types-of-innovation

One of the biggest challenges innovators face is to truly understand the market opportunity space before they start creating a strategy and well in advance of product development. Since we can’t see the future, we need to gain some real insight from deep domain experts and make sense of possible scenarios. Even if the innovations are disruptive and the future is discontinuous, all we can really know is based on the data we have today. So it is through diligent inquiry and sense making that we get some general idea as to what will likely happen next. But creating innovations that we believe will succeed in the future requires that we first develop some clear foresight.

I was given such a challenge when a celebrated medical device company came to me with the following questions: 1). “How do we develop a vision of the future that is highly probable?” 2). “Given that probable future, how do we develop innovations that will have a high impact?”

This organization had mastered incremental innovation, smaller and less intrusive devices for example. Now they were looking for a breakthrough new product: something that moved them beyond cost competition.

Innovations often get stuck in the strategic planning cycle where excessive data collecting about the future often postpones their development. So we needed to do something quickly to create momentum and give the organization a good look at what the next three years might bring.

We decided to hold a one day summit at an airport hotel and invite a diverse group of domain experts. In attendance were a wide range of physicians: radiologists, cardiologists and vascular surgeons. Some were well established while others were young up-and-comers. Others attending the summit were product engineers, marketing staff and senior leaders from the company: about 50 people in all. The goal of the summit was to develop three scenarios of the future and identify what products would be needed to succeed in each one:

  1. Health care is driven by breakthrough technologies and cost is not the primary driver
  2. Health care is driven by cost and breakthrough technologies are slow to be adopted
  3. Health care is driven by personalized patient care and costs and breakthrough technologies are secondary

Each group was given a one page written scenario that they were asked to discuss and adjust to be more realistic given their experience. Within each scenario group, physicians were asked:

  1. What are the future opportunities and challenges you will face?
  2. What types of innovative products and solutions will you need to capture these opportunities and overcome these challenges?
  3. What attributes and functions will these products and solutions need to posses to be adopted by your organization?
  4. What will these products and solutions need to cost to be adopted by your organization?

Leaders from the medical device company watched on as the scenario groups of physicians answered these questions. Afterwards, they joined the physicians to gather more detailed information on what would be needed for future success and to discuss potential trajectories for further research and development.

The one-day summit was adjourned and attendees headed home. The responses of physician scenario groups were recorded, codified and worked into strategic pathways and technology roadmaps with regular review for revisions based on changing conditions in market demand, innovation breakthroughs and the competitive landscape.

After several months of work, the medical device company developed a game changing new product that capitalized on the foresight of the physicians. Sales and profits grew quickly. They had created a winning innovation.

Unfortunately this story of this innovation doesn’t end here. While the forward thinking members of the medical device company created the new product and the new market, they failed to engage the more conservative financial and manufacturing leaders. They were organizational orphans: given enough resources to survive but not enough to thrive. Competitors soon invested heavily in copycat technologies that could be produced faster and cheaper and drove the medical device company out of the market it had created.

So what’s moral of the story?

  1. You can’t see the future first from the boardroom
    • Gather a diverse group of deep domain experts and engage them in the sense making process to quickly understand the real barriers and opportunities for specific innovations
  2. Commercializing your innovation requires much more than a product and market launch
    • Enlist early the operational leaders in your organization and beyond that can quickly take a proven product or service and get it to scale
  3. Once you move on an innovation you will rapidly pursued by larger and better resourced rivals
    • Use your advantage as an entrepreneurial firm to move faster with ever more radical variations

Seeing the future first is worthless. Getting to the future first is priceless.

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You may have never heard of Joseph Schumpeter, an eccentric Austrian economist who taught at Harvard in the 1930s and 40s. But to those of us who study the strategic and financial dynamics of innovation, he is far more influential than his peers John Maynard Keynes or Milton Friedman. Schumpeter is the guy who made the entrepreneur the engine of growth for an economy, and several Nobel Laureates since have suggested that he was right on most counts.

Schumpeter’s most famous and controversial work is his disjointed and rambling classic, Capitalism, Socialism, and Democracy. In it, he warns that as capitalism advances, it becomes more efficient and seeks better and cheaper ways of getting the work done even if it means replacing jobs with machines or sending them abroad. In other words, corporations use innovation to do more with less. But he warns that capitalism is not sustainable because, in a democratic society, majorities vote for the creation of a planned economy where the wealth is distributed equitably by the state. You need only look to the current European economy as a whole to see what Schumpeter saw 75 years ago. No friend of socialism, Schumpeter cautioned that democracy taken too far will destroy meritocracy, where the best and brightest advance through personal initiative, resourcefulness, and innovation–the essential attributes of entrepreneurism. Schumpeter has a Darwinist view of innovation where only the fittest excel.

What if we are going about jumpstarting our own economy the wrong way? I’m not talking about any political party. I’m talking about our modest sensibilities: our belief that giving our best and brightest special consideration is elitist and wrong.

The good news is that many of our sons and daughters are indeed the best and brightest. The bad news is that we treat them the same as anyone else, and inevitably they leave for places where they are considered special.

Here’s an oldie but goodie idea: Let’s invite those who have proven themselves to be the best and brightest entrepreneurs and ask them to identify a dozen students from our top institutions of higher learning and other competitive venues where talent and ambition are rewarded: special innovation training, one-on-one mentoring with proven entrepreneurs, fast track funding and easy access and terms for business work space development. But before we develop any rewards, let’s try something different this time and ask them what they need to succeed. Let’s do our best to give it to them. Most importantly, let’s make them feel special, because they are.

With time and a little luck, we will gain momentum and begin to re-establish our creative culture and become more inclusive. Who knows? Our best and brightest might just prove old Joe Schumpeter wrong and find a way to balance democracy and meritocracy here in America.

Innovation

Most descriptions of innovation end up in overreaching hyperbole: groundbreaking, disruptive, radical. This shouldn’t surprise anyone because innovation is basically a type of positive deviance, a form of useful novelty. What separates a new soft drink that has a hint of cherry flavor from a vaccine that prevents the onset of Alzheimer’s Disease is the magnitude and speed at which it deviates from the norm. Put another way, it’s how much and how fast the innovation makes the way we do things now obsolete. (more…)

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