What is Business Innovation?

A century ago, Thomas Edison thought deeply about what drives invention or, as we call it today, innovation. One of his famous sayings, “Genius is 1 percent inspiration and 99 percent perspiration,” stresses that innovation involves more than just great ideas. Edison knew from his own experience that the systematic hard work of trial-and-error experimentation paid off. His inventions, like the lightbulb and the phonograph, emerged through thousands of attempts as he refined the process step by step.Otazo, K. (n.d.). Innovation takes perspiration. https://www.strategy-business.com/article/li00010

There are many definitions for innovation and even the innovation experts in today’s business world cannot agree on the definition of innovation. Below are definitions from 15 innovation experts.Idea to Value. (n.d.). What is innovation? 15 experts share their innovation definition. https://www.ideatovalue.com/inno/nickskillicorn/2016/03/innovation-15-experts-share-innovation-definition/

We might give business innovation a more encompassing definition. Business Innovation is “Executing an idea that addresses a specific challenge or opportunity and achieves value for both the company and its stakeholders.”  Of course, stakeholders include customers, government, partners, suppliers, shareholders/owners, lenders, society, employees (and their families), and the community.

When we think of innovation in the great big world, including the innovations of organizations, we might define Innovation in more broad terms, such as, “Creating something new that serves people’s needs or wants.”

Why Do We Innovate?

Innovative ideas are envisioned by individuals, businesses, and governments because of the following reasons.

• Remain competitive and relevant and avoid obsoletion
• Keep up with customer demands, preferences, and trends
• Adapt to take advantage of changes in modern technology
• Reduce expenses
• Increase revenues
• Improve efficiency and/or effectiveness
• Improve company and/or brand image
• Expand market share
• Improve the quality of life
• Improve the standard of living
• Attract investors, employees, and partners
• Solve a problem
• Take advantage of an opportunity

As commonly said in business, innovation is the only Imperative. In a world where everything changes rapidly, the field of business has been left no other option but to keep pace. Whether the innovation is about making a product more user-friendly or creating a more efficient finance model, Innovation is bound to happen.

What is the calculus of innovation? The calculus of innovation is quite simple: Knowledge drives Innovation, Innovation drives Productivity; Productivity drives Economic Growth. – William BrodyEveryday Power. (2021). Innovation quotes to motivate you to create. https://everydaypower.com/innovation-quotes/#:~:text=The%20calculus%20of%20innovation%20is%20really%20quite%20simple%3A,innovation%2C%20innovation%20drives%20productivity%2C%20productivity%20drives%20economic%20growth.%E2%80%9D

Where Do Good Ideas Come From?

Innovation is the process of taking an idea and putting it into practice. Creativity, on the other hand, is what you do in your head to generate the idea. An innovative idea must be new, original, or improved, and must create value.

Once a business has a creative idea it must determine if the idea is feasible to implement. Can it be done? Is it affordable? Are resources available or obtainable?  Will it meet the needs of the target audience?  Before spending time and money researching and developing a new product or changing a business model, feasibility and risk must be assessed.

Watch the YouTube video below, “Where Good Ideas Come From” to learn about where you can find or how you can develop good ideas. Johnson, S. (2010, September 17). Where good ideas come from. [Video]. YouTube. https://youtu.be/NugRZGDbPFU  Transcript for “Where Good Ideas Come From” Video [PDF–New Tab].  Closed captioning is available on YouTube.

Why is Innovation Important?

Today, we need innovators more than at any time before. Every organization and business is feeling the impact of globalization, migration, technological and knowledge revolutions, and climate change issues. Innovation will bring added value and widen the employment base. Innovation is imperative if the quality of life in these trying circumstances is to improve. Innovation will make the world a better place for the younger generation.Shukla, A. (2009, May 30). What is innovation? Why innovation is important?  https://www.paggu.com/getting-into-roots/what-is-innovation-why-innovation-is-important/

What are the Types of Innovation?

We often see innovations in products and services being offered to customers, but there are many other types as well.  Innovation can be classified based on the degree of innovation as well as the object of innovation.

Degree of Innovation

Incremental Innovation is the concept of growing or improving a company by making a succession of small-scale improvements to existing products, services, processes, and tools. Incremental innovation focuses on improving existing offerings to align with current consumer trends and is considered a relatively low-risk approach. This approach is the most common type of innovation and has helped many companies remain competitive for decades.

A few examples:

• Volkswagen (VW) releases a new Golf model every five years or so.
• Gillette uses incremental innovation each time it brings out the next generation of its razors.
• Microsoft innovates incrementally with each new Windows release (Win 3.1, Win XP, Win 7, Win 8, Windows 10).

Disruptive Innovation is the launch of a new business model, concept, product, or service that creates a new market segment and value drivers. Often, disruption comes from a new company, which eventually displaces established market leaders and products.  This approach focuses on meeting consumer demands in ways that no other product or service has done before. Disruptive innovation often creates entirely new markets or a fundamental shift in how the consumers interact with the current market after the disruptive product is introduced.

• There are quite a few examples of disruptive innovation, one of the more prominent being Apple’s iPhone disruption of the mobile phone market.   Prior to the iPhone, most popular phones relied on buttons, keypads, or scroll wheels for user input.
• Apple’s iTunes and Spotify are streaming music platforms that made previous music formats obsolete.  Do you know what a vinyl record is? How often do you see a physical music store? They used to exist. As each new technology became available it disrupted the music industry and made past formats obsolete. For example, we used to listen to music on vinyl records, then 8-track tapes and cassette tapes, then compact discs (CDs), then MP3 digital music (iPod craze), and more recently with iTunes and Spotify. Streaming music seems to be where it’s at, for now!
• Netflix’s business model is subscription-based. It is a streaming platform, which offers on-demand video. The evolution of movie formats–8mm film to videocassettes (VHS, Beta) to CD, DVDs, and Blu-rays took home entertainment to the next level, then Netflix brought us movie steaming. Movie streaming has revolutionized the home entertainment experience.  When Netflix began streaming movies, video rental companies such as BlockBuster went out of business and cinemas also saw reduced revenues. While Blockbuster clung to its business model of being a video rental company, Netflix constantly disrupted itself. Netflix went from a business model of being a DVD subscription rental service to streaming movies and TV series to being a creator of content.

Object of Innovation

Products and services are the most common objects to innovate, but there are many types of innovation and they are categorized in many ways.

Business Model

Business Model Innovation is probably the most challenging of the innovation types as it will likely present an organization with major requirements for change. Often, the very capabilities or processes that have been optimized to make a company successful and profitable will become the targets for transformation. In some cases, these changes can threaten elements of the company’s identity and come into conflict with brand expectations or promises.Differential. (2020, March 20). The three types of innovation: Product, process, business model. https://www.differential.com/posts/the-3-types-of-innovation-product-process-business-model/

Whereas both product and process innovation can be incremental and moderate, business model innovation is almost always radical, risky, and transformative. When talking about business model innovation, without a doubt, names like AirBnB, Uber, or Spotify will come up. These are perfect examples of fast-moving companies that were able to disrupt age-old markets (hotel, taxi, music) by tweaking or inverting their industry’s traditional business model.Differential. (2020, March 20). The three types of innovation: Product, process, business model. https://www.differential.com/posts/the-3-types-of-innovation-product-process-business-model/

Social innovation

Social Innovation refers to a response to a social or environmental problem, which, once adopted, results in better solutions than existing approaches. Social innovations have a transformative impact and improve organizations, communities, regions, or systems.

Social innovation can include:

• new, more effective social programs
• the use of new technologies
• the growth of social enterprises

Social enterprises are businesses that pursue a social or environmental mission.Government of Canada. (2021, August 12). About the social innovation and social finance strategy. https://www.canada.ca/en/employment-social-development/programs/social-innovation-social-finance.html

In Canada, activity at the governmental level includes the government’s launching of a Social Innovation and Social Finance Strategy to provide better support to community organizations working to tackle social challenges. The strategy includes a Co-Creation Steering Group made up of 16 leaders, practitioners, and experts from multiple fields, including the community, philanthropic, financial, and research sectors, and complemented with public consultation.Leeuwen, M. (2018, October 31). 8 cool examples of social innovations in America. Social Innovation Academy.  http://www.socialinnovationacademy.eu/8-cool-examples-social-innovation-north-america/

Product innovation

When people think of innovation, often, they’re thinking of product innovation. Product Innovation can come in three different forms. 1) The development of a new product, such as the Fitbit or Amazon’s Kindle. 2) An improvement of the performance of the existing product, such as an increase in the digital camera resolution of the iPhone 11. 3) A new feature to an existing product, such as power windows to a car.Differential. (2020, March 20). The three types of innovation: Product, process, business model. https://www.differential.com/posts/the-3-types-of-innovation-product-process-business-model/

Drivers of product innovation might be technological advancements, changes in customer requirements and demands, or outdated product design. Product innovation is generally visible to the customer and should result in a greater demand for a product.Differential. (2020, March 20). The three types of innovation: Product, process, business model. https://www.differential.com/posts/the-3-types-of-innovation-product-process-business-model/

Service innovation

With the growing economic importance of the services sector, service innovation is playing an ever more significant role in driving growth in today’s knowledge-intensive economy. Service Innovations ensure and enhance the utility, performance, and apparent value of an offering.  Some offerings are purely service, such as getting a haircut, hiring someone to paint your house, or taking an Uber to your friend’s place. These are services you may utilize throughout your lifetime. Other service innovations may be combined with product offerings, such as purchasing groceries (products) and having them delivered to your home (service), or buying a new television (product), and purchasing the warranty (service).

Service innovations may make a product easier to enjoy, reduce the risk associated with buying a product or may make a product more compelling to buy. Service innovations may simply make your life more enjoyable. Who doesn’t enjoy a visit to the spa?  According to SuperOffice, 86% of buyers will pay more for a great customer experience.Kulbyte, T. (2021, June 24). 37 customer experience statistics you need to know for 2022. https://www.superoffice.com/blog/customer-experience-statistics/

Process innovation

Process is the combination of facilities, skills, and technologies used to produce, deliver, and support a product or provide a service. Within these broad categories, there are countless ways process can improve. While product innovation is often visible to customers, a change in process is typically only seen and valued internally. Generally, changes in process reduce costs of production more often than they drive an increase in revenue. Of the three types of innovation, process is typically the lowest-risk.Kulbyte, T. (2021, June 24). 37 customer experience statistics you need to know for 2022. https://www.superoffice.com/blog/customer-experience-statistics/

Process Innovation can include changes in the equipment and technology used in manufacturing (including the software used in product design and development), improvement in the tools, techniques, and software solutions used to help in supply chain and delivery system, changes in the tools used to sell and maintain goods, as well as methods used for accounting and customer service.Kulbyte, T. (2021, June 24). 37 customer experience statistics you need to know for 2022. https://www.superoffice.com/blog/customer-experience-statistics/

One of the most famous and groundbreaking examples of process innovation is Henry Ford’s invention of the world’s first moving assembly line. This process change not only simplified vehicle assembly but shortened the time necessary to produce a single vehicle from 12 hours to 90 minutes.Differential. (2020, March 20). The three types of innovation: Product, process, business model. https://www.differential.com/posts/the-3-types-of-innovation-product-process-business-model/

Technological Innovation

Technological Innovation focuses specifically on technology and how to embody it successfully in many types of innovations such as products, services, processes, profit models, channels, and customer service engagement innovations. Regardless of the industry or products, technology is likely to be a pillar for businesses because many innovations stem from advances in technology.  By embracing AI, machine learning, data science, and automation, businesses can innovate in each of these areas to improve internal processes and external communications. Ultimately, these advances will positively impact productivity, sales, marketing, and customer service.Richards, R. (2021, September 1). 5 main types of innovation: Which is right for your business?  https://masschallenge.org/article/types-of-innovation

Doblin’s Ten Types of Innovation

The Ten Types of Innovation Framework®  is a great way to categorize innovation types. For many years, executives equated innovation with the development of new products. But creating new products is only one way to innovate, and on its own, it provides the lowest return on investment and the least competitive advantage. The Ten Types of Innovation® framework provides a way to identify new opportunities beyond products and develop viable innovations.Doblin. (2021). Ten types of innovation: The discipline of building breakthroughs. https://doblin.com/ten-types

What is Systematic Inventive Thinking (SIT)?

Surprisingly, the majority of innovative products and services can be explained by just five patterns as listed in table 1.1 below.Boyd, D. (2014, July 3). Business Innovation Foundations. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/business-innovation-foundations/what-is-innovation-introducing-systematic-inventive-thinking?contextUrn=urn%3Ali%3AlearningCollection%3A6569259175287812096&u=2167290   Check out Drew Boyd’s Pinterest page for multiple examples of each pattern.

Table 1.1 Systematic Inventive Thinking (SIT) – Five Patterns

Subtraction	Remove an essential component from a product and find a new arrangement of the existing components.
Task Unification	Assign a component of a product an additional job, one that it wasn’t designed to do.
Multiplication	Take a component and copy it but change the component in some counterintuitive way.
Division	Take a component or the product itself and divide it along some physical or functional line and then rearrange it back into the product.
Attribute Dependency	The product has a correlation between two attributes of the product and its environment.

Creative Constraint

SIT uses thinking inside the box as a guiding principle, which means using constraints to help you be more creative in solving problems.  Constraints can foster innovation when they represent a motivating challenge and focus efforts on a more narrowly defined path. Having some constraints may incite big thinking, while having too many constraints may limit outcomes. Constraints may include limited time, money, or requiring results to include very specific needs.

Watch “The Power of Creative Constraints” YouTube Video below to learn more about creative constraints.Rodriguez, B. (2010, September 17). The power of creative constraints. [Video]. YouTube. https://youtu.be/v5FL9VTBZzQ Transcript for “The Power of Creative Constraints” Video [PDF–New Tab].  Closed captioning is available on YouTube.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Inspiration or Perspiration

A century ago, Thomas Edison thought deeply about what drives invention or, as we call it today, innovation. One of his famous sayings, “Genius is 1 percent inspiration and 99 percent perspiration,” stresses that innovation involves more than just great ideas. Edison knew from his own experience that the systematic hard work of trial-and-error experimentation paid off. His inventions, like the lightbulb and the phonograph, emerged through thousands of attempts as he refined the process step by step (Otazo, K. (n.d.). Innovation takes perspiration. https://www.strategy-business.com/article/li00010).

Thomas Edison knew breakthroughs do not come from “lightbulb” moments (pun intended). His quote captures this concept perfectly.

Personal Creativity

Not everyone considers themselves creative, but most of us do have the ability to be creative. We use our creative minds more often than we think.  Whenever you solve a problem, try something new, or give advice to a friend, you are probably using creative thought.

Just like doing physical exercise to work out your body, sometimes you need to do mental exercises in order to work out your mind. Watch the video below to learn about the following eight creative thinking tips you can put into practice to help boost your creativity.

1. Schedule Creative Free Time
2. Set a Timer
3. Think Quantity Over Quality
4. Become an “Idea Machine”
5. Switch Up Your Routine
6. Look at Something Familiar Through a New Lens
7. Read More
8. Freewrite More

Watch the “8 Creative Thinking Exercises to Boost Your Creativity” YouTube Video below to see if there is an exercise to boost your creative thinking.Johnson, S. (2010, September 17). 8 creative thinking exercises to boost your creativity. [Video]. YouTube. https://youtu.be/pfg9a9diN40 Transcript for “8 Creative Thinking Exercises to Boost Your Creativity” Video [PDF–New Tab]. Closed captioning is available on YouTube.

There is a misconception that creativity is this thing that happens in the shower, a strike of lightning that you get out of nowhere, but the reality is creativity is not a moment in time, it’s a process and it takes time to develop.

If you were to generate a list of possible solutions to any given problem you may notice that the first few on the list will be similar to ideas other people may also come up with, but as you get to the bottom of the list you may find your ideas become more unique.  This is because we solve problems every day in our lives and we are good at it.  If I asked you how you will get to work today since your car is being repaired at the service center, you might say, “I’ll get a ride with a friend,” or “I’ll take the bus,” or “My mechanic loaned me a vehicle.”  If I then asked you to think of some other ways you might get to work, I’m sure your ideas will become more novel as you provide additional possibilities.  These novel ideas may not always be feasible, but while you are brainstorming new ideas, don’t judge them for feasibility, just get the ideas first (quantity), then later evaluate each idea on how well it resolves the problem or takes advantage of the opportunity.

SCAMPER Technique for Brainstorming

Creative thinking and problem-solving are essential parts of the design process to turn ideas into innovation and break the barriers against creativity. One of the successful methods used in creative thinking is the SCAMPER technique. While there are different creative thinking and problem-solving techniques such as reversed brainstorming, Hurson’s thinking model, the Six Hats of critical thinking, and Lego Serious Play, SCAMPER is considered one of the easiest and most direct methods. The SCAMPER technique is based very simply on the idea that what is new is actually a modification of existing old things around us.Elmansy, R. (n.d.). A guide to SCAMPER technique for creative thinking. https://www.designorate.com/a-guide-to-the-scamper-technique-for-creative-thinking/

What does the SCAMPER acronym stand for?

• S–Substitute (e.g., components, materials, people)
• C–Combine (e.g., mix, combine with other assemblies or services, integrate)
• A–Adapt (e.g., alter, change function, use part of another element)
• M–Modify/Magnify (e.g., increase or reduce in scale, change shape, modify attributes)
• P–Put to other uses (e.g., more than one way to use, more than one function)
• E–Eliminate (e.g., remove elements, simplify, reduce to core functionality)
• R–Rearrange/Reverse (e.g., turn inside out or upside down)Serrat, O. (2009, February 31). The SCAMPER technique. https://www.adb.org/sites/default/files/publication/27643/scamper-technique.pdf

Click on the information icon beside each of the letters below to learn more about SCAMPER.

Transcript for “SCAMPER” H5P [PDF–New Tab].

Creativity exercises offer many benefits for individuals, groups, or companies who use them, including the following:Indeed. (2021, March 19). 18 creativity exercises to improve creative thinking and problem-solving at work. https://www.indeed.com/career-advice/career-development/creativity-exercise

Team Creativity

Team creativity is based on having open debates, and a free flow of ideas. For that to happen, trust must exist among team members. Where trust is lacking–so will creativity.  Below are some ideas on how to enhance creativity and collaboration in teams, as well as some threats to team creativity.

When teams are working creatively during an ideation session there is a common pattern that occurs.  At first, many ideas are shared that are not very unique, then ideas wane, then a spark of inspiration hits the team which drives momentum again but this time with unique ideas which may provide companies with new paths to increasing revenue, market share, and more.  This pattern is known as the shape of ideation and you will read more about this below.

