Reinventing Your Company Through Strategic Innovation

In the fast-paced landscape of modern business, strategic innovation has become more than a buzzword; it’s a strategic imperative. As Joseph Schumpeter aptly noted, strategic innovation is a process of creative destruction, enabling companies to reinvent themselves and progress in an environment marked by constant change.

In today’s highly competitive market, innovation is not just a choice; influential thinkers like Peter Drucker have identified it as the cornerstone of business activity.

This article aims to delve into the multifaceted realm of strategic innovation, exploring the challenges associated with breaking entrenched behaviors and habits within a company and its markets.

The Imperative of Strategic Innovation

Strategic innovation goes beyond the mere introduction of new products or services; it necessitates a fundamental shift in the way organizations think and operate. Breaking deeply rooted behaviors and habits, both within the company and in the markets it serves, becomes a challenging yet essential aspect of strategic innovation.

Fernando Doral, an instructor of the Strategic Innovation program at Cornell University, stresses the importance of building a foundation for a customer-oriented innovation culture. In a recent #ENyDOpenClass, he underscored the need to raise awareness about reinventing companies through strategic innovation.

Distinguishing Creativity from Innovation

Before delving into the intricacies of strategic innovation, it’s crucial to distinguish between creativity and innovation. Creativity is the ability to generate novel ideas, conceptualizing something that didn’t previously exist. On the other hand, innovation involves implementing these creative ideas to enhance various aspects of a business, whether it’s production, products, processes, or systems. The focus is on achieving tangible results, such as launching new products, improving value propositions, optimizing production processes, or enhancing cost efficiency. According to Fernando Doral, all innovative ideas in a company’s process must be justified with a plan, ensuring positive returns on investment.

The Systematization of Creativity and Innovation

While the prospect of creativity and innovation being considered capabilities might initially seem daunting, the good news is that these skills can be systematized. Researchers have dedicated years to studying the behavioral patterns of creative and innovative companies, offering a blueprint for others to follow.

The ability to systematize creativity does not imply dismissing unconventional or seemingly implausible ideas. On the contrary, even the most outlandish concepts can pave the way for implementable and successful innovations.

Innovation Strategies: Navigating the Blue Ocean

Historically, companies adhered to generic competitive strategies, emphasizing differentiation, cost leadership, or focus. This red ocean strategy aimed at outperforming rivals in existing markets, with profitability and growth diminishing as market saturation increased.

However, W. Chan Kim and Renée Mauborgne introduced a paradigm shift with the blue ocean strategy. This innovative approach involves creating markets in untapped areas, fostering opportunities for sustained long-term growth.

The blue ocean strategy encourages companies to distance themselves from direct competition by seeking new horizons. Rather than competing in saturated markets, organizations leap into blue oceans where competition becomes irrelevant.

Notable examples include Cirque du Soleil, which redefined the circus business by blending elements of the circus with theater, creating a unique and appealing entertainment offering.

Systematizing Creativity: The TRIZ Model

To systematize creativity, the TRIZ (Theory of Inventive Problem Solving) model becomes a valuable tool. Developed by Genrich Altshuller, TRIZ aims to enhance technological creativity by studying patent evolution models and problem-solving solutions.

The methodology works on three key elements: essential notions, psychological inertia tools, and solution tools. TRIZ emphasizes that patterns are repeated across industries, concepts external to the industry can be applied, and the number of inventive principles is finite.

By leveraging TRIZ, companies can systematically generate ideas and innovative solutions to solve problems.

Systematizing Innovation: The Innovation Placemat

The process of systematizing innovation involves practical tools such as the Innovation Placemat.

This model enables companies to perform as highly innovative entities, outlining the idea, seeking a budget, understanding potential barriers, defining objectives, establishing measurement criteria, estimating costs, and calculating return on investment (ROI).

The Innovation Placemat provides a structured framework to materialize ideas and navigate the complexities of innovation.

Adoption of Innovation: Understanding the Innovation Adoption Curve

Both internally and externally, companies encounter challenges when it comes to adopting innovation. Everett Rogers’ Innovation Adoption Curve is a sociological model classifying users based on their willingness to adopt a specific innovation or technology. This curve categorizes adopters into five groups:

1. Innovators: The earliest adopters, willing to pay a premium for the latest gadgets.
2. Early Adopters: Influential individuals eager to try new ideas and technologies.
3. Early Majority: Replicate trends set by early adopters, contributing to market scalability.
4. Conservatives: Adopt only when the majority does, resistant to change.
5. Skeptics: The last to adopt, showing little opinion leadership and aversion to change.

