197. Six ways to innovate

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Episode Transcript

When most people hear the term “innovation” they assume it means doing something drastically new, like when Steve Jobs created the iPhone. This puts many smart people off, and makes them (wrongly) assume that they are not creative. But in fact, we are all innovating all the time. Listen to this episode to learn about what innovation is and hear about the 6 ways to be an innovator.

Hello smart people!

How are you today?
I’ve been having a lot of adventures lately, and I’ve even moved house! But, more on that another time.

A while ago, my company Tech for Non-Techies, and researchers from the University of Chicago, decided to investigate how the largest and most interesting companies in the world approach innovation. We interviewed the heads of strategy and innovation anonymously, which was super fun, and then wrote our findings in a report called Innovate but how? The pragmatist’s guide to growth.

I’m going to share the opening of it with you here, and you’ll learn about what innovation is and the different ways to approach it. And, because I headed the research, it’s not your usual boring corporate blah di blah. I think you’ll find it insightful and fun.

AND - literally about a month ago, I met the chairman of a major law firm, and we got talking about innovation and I sent him this report. After reading it, he asked for an innovation training proposal for the entire firm.

So, not only is it fun and insightful, people with power and money seemingly can’t get enough!

You can get the full report for just $20 at .techfornontechies.co/innovate or via the link in the show notes, and see what impressed this chairman so much.

And now, here’s chapter 1 from Innovate but how? The pragmatist’s guide to growth.

While most of us agree that innovation is a good thing, we don’t actually agree on what it is, or how to do it.

What we all know is that Covid has fundamentally changed business and consumer behaviour.

Whatever innovation strategy companies had before the pandemic needs a thorough re-examination as we emerge into our new “living with Covid†world.

First, let’s ask the existential question of what is a company supposed to do?

Before we even delve into the debate of Becker-Friedman sanctity of shareholder returns vs the more modern version of stakeholder capitalism, let us assume, for the purposes of this paper, that a company needs to do two things:
- Survive
- Grow

To survive, it focuses on the jobs to be done every day. How do you keep making your product and selling it to your customers?

To grow, the company must do something new, unless the market has drastically changed in its favour.

But what? This is where innovation comes in.

Innovation is opening up new value pools.

Naturally, for different value pools, there are different methods.

Before we start talking about business case studies, let’s think about our favourite subject: ourselves. Most of us are attempting to innovate all the time, whether we know it or not.

We hire tennis coaches to improve our serve (incremental innovation), we get divorced (breakthrough innovation) and we get a post-break-up new look (public innovation).

Sometimes, those innovations backfire. Maybe our partner was actually the right one for us after all, or the new haircut didn’t turn us into the sex magnet we had intended to be. (Oh my god, I sent this to the chairman of a major law firm, and he asked for a firm wide training proposal…)

While no plan is perfect and life is not linear, a very high failure rate can leave us broke, alone and with horrible hair.

This is why, as individuals, we need to establish what we want from life first, and then take actions that align with those goals. We also need to establish our risk tolerance from the outset, and not get into territory that’s frankly too much.

This can help us decide whether we want to take small steady steps (incremental innovation) or take giant leaps into the unknown (disruptive innovation). Each approach has its benefits, but they are fundamentally different.

Once we have clarity, then we can start taking relevant action, in the knowledge that while some of it inevitably won’t work out, we are broadly moving towards our goals.

This is why, in this report, I’m going to show you lessons from business and from life. We cannot divorce the person leading the business from the actual human. If the CEO is themselves risk averse as a human, they are not going to be great at leading a company that’s heavily investing in Breakthrough Innovation.

To implement the lessons from this report best, I suggest you apply them to both facets of your life: to one business challenge and to one personal challenge. *

innovation efforts can be categorised into the 6 paths below. But remember, a company is a collection of humans.

As humans, we’ve tried most of these paths in our personal lives too. As you read this, think about what you’ve tried most recently and how it worked out.