Enhancing Creativity and Collaboration in Teams

1. Complementary Skill Sets. Collaboration works best when team members have complementary and diverse skill sets required to complete the project. Companies may also consider collaborating with customers, experts in the field, or experts in technical, design, marketing, and finance areas.Creativity at Work. (n.d.). 12 ways to enhance creativity and collaboration in teams. https://www.creativityatwork.com/12-ways-to-enhance-creativity-and-collaboration-in-teams/
2. Appreciating Others.  Engaging in purposeful conversations and the ability to resolve conflicts are essential ingredients for collaboration. The team needs time to get to know each other not just as professionals, but as human beings, to build trust through informal social interaction.Creativity at Work. (n.d.). 12 ways to enhance creativity and collaboration in teams. https://www.creativityatwork.com/12-ways-to-enhance-creativity-and-collaboration-in-teams/
3. Open Communication. Encourage people to voice their ideas and opinions. Team members need to know it is okay to share their ideas and opinions, and that this is actually valued. When team members feel comfortable sharing their thoughts, it’s more likely to foster the kinds of discussions required to generate creative solutions.Kelly. (2019, August 22). Four strategies to enhance your team's creativity. https://www.creativityatwork.com/12-ways-to-enhance-creativity-and-collaboration-in-teams/
4. Facilitate Diverse Ways of Working. People have their own ways of doing things. Some people like to work in teams; others prefer to work alone. Some enjoy using a pencil and notepad to jot down their thoughts, while others always make notes on their tablets or make voice recordings on their phones. Managers and team leaders need to allow people to choose how they work – as long as they do their jobs and do them well – they’re happier, and that can prompt more creativity.Kelly. (2019, August 22). Four strategies to enhance your team's creativity. https://www.creativityatwork.com/12-ways-to-enhance-creativity-and-collaboration-in-teams/
5. Prevent Internal Competition. Competition for a promotion, pay raise, a bonus, or anything else among team members has a negative effect on team creativity. Team members will try to promote their own ideas, or even not share ideas within the team, and rather share them outside the team with the team leader, or upper management. No internal competition among team members should exist.Solomon, Y. (n.d.). How to build a brilliantly creative team. https://www.inc.com/yoram-solomon/8-steps-to-build-superior-team-creativity.html
6. Establish Ground Rules. Include rules such as “nobody gets to monopolize the conversation,” and “nobody gets to be quiet all the time.” Establish what happens when someone is late to a meeting. Will you allow using computers and phones in the meeting (hint: do you want their full attention or not?) Make sure you keep a “parking lot” list of things so you do not forget any idea.Solomon, Y. (n.d.). How to build a brilliantly creative team. https://www.inc.com/yoram-solomon/8-steps-to-build-superior-team-creativity.html

Threats to Team Creativity

Social Loafing: This is the tendency for group members to slack off. These members may think their ideas are dispensable or may see other members working hard, and believe they do not need to contribute.Kaur, S. (n.d.). Team making portfolio: Teach creativity. https://sandeepartly.wordpress.com/team-creativity/

Conformity: Members may conform due to the desire to be liked. If they believe their teammates will be critical of their suggestions, they will be more likely to agree rather than disagree.Kaur, S. (n.d.). Team making portfolio: Teach creativity. https://sandeepartly.wordpress.com/team-creativity/

Production Blocking: This can occur when members cannot express their ideas because others are expressing their own. When working alone, individuals can work without interruption of thought, whereas when working in a group, members may forget their ideas or may not get time to speak.Kaur, S. (n.d.). Team making portfolio: Teach creativity. https://sandeepartly.wordpress.com/team-creativity/

Performance Matching: When working in a team for an excessive amount of time, members will start to develop the same tendencies. Members that achieve higher ideals than the group may “lower their standards”, whereas members that work at a slower pace may “raise the bar”. Overall, the team will plateau and may find it more difficult to generate unique ideas over time.Kaur, S. (n.d.). Team making portfolio: Teach creativity. https://sandeepartly.wordpress.com/team-creativity/

Team Ideation Session: Graphing the Process

What happens in our thinking process when we are given a problem to solve in a specific amount of time?  As described by Stefan Mumaw in the LinkedIn Learning, Creativity Boot Camp course, if we graphed this ideation process for a group trying to solve a problem or take advantage of an opportunity, we would see a graph that at first has many ideas, but after a short period of time the group feels they have exhausted all the good ideas, and the ideas stall.  What happens next, someone offers a different, silly, or absurd idea, then more ideas come from that idea and the tide has turned.  The best ideas often come after this turn in the graph.  This is known as the shape of ideation because it consistently reveals itself this way.Mumaw, S. (2014, November 19). Creativity Boot Camp. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/creativity-boot-camp?u=2167290

Barriers to Creativity

Below is a list of some of the things that can be barriers to personal, team, and organizational creativity.Innovation-Creativity. (n.d.). Creativity barriers. https://www.innovation-creativity.com/barriers-to-creativity/#:~:text=Barriers%20To%20Creativity%20Include%3A%201%20Functional%20fixedness.%20Functional,creativity%20but%20to%20most%20other%20things%20too%21%20

1. Functional fixedness. You see objects, components, and things around you, and you can’t imagine them doing different functions than what they’re designed to do.Ozment, D. (2020, September 22). Fixedness: Your main barrier to creative thinking. https://drewboyd.com/fixedness-your-main-barrier-to-creative-thinking/
2. Structural fixedness. This makes it really hard to imagine objects having a different structure than what we’re used to.Ozment, D. (2020, September 22). Fixedness: Your main barrier to creative thinking. https://drewboyd.com/fixedness-your-main-barrier-to-creative-thinking/
3. Relational fixedness. This type of fixedness makes it very hard to imagine two objects having a relationship that wasn’t there before.Ozment, D. (2020, September 22). Fixedness: Your main barrier to creative thinking. https://drewboyd.com/fixedness-your-main-barrier-to-creative-thinking/
4. Self-censorship.  Get the critic out of your mind. Stop telling yourself your ideas are not good enough.
5. Micro-Management. Micro-Management stifles a person’s ability to be creative as micromanagers provide too much detail related to how a particular task or problem should be tackled. This reduces the ability for the person to think for themselves and add their own creative flair.
6. Overthinking. Overthinking about a problem or task uses the logical conscious side of our mind. Often creativity comes from the subconscious mind so rather than overthinking it might be wise to go for a walk or simply start daydreaming.
7. Concerns about Image. Image risks are where people worry about the impression that people will have of them after suggesting an idea.
8. Lack of Time. Lack of time and/or opportunity. People often feel that they are too busy with their day-to-day efforts to have time to focus on being creative. Resolve this by setting some planned time aside each and every day for creative efforts.
9. Lack of Sleep. Lack of sleep not only forms barriers to creativity but to most other things too! Try and lead a healthy well-balanced life with lots of exercise and water and healthy nutrition.
10. Criticism. Criticism from others can off-put you from proceeding any further with your ideas. Try and dismiss negative thinkers or win them over by demonstrating the validity of your idea with a prototype.
11. Rules, Policies, and Procedures. If the organization that you work in has lots of rules, policies, and procedures then these can sometimes stifle creativity due to the bureaucracy that they create. If you can’t advance your project forward without five signatures then you will find it difficult to maintain momentum.
12. Fear of Rejection. Just having that underlying fear that others will reject your ideas can be a barrier to creativity. Work with your passions, enjoy your creative moments, and don’t let others put you off.
13. Stress. Stress is not only a distraction that drains the energy we might channel into being creative, it is also very bad for our health and concentration.
14. Lack of Motivation, commitment, skills to perform creative tasks, or employee preparation to persist.
15. Lack of organizational or managerial support or sufficient resources for creative work.

Importance of Creativity and Innovation to Business

Creativity fuels innovation. Creativity is a thought process, while innovation is an action.  For a business to survive it needs both. Some of the top reasons businesses nurture creativity and innovation include:

1. Innovation helps organizations grow.
2. Innovation keeps organizations relevant.
3. Innovation helps organizations differentiate themselves.
4. Innovation increases productivity in the workplace by sparking excitement and feelings of purpose in employees.
5. Innovation improves a team’s problem-solving skills by challenging the team to dive deeper and develop novel solutions.
6. Innovation helps organizations position themselves as innovators in the marketplace.
7. Innovation helps organizations generate more profits.
8. Innovation helps organizations reduce expenses.
9. Innovation helps organizations attract employees, investors, partners, and contractors.
10. Innovation helps organizations gain a competitive advantage.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

The New Service Landscape

Service innovations take place across all industries and around the world. Of course, this involves service firms, but product-based companies can also develop service innovations.  A service innovation changes the way customers are served to create value for customers and revenue for the company.  Through a new service innovation, a company may increase its revenue due to existing customers spending more, improved positive company image, referrals, etc.

This sector accounts for 75% of Canadian jobs and 78% of the country’s GDP. The sector includes the following sectors; transportation, economic, health care, construction, banking, communication, retail, tourism, and government. As a vital part of the Canadian economy, the most popular sector is retail with some big franchise names including Walmart and Future Shop. In recent years, the financial services, real estate, and communications industries have grown exponentially, especially in the business hubs of Vancouver, Montreal, and Toronto.Canadian Visa. (n.d.). Service industry. https://canadianvisa.org/life-in-canada/key-industries/service-industry

Four Evolving Trends in Service

The nature of services and the pace of change have shifted dramatically in recent years, and mastering the traditional aspects of service delivery will no longer be enough. To seize the opportunities, companies must learn to tap the potential for service innovation made possible by four evolving trends.McKinsey Quarterly. (2015, February 1). Service innovation in a digital world. https://www.mckinsey.com/business-functions/operations/our-insights/service-innovation-in-a-digital-world

1. Higher customer expectations. More than ever, consumers demand greater involvement, customization, personalization, and mobility from services—with immediate results. When they see cutting-edge service innovations in one industry, they expect to find them in others as well; witness the spread of self-service kiosks from airline check-ins to the retailing and hospitality industries.
2. The rise of the mobile Internet. Just about everyone has a cell phone today and the number of apps is extensive. The resulting mobile and self-service possibilities are transforming service delivery. Uber’s disruption of the taxi business is just one prominent example. Advances in digital payments are increasingly spurring mobile commerce, with far-reaching implications in financial services and retailing. Remote access and monitoring in healthcare are also potential game-changers made possible by increased connectivity. The proliferation of smart devices unlocks growth opportunities, reduces the cost to develop services, and dramatically lowers barriers to entry.
3. Big data and advanced analytics. Companies such as Amazon and Harrah’s are known for using customer data to personalize and tailor their services. Continued advances in analytic capabilities allow companies to draw insights from massive, previously untapped sources, leading to new service possibilities.
4. The Internet of things (IoT). The prevalence of connected devices opens up possibilities for proactive, even “touchless” service, as well as new commercial models quite unlike the traditional fee-for-service one.

Service Innovation Examples

An interesting thing about service innovations is that they are often combined with other types of innovations. For example, if you are a customer of Tim Hortons then you may have used their loyalty program. When you place a product order you gain points and when you get enough points you can use those points to purchase a product.  The app is a service innovation for customers as it improves the customer experience and adds value to their transactions.  The app is also a technological innovation as well as a process innovation for the company.  When customers use the points program it changes the payment process for staff and the technology integrates with the payment system which allows the company to gather data about consumer purchases and preferences.

Airbnb’s business is primarily based on service innovation. The creative entrepreneurial innovation allows people to travel and stay at different hosts connecting them in advance. Airbnb is giving tough competition to the hotels in the hospitality industry, thus disrupting the industry, and forcing the existing way of doing things to evolve and the existing companies to innovate to keep up.

Netflix produced a series of disruptive innovations that revolutionized how people get their daily dose of entertainment at cheap prices.

Need a snack on the go? Forgot your toothbrush or charger? It’s not a problem at Grab, a line of taxis in Singapore that offers in-car convenience stores. The simple solution shows that innovative ideas don’t need to be flashy as long as they meet customers’ needs. Providing items to customers when they need them most solves a major pain point.Morgan, B. (2019, October 21 ). 20 fresh examples of customer experience innovation. https://www.forbes.com/sites/blakemorgan/2019/10/21/20-fresh-examples-of-customer-experience-innovation/?sh=7f23d80c7c41

Discover What Customers Want

Many companies start their service innovation journey at the wrong end. They look at their existing services and try to find ways to improve them. For a more promising approach through service innovation, they should begin by asking the following questions.

1. How can we relieve customers from activities they do not like to perform?
2. How can we enable customers to perform activities they cannot do without our service?
3. How can we make it easier for customers to do what they need or want to do?

In order to create break-thru innovations, a company must do more than just add an element or a single attribute to an existing service or product.  Unfortunately, most of the customer surveys businesses use today are trying to do just that, evaluate customer satisfaction based on current attributes. When you ask a customer what they want from their car mechanic they might say, “to pay less,” or “to know my car is repaired and safe to drive, peace of mind,” or “to be quick and save me time by getting me back on the road again.”  In order to successfully innovate, a business must have a very clear and systematic understanding of what they do and how the customer benefits from it.  For example, if the bank offers a drive-through ATM, which is an attribute, the benefit to the customer might be that the bank helps them to save time. If the bank stays open until 10 p.m. they are meeting the customer’s need for convenient hours of service. There is often more than one relationship between the attributes and the benefits. For example, a drive-through ATM may not only offer time savings but also safety, or it increases personal mobility and freedom for handicapped customers who cannot walk to the bank. When you meet with customers to find out what they really want it is helpful to take notes, ask questions, and separate attributes from benefits.Michel, S. (2020, June 4). Service innovation. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/service-innovation/innovation-and-value?autoAdvance=true&autoSkip=false&autoplay=true&resume=false&u=2167290 If an attribute is not a benefit to customers then you may need to consider removing it. Customers will often not pay more for attributes that do not bring them benefits, as from the customers’ perspective this would not be of value.  The formula for customer value can be written as: (Total Customer Benefits – Total Customer Costs) = Customer Value, or (B – C = CV)

Tips for Businesses to Increase Customer ValueFontanella, C. (n.d.). What is customer value? https://blog.hubspot.com/service/customer-value

1. Evaluate your customer experience. Make it convenient for the customer to buy, and provide options in how the customer wants to buy and pay.
2. Focus on more than price. Reduce the price, or don’t, but provide something extra over competition (this could be improved service, better attention, community, improved quality, warranties, and other add-ons to the product or service).
3. Collect customer data. Consider surveys, focus groups, observation, trends analysis, buying behaviour, needs/wants, and preference history.
4. Target your most loyal customers. Keep these customers by providing the benefits that bring them value.
5. Segment your customer base.  Different segments have different needs for different benefits.

Explore the Concept – Attributes, Benefits, Values

If you were to purchase a pair of new running shoes, which attributes would bring you benefits that you consider of value?

Product and service benefits are the features that are most important to the customer. More often than not these are conceptual and change according to the individual shopper or customer segment. Different types of customers will find different attributes valuable.  Some may like the no-tie laces (maybe they have problems with dexterity), while others may be more enticed to buy because of the recycled soles (maybe they have a concern for the environment).  A company will segment its customers and devise promotions to emphasize the benefits that may be of value to specific target groups.  For example, a senior may like the extra cushioning and water repellent attributes, and they may also hope to find arch support.  A business can create a customer segment for seniors (e.g., over 60) and survey these customers or potential customers to determine which attributes would bring benefits of value to that customer segment, then design products and services to provide those benefits.  Offering products or services customers do not need or want will mean the innovation will probably not be successful.

 

 

Now imagine that this same company also offers three services with the purchase of this running shoe: 1) As a customer of the company you can join a loyalty program to collect points and when you have a certain number of points you will receive a discount on your next purchase.  2) This company also offers a running club for customers, in which customers join the group and go running with other avid runners each week. 3) There is a warranty for one year that covers any product defects or issues such as not fitting well or sole wearing out too quickly and they will repair the shoe for free.

Which of the above service attributes would be a benefit to you?  Which brings you added value? Which of these services would you consider of no benefit or value to you?  Why? Can you think of someone else who might enjoy the benefit of these services?

The Customer: The User, The Buyer, The Payer

First, you need to understand the customer roles – user, buyer, payer. The user, buyer, and payer may not always be the same customer.  When you go to the store and buy groceries, you are the user, the buyer, and the payer because you will use the groceries and you selected the store to shop at and you used your credit card to pay.  Now imagine that you are buying groceries for your grandmother who asked you to purchase a few items on a list at a grocery store, and she gave you her credit card to pay for the items.  In this scenario, she is the user and the payer, and you are the buyer as you selected the grocery store to shop at. If she had sent you to a specific grocery store then she would also be the buyer and you are just the lovable delivery person.

If you attend a marketing convention out of town as approved by your manager, the payer of the hotel room is your employer, the user of the hotel room is you, and the buyer of the hotel room is the marketing association since it determined where the conference would be and which hotels would hold rooms for convention attendees.

Another example; if you work in the procurement department at a hospital, your job would be to buy the materials needed by surgeons to conduct surgeries. The surgeons are the users, and the payer is the hospital department that Accounting charges when the invoice is paid.

A deep understanding of the three roles is crucial for innovation success. The user, needs the right materials, in the right place,  at the right time.  They need the materials to do the job they are supposed to do.  The buyer requires a catalogue of all the materials the supplier provides, the prices, and the uses of each product or service. They need to know about warranties, inventory in and out, repair or replacement options, time for delivery, etc.  They must also understand the needs of the users and communicate with them. The payer needs to know what was ordered and if the full order was delivered and which department is paying for the order. They also need to know the budget maximum and communicate this information to the buyer.

When a business tries to understand the customer’s needs they must be specific–they must understand the user’s needs, the buyer’s needs, and the payer’s needs since they might be quite different.  When a company defines a new service innovation the best innovations are those that simultaneously improve the job to be done for the user, the buyer, and the payer.

Aligning Service Innovations

Organizations must align service innovations with the company mission, vision, values and goals as well as with customer expectations. The Customer Star framework (below) helps executives and entrepreneurs align their decisions and actions around what customers really want.

Align with Company Brand

Companies need to align service innovations with the company’s mission, vision, values, and goals to retain existing customers and obtain new customers.  Sharing with customers the company mission, vision, values, and goals will help set customer expectations around product and service offerings and attract customers that want the company offerings.  There is not much sense in offering a sauna at a fitness center if the customers would not use it or if the mission of the fitness center is to offer a quick workout at a low price.  Adding a sauna might be expensive and there would be considerations around safety and hygiene, so not a cheap innovation to implement.  Adding a sauna would probably not bring the benefits the fitness center customers would want; therefore, they would not pay extra to use it, so the company may lose money on this innovation.  If the fitness center is a place that promotes luxury and various spa treatments as service offerings after a workout, then a sauna may be right in line with the company’s mission and vision, and it would bring added value to the customer segment that frequents the fitness center.

To confirm this assumption, the fitness center would need to conduct research through customer surveys or focus groups, for example, in order to gather customer feedback. Psychographics are all about understanding customers’ lifestyles, values, beliefs, and optimizing marketing to demonstrate to customers how the company can fulfill these psychographic variables by providing the benefits sought thus providing customers value.

The fitness center would also conduct a competitive analysis to see if saunas are offered at competitor locations in the area. The company would examine costs and expected returns on investment as well as internal and external strengths and weaknesses, opportunities, and threats (SWOT).  The company might conduct a PEST analysis as well to determine if this innovative idea for a new service offering will be successful. After the research is complete and the results analyzed the company management team would decide if this new service innovation is feasible.

