Why are some companies more innovative than others?
Scan the literature and you are bound to collect a dazzling array of answers.
They are better led. No, they are culturally open. No, they have more efficient processes. No. No. No! They are especially attuned to customer concerns. Wrong again! They understand technology better. They are risk takers. They have cleverer people. Are richer. Just bloody lucky.
So which is it?
Well, that’s precisely the point. There is strong correlation between innovation and each of the parameters above (besides the last, which is difficult to qualify). Good leaders provide clarity and focus. An open culture encourages employees to share and develop new ideas. Efficient processes streamline ideas into products. Insight to customer needs ensures those products find a warm home. Technology leadership forge competitive advantage. A taste for risk is a prerequisite for venturing anywhere new. Luck, clever people and pots of money are always good.
An innovative company is fast, flexible and focused. It’s strategy, processes and culture are aligned and optimized for innovation. It should excel in many of the points mentioned above and more. Our innovation environment framework consists of over 140 parameters spanning across the company strategy, processes, culture and value proposition. Below is a depiction of the first two layers of the framework. For example Strategy consists of: Purposefulness, Insight and prioritization. Purposefulness breaks further into: Leadership and Clarity. These too breakdown further.
Companies might not be able to top all the boxes, but the more the merrier. Amazon and Apple, the reigning and recently deposed poster boys for innovation, respectively, (at the time of writing) are a case to the point. An illustration of the two companies innovation environment is provided below.
When Amazon Web Services (AWS) was introduced back in 2002, Amazon was a fledgling web retailer mainly known for selling books cheaply. It realized that it could turn its web hosting technology, which was used for developing its own web service, from a cost center into a cash cow. Its innovation activities spanned the entire environment.
Starting with Strategy. The company was set and continually led by a charismatic leader, revered to the point of adulation, with an insight touching on clairvoyance. (This was also true for Apple). Such leadership is difficult to emulate. In this case Amazon had the rare insight to identify a growing need of sourcing flexible computer memory. (At the time, the term cloud was reserved to describing a floating body of water particles that occasionally dropped rain). In addition the company communicated a clear vision internally and externally and deployed resources accordingly.
Going to the culture: The company exhibited openness to revising the business model and a high level of cooperation between departments. Employees of the (usually shy and reserved) IT/Technology department took ownership to become a commercial facing organization. The company is also famed for the high level of customer engagement.
With regard to processes: At the heart of the product was a reuse of dormant assets. The company experimented and adapted the product based on market input. The company expanded on its brand touting itself as a technology solution provider and not just a retailer.
As finally looking at the value proposition itself: The company introduced an entirely new service to customers, empowering companies to provide webservices without the need to deal with tricky IT infrastructure, also enabling companies to further customize their usage. It was a considerably cheaper option than the alternative. Since the service is subscription based, Amazon could be certain of a stream of continuous revenues.
When Apple introduced the iPod + iTune service, it had revolutionized its market. The illustration below shows how.
These two quick examples demonstrates how innovative companies must be strong across many parameters of innovation and their strength can never be attributed to a single metric.
This framework can be used by companies to identify their strength and weaknesses with regard to innovation. It can be used with the disruptibility curve, introduced in my previous blog, toward working to improving the innovation credentials of the company.
Wed, 14 June