On my website, https://15consulting.com, I list constant innovation as one of the seven things businesses must do well in order to be highly effective and sustain success. I firmly believe businesses must be continuously innovating and developing new products and more efficient processes if they are going to prosper in the 21st century. Thus, I felt it appropriate to devote one whole chapter to innovation.
My definition of innovation: The process by which you take a product or functional process that is already in existence in some form and, by applying novel ideas or methods, create something entirely new, unique, and impactful.
Myths about Innovation – Common thinking in many businesses today is that engineering is where innovation resides. Innovation is a primary component of the culture of successful businesses; 3M built a tremendously successful business with innovation at the core. While many others narrowly define innovation as new product development, much broader views are ingrained in the culture of those firms truly committed to innovation. They believe that innovation is a relevant component of every process in the company. Some leaders only look to innovation when things are not going well in the business. However, great businesses pursue innovation incessantly, no matter the business climate. Another excuse used for non-innovation is that the company simply does not have the talent. Yet the real reason in most of these instances is a deficiency of leadership and the lack of a process to allow innovation to flourish in the company. A scarcity of money in the annual budget is another excuse used for not pursuing innovation. I found this disappointing when I encountered it in my professional career. It really tells the stakeholders of the business that the only focus of leadership is the present and that nothing is being invested for the future health of the enterprise. Finally, arrogant businesses and leaders believe that they already have the best products in the market and that there is no need to spend any money on developing new ones. Perhaps Blackberry thought the same and was shocked when Apple came along with their version of the smartphone and virtually eliminated Blackberry as a dominant player in this huge market.
Truths about Innovation – Innovators are always looking for the next mountain to climb. They realize that others are striving to move ahead of them with their own new products. They are constantly rearranging their innovation targets and widening their challenge zone. As I said above, innovation can include new product development, manufacturing processes, organizational structure, and even new business models. The innovation process is broad in what it can encompass when there is an openness to new thinking. New product innovation (the major focus of this chapter) must be customer oriented. It cannot be engineering experimentation that may yield a new product for which there is no market. All market/customer research should be finalized in advance of establishing the innovation target. Input from sales, marketing, and engineering regarding customer needs should be incorporated into the innovation target. The innovation target set by the team must yield a product that satisfactorily solves customers’ problems or provides some tangible benefits to customers’ operations. Anything less may result in failure. An economic feasibility analysis should be completed, reviewed, and approved by company leadership before starting the process. This financial analysis will weigh the cost of the project against the expected benefits using a discounted cash flow model against the firm’s weighted average cost of capital. If the result yields a positive number, the project should be granted the green light. If the number is near zero or negative, senior leadership must weigh the decision to proceed against other capital needs of the business. The innovation target must be defined very clearly, with the desired outcome at the far end of the challenge zone. Milestones and time frames for reaching the innovation target should be created to provide the team with disciplined execution practices.
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