Align with Evolving Customer Expectations

Key areas of customer service have evolved, including the emergence of analytics, personalization, and employee engagement. Companies that thrive in an era of rapidly evolving customer expectations need to align their initiatives accordingly. It’s about going beyond short-term goals to building a self-sustaining customer-centric organization. The companies below are not only part of the service industry — they are also shaping its future. By extension, these and other companies like them are changing the way we live our lives.Scalco, D. (2017, February 19). 5 companies innovating the service industry. https://www.entrepreneur.com/article/287093

1. Facebook, Twitter, Yelp, et al.  Social media sites should be recognized for their role in changing the service industry. Customers are increasingly turning to online outlets to share reviews, ask questions, and solicit feedback from brands that play a role in their lives. These interactions provide companies with an opportunity to learn more about their customers so they can better tailor their services to consumers’ needs.
2. Motif Investing. The personal finance industry doesn’t exactly have a reputation for innovation. Motif Investing is the exception that proves the rule. The company is making investments accessible to a broad segment of the population by creating an investment structure that is affordable and easy to understand.
3. Noma. The restaurant has both driven innovations in the food industry and capitalized on them. Led by world-renowned chef René Redzepi, noma embodies the farm-to-table movement by utilizing local and wildly sourced ingredients, avoiding GMOs, and emphasizing quality at all costs. In the process, it’s put Nordic cuisine on the international map.
4. City CoPilot. More and more individuals and companies are enlisting personalized service from concierge companies—and not just when they’re staying in a hotel. City CoPilot and other innovative concierge companies have moved these services beyond the hotel lobby. Whether clients need assistance with luggage storage and delivery, package acceptance, airport transportation, finding discounted tickets to tours and attractions, or something else entirely, this new brand of concierge is here to make people’s lives easier at all times.
5. UberEATS. Uber has already transformed the service industry with its innovative approach to transportation, but the company isn’t stopping there. It’s now attempting to disrupt the food delivery market with UberEATS. The company has more opportunities for distribution than any other business in the market, and thanks to their pre-existing name recognition, they have had an easy time identifying partners in the restaurant industry. It’s a winning combination that’s threatening even the companies that have long sat at the top of the food delivery chain. 

The service industry entails a vast variety of services ranging from food delivery to digital investing tools. Still, these companies all share something in common. They’re innovating existing services and transforming the country’s economy in the process.

Alignment Tool: The Customer Star Framework

The Customer Star framework created by Stefan Michel helps executives and entrepreneurs align their decisions and actions around what customers really want. In order to successfully implement any service innovation, a firm must make choices in regard to each point of the customer star. Those choices must then align and support each other.  When you apply the Customer Star Framework you can begin with any of its points. Service innovations may fail when the eight dimensions of the customer star are not in alignment. Michel, S. (2020, June 4). Service innovation. https://www.linkedin.com/learning-login/share?account=2167290&forceAccount=false&redirect=https%3A%2F%2Fwww.linkedin.com%2Flearning%2Fservice-innovation%3Ftrk%3Dshare_ent_url%26shareId%3DRwn1bJZ8RrWHRQ%252FYPDxqjg%253D%253D

When using the Customer Star Framework to check service innovation alignment, a company must ask the following questions about the eight dimensions.

1. Customer Segments. Which current and future segments can we identify in our market?  Which of these segments are we interested in? How do we serve different segments differently?
2. Positioning. What does our brand stand for?
3. People. What are the employee skills required? What is the leadership style and how doe it shape the culture in the organization?
4. Information/IT. How do we use the Internet and other IT systems for gathering, storing, and disseminating data? Which analytics do we use to convert data to insights?
5. Products. How do we innovate, manufacture, and distribute our products? How do we customize our products to each customer’s needs? How do we bundle our products with services?
6. Operations. How do we design and manage our processes in all phases of the customer relationship? How do we link customer-facing processes with back-office work? How do we handle variability in terms of customer needs and demand/supply cycles?
7. Partners. In addition to suppliers and distributors, which partners are essential to serve your customers?  What is our organization’s role in providing customer value in the partnership?
8. Profit Model. What are our major revenue drivers, and what are our major cost drivers? How sensitive is the profit model in respect to fluctuating demand and costs?

For example, if you operate a 4-star resort then you need to be sure that your products are of high quality, your employees understand how to provide excellent customer service, and the services you offer at the resort are what your target customers want, thus, will pay for.  If you put a fast-food restaurant in a prestigious, high-class resort, the customers may frown upon it, as they want fine dining and they have expensive tastes.  You may need to go back and determine your resort’s positioning dimension.  If you position the company as prestigious then you need the other dimensions to align with that in order to obtain and retain the customers in the segment you are seeking.  Some brands that are thought of as prestige or luxury brands include Apple, BMW, Gucci, Ritz-Carlton, Tiffany, Rolex, and Cartier. If your resort is to be considered a luxury or prestige resort then you would want to align the eight dimensions accordingly, otherwise, your service innovation may fail to meet customer needs and expectations.  On the other hand, if you operate a resort that is considered a fair price, economy class resort, then you would position your resort that way in your marketing efforts and you would serve the needs of the customer segment who would be spending their money in this type of resort.

Issues Outside The Company

Business challenges and customer dissatisfaction are often due to problems, for which the company is NOT responsible, and to solve them, managers will need to think beyond the firm. Organizations may need to partner with external firms to solve problems stemming from the external environment, they may need to adapt processes to meet new government regulations, or they may need to change their business model in order to remain relevant with changing social trends and customer buying behaviours. There are eight dimensions to the customer star and not all dimensions are equally important in any given setting.

For example, many international students who wish to attend college or university in Canada are told by recruiters from their home country that they can come to Canada and work at the same time they attend school.  When the students arrive they find that it is very difficult to be successful in their studies when they are working 30, 40, 60 hours per week.  Many need the income to pay the bills, they may not have a place to stay, or even understand how much living in Canada costs. Students end up failing many courses due to a lack of time to commit to schoolwork, becoming depressed, and some end up spending far more money than they budgeted for on college course fees when they have to retake courses they failed. While this may not be an issue directly related to the specific Canadian college they attend, it is probably an issue the Canadian colleges and universities need to address with the recruiting agencies in foreign countries.  What might the colleges do to improve this situation? The colleges might implement an orientation course that all international students must take before they arrive in Canada or before they enroll and pay fees at a Canadian institution.  This would set the expectations for students before they spend their money as well as acclimatize students to Canadian culture and Canadian college expectations. Can you think of other possible solutions?

Another example might be a retailer who is always out of stock with specific items.  Customers may become upset or dissatisfied with the retailer when the items are not in stock.  This problem may be an internal issue pertaining to incorrect ordering, but what if the issue is with the supplier?  The retailer will have to decide if they need to switch suppliers, but what if they are locked into a contract, what then?  During COVID many products were in short supply, including bicycles, toilet paper, hand sanitizer, refrigerators, and kayaks.  Production shutdowns sent the price of lumber sky-high. Months spent quarantining led homeowners to spend more time outdoors, some taking on more do-it-yourself (DIY) renovation projects. And the fear of the unknown led to hoarding and stockpiling.Metz, J. (2021, October 22). Car chip shortage 2021: What's going on? https://www.erieinsurance.com/blog/car-chip-shortage-2021

Nearly two years after the pandemic began, the global supply chain mostly stabilized, but there was still one industry where shortages continue to abound: semiconductor chip manufacturing and the auto industry was one of the hardest hit. A semiconductor chip, also called a microchip, serves as the “brain” of modern electronics. With every new model, cars and trucks feature bigger infotainment systems and a host of other high-tech car safety features. Each of these technology-packed features relies on semiconductor chips. Building semiconductor chips is an extremely complex, expensive, and time-consuming process. For that reason, there are only a handful of chip manufacturers in the world, and all of those manufacturers were currently operating at full capacity.Metz, J. (2021, October 22). Car chip shortage 2021: What's going on? https://www.erieinsurance.com/blog/car-chip-shortage-2021

You may have found it hard to visit your favourite retailer, see a doctor, or get into a restaurant during COVID.  This was not the organization’s fault or problem, but a larger national and global problem.  The retailers, restaurants, and other service companies must abide by government health regulations and they took the health safety actions they were told to take.  Some retailers and restaurants began offering services such as pickup, delivery, and online ordering with pickup in the parking lot.  You could order groceries and pull up to the grocer’s location and the staff would load your groceries into the trunk of your vehicle.  Some companies already had those services in place which made it easier and quicker for them to adapt to COVID health regulations. These were some of the service solutions retailers came up with while they were NOT allowed to serve customers in-store or in-person or were restricted on the number of patrons they could have in the physical store at one time.

End-of-Chapter Exercises

 

1. Changes Impacting the Service Sector. Research one of these companies and explain how this company is addressing the changes impacting the service sector: Bank of Nova Scotia, Canadian Tire, PepsiCo, McDonald’s, IKEA.s that relate to this chapter’s content?  If so, what does it say?
2. Walmart Service Innovation. Conceptualize five ways in which Walmart could innovate its customer service offerings.  Share your thoughts with the class and/or professor.  Do your ideas align with Walmart’s mission, vision, values, and goals?  Do your ideas align with the customer segment that shops at Walmart?  Do you think your ideas will be successful? Why or why not?
3. Nordstrom Customer Insights. Nordstrom is known for customer support excellence. Search the Internet to find information about how the business is using AI-powered analytics and customer insights to transform its digital approach.  Discuss your findings with the class and/or professor.
4. McDonalds Customer Star Framework.  Try applying the Customer Star Framework for McDonalds.  Start with Products bing Fast Food, and Profit Model being Franchised with Low Labour Costs.  Fill in the other points on the Customer Star Framework as you can and determine with a partner, your class and/or professor if the Customer Star dimensions are aligned. You may wish to watch the LinkedIn Learning module, Service Innovation by Stefan Michel who created the Customer Star Framework (you may require a subscription).
5. User, Buyer, Payer Scenarios. Come up with three (3) different scenarios, one where you are the user,  buyer, and payer. A second scenario in which you are only the payer and someone else is the user and buyer. A third scenario in which you are the user and someone else is the buyer and payer. Share with a partner, the class and/or the professor and see if they agree with your positions in these scenarios.
6. Services Customers Value. Assume you own a Hair Salon, besides cutting hair, what other services could you offer customers that would be a benefit they would value?  Consider the value for different customer segments.  Discuss with the class and/or professor.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Business Process Improvement

Process innovation is probably the least attractive form of innovation. It is the combination of facilities, skills, and technologies used to produce, deliver, and support a product or provide a service. There are many ways business processes can be designed or improved. Process innovation can include changes in the equipment and technology used in manufacturing (including the software used in product design and development), improvement in the tools, techniques, and software solutions used to help in the supply chain and delivery system, changes in the tools used to sell and maintain goods, as well as methods used for accounting and customer service.Differential, (2020, March 20). Three types of innovation: Product, process, and business model. https://www.differential.com/posts/the-3-types-of-innovation-product-process-business-model/

Good business processes enable companies to satisfy both customers and employees. Good business processes can drive reliable and consistent results and support company growth. A business process is a sequence of steps progressing toward a business goal. This sequence of steps can be clearly depicted using a flowchart and may also be referred to as a business method.  Developing and implementing business processes can help a company improve efficiency, consistency, and quality. It can also reduce costs and risks. Business processes occur at all organizational levels and some are visible to customers, while others are not.

Types of Business Processes

1. Management Processes: The processes that plan, organize, coordinate and control all the functions of the business.
2. Operational Processes: The processes that constitute the core business of the organization and create the primary value stream.
3. Supporting Processes: The processes that support the core processes. They help the business create an environment where the core processes can work better. Examples include accounting and technical support.

Often processes are documented and taught to employees. Employees are expected to follow the business processes as the processes support the company brand, function, mission/vision/values/goals, and service objectives.  A great example of a company using processes to streamline operations and maintain consistency and quality is McDonald’s fast-food restaurant.  McDonald’s operating processes would include taking orders, making food, and serving it to the customers.  The processes for making fries, burgers, and pies are each documented and employees are trained on these processes.  Machines are used to cook and warm food and timers are used to enable employees to cook each hamburger or Egg McMuffin exactly the same way each time for every customer.

A simple business process might include the steps an employee follows to take a pizza order over the phone or the steps a college registrar’s office takes to enroll a student in a course.  More complex processes might include the steps required to purchase new medical equipment for a hospital, the steps a furniture company follows to manufacture their most popular desk or the steps an executive chef takes to prepare a dinner for six customers.

New employees have a good chance of job success once they learn the business processes. Processes in the kitchen at a restaurant might utilize ingredients, utensils, cooking equipment, recipes, etc. Processes in an office might utilize computers, software, office space, people, documents, etc. Processes in a paper factory might utilize people, machines, safety equipment and procedures, raw materials such as pulp/paper, etc.  Most big companies have hundreds of interconnected business processes. Knowing how to design, manage, and improve business processes gives companies the power to manage and grow the business.

Good business processes can improve customer satisfaction while missing or badly designed processes can have a negative effect on customer satisfaction. Assume you are a student at a college and you wish to add another course to your schedule, which includes paying additional fees. If there is a good process in place, all employees and computer systems you interact with consistently guide you in the same direction in order for you to complete the process of adding and paying for an additional course. If the process is not clearly designed or it is missing, then employees will be confused and may have their own personal way of doing tasks and systems may not be designed for self-service tasks that enable you to add a course to your timetable.

Business Process Requirements

A good business process meets the following requirements. Davila, E. (2019, February 25). Business process improvement. [Video]. LinkedIn Learning. https://www.linkedin.com/learning-login/share?account=2167290&forceAccount=false&redirect=https%3A%2F%2Fwww.linkedin.com%2Flearning%2Fbusiness-process-improvement%3Ftrk%3Dshare_ent_url%26shareId%3D8zimyiAZQOqi27vc6W5bzA%253D%253D

1. Provides clear instruction
2. Answers frequently asked questions
3. Teaches new things
4. Measures success
5. Provides corrective actions

Why do bad business processes exist?

1. Assumptions. Often companies assume they know what customers want. It is important to challenge these assumptions through research and analysis.
2. Ambiguity. Employees are uncertain of the process. Maybe the process needs more clarification.
3. Miscommunication. The process may not be communicated to employees and employees develop their own processes.
4. Misalignment. Advertising and actions are not aligned with the goals of the process.

Since processes are interrelated, each process should consider its relationships with other processes. Good business processes always need to be looking forward and require periodic review and revision to keep up with changes in the internal and external business environments.  If a company experiences massive growth, will the processes still be effective and efficient?  If a process is good at supporting 20 customers, does it still work when supporting 200 customers? Some processes cannot be changed significantly due to a lack of availability of technology and tools. Maybe the steps in the process are not the problem, perhaps the company tools and technology need to be improved. Companies need to ensure their processes are built for both present demand and future growth; that processes are scalable.

Lack of a good process can lead to inconsistency, time loss, employee frustration, customer frustration and dissatisfaction, lost revenue, etc. So you can see why it is important to have good processes in place and ensure staff understands these processes and apply them consistently.  Without a good business process company growth and success are difficult to achieve.

Not only is it important to have processes but it is also equally important that these processes be effective and efficient in reaching the goal.  If the goal is to add a course to your college timetable, then the process and procedures you follow to do that should help you obtain that goal (effective) and should do it in a timely and user-friendly way (efficient).   When processes are created with these things in mind, they increase employee effectiveness and efficiency, maintain consistency and quality, and improve customer satisfaction. Customers continue to shop with a business because of reliability in product or service quality, price, design, etc. Employees become good at their jobs because they follow the business process they were given.  Once good processes are established at one business location, the organization can adopt the same processes at multiple locations (just like McDonald’s does).

Cow Path Theory

The Cow Path Theoryis a theory that many organizations have processes they have been following for years and may not notice that these existing processes may no longer be efficient or effective.  New employees follow the processes they are told to follow and often without questioning them because new employees don’t want to make a fuss or they feel the process must be right because someone in the company developed it and everyone has been following it for years. Existing employees may continue to follow the old, outdated processes because they are used to them and don’t wish to put in the effort to learn something new, or they don’t feel it is their job to question the processes that have been in place for many years.

Basically, when leaders follow the cow path they are just doing things the way they have always been done without making changes to it. But there are exceptions to this rule. Just because something has always been done a certain way doesn’t mean that it can’t be improved upon or even replaced with something better. Think about how many times you’ve ordered a pizza. It’s not like the process of ordering one has changed much in recent years, but it is now more efficient and effective than ever before.  A problem with “cow paths” is that they are so common that no one notices them. The more common something is, the less likely it is that anyone will notice when it’s being done wrong. This means that people who are in a position to change things have little incentive to do so. Cow paths are the result of an unhealthy work environment, where there is no accountability for poor results, and where people are rewarded for failure. Cow paths are usually difficult to detect because they tend to be systemic and non-discriminatory. “Don’t pave the cow path” often refers specifically to businesses that create their own way of doing things in order to innovate and improve on what has been done before. Narayanamurthi, (2021, September 30). Paving the cow path: Why you shouldn't pave the cow path in your business. https://agileseeds.com/paving-cow-path/#:~:text=Cow%20Path%20Theory%20The%20Cow%20Path%20Theory%20is,if%20it%20may%20not%20be%20the%20best%20option.

Process Improvement Steps

The first step in improving any process is setting a goal, then the next step is measuring your progress toward that goal.  If there is an existing process in place then you must ask the following questions. Is the business process currently effective in achieving the goal it was designed to do? Is the original goal still the goal to achieve now? Is the original goal efficient?  If the answer to any of these questions is “no” then there may be an opportunity to improve the business process.

Watch the “Business Process Improvement Tutorial for Beginners” YouTube video below for an introduction to business process improvement.Invensis Learning. (2021, February 25). Business process improvement tutorial for beginners.  [Video]. YouTube. https://youtu.be/creyvNYr-e4 Transcript for “Business Process Improvement Tutorial for Beginners” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Before a process can be improved it must be measured so the company will know if the changes have made a difference.  For instance, you will want to know if the changes in results were due to something you did, or something else, or just pure chance?  There is a 50/50 chance that this year will be better than last year even if you make no changes.Croft, C. (2020, January 9). Business improvement foundations. [Video]. LinkedIn Learning. https://www.linkedin.com/learning-login/share?account=2167290&forceAccount=false&redirect=https%3A%2F%2Fwww.linkedin.com%2Flearning%2Fprocess-improvement-foundations%3Ftrk%3Dshare_ent_url%26shareId%3DAyJebGv3QFGaHiNzNhjo2A%253D%253D

Measure the Right Things

Most process improvements have one or more of the following goals: improve quality, decrease lead time (the time between the initiation and completion of a production process), or decrease costs.  Should each goal be measured? Which goal should get priority?  It is difficult to achieve all three goals at the same time.  For example, if a company reduces costs, that may also reduce quality or something else that is important. If time is reduced, that may increase costs.  A company can reduce costs by reducing quality, while higher quality products may take a longer time to produce.

Never try to measure just one number without context.  For example, if sales revenue has gone up, that seems good, but what else is happening?  Was there a sale, were employees reducing prices so they could sell more and gain higher commissions or has something else affected revenue?  If customer complaints have increased, at first this seems bad, but what if employees have just gotten better at listening to customers and reporting complaints, or maybe you implemented an online complaint process that has resulted in customers being able to submit complaints more easily and this has contributed to the rise in complaints. So never measure just one number.

