Thursday, July 29, 2010

Notes from My Digital Compost Heap

I make a lot of notes as I survey business or technical literature. Sometimes they form the basis of future work, and sometimes they just gather digital dust. Rather than allowing so many bits and bytes to forever languish on my hard drive, I've decided to start publishing them as blog posts. Who knows, maybe my germ of a thought can add to your next breakthrough idea.

First retrieved from my digital compost heap are notes I made after reading Innovation is Not a Strategy (, Sept. 8, 2009) and the comments following the post. Personally, I think innovation can be a strategy.

First of all, what is innovation? Innovation isn’t invention, nor is it adding “nice to have” features to existing products. My best definition of innovation is filling an unmet need in an entirely new way in which the customer finds substantive value. This may be a new-to-the-world product (TiVo*), transforming an existing product into something that operates very differently (Glad Forceflex*), or the total re-invention of an old idea (Swiffer WetJet – it’s really just a mop, but by eliminating the need for a bucket, the whole process of cleaning the floor changes dramatically). All of these ideas introduce something new to the world and customers recognize and value it.

When invention meets value, it becomes innovation. It may take a long time for that value to be realized, but for innovations like the internet, which took a long, long time for invention to meet value, the magnitude of the value when it does “hit” quells any doubt that it was innovation.

Although sales can be an indicator of value, value is not sales. Fads sell, but there is no substantive value to the consumer. Value is defined as relative worth and return on investment. I suspect most former pet rock owners became disenchanted with Sedimentary Fido soon after purchase.

So, can innovation be a strategy? I think it can, but it only works within a larger vision.

Pepsi, which cranks out inventions regularly, seems to lack vision. It builds the soft-drink version of the pet rock repeatedly. It responds to trends like health consciousness and environmental responsibility superficially with small variations on existing products. I think this cheapens the brand image, although a brand like Pepsi has been around for so long that maybe it can sustain the knocks of repeated innovation failures on the chance that something will hit.

Google or Apple, on the other hand, have strong vision and are able to translate invention into innovation over and over again to the acclaim of pretty much everybody other than Microsoft. They have failures, but they're overshadowed by the big hits. They start by saying things like, "If X were designed today, what would it look like?" They don't use their existing products to tether them to a starting point; they start from scratch every time. Yet, the pieces all fit together because they align with the larger vision.

Pepsi, Apple, and Google all are profitable and have power brands, but a reputation of innovation also draws passionate consumers that are not only the source of sales dollars but unpaid marketers of the brand with their fierce loyalty. They draw in other consumers and make each product launch a phenomenon. Innovation as a strategy? Looks like it to me.

For some companies, it may be the dominant strategy at times and a crucial factor in maintaining the brand. For U.S.-based manufacturing companies whose products have become commodities, it must be.

The innovation strategy may be cannibalistic (i.e., trade-up) or it may be redefining the product portfolio because technological advances obsolete the old products (however slowly). The latter requires a company to look very hard at its core competencies and decide how best to apply them beyond the company's traditional boundaries. Consider how brilliantly Amazon did this.

With good leadership and strong vision, a new innovative product, even one that in no way resembles the old (“big time innovation”*), could be the new flagship of the brand. Why not leverage a strong brand for a strong new product? Of course, this must be managed expertly, or you're just Pepsi with another useless sku.

Of course, I'm no expert. Just a businessperson and a consumer.

* Special thanks to Jeannie Chan who provided the examples of TiVo and Forceflex as innovations in her comment to the post that I referenced, above. She also used the term “big time innovation,” which I also re-used – the term has been used by others, but she should have credit for inspiring me to use that term in this post. Make sure you scroll down past the post and read her comment, among others.

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