Innovation

Innovation is not a random event or intangible activity. It is a process. More specifically, innovation is best defined as “the process of devising a solution that addresses unmet customer needs.”

Generally speaking, there are three different types of innovation: (1) product and service innovation, which focuses on improving a product or service, (2) operational innovation, which focuses on making an internal business process a core strength, such as Toyota did with the automotive production process, and (3) business model innovation, which focuses on creating a new formula for making money. Google, for example, has reinvented the way a company makes money with advertising on the Web.

When it comes to product and service innovation, there are four growth paths: (1) core market growth, which is making improvements to products and services that already exist in order to help customers get a job done better, (2) adjacent or related market growth, which is improving existing products and services to help customers get related or ancillary jobs done (for example, by adding a tongue cleaner to a tooth brush), (3) new market creation, which is creating a new product or service for customers who are trying to get a job done but cannot because no solutions or only ad hoc solutions exist, and (4) disruption, which is specifically defined as the creation of a technology that enables a new set of customers to perform a job that only specialists could previously perform. Crest Whitestripes, for example, made it possible for people to whiten their teeth on their own, eliminating the specialist – the dentist.

So much has been written about disruptive innovation that the word “disruptive” has become a way to refer to practically any type of innovation that changes anything. Although a company can be impacted – even to the point of its demise – by a competitor that employs a strategy of operational and business model innovation (we see this with Wal-Mart in the retail industry), this is not disruptive innovation.

It is important for a company to be specific in the way it defines its innovation strategy, as different strategies require different tactics. Companies must keep in mind that not everything is disruptive innovation – a better categorization scheme is needed.

Using the job the customer is trying to get done as the unit of analysis, rather than technology, we say that companies can engage in product or service innovation by (1) helping customers get a job done better, (2) helping them get related jobs done, (3) helping them get new jobs done where no product currently exists, and (4) helping a new set of customers perform a job that was previously performed by other, more skilled people. Using this simple framework, product and service innovation initiatives can be planned and executed predictably.