If you find out that your school’s student satisfaction score is 5% worse than another school you must question what “worse” really means, and whether or not 5% is really significant. Maybe your school is better at other things and worse at one thing.  Maybe it is just that this year your school was under construction and that affected student satisfaction negatively, but usually your school has much higher scores.  Take measurements as a starting point to asking the question “why?” (Why are these numbers as they are?) This will help you understand the causes of the lower numbers or scores so you can begin to take action.Croft, C. (2020, January 9). Business improvement foundations. [Video]. LinkedIn Learning. https://www.linkedin.com/learning-login/share?account=2167290&forceAccount=false&redirect=https%3A%2F%2Fwww.linkedin.com%2Flearning%2Fprocess-improvement-foundations%3Ftrk%3Dshare_ent_url%26shareId%3DAyJebGv3QFGaHiNzNhjo2A%253D%253D

Implement a Process Improvement Plan

Given how process improvements deliver a range of organizational benefits from better communication to increased profitability, it’s essential to know how to implement a process improvement plan. Listed below are the steps to do so. Izquierdo, R.  (2020, November 17). How to implement process improvements for your small business. https://www.fool.com/the-blueprint/process-improvement/#:~:text=%20Process%20improvement%20steps%20%201%20Step%201%3A,real%20life.%20Because%20modifying%20a%20process...%20More%20

1. Identify the improvement opportunity.  Map the current process. Identify the pain points (things that are not working well).
2. Obtain stakeholder buy-in. Clarify stakeholders’ roles and degree of involvement with the process change. Explain the rationale for change.
3. Design the process improvement plan. Determine the changes required to improve the process and decide how you will measure the effectiveness of the changes, evaluate any risks, and identify how the changes will affect the customer experience; for example, introducing a technical solution to streamline the workflow helps, particularly if the solution automates many of the process steps. Transforming processes affects an organization to varying degrees depending on the extent of the changes. If the process improvement is larger than small adjustments affecting a single team, project planning may be needed with a full project plan incorporating the five project management process groups. This includes identifying budgets to cover costs like training and any additional resource requirements needed to execute the changes.
4. Test the changes. Often when designing new processes a company might test in a single department at a single location before implementing the changes in all departments at multiple locations, or before integrating a new technology system with an old technology system.  Take time to test thoroughly and compile measurable results for analysis.  Make adjustments as needed, then when you are sure the new process works according to plan then you can roll it out across the organization.
5. Monitor and optimize. Even after thorough testing, process improvements require daily monitoring in the early weeks of a rollout to catch any issues that may have been missed during the test phase. The monitoring should compare the results of the improved process against the goals identified at the start of the project.  Collect more feedback from stakeholders and continue to optimize until you have met or exceeded all benchmarks for the process.

Once a company improves a process, the reality is that it must review the process again in the future. Business goals, market forces, and new technologies evolve, making established processes and procedures inefficient or obsolete. Rather than execute a big project whenever a change is required, most organizations adopt an approach of small, iterative, improvements that happen routinely over time.

Tools and Techniques for Improving Processes

The tools and techniques most commonly used in process improvement are:

• Problem-solving methodology, such as DRIVE
• Process mapping
• Process flowcharting
• Force field analysis
• Cause & effect diagrams
• CEDAC
• Brainstorming
• Pareto analysis
• Statistical process control (SPC)
• Control charts
• Check sheets
• Block Diagrams
• Flowcharts
• Bar charts
• Scatter diagrams
• Matrix analysis
• Dot plot or tally chart
• Histograms

The most commonly used business process diagramming tools are Business Process Modeling Notation (BPMN), Data Flow Diagram (DFD), and the Unified Modeling Language (UML).  BPMN (Business Process Modeling Notation) is a graphical method of representing business processes within a business process diagram. ​BPMN diagrams help the whole team see the flow of the process.  For example, the process improvement team may be a cross-functional team consisting of various stakeholders, such as technical personnel who manage Information technology, managers responsible for the process as well as managers of other departments who may be affected by the process change, employees who apply the process, and possibly users (customers, clients, students).

Review the example below of a partial BPMN diagram for a Fast Food Restaurant, Customer Order Process.

The BPMN above diagrams the process for the current way the customer order process happens (current state).  There are many ways to create this diagram and before starting to diagram the business analyst must first gather information from the stakeholders who implemented, manage, and use the process so as to gain an understanding of who does what, when things get done, how things get done, what is necessary to do and when one step depends upon another (triggers).  Once that information has been gathered and analyzed, the business analyst diagrams the process and then gains confirmation and approval from the stakeholders that the diagram does indeed reflect what is currently happening.

After diagramming and gaining an understanding of the current state of the process (the way things are done),  the business analyst will analyze the process to determine if improvements could be made. They will question the stakeholders on pain points, what works, what doesn’t and ask them to share their goals for improvements. The business analyst will then diagram a future state process (what the process will be after the improvements are implemented) and again, gain approval for the proposed changes.  Then the changes are implemented, first on a small scale or in one location only, to ensure all works as planned.  Maybe a few adjustments are made, then the new process is implemented fully.

In the example above you see the partial process you see is diagrammed in a pool called “Fast Food Restaurant Customer Order Process”  Each role gets its own lane (swimlane) and each role is an actor (person or system that is part of the process). The customer can be diagrammed in their own pool or within the company pool.  If we follow the process flow we see that the process begins with the customer (start symbol), then the customer makes a decision (Xor gateway) to either use the drive-thru or go into the restaurant to eat.  After that, the order is placed with the corresponding actor (employee) who then enters the order into the enterprise resource system (ERP) and collects the payment from the customer.  The order and the payment details are sent to the ERP (diagrammed in its own lane (swimlane)).   After that, the process flow comes back together (convergent gateway) and the customer waits for their meal (timer). What do you think the next step would be? That’s sort of a trick question because many things are happening while the customer waits. There are actually quite a few more steps because the kitchen staff would need to prepare the meal, a staff member would get the drinks/fries, a staff member would package the meal, and a staff member would deliver the order to the customer either at the drive-thru or front counter.  These tasks may be done by the same staff member or several staff members. You see there are lots of things to think about when diagramming a business process.  Learning how to diagram processes is a course in itself, but don’t let that stop you from giving it a try.  Check out the chapter exercises below for some ideas.

Process Improvement Methodologies

Process improvement is so important to business success that a number of methodologies have developed over time to address this key concept. Listed below are some of the most common process improvement models.Izquierdo, R.  (2020, November 17). How to implement process improvements for your small business. https://www.fool.com/the-blueprint/process-improvement/#:~:text=%20Process%20improvement%20steps%20%201%20Step%201%3A,real%20life.%20Because%20modifying%20a%20process...%20More%20

1. Six Sigma. One of the most famous process improvement frameworks is Six Sigma. It is a set of techniques designed to make business processes more effective and efficient. In addition to establishing a culture dedicated to continuous process improvement, Six Sigma offers tools and techniques that reduce variance, eliminate defects, and help identify the root causes of errors, allowing organizations to create better products and services for consumers.  General Electric, one of the most successful companies implementing Six Sigma, has estimated benefits on the order of $10 billion during the first five years of implementation. GE first began Six Sigma in 1995 after Motorola and Allied Signal blazed the Six Sigma trail. Since then, thousands of companies around the world have discovered the far-reaching benefits of Six Sigma.ISIXSIGMA, (n.d.). What is Six Sigma? https://www.isixsigma.com/new-to-six-sigma/getting-started/what-six-sigma/
2. Kaizen. When applied to the workplace KAIZEN™ means continuing improvement involving everyone – managers and workers alike. This methodology originated in Japan, aims to eliminate all waste from process flows to achieve a high level of efficiency and productivity. Kaizen is known for its team approach where everyone in the organization shares ideas and works together to keep improving every area of a business. If mistakes occur, the goal is to learn from them as part of the cycle of continuous improvement.
3. PDCA (plan-do-check-act). Plan-do-check-act (PDCA) outlines a four-step scientific approach spelled out in its name. First, identify the problem or opportunity and the improvements you hope to achieve. Once a potential solution is identified, test it safely with a small-scale pilot project. Then, analyze if the changes had the desired impact. Finally, you take action based on your data analysis.
4. BPR. Business process re-engineering (BPR) is a framework that tackles process improvement at scale. Rather than address a small component of an overall workflow, BPR attempts to address issues and eliminate unnecessary steps by holistically redesigning an entire process from end to end. The changes can be so substantial that a change management plantypically accompanies the use of BPR.Izquierdo, R.  (2020, November 17). How to implement process improvements for your small business. https://www.fool.com/the-blueprint/process-improvement/#:~:text=%20Process%20improvement%20steps%20%201%20Step%201%3A,real%20life.%20Because%20modifying%20a%20process...%20More%20 
5. Gap Analysis. A gap is a problem, issue or challenge, and could be an opportunity for improvement. Gap analysis compares two different states of something, the current state, and the desired state. It is mainly used to assess where a company or process is today (current state), where it needs to be in the future (future state), and how the gap between current and future states can be closed. Gap analysis is also known as need analysis or needs assessment.  You can implement this methodology to confront many types of gaps such as gaps in operational processes, product features,  profitability, and labour shortages.
6. Process Mapping. A useful approach that applies careful analysis and a visualization tool to address process issues — or to create a new workflow from scratch — is process mapping. In this method, you create a document that details the steps in a procedure, usually captured in a flowchart. The document allows you to see the entire process and identify areas to change. It then serves as a reference tool for subsequent process changes, or for writing a runbook.Izquierdo, R.  (2020, November 17). How to implement process improvements for your small business. https://www.fool.com/the-blueprint/process-improvement/#:~:text=%20Process%20improvement%20steps%20%201%20Step%201%3A,real%20life.%20Because%20modifying%20a%20process...%20More%20 

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Definition of Sustainable Innovation

What is meant by sustainable innovation? Sustainability is the capacity to endure in a relatively ongoing way.  Sustainable innovation means that companies seek out ways in which to sustain continuous innovation/improvement for company growth, competitive advantage, increased market share, etc. The right company structure can help make innovation a sustainable practice. Organizations cannot afford to put resources (time, people, money) into innovating only to have these innovations fail.  Companies structure for innovation to help sustain, or maintain, ongoing innovation in an effort to stay competitive in their markets. Allocating resources appropriately, ensuring feasibility, and reporting a return on investment are important steps in creating a sustainable innovative business environment.

The term sustainability is also used to refer to environmental sustainability.  Environmental sustainability focuses on acting in a way that ensures future generations have the natural resources available to live an equal, if not better, way of life as current generations. Many innovations today are focused on solving environmental issues. The Sustainable Development Goals (SDGs) of the United Nations are broad and ambitious, calling on all countries – be they upper, middle, or low income – to make tangible improvements to the lives of their citizens. The ‌goals (shown below) ‌encompass social, environmental, and economic aspects.

Our world has grown increasingly complex, and it’s no longer enough for individual organizations, companies, or even governments to apply superficial fixes of their own making to chronic problems. Solutions that are not inclusive or do not consider root causes are by definition short-sighted. Short-sighted solutions may not continue to work over time. Societal issues like poverty, social inequality, racial injustice, and food insecurity, to name a few, require a new kind of collaboration between the business, the nonprofit, and the government sectors.Boylston, F. (2017, November 6). Learning design for sustainability. [Video]. LinkedIn Learning. https://www.linkedin.com/learning-login/share?account=2167290&forceAccount=false&redirect=https%3A%2F%2Fwww.linkedin.com%2Flearning%2Flearning-design-for-sustainability%3Ftrk%3Dshare_ent_url%26shareId%3DWgJ22t4YRx2GomU3NV1y6A%253D%253D

Sustainability and innovation go hand in hand. One thing that the green building movement is achieving is that it’s challenging our community, architects, engineers, building owners, lenders, appraisers, and others, to think differently from their predecessors, or even from themselves. In less than a decade, the green building movement changed the entire building industry and manufacturing industry for construction products and equipment. With the increased demand for green and healthy materials, efficient equipment, and fixtures, green buildings became cost-effective and achievable.Gin, F. (2018, May 4). Green building concepts foundation. [Video]. LinkedIn Learning. https://www.linkedin.com/learning-login/share?account=2167290&forceAccount=false&redirect=https%3A%2F%2Fwww.linkedin.com%2Flearning%2Fgreen-building-concepts-foundations%2Fleadership-and-innovation%3Ftrk%3Dshare_video_url%26shareId%3DJ6cZhMC3S3SiPtAfLeJSwQ%253D%253D

Sustainable Innovation Collaboration

The Ivey Innovation Learning Lab is a new approach to learning that builds unique insights from leading academic thinking and peer-to-peer dialogue with fellow leaders. Participants come from business, government, and academia. The Lab consortium knows that the way in which people live and work is being profoundly disrupted. The knowledge and tools of the past will not necessarily help navigate the future, nor solve the urgent and complex challenges facing society and business.

Watch the “Shaping the Future of Innovation”, Ivey Business School YouTube video below to learn about the Ivey Centre for Building Sustainable innovations.Ivey Business School. (2019, November 4). Shaping the future of innovation. [Video]. YouTube. https://youtu.be/yHr1QAQycIE Transcript for “Shaping the Future of Innovation” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Examples of Sustainable Innovations

Eco-friendly Biofuel. Through sustainable innovation, companies can invent and offer novel products or services that directly contribute to achieving sustainability. For example, Bio-bean, a British startup, developed an eco-friendly biofuel made from coffee waste to help power London’s double-decker buses. Bio-bean also upcycles spent coffee grounds into eco-friendly products such as coffee logs and coffee pellets—alternatives to carbon-heavy fuels such as coal briquettes and imported wood logs. Bio-bean is using material previously considered waste, contributing to a circular economy while generating approximately $10 million (USD) in annual revenue in 2020.Lee, J. Y. (2021, October 19). What is sustainable innovation? https://www.nbs.net/articles/what-is-sustainable-innovation-and-how-to-make-innovation-sustainable#_ftn1=

Fairly-sourced Smartphones. Sustainable innovation is not only about inventing novel products or services. Firms can also innovate sustainably while offering existing products or services when they change their processes. Process changes can occur in many areas, e.g. design, production, marketing, and even HR. For example, Fairphone, a Dutch social enterprise, offers consumers fairly-sourced smartphones. Unlike bio-bean, which created novel products (i.e., logs and pellets made out of coffee waste), Fairphone products do not have any new technical features. Instead, Fairphone dramatically changed the smartphone production process to make it more responsible and sustainable. They use recycled and responsibly mined materials and provide their workers with fair wages and good labor conditions. Because approximately 80% of the emissions of a smartphone come from its production, Fairphone designs its phones to last. They have a modular design which makes repairs and upgrades easier, thereby significantly reducing e-waste.Lee, J. Y. (2021, October 19). What is sustainable innovation? https://www.nbs.net/articles/what-is-sustainable-innovation-and-how-to-make-innovation-sustainable#_ftn1=

Smog Vacuum Cleaner. Daan Roosegaarde is the mastermind behind the world’s first smog vacuum cleaner. The Smog Free Tower measures almost 23 feet high (7 meters) and sucks in polluted air, cleaning it through a process of ionization before releasing it again. At its peak performance, the tower cleans 30,000 m3 of air per hour.  Thanks to Roosegaarde’s design, you can even wear rings made from the compressed smog particles collected from the tower. By buying and wearing a Smog Free Ring, you’re contributing to over 10,700 square feet (1000 square meters) of clean air. The project has garnered a lot of attention since its inception, winning multiple awards. Recent tower campaigns have been launched in South Korea, China, the Netherlands, Mexico, and Poland.Alexander, D. (2020, November 26). 21 sustainability innovations that might just change the world. https://interestingengineering.com/21-sustainability-innovations-that-might-just-change-the-world

Solar Glass. Solar glass could change the way we create homes and commercial buildings. Researchers at the University of Michigan are developing solar glass, a sustainable engineering project that has generated a lot of buzz in recent years. Just as the name implies, solar glass would be able to capture and store solar energy. According to the research team, 5 to 7 billion square meters of usable window space exists, enough to power a full 40% of US energy needs using solar glass.Alexander, D. (2020, November 26). 21 sustainability innovations that might just change the world. https://interestingengineering.com/21-sustainability-innovations-that-might-just-change-the-world

Edible Cutlery. A green alternative to plastic cutlery, Bakey’s edible alternative comes in three different flavors—plain, savory, and sweet. They’re 100% natural and will biodegrade if not consumed.Mishra, A. (2017, January 15). Bakeys editable cutlery--an Indian innovation. https://discoverfoodtech.com/bakeys-edible-cutlery/

Water Capture. Some innovations are the result of using nature as a design mentor (biomimicry), for example, recent advancements in fog catchers or netting systems in arid climates help communities capture water from the morning fog and were modeled on an understanding of how the texture on the Namibian Desert Beetle’s forewings captures moisture so efficiently. The Biomimicry Institute provides learning journals that can help designers create a strong foundation for further learning. They have also created an amazing website called “Ask Nature”.Boylston, S (2017, November 6). Learning design for sustainability. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/learning-design-for-sustainability/a-diversity-of-sustainable-design-approaches?

Difference Between Sustainable Innovation and Traditional Innovation

Both traditional and sustainable innovation involves developing new products, services, or processes. Three core features set sustainable innovation apart.

1. Sustainable Business. Sustainable innovation intentionally aims to “meet the needs of present generations without compromising the needs of future generations.” It requires businesses to actively incorporate issues such as those defined by the United Nations Sustainability Goals. Companies that engage in sustainable innovation think long-term, about aligning with consumer demands for fair working conditions, environmentally friendly processes and products, improvements in communities, etc. These companies understand that consumers evaluate how ethical and sustainable an organization is, and base their decisions on whether or not to support a business on these evaluations.Day, J. (n.d.). Sustainable innovation: Explanation and examples. https://ideascale.com/what-is-sustainable-innovation/
2. Corporate Culture. Unlike traditional innovations that are mostly performed within a separate R&D department or unit, sustainable innovations are likely to be more successful when they are deeply embedded in the firm’s culture. When sustainability is not part of the corporate culture, the pursuit of short-term profits will kill sustainability-oriented creative ideas without giving them sufficient time to mature. Sustainable innovation is disruptive because it can result in better business models, improved processes, streamlined resource flows, reduced waste and cost, and create new market segments entirely, making it harder for corporations to defend the status quo.Lee, J. Y. (2021, October 19). What is sustainable innovation? https://www.nbs.net/articles/what-is-sustainable-innovation-and-how-to-make-innovation-sustainable#_ftn1=
3. Systems Thinking. Sustainable innovation is more collaborative because it is a cross-discipline concept. Companies must reach out across industries to unlock the value of sustainable innovations. It changes the corporate “value chain” to more of a “value web.” Companies consider how their innovations affect various stakeholders, the environment, and society.Day, J. (n.d.). Sustainable innovation: Explanation and examples. https://ideascale.com/what-is-sustainable-innovation/

Facilitating Change Through Sustainable Innovation Design

The Institute for Manufacturing at the University of Cambridge crafted a chart of increasingly complex approaches to sustainability for designers.Boylston, S (2017, November 6). Learning design for sustainability. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/learning-design-for-sustainability/a-diversity-of-sustainable-design-approaches?

1. Green Design. Green design is the most basic level as it describes design efforts that optimize individual aspects of product design, for example, replacing virgin plastics with recycled plastics.
2. Eco-Design. The next level is eco-design because it goes beyond single materials and focuses on the life cycle of the entire product. For example, selecting low-impact material choices, optimized manufacturing, efficient distribution, and optimized product lifetime.
3. Sustainable Product Design. This approach added aspects of social fairness to the design equation, so it is only at this point that design can be considered to address the triple bottom line.
4. Design for Sustainability. This is the point where design no longer focuses only on design for products but rather a systemic lens is being applied. Design for sustainability includes four domains: design for symbolic and visual communications, design for material objects, design of activities and organized services, and design for complex systems or environments for living, working, playing, and learning. Issues of democracy and justice are also incorporated into this lens.
5. Transformative Design. Includes all of the above and adds the design of entirely new ways of thinking about the human experience in the future. This is often achieved through creating solutions that highlight future ways of living.

