Business

Innovate DELIBERATELY

Those of us who advocate advancement as a business methodology or discipline often discuss the different possible outcomes for innovation. That’s because invention is often described far too narrowly as a new “product”. Product advancement is the most well-known, and most consistently performed type of innovation. However, there are other potential outcomes and uses for innovation, and many evolving changes in the marketplace that will require far more investment in these other outcomes.

Let’s take a look at these two factors and realize why they suggest far too much emphasis is positioned on product creativity, and inadequate on other outcomes significantly. First, let’s consider the US economy. In the first 1960s, when JFK was talking about sending a man to the moon, making accounted for over 50% of our Gross Domestic Product (GDP). In the last 50 years, the percentage has dropped to approximately 20%, as manufacturing has become better and many manufacturing jobs have been outsourced. There was not a fall off in the number of manufactured products even though the number of careers and the percentage of our GDP from developing decreased – the merchandise now are brought in.

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But look at this yet another way – over 80% of our economy is based on services, which begs the question: how much service invention is underway, given the development and need for services in this country? And oh, by the way, we’re simply in the vanguard of a big shift toward services.

Other economies will observe this same route. Western Europe and Japan quickly will definitely follow, and even the rising economies will shift their mixture of production and services more rapidly than we did. So, you can see that services will dominate the economy as a percentage of GDP. But where is the current focus of innovation?

On products mainly. Although this is a little unfair. Many service focused firms offer “products” that aren’t manufactured, and those service oriented “products” require advancement. But services haven’t experienced the concentrate that manufacturing and the next products experienced traditionally, and this means there’s a large, and emerging, chance for service development.

And for improvements beyond services. Many of the things we think of as innovative – the iPad, for example, are still physical products. That’s because it’s easier to talk about and display a tangible item and compare its features and benefits than to discuss an innovative service. Services are more ephemeral, and can be found in a brief instant. Services are more difficult to provide consistently, because they rely on inconsistent people to deliver them.

But services, along with experience technology and business model development, are the next focus area for many firms clearly, because of the economic shift toward services simply, and the overpowering concentrate today on product creativity. Of course we can combine experience, service and business model innovation and deliver it around familiar product innovations. Experience innovation can be delivered through packaging, through channels and through marketing and support of existing products.

OXO has done a few of that by “innovating” common kitchen equipment to make it more comfortable to use. That’s experience development in at least one aspect. Few firms have thought deeply about the idea of radically enhancing or changing a customer’s experience of their products and services, and even fewer firms are actively considering business model innovation, these outcomes are available yet. They are more challenging than product innovation, yes, but they are more differentiable and more defendable also. In the book Blue Ocean Strategy the authors argued that lots of firms needed to find “new blue oceans” to conquer rather than compete in the same red oceans with other firms.

Perhaps that same idea should be put forth for innovation. Product technology is significantly a “red ocean” while relatively easily observable blue oceans of service invention, experience innovation and business model innovation can be found. As our economy shifts and places a lot more importance on services, innovation models and features will surely follow.