Understanding the dynamics of the Innovation Adoption Curve is crucial for companies, helping them focus their efforts on specific target audiences for their innovation projects. A key objective is to target the early majority quickly, as they play a pivotal role in achieving market size scalability.

The Blue Ocean Strategy in Depth

To truly master strategic innovation, a deeper exploration of the blue ocean strategy is warranted. This groundbreaking approach challenges the conventional wisdom that companies must compete in existing markets, often resulting in fierce competition and limited growth opportunities.

Instead, the blue ocean strategy advocates creating uncontested market space, making competition irrelevant.

Characteristics of the Blue Ocean Strategy

1. Untapped Markets: Blue oceans represent new and untapped market spaces, offering companies the opportunity for uncontested growth.
2. Value Innovation: Instead of focusing on beating the competition, the emphasis is on value innovation. This involves creating new and unique value for customers while simultaneously reducing costs.
3. Wider Profit Margins: By creating a new market space, companies can often achieve higher profit margins due to reduced competition.
4. Shift from Red to Blue Oceans: Successful companies often transition from competing in red oceans, where competition is intense, to creating blue oceans, where they can thrive without direct rivals.
5. Continuous Innovation: The blue ocean strategy necessitates a commitment to continuous innovation. It’s not a one-time effort but an ongoing process of identifying new opportunities.

The Cirque du Soleil Example

The success of Cirque du Soleil serves as a compelling illustration of the blue ocean strategy in action. Traditional circuses were stuck in red oceans, competing fiercely with similar offerings. Cirque du Soleil, however, broke away from this pattern by combining elements of the circus with theater.

This innovative approach created a unique entertainment experience appealing to both children and adults. By expanding the horizons of demand and eliminating risks associated with traditional circuses, Cirque du Soleil exemplified the blue ocean strategy in its purest form.

Systematizing Creativity with TRIZ

While creativity is often perceived as an abstract and unpredictable process, the TRIZ model provides a systematic framework for enhancing technological creativity. Developed by Genrich Altshuller, TRIZ stands for the Theory of Inventive Problem Solving. The core principles of TRIZ include:

Essential Notions

TRIZ identifies essential notions that form the foundation of inventive problem-solving. These notions help in understanding the fundamental elements involved in a problem and its potential solutions.

Psychological Inertia Tools

Psychological inertia refers to the resistance to change and the tendency to stick with familiar solutions. TRIZ provides tools to overcome psychological inertia, encouraging individuals and teams to explore innovative ideas.

Solution Tools

TRIZ offers a set of solution tools based on the analysis of successful patents and problem-solving methods. These tools guide the generation of inventive solutions by leveraging existing knowledge.

Benefits of TRIZ

1. Cross-Industry Applicability: TRIZ recognizes that patterns repeat across industries, allowing concepts from one industry to be applied successfully in another.
2. Finite Inventive Principles: The number of inventive principles in TRIZ is finite, providing a structured approach to problem-solving.
3. Sparking Creativity: By offering a systematic methodology, TRIZ sparks creativity and facilitates the generation of innovative solutions.
4. Working on Three Groups of Elements: TRIZ organizes problem-solving efforts into three groups of elements: technical contradictions, physical contradictions, and administrative contradictions.

Applying TRIZ to Real-World Challenges

Let’s consider a real-world example to understand how TRIZ can be applied to solve complex problems. Imagine a manufacturing company facing a challenge in reducing energy consumption during the production process. Applying TRIZ involves:

1. Identifying the Contradiction: Recognizing the contradiction, such as the need for efficient production (increased energy) versus the need for reduced energy consumption.
2. Applying the Contradiction Matrix: TRIZ provides a Contradiction Matrix, mapping inventive principles to specific contradictions. In this case, principles like “Segregation” or “The Other Way Around” may be relevant.
3. Generating Innovative Solutions: Based on the identified principles, innovative solutions can be generated. This could involve segregating energy-intensive processes, exploring alternative energy sources, or implementing energy-efficient technologies.
4. Assessing Feasibility: Each proposed solution is assessed for feasibility and potential return on investment. Feasible and high-impact solutions are then implemented.

By systematically applying TRIZ, companies can tackle complex challenges, enhance creativity, and drive innovation in their processes and products.

Systematizing Innovation with the Innovation Placemat

As companies navigate the dynamic landscape of innovation, having a structured approach is crucial. The Innovation Placemat is one such tool that provides a comprehensive framework for systematically addressing innovation challenges.