Sustainable design continues to evolve with new technology and understanding. Architects and designers are thinking into the future and creating buildings based on a broader concept of sustainability; one that embraces more than improved energy performance. With building design having a profound impact on the environment, its occupants, and the economy, architects and designers have a unique ability to impart real positive change.Terramai. (n.d.). 6 famous architects share their top sustainable design tips. https://www.terramai.com/blog/6-famous-architects-share-their-top-sustainable-design-tips/

Modern society has become very good at creating linear systems of production, the take-make-waste process. In these systems, we extract raw materials and put them through a process of manufacturing that includes intensive material and energy input as well as a lot of transportation from one manufacturing plant to another. This is considered the upstream phase because it occurs on the way to the user. Consumers then use the products until they become obsolete which can mean everything from being no longer in style to breaking, to requiring replacement upgrades. Much of this obsolescence is actually built into the design in order to generate profits for companies, but this is a narrow way of thinking about long-term business success. Finally, once a user is done with a product, they discard it. This end-of-life phase is considered the downstream phase. This linear system results in significant damage to the natural systems that support us.  So, design for sustainability involves transforming linear thinking into cyclical thinking. In nature, there is no such thing as waste. Cyclical thinking is not merely recycling. It’s designing products to be easily disassembled in combination with designing new take-back systems and infrastructure that make it easier and less expensive for companies to collect the materials they will use in one generation of products in order to manufacture the next generation of products. This regenerative approach to design has taken many forms over the last several decades as we move towards establishing a circular economy.Boylston, S (2017, November 6). Learning design for sustainability. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/learning-design-for-sustainability/a-diversity-of-sustainable-design-approaches?

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Aligning Innovation to Growth Strategy

Know Where the Company Is Going

Innovation strategy is about mapping an organization’s mission, vision, and value proposition for defined customer markets. It sets boundaries to innovation performance expectations by simplifying and structuring the innovation work to achieve the best possible outcome. For a business to thrive in today’s world of intensified competition it is critical that innovation initiatives are aligned with corporate strategy. For this to happen, senior management needs to take a leadership role in implementing innovation initiatives. In order to align innovation with strategy, leaders need to review and analyze how well the company is meeting its strategic objectives. Leaders need to attend to the current needs of the company and its present performance, optimize current business, and build within its core. This might include taking current products to new markets, adding new models to refresh existing product lines, or improving margins on best-selling products/services. That takes care of current needs, but what about the future? Thinking about the future means developing entirely new avenues for growth that are often outside the current business, building beyond its core. Activities here might include, launching products or services that are unprecedented in the company or perhaps even unprecedented in the market.Imboden, E. (2016, December 6). Aligning Innovation to Growth Strategy. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/design-thinking-venture-design/aligning-innovation-to-growth-strategy?u=2167290  For example, Amazon continually innovates its core retail business, such as launching AmazonBasics, their private labeled line of essential products. But, at the same time, they are also exploring well beyond their core. The Amazon Echo is a good example of this. Taking them into the consumer Internet of things (IoT) and artificial intelligence (AI) arenas, and pretty far from their original retail business.Imboden, E. (2016, December 6). Aligning Innovation to Growth Strategy. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/design-thinking-venture-design/aligning-innovation-to-growth-strategy?u=2167290

Watch the Innovation Strategy YouTube video by Kuczmarski below to learn more about innovation strategy. You may be surprised to learn that many companies do not have an innovation strategy because they have not taken the time to figure out what strategic role they are trying to fill by pursuing new innovations. Learn about the four key components of an innovation strategy: 1) What is the Innovation vision? 2) What is the financial revenue gap the company is trying to fill? 3) How to screen one new idea from the next? 4)  What is the investment level the company is willing to make toward innovation? Kuczmarkski Innovation. (2016, March 17). Innovation strategy. [Video]. YouTube. https://www.youtube.com/watch?v=B-tY6citUHw Transcript for “Innovation Strategy” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Make an Innovation: Plan and Test It

Every organization is nothing more than a series of processes. How a product is designed, is a process. How it’s manufactured is another process. How it’s shipped around the world, is yet another process. If a company can make its processes work faster, cheaper, and/or at higher quality, that amounts to higher profits and increasingly happy customers. Many companies come up with great ideas simply by taking ideas from one aspect of the business and applying it to another.  Often creativity is simply a mix of disciplines. Companies create cross-departmental teams or teams that mix employees with customers or partners and experts in the field or various fields in order to get a wide variety of ideas from various stakeholder perspectives.  During brainstorming sessions, it is important to let everyone know that no idea is bad and all innovation comes with some risks.  Of course, once a plan is put together, ways to mitigate risk will also be considered.

Develop a rough strategy. What needs to happen before the next thing can happen? Let the team get a little wild with it. Which paths are not obvious? It is acceptable if the map has some forking roads–follow each of them to see where they lead and choose a specific route later. Are there skills or resources the team already possesses that can help execute the innovation vision? Consider who can help the team put ideas into action. Realizing that the team may lack certain expertise can feel like hitting a dead end, but consultants or other experts can be approached.  Trouble-shoot with the team.

Create a prototype and run a pilot (test-run) implementation to show others that implementing this innovation is possible. Try it on a small scale first to see how it works. Gather input from others and make adjustments as needed. Refine and get the details right.  Bring in others to help finalize the innovative concept and put it into action. Partners should contribute in ways the team cannot.

Launch the Innovation

Watch the Innovation Process YouTube video by Kuczmarski below to learn more about how the innovation Process should be systematic and predictable. The first step of the process is doing market research, the second step is solution generation,  the third step is business case development (figure out how to monetize the innovation), the fourth step is to scale up (get ready for launch),  and the last step is to launch the innovation in the marketplace.Kuczmarkski Innovation. (2016, May 17). Innovation strategy. [Video]. YouTube. https://www.youtube.com/watch?v=L1mDi3NIZ18 Transcript for “Innovation Process” Video [PDF–New Tab]. Closed captioning is available on YouTube.

The Ansoff Matrix is a strategic planning tool that organizations use to plan and analyze strategies for growth. Each strategy for growth carries a different level of potential risk. Each strategy is determined by focusing on whether the products are new or existing and whether the market is new or existing. Each quadrant corresponds to a different product-market strategy.

When a company seeks to grow using its existing offerings in its existing markets, the company is pursuing a market penetration strategy. An example of this would be the introduction of the Kindle Fire. It was a new generation of products in a category where Amazon had already established the original Kindle line.

When a company seeks to grow using its existing offerings in a market that the company is not currently in, the company is pursuing a market development strategy. This is actually how Amazon began, by developing the market for online book sales. Others were already doing this, simply not with the scale or scope envisioned by Bezos.

When a company seeks to grow using new offerings in its existing markets, the company is pursuing a product development strategy. This is where AmazonBasics would fall.

Finally, when a company seeks to grow by presenting new offerings in a market the company is not currently in, the company is pursuing a diversification strategy. This is the highest risk option, as it requires both product and market development.  This is where Amazon web services would be placed. Other companies were already providing these services in a variety of ways, but it was both a new market and a new service for Amazon to address.

Below are some examples from Indeed of how a company might achieve each of the four growth strategies.Indeed Editorial Team. (2022, February 11). Ansoff matrix: Definition, strategies, and how to use. https://www.indeed.com/career-advice/career-development/ansoff-matrix

1. A business may achieve market penetration by:

• Increasing their promotional efforts

• Decreasing their pricing

• Running sales and specials to get new customers

• Merging with or acquiring a competing business in the same market

• Making product improvements to appeal more to consumers

• Refining their distribution process

2. With market development, a business may:

• Establish different segments of its customer base

• Appeal to foreign markets

• Expand its customer base to include a different part of the market previously not used, such as expanding from B2C to B2B

• Partner with another company to offer an additional product or to increase distribution

• Buy the rights from a company to produce and sell their product

• Use budget dollars to research what the market needs and develop products that will fill a void in their customers’ lives

3. As part of their product development plan, a business may:

• Partner with another company to offer an additional product or to increase distribution

• Buy the rights from a company to produce and sell their product

• Use budget dollars to research what the market needs and develop products that will fill a void in their customers’ lives

4. There are two types of diversification:

• Related diversification: Related diversification is when a company’s new offerings complement the products they already produce or at least exist in the same sphere. For example, a company that builds computers may then make a device that hides computer cords from sight.

• Unrelated diversification: Unrelated diversification is when a company’s new offerings are outside of its known capabilities. For example, if a company has been making notepads and pens for 10 years but then decides to delve into producing reusable water bottles.

The pace and impacts of technology have grown tremendously since the Ansoff matrix was first devised so an expanded matrix was created. The expanded Ansoff matrix delineates new growth strategies beyond market development to market innovation and beyond product development to product innovation. It also gives us advanced diversification, where we are combining both development and innovation, and outright industry disruption where we are innovating deeply on both market and offering. Amazon’s original launch of the Kindle ebook and store qualifies as an industry disruption. Whereas, subsequent incremental Kindle launches do not. The Echo represents product innovation in a market that is new to Amazon, so it would land in advanced diversification.Imboden, E. (2016, December 6). Aligning innovation to growth strategy. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/design-thinking-venture-design/aligning-innovation-to-growth-strategy?autoAdvance=true&autoSkip=false&autoplay=true&contextUrn=urn%3Ali%3Al

Breakdowns Between Business Strategy and Innovation

Why does the alignment between business strategy and innovation break down?  Below are five reasons misalignment might occur.

1. Exploring solutions for the wrong reasons – Not aligned with strategy.
2. Changes in leadership – May bring changes in goals.
3. Poor communication of corporate vision and strategy – “Strategic clarity accounts for 31% of the difference between high and low performing organizations in terms of revenue growth, profitability, customer satisfaction, and employee engagement.”Cooper, B. (2019, January 21). The importance of aligning innovation strategy with business goals. https://movestheneedle.com/leadership/the-importance-of-aligning-innovation-strategy-with-business-goals/
4. Poor communication of innovation strategy – Goals, outcomes, and expectations with regard to innovation are not clear.
5. Context – Dissolving projects prematurely because they may not appear, at first, to fit with business goals and strategy.

How can companies avoid these breakdowns?

In order to ensure that strategic alignment is occurring across all innovation projects, organizations must constantly work to do the following:Cooper, B. (2019, January 21). The importance of aligning innovation strategy with business goals. https://movestheneedle.com/leadership/the-importance-of-aligning-innovation-strategy-with-business-goals/

• Understand Customer Pains – Pursuing solutions based on new technologies or deciding to pull a product are decisions that need to be made based on customer evidence. Relentlessly seeking to understand the customer will help leadership and innovation teams with corporate and innovation strategy alignment in the long run.
• Create a Feedback Loop – The business strategy should inform the innovation strategy and vice versa. Keeping these two engines running simultaneously and continuously feeding both sides with key learnings from Lean Innovation work will ensure that they are working in harmony.
• Communicate Vision and Strategy Clearly – Make sure everyone is on the same page with regard to company vision and strategy by taking as much time as needed to explain these concepts. Connect regularly with team members to make sure everyone is still aligned, and focus employees around big picture goals.
• Consider the Context –  Not all innovation projects that are misaligned today will be misaligned in the future. There is a time and a place to leave things alone to develop. Killing projects too early can lead an organization away from true innovation and keep it from producing high-impact projects that help the company reach its goals.

Spotting Opportunities

To spot opportunities for innovation, managers and employees first need to understand the company and how it works.  Whether you are the CEO or an employee working the front line (directly with customers/clients), you can spot opportunities for improvement by learning about the company’s problems and goals. This may mean reviewing company policies and values/mission/vision, talking with other department managers and employees, gathering customer feedback as well as spotting trends in customer complaints.  Ask yourself if there are processes that take a long time, and if so, could they be automated for improvement? Are employees or customers complaining about specific systems, communication, or processes, and do these need to be given more thought in how they could be made more efficient and/or effective? Also, consider what works well and can be replicated in other areas? It is important to understand who the company’s target customers are and always be thinking about how the company can better help them. Focus groups, mystery shoppers, buyer personas, and observing the customer journey from the pre-sale stage to the sale stage and into the after-sale stage can help companies better understand customer needs and wants.  Identify what is working well and what is not working well, and consider how things might be improved.

These seven sources of innovative opportunity were listed by Peter Drucker in his book “Innovation and Entrepreneurship. If you are unaware, Peter Drucker is considered one of the truly great management consultants. He wrote 39 books and is considered a seminal thinker in the field of management.Incremental Innovation. (n.d.). The 7 sources of innovative opportunity. http://www.incrementalinnovation.com/innovation-management-development/7-sources-innovative-opportunity#:~:text=%20The%207%20Sources%20Of%20Innovative%20Opportunity%20,continual%20flux.%20Regulations%20change%20and%20some...%20More%20

Unexpected Success and Failures

The marketplace is the number one area to look for opportunities. A good manager should be constantly studying the market by conducting environmental scans (e.g. PEST, competitive analysis, trends, SWOT). Is a particular product or service in greater or lesser demand than anticipated? Why? For example: If a competitor is having unexpected success in a particular market segment, management must find out why this is happening. They must ask themselves what it would mean to their company if they exploited the same opportunity. They must consider what has to happen to convert this opportunity into a success?

Incongruity Between What Is and What Should Be

One of the best places to look for incongruity is through the customers’ voices. Their complaints and unmet wants are all the hints a company needs to determine if there is a discrepancy between what is and what should be. Identifying incongruity is a key to developing wildly successful businesses, but it’s tricky. Facebook is a company that got it right. Prior to the social network’s prolific rise, Myspace was the dominant player, but it had its downfalls. Facebook wisely noted what Myspace was versus what it should be and then built a better platform. The end result is that many people don’t even remember Myspace, but most of the world knows and uses Facebook.

Process Need

Process need involves identifying the company’s process weak spots and correcting or redesigning them. This source of innovation comes from the company’s existing capabilities and ways of doing business. An example might be a restaurant that identifies that people wait too long for their entrees and so decides to hire another chef to speed up creation times. Essentially, a company will want to look for all weak links and eliminate them.

Industry and Market Structure Change

The industry and the market are in continual flux. Regulations change and some product lines expand while others shrink. Firms should continually be on the watch for this. One example is deregulation. When a previously regulated industry becomes open there is historical precedence for companies that enter early to be very successful. Other things to watch out for are the convergence of multiple technologies and structural problems that occur from time to time (often immediately following an industry boom).

Demographics

We continually see changes occur in populations, income levels, human capital (education), and age ranges. Smart firms are constantly paying attention to this. When it comes to the baby boomers, businesses have been following them as they got older. At present they are one of the largest as well as the most affluent demographic groups, with high levels of disposable income. Combining demographic data with segmentation and targeting is a powerful method of accurately meeting a target market’s desires.

Changes in Perception, Meaning, and Mood

Over time populations and people change. The way they view life changes, where they take their meaning from, and how they feel about things change over time and smart companies must pay attention to this in order to capitalize (and avoid becoming forgotten, a relic of ages past). For example, a principle called “down aging” refers to people who look at 50 as being the new 40. Industries have responded to this, most notably in the cosmetic and personal care industry which provides plenty of solutions to help these people look younger. Full industries are creeping up that make people feel younger. Have you spotted any lately?

New Knowledge

As the speed of the technological revolution increases, there will be an ever-increasing number of opportunities that open up. The internet has been the most notable one in the last couple of decades but there have been a plethora of other industries and opportunities pop up as a result of this technological revolution. New knowledge is about more than just technology though, it’s about finding better ways of doing things and improving processes. Companies should look to this new knowledge for ways to make incremental improvements. Intel does this continuously, and it’s a major part of why they’re the leading processor manufacturer today. Constantly paying attention to the latest in both academic research as well as investing heavily in its own R&D, the company has managed to find continual sources of innovation, driving its success.

Ten Types of Innovation

Innovation is all about coming up with new things that create value for your customers, and the organization. There are many types of innovation, although when we hear about a company innovating we often hear about new products or services.  The most common innovation types include product, service, and process.  The real problem with innovation is that people think too incrementally and often too exclusively about products and services and do not consider the many targets for innovation that are all around us. There are many ways for companies to innovate to remain competitive in their industries. There are many reasons companies innovate, some of which include reducing costs, increasing profits, staying ahead of the competition, attracting talent, creating a leadership image, attracting investors/funding, and more.

The Ten Types of Innovation® framework captures the entire innovation ecosystem, from essential organizational structures and processes to critical aspects of the product or service being introduced. Doblin’s Ten Types of Innovation® analyzes 10 key areas to consider when you are innovating:

1. Profit Model
2. Network
3. Structure
4. Process
5. Product Performance
6. Product System
7. Service
8. Channel
9. Brand
10. Customer Engagement

Watch this 3-minute video by MindTools explaining Dolbin’s 10 Types of Innovation®.MindToolsVideos. ( 2018, February 9). Dolbin's 10 types of innovation. [Video]. YouTube. https://www.youtube.com/watch?v=Q3sfmDkrAI0 Transcript for “Dolbin’s 10 Types of Innovation® Video [PDF–New Tab]. Closed captioning is available on YouTube.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

What is Design Thinking?

Design thinking encourages organizations to focus on the people they’re creating for and leads to human-centered products, services, and internal processes. The core of design thinking is getting actionable and knowing your questions. It’s about simple mindset shifts or ways of asking questions differently—a new way to look at problems. Watch this brief introduction to design thinking from IDEO U.IDEO U. (2021, May 26). What is design thinking? [Video]. YouTube. https://www.youtube.com/watch?v=QWdgcpAHRlM&t=37s Transcript for “What is Design Thinking?” Video [PDF–New Tab]. Closed captioning is available on YouTube.

The Five Stages of Design Thinking

As the world is changing at an accelerated rate, organizations look for solutions to grow with their customers or users, to do new things in better ways to improve their practices, retain and grow their customers, and expand their business. Innovation is a must for these organizations. Design thinking is one of several approaches to innovation and is a process for creative problem-solving. Design thinking has a human-centered core. It encourages organizations to focus on the people they are creating for, which leads to better products, services, and internal processes. The design thinking framework helps inspire creative thinking and strategies that lead designers to create user-friendly products that help solve a particular problem.

There are five stages to the design thinking process which include empathizing, defining, ideating, prototyping, and testing. They are not always completed in a linear fashion. They can be done in any order, and then redone as needed.  Different stages might spark new ideas or showcase new findings in the user journey that will inspire new iterations of phases that have already been completed.

