator’s DNA is the last section with the heading, practice, practice, practice. Yes, if you want to be an enterprise leader who
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leads innovation, you will need to practice. Dryer and his co-authors write, “try spending 15 to 30 minutes each day writing down questions that challenge the status quo in your company” (para. 30).
You don’t have to be in an enterprise-level c-suite role to put these innovative practices to use. Each week, see if you can move one of these five practices forward in your world. Or even better, half coffee with a co-worker and talk through these ideas.
Look outside We started this discussion on innovation with an emphasis on
the need to look outside. You can look inside as one way to pursue innovation but that is often not the best. Kent Bowen, a scientist who founded CPS, an innovative maker of ceramic composite, is known for putting this on the wall:
The insights required to solve many of our most challenging problems come from outside our industry and scientific field. We must aggressively and proudly incorporate into our work findings and advances which were not invented here. (Dyer, Gregersen, and Christensen, 2009, p. 66)
Design Thinking Another aspect of innovation is design thinking which
continues to grow in presence and popularity. IDEO founder, David Kelley, defines design thinking as:
Design thinking is a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success. (Turnali, 2015)
Tim Brown (2008) describes design thinkers as having these attributes:
• Empathy • Integrative Thinking • Optimism • Experimentalism
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• Collaborations In her 2018 HBR article, “Why Design Thinking Works,”
Jeanne Liedtka writes:
I have seen that another social technology, design thinking, has the potential to do for innovation exactly what TQM did for manufacturing: unleash people’s full creative energies, win their commitment, and radically improve processes. By now most executives have at least heard about design thinking’s tools—ethnographic research, an emphasis on reframing problems and experimentation, the use of diverse teams, and so on—if not tried them. (para. 2)
For more on design thinking, you may want to read: • “Design Thinking Comes of Age” (2015, HBR) by Jon
Kolko • “The Right Way to Lead Design Thinking” (2019,
HBR) by Christian Bason and Robert Austin • The Design of Business (2009) by Roger Martin • Change by Design (2019) by Tim Brown
Innovation comes in many different forms and is being
implemented by leaders in many different ways.
Forbes Top 10 Most Innovative CEOs (2019) As you think about innovation, you can also look to these
leaders who were ranked as the most innovative CEOs by Forbes. 1. Jeff Bezos (Amazon) Tie 2. Elon Musk (Tesla) Tie 3. Mark Zuckerburg (Facebook) 4. Marc Benioff (SalesForce) 5. Reed Hastings (Netflix) 6. Satya Nadella (Microsoft) 7. Shantanu Narayen (Adobe) 8. Tim Cook (Apple) 9. Arne Sorenson (Marriot)
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10. Larry Page and Sergey Brin (Alphabet/Google) Like all the tools in this book, innovation can be learned. You
can grow in your ability to work and lead more innovatively. Let’s look at some next steps.
WHAT TO DO NEXT? The first next step is to take ownership in your world for
innovation. Make it your job, not a job for someone else. “For A.G. Lafley [Proctor and Gamble CEO], innovation is the central job of every leader, regardless of the place he or she occupies on the organizational chart” (Dyer et al., 2009, para. 29).
“For A.G. Lafley [Proctor and Gamble CEO], innovation is the central job of every
leader, regardless of the place he or she occupies on the organizational chart.”
Practice, Practice, Practice Today As we mentioned above, innovation skills can be learned and
developed through practice. Researchers on the topic say that with practice, these skills can be developed.
“The most important skill to practice is questioning. Asking “Why” and “Why Not” can help turbocharge the other discovery skills. Ask questions that both impose and eliminate constraints; this will help you see a problem or opportunity from a different angle. Try spending 15 to 30 minutes each day writing down 10 new questions that challenge the status quo in your company or industry.
Innovative Entrepreneurship is not a genetic predisposition, it is an active endeavor. (Dyer, et al., 2009, para. 31)
Take action today and you can build your innovation skills as outlined in “The Innovator’s DNA.”
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1. Associating 2. Questioning 3. Observing 4. Experimenting 5. Networking (Dyer et al., 2009)
Each month, review these five topics and see if you can move at least one of them forward. You can also spend time with your team, helping them to grow in innovation.
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2.
INNOVATION:
Moving Towards Higher Value There’s a better way—find it!
Edison, Thomas
The ability to see change as an opportunity rather than a danger is what defines innovation.
The distinction between a leader and a follower is made by innovation.
Jobs, Steve
“If you are not innovating, you are dying,” Dean Diehl says.
If creating value is at the center of all great endeavors, then innovation is about providing more value for your stakeholders.
WHY DOES IT MATTER? Organizations and businesses are moving at a faster pace these days.
than any before You will be left behind if you continue to do what you have always done. Whether it’s small-scale sustaining innovation, large-scale disruptive innovation, or even inventive entrepreneurship, you, your team, and your company (for-profit or charity) require it.