01 - PRIVATE INNOVATION

It is part of the R&D process and its secrets do not leave the company's walls.
Aim: create something completely new or even create a new market.

Personal: You've self-sabotaged one too many times and realised that you don't want to wake up with people you neither know nor like again. You get a therapist.

Business: While it is easy to think of pharma or tech businesses doing this (which they do), creative businesses do this too.

The Netflix content team will probably withstand interrogation by the Gestapo before they tell you about new shows they’re working on. Their unique programming drives new subscriptions and renewals.

02 - PUBLIC INNOVATION

Being seen as innovative is part of marketing strategy.

Aim: open up new markets or deepen relationships with existing customers.

Personal: you think that your new executive job requires a new look, so you hire a personal stylist who makes you look powerful and important.

Business: Burberry invested in digital strategy and social media to attract millennial consumers and became “the first fully digital luxury company.”*

03 - INCREMENTAL INNOVATION

Here you're answering the question “what can we do to make process X cheaper, faster, easier?â€

Aim: deepening existing value pools, rather than creating new ones.
Personal: You love your tennis club buddies, but your game just isn't improving. You hire a tennis coach to help you out of the plateau.

Business: Waldo, a contact lens subscription company changes its delivery box size to fit into more letter boxes.

Fewer boxes get lost or stolen, and arrive in glossy condition, which makes customers happier.

More customers continue their subscription: lower churn, more revenue, and the comparative cost of this innovation is miniscule.

04 - BREAKTHROUGH INNOVATION

We need to do something completely different. What? How?

Aim: drive exponential revenue growth by entering completely new markets.

Personal: You leave your successful career as a trader to start a fintech business.*

Business: The urgent need for a Covid vaccine advances MRna genetic technology by Moderna, a 10-year-old biotech company with billions in market valuation but no approved until their massive success.
You don't have to be a genius scientist to lead breakthroughs. We spoke to a senior leader an alcohol brand, which is moving into the cannabis edibles market.

Would you like a little buzz with your fizz?

05 - PRODUCT INNOVATION

Our customer is changing. How can we get them the things they want today and will want tomorrow?

Aim: sell new things to existing customers & bring in new ones, in response to changing tastes

Personal: you want to get promoted to the C Suite and know this will require speaking to the press. You haven't done much of this, so you sign up for media training.

Business: FMCG and fast-food brands invent vegan healthy alternatives for a health and socially conscious consumer. Have you tried Burger King's Vegan Royale?
06 - PROCESS INNOVATION

It takes us too long/ it costs too much to do X. How can we change that?

Aim: improve internal processes and tools to lower costs and drive revenue.

Personal: You're forever stuck in the intermediate level in your French class. During the pandemic, you move to the French Riviera.*

Business: Traditional lender uses AI to process loan applications. In Korea, Aizen, a fintech AI company, works with Woori Bank, one of South Korea’s biggest banks to lower transaction cost by 30+%.

Mix & match

Some of these innovation paths aren't mutually exclusive.

Product Innovation can take place as Breakthrough or Incremental growth.

While Breakthrough and Incremental innovation are fundamentally different, they can still be done by one company, just not by the same people.

One of the frequent assumptions we've seen is that you have to pick one path and do nothing else.

Netflix brings us private innovation in content, incremental innovation in its content algorithm, and public innovation in its marketing. Each contributes to revenue growth in a different way.

So this is the end of the excerpt from this excellent book. If you’re working on innovation, or want to learn about different innovation strategies, and do so in a new non-boring way, then this book is for you.

The ebook version is only $20 and it has lots of pretty pictures in it too!

I’ve pasted the link in the show notes, or just go to https://www.techfornontechies.co/innovate to buy it.

And if you found this episode informative, then be a darling and leave this show a rating and a review. It really does help other smart people like you discover this show, and grow in their careers.

And on that note, thank you very much for lending me your ears today. I really love the time we get to spend together.

Have a wonderful day and I shall be back in your delightful smart ears next week.

Ciao!