Empathize

Imagine what the customer might be thinking or feeling, what needs they may have, and what their desires are.  Observe the customer, interview the customer, and put yourself in the customer’s shoes. How do they want this product to work? As designers (or design thinkers), we should always do our best to leave our own assumptions and experiences behind when making observations. Our life experiences create assumptions within us, which we use to explain and make sense of the world around us. However, this very process affects our ability to empathize in a real way with the people we observe. Since completely letting go of our assumptions is impossible, we should continuously and consciously remind ourselves to assume a beginner’s mindset. It’s helpful if you often remind yourself never to judge what you observe, but to question everything—even if you think you know the answer—and to really listen to what others are saying.Mortensen, D. (2020). Stage 1 in the design thinking process: Empathize with your users. https://www.interaction-design.org/literature/article/stage-1-in-the-design-thinking-process-empathise-with-your-users

Define

Designers will analyze their observations completed throughout the empathy stage, and work on synthesizing that information.  Forming a problem statement that is succinct is an important part of this phase that ensures a human-centered approach by focusing on the end-user. A problem statement is important to a Design Thinking project because it will guide you and your team and provide a focus on the specific needs that you have uncovered. A good problem statement should thus have the following traits. It should be human-centered, broad enough for creative freedom, and narrow enough to make it manageable.Dam, R. & Siang, T. (2021). Stage 2 in the design thinking process: Define the problem and interpret the results. https://www.interaction-design.org/literature/article/stage-2-in-the-design-thinking-process-define-the-problem-and-interpret-the-results

Ideate

The solution-finding stage is where the team comes together to brainstorm creative solutions to solve the defined problem(s). When facilitated in a successful way, Ideation is an exciting process. The goal is to generate a large number of ideas — ideas that potentially inspire newer, better ideas — that the team can then evaluate and reduce into the best, most practical, and innovative ones.

Ideation Will Help You:

• Ask the right questions and innovate.
• Step beyond the obvious solutions and therefore increase the innovation potential of your solution.
• Bring together perspectives and strengths of team members.
• Uncover unexpected areas of innovation.
• Create volume and variety in your innovation options.
• Get obvious solutions out of your heads, and drive your team beyond them.

In Ideation sessions, it’s important to create the right type of environment to help create a creative work culture with a curious, courageous, and concentrated atmosphere. Instead of using a boardroom with the CEO sitting at the head of the table, Design Thinking and Ideation sessions require a space in which everyone is equal. There are hundreds of ideation methods used to spark innovative ideas. Some methods are merely renamed or slightly adapted versions of more foundational techniques. Here you’ll get a brief overview of some of the best methods:Dam, R. & Siang T. (2020). Stage 3 of the design thinking process: Ideate. https://www.interaction-design.org/literature/article/stage-3-in-the-design-thinking-process-ideate

• Brainstorm
• Braindump
• Brainwrite
• Brainwalk
• Challenge Assumptions
• SCAMPER
• Mindmap
• Sketch or Sketchstorm
• Storyboard
• Analogies
• Provocation
• Movement
• Bodystorm
• Gamestorming
• Cheatstorm
• Crowdstorm
• Co-Creation Workshops
• Prototype
• Creative Pause

Prototype

Without testing a new idea, designers would have a tough time actually solving the problem comprehensively. At this stage, small-scale, inexpensive versions of the product are required. This sets the stage for decision-making conversations around what works and what doesn’t. Prototypes can be sketches, models, or digital renders of an idea. These scaled-down prototypes can then be used in order to observe, record, judge, and measure user performance levels based on specific elements, or the users’ general behaviour, interactions, and reactions to the overall design. For instance, when developing software, a design team may produce a number of paper prototypes that the user can gradually work through in order to demonstrate to the design team or evaluators how they may tackle certain tasks or problems. When developing tangible devices, such as the computer mouse, designers may use a number of different materials to enable them to test the basic technology underlying the product. With advances in 3D printing technology, producing prototypes is now often a more instant and low-cost process, and as a result, this has allowed designers to provide stakeholders with accurate and testable/useable replica models before settling upon a particular design.Dam, R. & Siang T. (2021). Stage 4 of the design thinking process: Prototype. https://www.interaction-design.org/literature/article/stage-4-in-the-design-thinking-process-prototype

Test

Gather feedback from real users.  Because design thinking is iterative, many designers roll out multiple prototypes to test different change factors within their idea. Designers should expect to go through a series of changes, edits, and refinements during the testing stage. It is not uncommon for the testing phase to “restart” some other design thinking processes such as ideation or additional testing or an entirely fresh approach. In order to achieve the best learning results from each test, here are some areas of a test that you should take into consideration:Dam, R. & Siang, T. (2021). Stage 5 in the design thinking process: Test. https://www.interaction-design.org/literature/article/stage-5-in-the-design-thinking-process-test

• The prototype
  Remember that you are testing the prototype, not the user. Your prototype should be designed with a central question in mind — a question that you will put to the test in the testing stage.
• Context and scenario
  As much as possible, try to recreate the scenario in which your users are most likely to be using the product. This way, you can learn more about the interaction (or disruptions) between the user, the prototype, and the environment, as well as how problems might arise as a result of that interaction.
• How you interact with the user
  Make sure your users know what the prototype and test are about, but do not over-explain how the prototype works.
• How you observe and capture feedback
  While collecting feedback, make sure you are not disrupting the user’s interaction with the prototype. Find a way to collect feedback in a way that freely allows you to observe what is happening (for example, by having a partner in the test, or by recording an audio or video of the test).

Watch the YouTube video below for an explanation of the five stages of the Design Thinking process.InVision. (2020, January 29). The 5 stages of design thinking. [Video]. YouTube. https://www.youtube.com/watch?v=-ySx-S5FcCI Transcript for “5 Stages of Design thinking Process” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Products Created Using Design Thinking

Can you think of a few products you enjoy using that most probably were created using the design thinking methodology?  Here are a few examples: shoelaces that don’t need to be tied (great for kids), velcro closures instead of buttons or laces (great for anyone, but specifically for seniors that may have difficulty with buttons or laces), and what about gel pads that are placed inside shoes (great for anyone with sore feet or people that stand for long hours in the workplace).

IDEO, lists 11 of their favorite products and services created with design thinking:IDEO U. (n.d.). 11 products & services made using design thinking. https://www.ideou.com/blogs/inspiration/11-products-made-using-design-thinking#:~:text=Here%20are%20some%20of%20our%20favorite%20examples%20of,to%20take%20medications%20can%20be%20challenging%20and%20time-consuming

• Pillpack, a prescription home delivery system
• Airbnb, the online platform that lets you stay anywhere
• Willow, the first wearable breast pump
• Uber Eats, an app that is redefining food delivery
• Pay It Plan It from American Express, a feature to manage your money
• Project Bloks, a Google project that helps kids learn to code
• Besider, a birth control support network for women
• Braun, Oral-B electric toothbrush, a better brushing experience
• Moonrise, a platform that connects people with on-demand work
• LA County Voting System, an intuitive and accessible voting device
• Bendable, a community learning program for South Bend

Prototyping and 3D Printing

As mentioned above, a prototype is a mini design of the actual product. It can be a sketch, a low-quality, or a high-quality copy depicting what the real product will look like. It is important for companies to prototype fast and often in order to produce innovations at the right times–when customers demand them and before competitors beat them to market. The main benefit of prototyping is that it results in a faster and more effective design cycle (accelerated development). Because prototypes allow companies to test their design in the “real-world” environment, it is easier to identify potential problems and prevent costly mistakes down the road (better products).Erickson, A. (2019, May 14). The importance of prototyping. https://www.cati.com/blog/2019/05/the-importance-of-prototyping/#:~:text=The%20main%20benefit%20of%20prototyping%20is%20that%20it,problems%20and%20prevent%20costly%20

3Dprinting is an inexpensive way to make a prototype. Today 3D printing, or additive processing for manufacturing, has become a standard.  In previous years many manufacturers, automakers, jewelry makers, sculptures, etc., were using a subtractive processing method.  With subtractive manufacturing, there is much waste. Think about sculpting a statue out of a tree, you would whittle away the parts of the tree you don’t want to make the statue appear.  With additive manufacturing, there is little waste because the statue would be built layer upon layer from the ground up in the exact shape and design you specify.

Watch this YouTube video from Mashable, “What is 3D Printing and How It Works?”, to learn more about the 3D Printing process.Kwestyon. (2014, May 8). What is 3D printing and how does it work? [Video]. YouTube. https://youtu.be/Vx0Z6LplaMU Transcript for “What is 3D Printing and How Does it Work? Video [PDF–New Tab]. Closed captioning is available on YouTube.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Where should the responsibility for innovation lie? Companies need to create an organizational structure to drive innovation; there are many variations and approaches. A product innovator must recognize the company’s innovative business structure and its inherent roadblocks and then determine how to overcome them. The most common approaches companies use for innovation include components of design thinking, rapid prototyping, lean innovation, and open innovation. Design thinking is a process that brings together what is desirable from a human point of view with what is technologically feasible, and economically viable. The design thinking process starts with a deep understanding and empathy about the customers’ needs. Then, it goes through the steps of defining the problem, ideating the solutions, prototyping the ideas, and testing the ideas. IBM developed an internal framework for innovation, naming it IBM Design Thinking.Holst, K. (2018, June 29). Product innovation for product managers. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/product-innovation-for-product-managers/what-product-innovation-is-and-isn-t?autoAdvance=true&autoSkip=false&autoplay=true&resume=false&u=2167290

What are the Seven Stages of Product Development?

New product development teams often consist of top management, specialists from sales and marketing, research and development, manufacturing, and finance. This team will conduct market research and gather customer and employee feedback to consider when formulating ideas for new products. The team will also look at the feasibility of ideas and resources available as well as risks. This group considers and plans new and improved products in seven different phases, as shown below:

1. Idea Generation (Idea formulation)
2. Idea Screening (Evaluation)
3. Concept Testing
4. Business Analysis
5. Product Development
6. Test Marketing
7. Commercialization (Market Introduction)

The most innovative organizations rely on systems of individuals and teams working across functions in their organizations. Innovation isn’t the work of only scientists, engineers, or marketers; it’s the work of an entire business and its leadership.Woods, T. (2015, December 7). The ten types of innovation framework - and how to use it. Hype. https://blog.hypeinnovation.com/using-the-ten-types-of-innovation-framework

Watch the YouTube video below, “Product Development Process: 7 Essential Stages”, to learn more about each stage in the new product development process.Jelvix. (2020, June 24). Product development process: 7 essential stages. [Video]. YouTube https://www.youtube.com/watch?v=k9qOo09KG_I[/footnote] Transcript for “Product Development Process: 7 Essential Stages” Video [PDF–New Tab]. Closed captioning is available on YouTube.

What are the Success Factors for Product Development?

There are different factors that influence the success of new product development.  For instance, the entire team needs to be competent and committed to the success of the product. The product designer will be responsible for utility and usability, but there are a number of factors that are beyond the control of the designer. An effective new product development (NPD) function is supported by the right tools and the right business culture; it depends on teamwork underpinned by organizational knowledge and strong strategic direction from above. But it is also characterized by systems and processes that are agile, adaptable, and repeatable. Businesses should carefully consider how they can develop the precise mix of culture, people, and digital infrastructure to meet these demands in the most efficient and competitive way possible.Interactive Design Foundation. (2021). An overview of the factors of success for new product development. https://www.interaction-design.org/literature/article/an-overview-of-the-factors-of-success-for-new-product-development

The following eight factors will influence the success of new product development.Interactive Design Foundation. (2021). An overview of the factors of success for new product development. https://www.interaction-design.org/literature/article/an-overview-of-the-factors-of-success-for-new-product-development

1. Top Management Support

The support of top management is essential, without it the project will not get the resources and financial budget to implement the development phases. The design team must learn to convince top management to support the project, or the entire project collapses. Creating a culture that values innovation and encourages it at every level has been found in countless studies to be one of the key indicators of success in this area. The focus, resources, and respect that your organization channels towards NPD will reflect the priority it is given in the minds of those who can influence its direction the most. Steve Jobs, for example, based the leadership culture of the Apple Company on brand fanaticism and radical customer devotion and propelled the organization into a new and unprecedented era of innovation.

2. Market Orientation

Market orientation analysis should guide the team on how to meet the needs and wants of customers. Investopedia defines market orientation as follows: “Market orientation is a company philosophy focused on discovering and meeting the needs and desires of its customers through its product mix.” It seems reasonable to suggest that while a design team does not have control over company philosophy it should be in a good position to influence this. Conducting user research and where appropriate market research – two fundamentals of developing high-quality user experiences; will enable the discovery of customer/user needs and how to meet them.

3. Technology

Ensure the technology being used to introduce the product to the market is compatible with the market. It is imperative to use a technology the market can resonate with.  For instance, a multi-million dollar software or hardware requirement may make the product inaccessible to small consumers.

4. Knowledge Management

The company should ensure data and information are accessible to all. A digital document management system can act as a repository of information vital for the success of new product development (NPD) initiatives. It can give teams a firm grasp of project progress, deliverables, and dependencies. It can facilitate easy access to the documentation they need to complete tasks. It can allow different teams to work on and suggest changes to those documents. It can give overall governance of a project to a nominated individual, who can use its publishing and curation tools to keep projects well managed and on track. Good knowledge sharing capabilities reduce mistakes, increase the speed of delivery of goals, and build closer more aligned teams.Byrne, J. (n.d.). 5 critical success factors for a new product development process. https://www.cognidox.com/blog/new-product-development-process

5. New Product Development Strategies

The responsibility for drafting and implementing strategies is a shared goal between the development, design, and management teams. These parties should coordinate their activities to ensure there is uniformity in their decisions.  Having clear processes for design and development is essential. While these may be tailored to fit specific circumstances – a methodology for working that is clearly understood and agreed to by all members of the product development team is highly likely to produce better results than those created with no formal process.

Responsibility for new product development strategies is likely to be shared between design, product management, and development. This means that the design team will have some input into the strategies chosen and will be able to influence these strategies with their user research to guide the strategy to fit the needs of their users. It is probably fair to say that product management will normally have the final say on a strategic direction but designers have plenty of room to negotiate with product managers to ensure better outcomes.

6. New Product Development Speed

Speed to market is a critical factor in success. If the new product development process takes five years but a competitor’s process takes only two years – it is likely that no matter how good the team’s designs are; they will have been eclipsed by the time they get to market. Refining the design process to maximize speed whilst protecting the user experience is a delicate balancing act. Designing for a great user experience is within the design team’s control, however, the development process speed is much less likely to be within the design team’s control and their ability to influence that speed may be minimal.

7. New Product Development Process

Having clear processes for design and development is essential. While these may be tailored to fit specific circumstances – a methodology for working that is clearly understood and agreed to by all members of the product development team is highly likely to produce better results than those created with no formal process. The design team will, normally, have some input into these processes and be able to negotiate modifications to processes when they fail to produce optimal results. There is little control for the design team over the way other teams execute these processes. Failure in execution, from other teams, is one of the few areas where it is reasonable to say that failure was completely outside of the design team’s control.

8. New Product Development Team

New product development normally brings together teams of diverse people from all across an enterprise. It is strongly suggested that these diverse teams tend to be highly creative and more successful than teams of a more standardized nature. The way teams work together is a critical factor in their success and designers operating as part of such a team have their part to play in this. Professionalism and leadership can be displayed by any member of a team (including those without official leadership and management roles) and while the design team cannot bear any responsibility for the actions of others within a team – they bear complete responsibility for their own actions. As Michael Jordan, the world-famous athlete and basketball superstar says; “Talent wins games, but teamwork and intelligence wins championships.”Interactive Design Foundation. (2021). An overview of the factors of success for new product development. https://www.interaction-design.org/literature/article/an-overview-of-the-factors-of-success-for-new-product-development

How Can Product Innovation Be Combined with Other Innovation Types?

When a company works to combine multiple types of innovations, they often produce powerful results. Top innovators (those repeatedly launching successful offerings) integrate twice as many types of innovation as the average innovators.Woods, T. (2015, December 7). The ten types of innovation framework - and how to use it. Hype. https://blog.hypeinnovation.com/using-the-ten-types-of-innovation-framework

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Use a Balanced Innovation Portfolio

In today’s rapidly transforming business world, it seems the only constant is change. Companies that cannot keep up with the pace of change and adapt to disruptive innovation often find themselves struggling. There are quite a few companies that failed to innovate and were either forced to declare bankruptcy, merge with another organization, or fell from the top of the Fortune 500 companies rankings– 88% of the Fortune 500 firms that existed in 1955 are gone.Goh, F. (n.d.). 10 companies that failed to innovate, resulting in business failure. https://www.collectivecampus.io/blog/10-companies-that-were-too-slow-to-respond-to-change

Every new ground-breaking product and service, in the end, will become obsolete, commoditized, and outcompeted by new and better solutions, products, and companies.Anderson, M. (n.d.). https://www.mikeandersson.com/blog/the-importance-of-keeping-a-balanced-innovation-portfolio/ This may be best epitomized by Kodak, Blockbuster, Polaroid, Pan Am, Sears, Compaq, Nokia, Yahoo, and Blackberry.Aaslaid, K. (2019, July 2). 50 examples of corporations that failed to innovate. https://www.valuer.ai/blog/50-examples-of-corporations-that-failed-to-innovate-and-missed-their-chance To secure healthy revenue streams and long-term survival, organizations need to have a balanced portfolio of innovation projects covering horizons of time short-term (core), mid-term (adjacent), and long-term (transformational) initiatives.

A well-balanced innovation portfolio has a mix of high-risk game-changers and low-risk incremental innovations. Portfolio balancing is a technique used by the world’s best innovators to analyze the long- and short-term risks of innovation projects in their pipeline. No organization can afford to risk its business on one big idea. Likewise, developing a bunch of small, incremental projects won’t deliver a big win either.Bodell, L. (2018, December 28). Achieve a more balanced innovation portfolio in 2019. https://www.forbes.com/sites/lisabodell/2018/12/28/achieve-a-more-balanced-innovation-portfolio-in-2019/?sh=4814103070cb

The Innovation Ambition Matrix, as featured in the Harvard Business Review (May 2012), is a classic model that helps companies decide how to fund different growth initiatives. Few organizations think about the best level of innovation to target, and even fewer manage to achieve it. According to  Nagji and Tuff,  the best approach to innovation is to think in terms of managing an integrated, balanced ’portfolio’ of innovation initiatives which are divided into three types: Core, Adjacent, and Transformational.Nagji, B. & Tuff, G. (2012, May). Managing your innovation portfolio. Harvard Business Review. https://hbr.org/2012/05/managing-your-innovation-portfolio

Innovate Using Metrics

There are many risks associated with innovation such as the loss of money, the loss of time, the loss of company reputation/image, and the loss of potential. The loss of potential means that if a company invests money, time, and other resources into developing a new innovation that fails in the marketplace, those resources allocated to that failed innovation could have been allocated to other areas of the company or a different innovation project; therefore, there is a loss of potential on what could have been done with those resources.  Not every innovative idea can be brought to fruition due to the limited resources needed to make it so, therefore, companies must select the best ideas to pursue and mitigate risks as best they can. Using metrics to compare and track performance and progress on innovation projects is a good way to monitor return on investment.

Why Use Metrics for Innovation?

The list below provides a few reasons that companies should use innovation metrics.Mack Institute. (n.d.). Choosing innovation metrics for success in the digital era. https://mackinstitute.wharton.upenn.edu/2020/innovation-metrics-for-success-digital-era/

• Provide strategic direction by signaling shifts in priorities
• Guide resource (re)allocations
• Assess the effectiveness of innovation spending
• Hold managers accountable and link incentives to reach targets
• Diagnose and improve innovation performance

Input Metrics

Input metrics measure how well the company is gauging input and effort into the innovation project. These metrics measure things like the number of ideas generated by each employee, time spent by senior management on innovation activities, and the percent of capital allocated to innovation projects.

Development Metrics

Development metrics gauge the company’s progress, process, and pipeline of innovations. These metrics measure things like the amount of R&D spend on each phase of development, the number of projects in the pipeline, and time spent on each phase of idea management.

