Innovation: What’s the Point?
It’s fascinating to me that innovation is a core function of every successful business, helping companies evade obsolescence, increase productivity, increase market share and improve retention. Yet most companies lack an official title or process for innovation. As a rule, business leaders tend to think of ideas as a value-add of employees, but not a core, necessary, and strategic responsibility.
Media Innovation and the Chief Innovation Officer
In the past, I worked for the newspaper industry. That is, until I saw that they weren’t willing to make the investment in new media that I felt was necessary — that, and they fired me for talking about it too much. For example, when eBay and Craigslist hit the market, newspapers wrote extensively about the massive growth of online classifieds, yet they didn’t do anything to try to innovate their own solutions or capitalize on this new market segment. This was especially bizarre because traditional classified ads were historically a substantial revenue generator in the newspaper industry, driving the largest revenue-per-square-inch of any advertisement in the paper.
I wonder, if traditional media had invested in a Chief Innovation Officer, whether or not the financial — and eventually, personnel — hemorrhaging would have occurred. The problem of course is that newspaper ROI couldn’t be measured in fiscal quarters. It was years before the typical industry model fully collapsed. But should a CIO have been appointed at many of these publications, it’s likely that they would have served an essential purpose, bringing print news into a space where it could actually have survived without expensive subscriptions, lurid headlines, or highly-fractured, niche target audiences. Or, they could’ve forced the inevitable disruption and downfall of paper-and-ink news much more quickly.
Risks and Process
Today’s companies simply won’t wait to succeed or fail; no longer concerned with five and ten year plans, they expect results immediately. But even strategic innovation isn’t always a quick solution. Entrepreneurial initiatives used to require quite a bit of time and investment, but the internet and a now highly global economy have forever changed the speed of business. Now all it takes is a free wifi connection to kick off your new business online using free platforms, cheap resources, and friends and family ready to invest. As a result, the threat to established companies is clear — find a way to innovate consistently, to adjust alongside fluctuating markets, or acknowledge that your days might be numbered.
Having lived through the years of the Continuous Improvement movement, I saw the incredible results of utilizing data, research, and establishing innovation processes. To be clear, I’m not advocating disruptive innovation in every aspect of a business — a practice that could easily drive up costs and impede the company’s ability to serve its customers. But I do believe innovation requires a process. That process should include:
- Research. Reviewing the demands of the market and the customers to determine whether or not innovation will be beneficial.
- Resources. Understanding the resources needed to implement innovation processes, and whether or not it’s an appropriate business decision for the company.
- Ideation. Pooling the right resources to collaborate and ideate on innovative products and solutions.
- Implementation. Understanding the internal and external processes necessary to bring new innovations to market.
- Measurement. Developing short and long-term strategies to measure the impact and ROI of innovation.
ROI and Productivity
Declining market share, revenues, or profitability are predictable and can be used to measure innovation’s return on investment. There was no doubt in the newspaper example above that there was a measurable decline in the classifieds that could have been reversed through innovation. It simply wasn’t an option at the time, because no one wanted to stick their neck out and take the kinds of risks that are so common today. A Chief Innovation Officer would have had that expectation — if they had existed. Investing in efforts to avoid obsolescence does have a measurable return on investment; it’s simply the elephant in the room that no one wants to talk about.
Increasing productivity through innovation is, perhaps, the easiest initiative to implement and measure. Innovation need not just happen at the external, customer-facing level, though. Productivity can happen through billing, implementation, customer service, or any other process where there’s a significant investment or pain point within the organization.
Increasing market share through innovation has a measurable return as well. Often time, customers want the ease of new features, products, or services that are out of your core competency. New industry segments are a small feature away — it simply takes courage to make the move and invade a new market.
Innovation through integration of new features, products, and services can have a measurable increase in customer retention, too — another example of a measurable ROI. This was also discussed in our previous blog about APIs and Innovation on the development front. But it’s not just software where this can happen. Companies like Amazon are looking at innovation to deliver directly to their customers’ doorsteps and avoid third-party shipping altogether. That kind of innovation could reduce customer costs, increase shipment accuracy, reduce costly returns, and increase conversion rates, all which would have positive returns.
Do you have a designated innovation leader and process in your organization? Talk to us about it in the comments!