Components of the Innovation Placemat

1. Idea Outline: Clearly define the idea or innovation being considered. This involves articulating the problem or opportunity the innovation aims to address.
2. Budgeting: Determine the financial resources required for implementing the innovation. This includes costs related to research and development, technology acquisition, and implementation.
3. Barriers and Risks: Identify potential barriers and risks associated with the innovation. This could involve technological challenges, market acceptance issues, or regulatory hurdles.
4. Objectives and Measurement: Clearly define the objectives the innovation intends to achieve. Establish measurable criteria to evaluate the success of the innovation, whether it’s in terms of market penetration, revenue growth, or customer satisfaction.
5. Cost Estimation: Provide a detailed estimate of the costs associated with the innovation. This includes both initial investment and ongoing operational costs.
6. Return on Investment (ROI): Assess the potential return on investment for the innovation. This involves projecting the financial gains against the costs incurred over a specified period.

Benefits of the Innovation Placemat

1. Clarity in Concept: The Innovation Placemat ensures a clear and concise articulation of the innovation concept, helping all stakeholders understand its purpose.
2. Financial Planning: By including budgeting and cost estimation, the tool facilitates effective financial planning for the innovation.
3. Risk Mitigation: Identifying barriers and risks in advance allows companies to proactively mitigate challenges and plan risk management strategies.
4. Objective Setting: Clearly defined objectives and measurable criteria provide a roadmap for assessing the success of the innovation.
5. ROI Analysis: The tool enables a comprehensive analysis of the potential return on investment, aiding decision-making processes.

Application of the Innovation Placemat

Let’s explore how the Innovation Placemat can be applied to a hypothetical scenario involving the development of a new software product:

1. Idea Outline: Clearly articulate the idea for the software product, specifying its features, target market, and unique selling points.
2. Budgeting: Determine the financial resources needed for software development, quality assurance, and marketing. This includes salaries for development teams, software tools, and promotional activities.
3. Barriers and Risks: Identify potential barriers such as compatibility issues, market competition, or regulatory compliance. Develop strategies to address these challenges.
4. Objectives and Measurement: Define objectives such as achieving a certain market share, user adoption rate, or customer satisfaction level. Establish key performance indicators (KPIs) to measure success.
5. Cost Estimation: Provide a detailed breakdown of costs, including initial development costs, ongoing maintenance expenses, and marketing expenditures.
6. Return on Investment (ROI): Project the expected revenue from software sales against the total costs, calculating the ROI over a specified timeframe.

By systematically completing the Innovation Placemat, companies can ensure a thorough assessment of their innovation initiatives, fostering informed decision-making and strategic planning.

Adoption of Innovation: Understanding the Innovation Adoption Curve

The successful adoption of innovation, both internally within a company and externally in the market, presents unique challenges. Everett Rogers’ Innovation Adoption Curve, a sociological model, categorizes users into distinct groups based on their willingness to adopt a specific innovation or technology.

Understanding the dynamics of this curve is essential for companies aiming to introduce new products or services.

Categories of Adopters

1. Innovators: These are the earliest adopters, characterized by their willingness to embrace new innovations. Innovators are often willing to pay a premium to be the first to experience the latest technology or product.
2. Early Adopters: Positioned shortly after innovators, early adopters are influential individuals who eagerly embrace new ideas and technologies. They often have a higher degree of opinion leadership and play a crucial role in shaping trends.
3. Early Majority: This segment comprises individuals who adopt an innovation after observing its success with early adopters. The early majority tends to make up a significant portion of the market and contributes to achieving the necessary scale for widespread adoption.
4. Conservatives: Conservatives are cautious in adopting new ideas and products. They typically wait until the majority has adopted an innovation before considering its adoption themselves.
5. Skeptics: Skeptics are the last to adopt an innovation, exhibiting little opinion leadership and a general aversion to change. Skeptics are often resistant to embracing new technologies or ideas.

Importance of the Innovation Adoption Curve

The Innovation Adoption Curve is a valuable tool for companies seeking to introduce new products or services. It provides insights into the psychological and demographic factors influencing the acceptance of innovations. Key considerations include:

1. Targeting Efforts: The curve helps companies identify the stage at which their target audience lies. This information guides marketing and outreach efforts.
2. Demographic Factors: Understanding the demographic and psychological factors influencing innovation adoption aids in tailoring strategies to specific audience segments.
3. Timing of Innovation Launch: The curve emphasizes that the success of launching a new product is influenced by factors such as market readiness, demographics, and psychological factors.