Output Metrics

Output metrics measure the end or results of the company’s efforts. These metrics measure things like the number of products launched on an annual basis, the number of patents awarded, and the percentage of revenue from new offerings.

Metrics offer guideposts for improvements and progress, they calibrate the company’s efforts and show a clear path for remedy. Companies can determine from metrics what is working and what is not working and how to modify the project from start to finish.

Common Flaws With Measurements

The list below provides a few common flaws with using measurements.Mack Institute. (n.d.). Choosing innovation metrics for success in the digital era. https://mackinstitute.wharton.upenn.edu/2020/innovation-metrics-for-success-digital-era/

• Encouraging incremental innovation over disruptive innovation
• Having too few metrics, or too many
• Measuring what is available versus what is needed
• Placing too much emphasis on output measures over process effectiveness

Watch this YouTube video “Innovation QuickWin: Innovation Metrics” to learn about the major metrics that companies need to set to monitor and track innovation success.FutureThink. (2015, November 5). Innovation quickwin: Innovation metrics. [Video]. YouTube. https://www.youtube.com/watch?v=EewsYXAZopQ&t=17s Transcript for “Innovation Quickwin: Innovation Metrics” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Reduce Resistance to change

Innovation creates change, whether that is a new process or technology being implemented in the workplace or a new radical product being developed that creates change within the organization.  There will always be employees and other stakeholders that are resistant to change and this may hinder or put up roadblocks for the innovation project to succeed.

Ten reasons people resist change include the following:Crash Course MBA. (2020, July 2). 7 strategies for overcoming resistance to change. [Video]. YouTube. https://www.youtube.com/watch?v=8JHafy_Cj7I

1. Loss of Job Security or Control. They fear they may lose their jobs, or not have input into how their job is done. Management communication and employee training may help reduce their resistance.
2. Shock and Fear of the Unknown.  People will usually move forward if they feel the risk of standing still outweighs the risk of moving forward. The change should be communicated early and the need for change should be convincing–the less employees know about the change and how it will affect them, the more fearful they will become.
3. Lack of Confidence. They fear they will not be able to learn new systems/processes or perform to their best ability. Management should help employees build their competencies to increase their confidence.
4. Poor Timing.  Too much change all at once can cause employee resistance. People should feel the benefits of previous change efforts to help them buy-in to the next change.
5. Lack of Rewards. Employees will resist change when they do not see anything in it for them in terms of rewards. Management needs to explain the tangible short-term and long-term benefits to employees.
6. Office Politics. Some employees resist change to prove to management that the decision is wrong or that the person leading the change is not capable of this initiative. Others may resist change because they may lose power in the organizational structure. When teams are united and working toward a new initiative, employees will accept the decisions of the leaders.
7. Loss of Support System. Employees get comfortable with who they work with, their team, their managers and have built a predictable support system. It is human nature to avoid the unfamiliar, but on the other hand, most people enjoy adventures.  Management should communicate how the new support system will work.
8. Former Change Experience. If employees have experienced poor change management in the past, they tend to resist new change even more. Management should talk about previous change initiatives and highlight their benefits.
9. Lack of Trust and Support. Change does not happen well in an atmosphere of mistrust.  Communication must be and actions must be trustworthy in order for employees to build faith in the intentions of management/leaders.
10. Peer Pressure. Organizational stakeholders will resist change to protect the interest of a group. People are willing to change if the promise of the future is better than the realities of the present.

Watch this YouTube video “Ten Reasons Why People Resist Change in the Workplace” to learn more about why employees resist change and how companies can reduce this resistance.Crash Course MBA. (2020, July 2). 7 strategies for overcoming resistance to change. [Video]. YouTube. https://www.youtube.com/watch?v=8JHafy_Cj7I Transcript for “Ten Reasons Why People Resist Change in the Workplace” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Get the Right Talent

Innovation Project Team

An important component of innovation project success is to build the right team.  Companies must select, hire, collaborate with, and outsource the right talent (people), some key points to remember are listed below.Anderson, M. (n.d.). The importance of keeping a balanced portfolio. https://www.mikeandersson.com/blog/the-importance-of-keeping-a-balanced-innovation-portfolio/

• Innovating for short-term versus long-term initiatives (ten years in the future) demands very different skills
• Innovation teams should be staffed with people that represent different stakeholders and interests in the organization
• Innovation teams should have one or a few influential “champions” with the ability to convince other members of the organizations to get on-board
• It is vital to bring in highly talented outsiders that will look at innovation projects without the lens of the organization to get a fresh perspective

When the right talent for an innovation project is not available within the company, training to advance internal candidates may be an option.  If training is not available, too costly, or will take too long, then companies might consider outsourcing parts of the project development to experts in the field, for example, small companies that focus on a niche area.  Another option would be for the company to hire the talent they need, but if this is a one-time need or a need that occurs seldom, hiring a full-time employee may be too costly, therefore, not feasible.  It may be feasible though to hire a contract worker who can work on-site for the time frame needed with no long-term expectations of becoming a company employee.

It may be that the company could benefit from an innovation management contractor.  These companies guide the innovation project, train internal managers, help manage the project, and bring their expertise and experience to the company for a fee and a determined length of time.

Collaborate with Government

The Government of Canada is encouraging greater partnerships among Canadian businesses, universities, and colleges to drive innovation and encourage the adoption of new processes and technologies that help Canadian businesses prepare to compete and win in the global marketplace.Government of Canada. (n.d.). Seizing Canada's moment: Moving forward in science, technology, and innovation 2014. https://www.competitionbureau.gc.ca/eic/site/113.nsf/eng/h_07657.html Businesses can get a list of financing programs, expertise, facilities, and more to support their innovation projects at the Government of Canada Innovation Funding and Support website.

Collaborate with Customers, Consultants, and Competitors

Collaboration with customers, consultants, competitors, and employees may be something that will help the company meet its innovation goals. These projects are often referred to as co-creation projects and sometimes referred to as open innovation projects. Some well-known innovation consulting firms include IDEO, Innosight, frog, Board of Innovation, and there are many others. The expertise of each firm may vary as well as the services they offer, but companies can hire a consulting firm that specializes in innovation to help guide and support them through their innovation initiatives.

Open innovation is a business management model for innovation that promotes collaboration with people and organizations outside the company. In this sense, open innovation challenges are a true cultural break from the company silo mentality and the secrecy traditionally associated with the corporate R&D culture. This innovation model becomes viable when the company acknowledges that there are many bright professionals and greater knowledge outside the organization. It is at this very moment that the opportunity to attract those external individuals and/or companies becomes more real. Companies implement open innovation practices in different ways, such as alliances between companies, research chairs in universities, crowdsourcing competitions, and innovation ecosystems.ennomotive. (n.d.). Open innovation: Accelerating your innovation results. https://www.ennomotive.com/open-innovation

Below is an example of how Starbucks collaborated with Spotify to offer customers of both businesses an innovative music ecosystem. 

Below is an example of how IKEA co-creates with customers. 

Safeguard Intellectual Property

In general terms, intellectual property is any product of the human intellect that the law protects from unauthorized use by others. For some innovations, a company may require a patent or copyright to protect its intellectual property from competitors and help the company keep its competitive advantage, for a while at least.

This video explains the primary methods of protecting intellectual property (patents, copyrights, trademarks, trade secrets), including the qualifications for using them, and when an organization might opt to not protect its IP.Schilling, M. (2021, August 7). Innovation strategy: Intellectual property. https://www.youtube.com/watch?v=d6F4Hma6ijg Transcript for “Innovation Strategy: Intellectual Property” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Study Innovation Failures

No one likes to fail and most of us try very hard not to fail, but failure is about learning, and it is absolutely necessary to learn in order to succeed at innovation. For every innovation leader out there like Google, Microsoft, or Amazon, there are hundreds of competitors that never quite make it out of the gate. For growing startups looking to establish themselves, it’s always helpful to try and understand why this happens, although, innovation failure is not something that only happens to small companies; even market leaders like Coca-Cola, Samsung, and Nintendo can still have plenty of bad days. Just check out the sad history of the Nintendo Virtual Boy.braineet. (n.d.). 35 famous innovation failures - and what you can learn from them. https://www.braineet.com/blog/innovation-failures Despite the negative energy it comes with, failure has its positive side. Experiencing failure can teach you lessons that you wouldn’t have learned otherwise. Actually, some of the most successful people in the world were only able to attain success because of the lessons they learned from their previous failures.Andal, E. (2021, June 4). 10 famous failures to success stories that will inspire you to carry on. https://www.lifehack.org/articles/communication/10-famous-failures-that-will-inspire-you-success.html

To reduce the chance of failure companies should study their own past failures as well as those of their competitors.  Learn from failure. What worked? What did not? Failure is not something to be afraid of or viewed negatively within the company–it is a learning curve from trial and error. Businesses that reflect on past failures often discover that the failures of the past brought them to the successes they now enjoy.

Here are a few tips for teams to learn from innovation project failures:

1. Know it is OK to fail because a new route is created from failure
2. Realize experience is the best teacher because the team learns what works and what doesn’t
3. Allow the team the freedom to fail because if they are too cautious they will not take risks
4. Failure helps the team gain new knowledge in their work and resets their focus
5. Let the fear of failure help motivate the team to succeed, failure leads to mastery
6. Welcome failure because the faster the team fails, the faster they will succeed
7. Failure makes people stronger, making them better prepared to tackle the next challenge
8. Keep records of your company’s and competitors’ failures and successes to refer back upon “lessons learned” when working on future innovation projects

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Creating an Innovative Culture

Creating an innovative culture at work can improve employee satisfaction, team productivity, and the quality of the company’s products and services. It can also help grow brands, attract prospective employees, keep talent in the workforce, and help generate revenue.Indeed Editorial Team. (2021, April 29). How to create an innovative culture at work. https://www.indeed.com/career-advice/career-development/innovative-culture While innovation strategy varies depending on the market and business goals, some challenges are universal. For example, if an executive may be struggling to manage the company’s innovation efforts to produce the results planned for.  The leader of an innovation project may be finding it hard to garner the support needed from senior management.Swisher, P. (2016, July 29). How to lead successful innovation: Lessons from experts. https://professional.dce.harvard.edu/blog/how-to-lead-successful-innovation-lessons-from-experts/

What is an Innovative Culture?

An innovative culture is a work environment that fosters and rewards employee creativity instead of focusing on deadlines and revenue. Tech companies often have an innovative culture since the tech industry constantly changes and generates new ideas. Key characteristics of an innovative culture include:Indeed Editorial Team. (2021, April 29). How to create an innovative culture at work. https://www.indeed.com/career-advice/career-development/innovative-culture

• Unique strategy: An innovative strategy often involves specific goals and a strategy specifically designed for and by the company.
• Autonomy: When the workplace has an innovative culture, it often gives employees freedom in how they work to accomplish goals.
• Trust: An environment of trust encourages employees to share ideas and attempt new methods to accomplish goals.
• Accepting failures: Innovation may lead to some failures along the way. Allowing these failures helps employees be more creative without the fear of defeat or making a mistake.
• Leadership: Good leaders with effective management abilities help maintain an innovative culture. However, it’s best implemented when employees act as leaders, too.

Watch this YouTube video “Amazon’s culture of innovation” to learn more about how Amazon creates a culture of innovation.London Business School. (2018, March 26). Amazon's culture of innovation. [Video]. YouTube. https://www.youtube.com/watch?v=GNjmCewxyo0 Transcript for “Amazon’s culture of innovation” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Why Have an Innovative Work Culture?

An innovative work culture encourages continuous improvements which can help the company produce improved products and services to retain existing customers and attract new customers.  An innovative company also attracts investors and new talent (new employees). Innovation can improve the company’s image and make it a leader in the industry, again bringing more customers, investors, and profit. Innovative companies often have higher revenues than their competitors in the market, and they make more profit.

When companies trust, encourage and reward their employees, their employees feel more creative and create new ideas at work. This is a benefit to the company.  Often innovative cultures create happier and more productive employees.  Innovation can prepare a company to adapt to its industry and market and this ability to adapt can lead to a company’s longevity as it must keep up with its competition to stay relevant. When a team searches for new methodologies or processes and creates new products, it may discover a groundbreaking idea or predict a future problem it may face. Both can help the company adapt to a changing landscape. To summarize, the benefits of having an innovative work culture include the following:Swisher, P. (2016, July 29). How to lead successful innovation: Lessons from experts. https://professional.dce.harvard.edu/blog/how-to-lead-successful-innovation-lessons-from-experts/

• Sets a course for improvement
• Helps develop new ideas
• Leads to company growth
• Gives a competitive advantage
• Increases team efficiency
• Develops an adaptive nature
• Appeals to more talented professionals
• Improves the company brand

How Can Leaders Build an Innovative Work Culture?

How Can Leaders Nurture Innovation?

Internal Collaboration

It is important to create cross-departmental teams and make communicating across departments easy. When, for example, the marketing team only speaks to the marketing team this creates a recipe for groupthink. To ensure employees understand how the different parts of the company work and how they must work together to achieve progress, leaders might, for example, create a policy whereby anyone who wishes to become a business unit general manager must have worked in at least two functional areas for two or more years. The CEO of a very successful technology company requires the R&D people to spend about 10% of their time in marketing and sales and vice versa.Gupta, A. & Wang, H. (2017, August 3). Leading with innovation. [Video]. LinkedIn Learning. https://www.linkedin.com/learning/leading-with-innovation/novel-combinations-of-existing-ideas?autoAdvance=true&autoSkip=false&autoplay=true&resume=false&u=2167290

A great example of internal or cross-company collaboration is Starbucks. As the rise of café culture birthed hipster pop-ups and independent shops, the dominant chains began to lose ground. Keen to avoid a Kodak moment, Howard Schultz jumped to action. The Starbucks CEO invited store managers from all over the world to come together for a conference to redesign the café experience.Richards, R. (2021, January 6). Business innovation strategy: 9 key pillars for success in 2021. https://masschallenge.org/article/innovation-strategy

Innovation Labs and Intrapreneurship

Designing innovation labs is one way to foster and support innovative initiatives.  Some well-known organizations create innovation lab spaces where their employees can experiment and work on innovative ideas.  Some companies share successful ideas from employees by supporting them in intrapreneurship initiatives which often take the form of company spin-offs or subsidiaries whereby the employee who came up with the idea often becomes a top-level manager of the new spin-off company.

Top Innovation Labs

Innovation Labs focus on business growth. They can either be internal to a company that has the resources and the team available to run their own internal programs, or they can be external such as a consulting firm that supports the innovation process of other businesses. Innovation labs are strategic and goal-focused and are used as tools to address specific company innovation requirements. An innovation lab is a fast, flexible and creative concept that adapts to the needs of the host organization. Innovation Labs can be set up for just a few days, run over the course of a few months, or can become an ingrained part of a company that provides a constant source of innovation.

Below is a list of a few companies with successful innovation labs.Rice, M. (2019, November 22). 31 corporate innovation labs to know. https://builtin.com/corporate-innovation/corporate-innovation-labs

• Kohl’s Innovation Center
• Google[x]
• Amazon Lab126
• Verizon 5G Labs
• Volkswagen Automative Innovation Lab
• Staples’ Velocity Lab
• Coca-Cola’s KOLab
• Lowe’s Innovation Lab
• Capital One Labs

Some successful intrapreneurship examples include:

BOXLAB

Intrapreneurship programs are a great way to make innovation projects and ideas happen. This happened in BASF and its intrapreneurship program, Chemovator, where BOXLAB Services became the first corporate spin-off in the organization. Mischa Feig and Lisa Ruffin are the intrapreneurs behind the spin-off, which now operates as an independent startup on the market with BASF holding minority shares.Studio Záo. (n.d.). Innovation examples: Top 5 stories from Google, Airbus and more. https://studiozao.com/resources/intrapreneurship-examples

Vimeo

Vimeo is an exceptional example of how an Intrapreneur, Anjali Sud, transformed its companies’ business model inside out and went from being the Marketing Director to the CEO of the company. Increasing sales by 54% in a year, Anjali Sud changed the struggling online video platform to a successful SaaS business.Studio Záo. (n.d.). Innovation examples: Top 5 stories from Google, Airbus and more. https://studiozao.com/resources/intrapreneurship-examples

PlayStation

Back when gaming consoles were first being developed and marketed, Sony was not interested in entering this industry. It’s hard to believe this considering that today, gaming accounts for 29% of Sony’s revenue. Ken Kutaragi is the intrapreneur behind the launch of the first Sony PlayStation in December 1994 in Japan. It eventually became the first “computer entertainment platform” to ship over 100 million units, doing so in under a decade.Studio Záo. (n.d.). Innovation examples: Top 5 stories from Google, Airbus and more. https://studiozao.com/resources/intrapreneurship-examples

Innovation Time for Employees

Leaders who build innovation into their culture may offer “free time” to employees who wish to work on innovative initiatives. Leaders want to encourage innovation in non-obvious areas. Getting employees to expand their definitions of innovation is essential, so leaders should explicitly spell out for employees distinct areas that are ripe for innovation within the company, such as product, process, or business model, and let employees know the company is seeking contributions in any of these areas.Solomon, M. (2018, April 28). How to build a culture of innovation and turn every employee into an innovation powerhouse. https://www.forbes.com/sites/micahsolomon/2018/04/28/how-to-build-a-culture-of-innovation-and-turn-every-employee-into-an-innovation-powerhouse/?sh=2a1200514728

Companies like Google, 3M, and a host of others are known for letting their employees spend 15 to 20 percent of their time each week working on creative side projects, innovations, and ideas – and it pays off. (This is how Gmail and Google Earth were created.) In addition to creating space for employees to innovate, leaders should also be prepared to reward employees for their creativity. For example, employees might be promised a certain percentage of net revenue for any employee who comes up with a new product that goes to market.Abrams, M. (2021, December 23). How to make your company more innovative. https://bitrebels.com/business/how-make-company-more-innovative/#:~:text=Here%20are%20several%20ways%20you%20can%20encourage%20more,With%20Creatives.%203%203.%20Require%20Time%20Off.%20

Partnerships and Acquisitions

Forming partnerships with other organizations to create a new innovation is often a great idea since it will reduce the risks of innovating for each company because each partner shares in the risks. With that said, each collaborating organization will also share in the rewards.  An organization that may be weak in some areas and has determined it would not be feasible to expand operations, purchase technology, or obtain patents that would be needed to develop a specific innovation, might gain the strengths needed (e.g., supply chain, manufacturing, technology, patents, trademarks, etc.) through a partner company that would share these with the innovation team.  (Note that some of these concepts were discussed in the chapter on innovation risks.)

Large companies may work with smaller businesses that have a niche, expertise, technology, or specialty that the larger company does not have.  Many times large organizations purchase (acquire) these smaller companies so that the larger organization can expand its innovative skillset, technologies, processes, patents/trademarks, and expertise with what the smaller company brings. For example, software and application development might not be the company’s thing so the company might consider partnering with a Python developer to launch a brand new web application that the industry has never seen.Abrams, M. (2021, December 23). How to make your company more innovative. https://bitrebels.com/business/how-make-company-more-innovative/#:~:text=Here%20are%20several%20ways%20you%20can%20encourage%20more,With%20Creatives.%203%203.%20Require%20Time%20Off.%20

Cisco’s acquisition strategy generally targets smaller companies that have developed innovative new products,  but the key to making these acquisitions pay over the long term is the company’s ability to retain the talented engineers and managers from the acquired companies. They’ve been very successful at this, bolstered of course by the company’s increasing stock value.Morris, L. (2007). Creating the innovation culture: Geniuses, champions, and leaders. http://www.innovationlabs.com/CreatingInnovationCulture.pdf

The government often partners with businesses toward innovation, especially social innovation, technology innovation, and environmental innovation. Governmental organizations across the globe have launched their own innovation hubs often partnering with businesses to find innovations that will bring value to entire communities. (Note that some of these concepts were discussed in the chapter on innovation risks.)

