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Driving Growth Through Innovation

As I was perusing Chuck Frey’s Innovation Weblog this morning, I noticed a recent post by Charlie Alter titled “Demand innovation step 3: Finding new growth opportunities.” In this article, seven principles are highlighted. As I pondered the points, it struck me that the advice put forth in this article was actually pretty poor. Let’s dissect the suggestions made by Charlie Alter and understand what a good innovation driven growth strategy should look like.



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As I was perusing Chuck
Frey’s Innovation Weblog
this morning, I noticed a recent post by Charlie
Alter titled “Demand
innovation step 3: Finding new growth opportunities
.”  In this
article, seven principles are highlighted.  As I pondered the points, it
struck me that the advice put forth in this article was actually pretty
poor.  Let’s dissect the suggestions made by Charlie Alter and understand
what a good innovation driven growth strategy should look like.

Alter: “Shift from a “Product Centered” sales growth strategy to an
“Economic Centered” model”

 
Better Advice:
Customer/Market Centric innovation is the most effect path to growth hands
down.  Focusing on the term Economic Centered can lead to serious
problems for a company.  The last thing you should want to do is get
sucked into the vast gaping void of commodity hell.  Yet, this is exactly
where you will end up if you make economics the central piece of your
innovation strategy.

The keystone supporting the architecture of your business and innovation
strategy must be value.  It is the value proposition that
gets customers to buy; it is highly differentiated value that drives market
share attainment; it is tight full product value alignment that builds customer
affinity.

This high value delivery is achieved by immersive understanding of the
opportunity space defined by your target customer’s unspoken needs, goals, and
aspirations.  While Alter does acknowledge this, the emphasis on economics
is wrong.  The focus must always be on the customer.  Customer focus
leads to high value delivery.  Deliver high value and the economics will
follow.

Alter: “Stop relying on developing the latest blockbuster products and
develop a series of evolutionary”

Better Advice:
Sorry, if you want to be the leader, you can’t pick between ‘Big I’ and
‘little i’ innovation.  The only winning game plan is to pursue
both.  Strategy and tactics are two sides of the same coin.  The
evolutionary innovations that provide incremental value enhancements to your
existing customers are very important.  It is these everyday innovations
that sustain the value of your existing revenue channels, help ensure the
ongoing profitability of the business, and can provide the cash needed to fund
new opportunities.

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However, becoming reliant on incrementalism is a go out of business
strategy.  It is this mindset that creates the environment for disruptive
market change.  By focusing too tightly on the current needs of today’s
best customers, companies become inured to the constantly changing
market/customer ecosystem in which they operate.  They stop changing and
developing.  In an ever changing world, when you stop changing, you start
dying.

Learn to eat your own lunch before someone else does.  In parallel with
the incremental innovation, companies must engage in continuous reevaluation
and innovation of their products, their services, and themselves.  It can
be scary to think of creating a new product that may undermine an existing cash
cow.  But always remember that someone is going to do it.  Isn’t
better if that someone is you?

Look for new markets, too.  You can tap into vast new revenue
opportunities and extend the revenue life of your current products by applying
simple sustainable innovation practices.  Can you identify new communities
of users for your existing product?  What is the fundamental component of
our offering that is the source of its value?  Can that component be
retargeted to a different space where it can enjoy a second revenue
identity?  Are there licensing opportunities to be had?

It is these two approaches, self re-invention and white space development,
which should be at the heart of your strategic innovation thinking.  With
the dual tracks of tactical and strategic innovation, you will ensure both the
short-term and long-term success of your company.

Alter: “Look at the size of your business, no matter how large or small,
for the advantages it represents”

Better Advice:
It is always import to look at the elements of your business and consider
how they can be leveraged to competitive advantage.  But never try and
justify the status quo by focusing solely on the positive.  Every aspect
of you business, its size, your organizational design, your sales mechanism,
etc., presents both advantages and disadvantages.  You need to understand
both sides and consider how to optimize each element of the whole to deliver
maximum customer value and corporate performance.

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Taking the specific issue of organization size as an example, don’t assume
your current configuration is the right one.  Does your size and
organization really fit the optimal business model for your market and target
customers?  The answer to this question may change the way you think about
the business.  You might find you need to grow the organization to map
properly to the business model and growth goals; perhaps you will find that you
have excess capacity that must either put to a value driving use or trimmed
out.  You might even come to the realization that a fundamental shift in
the business model is important.

Alter: “Make sure profitable growth is driven through every level of
your company”

Better Advice:
On this point, I fully agree with Alter.  Every company must maximize
its return on investments.  Every dollar (Euro, Pound, Yen, etc.) which is
misspent detracts from that attainment.  As Charlie advises, do redirect
those wasted resources into activities that can drive revenue and value growth
for the company.  This is as true for a start-up as it is for a major
enterprise.  As Clayton Christiansen put it, “Be patient on revenue, but
impatient on profitability.”  One doesn’t have to look far these days to
see the wreckage of start-ups that became proof points for this when their
venture capital partners decided to turn off the funding flow.

Alter: “Develop lots of small or even maverick ideas for growth rather
than a few large ones”

        “One simple rule is that
the more ideas for growth the better”

Better Advice:
More is not always better.  Contrary to the popular mantra that you
need to throw as much stuff against the wall to see what will stick, the go
generate a ton of ideas approach to innovation is counterproductive and a
legacy view of the world that tenaciously hangs on because sometimes something
does in fact stick.  When you have too many ideas to wade through, the sea
of ideas itself becomes the roadblock to innovation.

Companies have limited resources and cannot afford to waste cycles winnowing
down a mountain of questionable and mostly incremental concepts looking for
that one gem.  Rather than letting a million flowers bloom and die only to
find that in doing so they have depleted the nutrients in the once fertile
ground that was your business, you are much better off selecting a handful of
high quality ideas that have a much better chance of success because you can
properly focus your energies on tending the innovation garden.

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This is fundamentally where needs led innovation diverges from the old school
thinking of idea first innovation.  By clearly identifying the target
audience, their needs, and then applying sustainable innovation methods to find
the best way to deliver value to that audience through a brilliant solution
that meets the needs, you will have the surest path to corporate value
creation.  In short, you don’t need 3000 ideas to create one new product,
you just need one.  Sustainable innovation practice is all about
identifying the one idea the first time.

Alter: “Form a small cross-functional team and visit your best customers
to determine what types of challenges and problems they encounter during their
business processes that “surround” the products or services they buy from you”

Better Advice:
On the surface, this is basically good advice.  Understanding the
entire use model and eco-system that your product or service is a part of can
help you develop many good strategic insights.  However, always remember
the limitations of your current customer experience.  Today’s best
customers may not in fact be tomorrow’s high value customers.  Be wary of
the pitfalls of steering the future course of your enterprise by always looking
in the rearview mirror.

Do pay attention to your top customers, as they can help you understand the
requirements for on-going incremental innovation as well as give you insights
into easily entered adjacent markets.  But don’t neglect your underserved
customers.  Understanding their issues can give you insights into
vulnerabilities that could be exploited by a disruptive agent.  Also
remember to listen to all the voices of innovation: the voice of the customer,
the voice of technology, the voice of regulatory influence; and the voice of
your business.  When you can properly harmonize these different voices,
you are properly orchestrating the business strategy for innovation.

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