Innovation consultants can help guide the innovative process.  Companies can outsource these experts if they do not have an organizational structure for innovation or lack talent within the organization. (Note that some of these concepts were discussed in the chapter on innovation risks.)

Open Labs for Co-Creation

An “open lab” can offer real benefits for organizations, for example, reinforcing corporate commitment to innovation and creativity in a physical space. Auto manufacturer, BMW, has a co-creation lab where its customers can share their ideas and become an integral part of concept vehicle development.Orange Business Services. (2019, February 4). Co-innovation: How to make it a success. https://www.orange-business.com/en/magazine/co-innovation-how-to-make-it-successful Collaborating with customers by inviting them into innovation projects through gathering feedback to participating in development, customers have helped companies make great strides. Companies might consider co-creation partnerships with customers, universities, suppliers, start-ups, and even competitors. In early 2018, Swedish furniture and home goods retailer IKEA launched ‘Co-Create IKEA’, a digital platform encouraging customers and fans to develop new products. In 2018, Coca-Cola entered into a co-creation experiment with customers to make sure its Southeast Asia product strategy reflects the tastes of the region and its people.braineet. (n.d.). Customer co-creation examples: 12 companies doing it right. https://www.braineet.com/blog/co-creation-examples

Structuring for Innovation

“The most important goal of innovation is to gain a competitive advantage by increasing the speed and effectiveness with which your company learns—and acts on that learning. Innovation is about experimentation—failing early and often.”Swisher, P. (2016, July 29). How to lead successful innovation: Lessons from experts. https://professional.dce.harvard.edu/blog/how-to-lead-successful-innovation-lessons-from-experts/

Innovation strategy is about mapping an organization’s mission, vision, and value proposition for defined customer markets. It sets boundaries to innovation performance expectations by simplifying and structuring the innovation work to achieve the best possible outcome. For a business to thrive in today’s world of intensified competition it is critical that innovation initiatives are aligned with corporate strategy. (Note that additional details about innovation strategy are provided within the chapter on growth strategy.)

An innovation strategy is a clearly-defined plan of structured steps a person or team must perform to achieve the growth and future sustainability goals of an organization. An innovation strategy provides people with a framework for critical decision-making. Leaders may consider the following questions when devising a strategy:Richards, R. (2021, January 6). Business innovation strategy: 9 key pillars for success in 2021. https://masschallenge.org/article/innovation-strategy

• In what areas will we invest?
• How much will we invest?
• Who will make investment decisions?
• What capabilities will we need to develop to support our investments?
• What capabilities can we not build, which we must then acquire or form a partnership to provide?

Holding on to traditional practices just because “that’s what we’ve always done” is not a strategy for success. That rigid approach is guaranteed to fail in the face of disruption, as proven by Kodak and Blockbuster.

Leaders who want an innovative company must ensure a balanced innovation portfolio; a combination of core, adjacent, and transformative innovation initiatives. Generally, 70% of innovation investments are in core innovations, 20% in adjacent innovations, and only 10% in disruptive innovations. In terms of value creation potential, however, the ratios are inverted:  core innovation efforts typically contribute 10% of the long-term cumulative return on innovation investment, adjacent initiatives contribute 20%, and transformational projects yield a huge 70%.  The right balance of innovation investment will vary from company to company according to particular factors like the age of the company, its competitive position in the market, and characteristics of the industry served (e.g. number of suppliers, market growth,  regulatory patterns, etc). Most companies tend to be heavily oriented toward just core innovation and whilst this is understandable in terms of avoiding the greater risks and uncertainties associated with adjacent and transformational initiatives, the result will be a steady, long-term decline in business and attractiveness to customers if a company never tries some adjacent or transformational projects.MBA Knowledge Base. (n.d.). The innovation ambition matrix. https://www.mbaknol.com/strategic-management/the-innovation-ambition-matrix/ (Note that some of these concepts were discussed in the chapter on innovation risks.)

Leaders must create corporate structures that continuously nurture innovation. They should build connections to innovation within the company vision, mission, and values and ensure that company values and goals are communicated throughout the organization. It is also important for the leaders of the organization to model the behaviours they want to see in their employees and create a culture of innovation through providing training, motivation, encouragement, and support to employees. Leaders must examine new ideas with an open mind.  Many ideas are in their infancy when they first appear and it may take time to refine and perfect the concept.

Leaders must continually look for opportunities and threats and examine the company’s strengths and weaknesses so as to build weaknesses into strengths, use strengths to combat threats, and take advantage of opportunities (SWOT, competitive analysis, PEST, Porter’s Five Forces, Ansoff Matrix, Innovation Matrix, etc.).

Leaders must be ready to accept risk and understand it is acceptable to fail and try again, as this is part of the innovative process. Investing in a knowledge management system will help the company make it easy to share information and ideas, track innovation progress, manage the budget, track ROI, and keep track of lessons learned from past failures so as to avoid these pitfalls in the future. An electronic system allows companies to capture the benefits of, and lessons learned from innovation.

Smaller businesses do not have much problem with the organizational structure getting in the way of innovation because most employees who have an innovative idea can speak directly with the owner of the business to get the idea reviewed and approved. Larger corporations have several types of organizational structures and some of those, such as hierarchical have many layers, so an employee may speak with their direct manager who then speaks to an area manager who then speaks to another manager, and so on.  Often in these large organizations, different departments are responsible for their own profit and loss, so they essentially compete with each other for company resources which is not the best structure to support collaborative innovation or make it easy to get big ideas into the innovation pipeline.

From small businesses to large organizations like global megacorporations, companies across the globe generally rely on four different types of organizational structures in the mechanistic model: Functional, Divisional, Matrix, and Hybrid. Matrix structures combine functional structures with divisional structures in a grid arrangement that combines vertical functions (e.g., organizational roles and titles) with horizontal divisions (e.g., directors of various product lines, projects, etc.). A matrix organization decentralizes decision-making and provides teams with increased autonomy while simultaneously improving cross-functional collaboration to boost overall productivity and encourage innovative approaches to problem-solving. Hybrid is similar to matrix structures, yet allows for collaborative sharing of data and resources while preserving division-specific specializations.Del Vecchio, D. (n.d.). Types of organizational structures and their pros and cons.  https://planergy.com/blog/types-of-organizational-structure/

While the four organizational structures above are the most common, companies around the world also use four other types of organizational structures which are more organic in nature: Process, Circular, Flat, and Network. Process structures concentrate on end-to-end workflows for specific processes. This improves adaptability and flexibility to meet changing demand and market conditions. A circular structure is intended to encourage the dissemination of information and inspiration from the center and allow different divisions to participate as components of a single whole. In flat structures, management and executive staff take a more collaborative rather than supervisory role, working and communicating closely with team members and project managers.Del Vecchio, D. (n.d.). Types of organizational structures and their pros and cons. https://planergy.com/blog/types-of-organizational-structure/

To ensure operations are running smoothly, many businesses follow an organizational structure that best supports their size and business goals. Having and communicating a clear organizational structure helps employees understand their roles and corresponding expectations and informs goal-setting.Indeed Editorial Team. (2021, May 21). Ten types of organizational structure (with pros and cons). https://www.indeed.com/career-advice/career-development/types-of-organizational-structures

Watch this YouTube video “How Apple is Organized for Innovation: The Functional Organization” to learn more about how to organize a company for innovation success.Harvard Business Review. (2021, January 27). How Apple is organized for innovation: The functional organization. [Video]. YouTube. https://www.youtube.com/watch?v=5hENFA3CJUY Transcript for “How Apple Is Organized for Innovation: The Functional Organization” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Funding and Budgeting for Innovation

The process for establishing a funding source will differ depending on the company. For example, Allstate CIO, Suren Gupta, has described how a formal Innovation Council evaluates ideas and allocates funding. In other companies, if the innovation ties closely to a particular business unit, then funding may come from that group’s budget. The actual size of the budget depends on whether a company lab is building the technology itself, partnering with other organizations, or acquiring a company, product, or talent. Amazon and Google have spent millions of dollars developing parcel delivery drones. Meanwhile, companies like UPS and Daimler AG have opted to partner with—and make strategic investments in—established drone makers. This lowers both the risk and the cost of innovation while still allowing the company to develop new capabilities. Regardless of how funding is established—or the size of the budget itself—it is critical to measure how much money was spent at each stage of the process: preparation (i.e. percentage of capital budget allocated to innovation projects), development (i.e. R&D spending at each phase of development the innovation process), and results (i.e. percentage of sales from innovation projects). As with the portfolio approach to general innovation metrics, the use of financial metrics across the innovation lifecycle reduces the focus on ROI, and too much focus on ROI can cripple innovative projects in the early stages.Davis, C. (2017, December 5). 7 considerations when creating a corporate innovation lab. https://www.cio.com/article/228053/7-considerations-when-creating-a-corporate-innovation-lab.html

Measuring Innovation Progress and Success

Measuring innovation input, progress, and output will help companies mitigate risk. It is not always easy to figure out the right mix of metrics to use to measure innovation. Some organizations measure what is easy rather than what is important. The most important function of measuring innovation is to ensure the project is moving in the right direction. Innovation metrics allow managers to see if the team is doing enough of the right kind of activities to be able to actually achieve results. Measuring innovation helps to guide resource allocation, hold the team accountable for their actions and responsibilities, and assess the effectiveness of innovation activities. (Note that some of these concepts were discussed in the chapter on innovation risks.)

Despite these challenges, businesses can measure innovation with a mixture of the following:braineet. (n.d.). Innovation metrics and KPIs: Measuring innovation to create growth. https://www.braineet.com/blog/innovation-metrics-kpis

• Timesheet metrics
• New product or service metrics
• Financial metrics
• Training and staff competency metrics
• Management and leadership metrics

By committing to measuring innovation, the company can encourage employees to be more conscious of the need for creativity and fresh thinking, no matter what their day-to-day responsibilities might be. If management regularly measures the company’s innovative output and shares these measurements with employees it will help encourage staff to think about innovation accountability on a daily basis and take responsibility for finding new ways of doing things.braineet. (n.d.). Innovation metrics and KPIs: Measuring innovation to create growth. https://www.braineet.com/blog/innovation-metrics-kpis

Not all metrics work for every company or every project. There are, however, certain types of metrics that every innovation team should pay attention to, including:

• Number of new ideas in the pipeline
• Number of innovation projects started
• R&D spent as a percentage of sales
• Revenue/profit/growth from new innovations
• Number of new innovations launched in a specific amount of time

Why Do Some Organizations Fail at Innovation?

Companies need to facilitate creative ideation; they also need processes to capture the outputs of creative ideation and transform them into profitable and scalable innovations. There are many reasons why innovation projects or new products fail in the market. Usually, a failure is not related to the quality of an idea itself, but to its implementation, which means that it has internal organizational causes. Management must be aware of the company’s weaknesses and act to create a framework that encourages and strengthens innovation, which should create higher innovation successes and generate additional revenue for the company.  A few reasons innovations fail are listed below.

1. Fear of taking risks. The innovative process carries no guarantees, and the consequences of fear of risk tend to make organizations prefer the status quo.
2. Lack of market orientation. The lack of market orientation and understanding of customer needs is another main reason why new products fail on the market. The product does not offer a true and convincing customer value or differentiate itself from existing products.Lead Innovation Blog. (2018, April 27). Four reasons why innovation fails. https://www.lead-innovation.com/english-blog/why-innovations-fail
3. Failure to scale. Scaling is the part where most of the value creation and impact comes from.  Scaling an innovation can be defined as the process of expanding the presence and the use of the innovation to be as widespread as possible to maximize that impact.Nieminen, J. (2021, October 22). Scaling innovation -- The what, why and how. https://www.viima.com/blog/scaling-innovation
4. Poor Organizational Structure and Processes. An organizational structure that does not support innovation. The larger an organization is, the slower the processes often become. Sluggish processes with long decision-making cycles can be a death sentence for innovations. In addition, there are often interface and communication problems. All this has a negative effect on the quality and efficiency of innovation projects. This becomes more obvious when compared to the speed of how quickly start-ups can innovate.Lead Innovation Blog. (2018, April 27). Four reasons why innovation fails. https://www.lead-innovation.com/english-blog/why-innovations-fail
5. Wrong decisions. Management may set the wrong course in innovation projects or when selecting ideas. Wrong decisions can affect the prioritization of ideas, product strategies for new products, selection of variants in development, etc. The reasons behind this include lack of corporate and innovation strategy or insufficient information as a basis for decision-making.Lead Innovation Blog. (2018, April 27). Four reasons why innovation fails. https://www.lead-innovation.com/english-blog/why-innovations-fail
6. Lack of Internal Communication. Despite working hard, being isolated in groups/departments can hinder collaboration by creating unnecessary competition within departments. Once input is required from all departments, internal communication and collaboration must be streamlined.
7. Low priority for innovation. The unrealized commitment and the lack of support for innovation are certainly some of the main reasons why innovations fail. As a result, many resources are lost through friction losses and innovation tasks are not worked out in the required quality. The main cause is from above and it is also reflected in the culture of innovation.Lead Innovation Blog. (2018, April 27). Four reasons why innovation fails. https://www.lead-innovation.com/english-blog/why-innovations-fail

Example: Innovation Practices that Saved LEGO

 LEGO story sourced from The Leadership Network

From the brink of bankruptcy, LEGO has grown into a highly profitable toy brand that produces a staggering 22 billion plastic bricks a year. Fuelled in part by LEGO movies, the privately held company surged ahead of its main rival, Mattel, in 2014 to become the biggest toy manufacturer in the world.  Against all odds, LEGO achieved one of the biggest turnarounds in history. How did they do it?

Setting a new direction

First, LEGO restructured and hired a new CEO, Jørgen Vig Knudstorp, a process-based thinker and father of four who arrived from McKinsey & Co. in 2001 and was promoted to CEO just three years later, at just 36. Knudstorp quickly realized that the problem was not with the product, but with the company’s attempts to become more relevant in the age of video games. LEGO had “over-innovated,” spreading itself far too thin and launching so many new initiatives that the company had lost its sense of identity.The Leadership Network. (2016, November 7). 5 sustainable innovation practices that saved LEGO.  https://theleadershipnetwork.com/article/lego-sustainable-innovation#:~:text=5%20Sustainable%20Innovation%20Practices%20that%20Saved%20LEGO%201,Products%20for%20Girls.%20...%205%20Low-Risk%20Experimentation.%20  

Innovation at the core

Knudstorp’s turnaround plan involved a mix of cost-cutting, philosophical revitalization, sustainable innovation, and back-to-basics simplicity. The goal was to rediscover the very essence of LEGO, innovate close to the core, and leverage their loyal and creative fan base. He set up “The Future Lab”, a secretive and highly ambitious R&D team tasked with inventing new, technologically enhanced “play experiences” for children all over the world based on detailed ethnographic studies of how children play. With The Future Lab, LEGO developed a range of low-risk, low-cost innovation practices to test ideas and cultivate expertise.The Leadership Network. (2016, November 7). 5 sustainable innovation practices that saved LEGO.  https://theleadershipnetwork.com/article/lego-sustainable-innovation#:~:text=5%20Sustainable%20Innovation%20Practices%20that%20Saved%20LEGO%201,Products%20for%20Girls.%20...%205%20Low-Risk%20Experimentation.%20  

Smart Licensing

LEGO’s breakthrough with licensed intellectual property began in 1999 with an agreement to license Star Wars characters and vehicles. On the heels of the Star Wars success, LEGO smartly committed itself to obtaining licensing arrangements with established brands, including Harry Potter, Lord of the Rings, DC Comics, Marvel, and Disney. The move paid off, while royalty expenses were in the hundreds of millions, profits reached billions.The Leadership Network. (2016, November 7). 5 sustainable innovation practices that saved LEGO.  https://theleadershipnetwork.com/article/lego-sustainable-innovation#:~:text=5%20Sustainable%20Innovation%20Practices%20that%20Saved%20LEGO%201,Products%20for%20Girls.%20...%205%20Low-Risk%20Experimentation.%20  

Rapid prototyping

Within its factories, LEGO has embraced a philosophy of rapid prototyping. Inspired by Google and other technology companies, they create minimum viable products to prototype and get new products to market quickly on a small scale. The Future Lab also cultivates intrapreneurship as its relationship with LEGO is more akin to an incubated start-up. By using market testing and validating their new products, The Future Lab is driving culture change to ensure that this new business model and way of working will be accepted across the organization.The Leadership Network. (2016, November 7). 5 sustainable innovation practices that saved LEGO.  https://theleadershipnetwork.com/article/lego-sustainable-innovation#:~:text=5%20Sustainable%20Innovation%20Practices%20that%20Saved%20LEGO%201,Products%20for%20Girls.%20...%205%20Low-Risk%20Experimentation.%20  

Open Innovation

Lego goes a step further with consumer feedback by putting customers, suppliers, and partners in the driving seat for innovation. LEGO Ideas is a crowdsourcing platform that allows fans to design their own sets, gather support from fellow fans (you need at least 10,000 votes), and eventually get LEGO to produce your set as one of its standard lines. Examples include Back to the Future’s DeLorean and the Ghostbusters Ectomobile, which are now widely popular.

The online platform now generates hundreds of new product suggestions each year and uses subtle and powerful open innovation techniques, employing everything from social media to peer selection to entice fans into contributing new designs and ideas.

LEGO Architecture is another good example. Several years ago, a Chicago architect and Adult Fan of LEGO (AFOL) reached out to LEGO, suggesting they create official kits similar to his homemade LEGO models of iconic buildings. The idea was initially met with some resistance, but fortunately, a free-thinking Norwegian LEGO executive saw value in AFOLs and created a stealthy, shoestring plan to prove their worth to the company. They tested the LEGO architecture line in just a couple of stores in Chicago and saw that they were able to charge “grown-up prices” for kits with the same number of LEGO bricks inside. The pilot was a success and the line remains hugely popular amongst adult fans of LEGO worldwide.The Leadership Network. (2016, November 7). 5 sustainable innovation practices that saved LEGO.  https://theleadershipnetwork.com/article/lego-sustainable-innovation#:~:text=5%20Sustainable%20Innovation%20Practices%20that%20Saved%20LEGO%201,Products%20for%20Girls.%20...%205%20Low-Risk%20Experimentation.%20  

Designing Products for Girls

Another example of audience diversification is LEGO Friends. In 2011, boys made up 90% of LEGO consumers and LEGO wanted to broaden its appeal to more girls. Their research showed that – while both girls and boys love the building aspect of LEGO – there is a key difference in how boys and girls tend to play with their sets. Whereas boys tend to be more compelled by a strong narrative, girls are more likely to use their sets for role-playing. After years of refinement, the company launched LEGO Friends, a new line designed specifically for girls. The line doubled sales expectations in 2012, the year it was launched, and in that year alone LEGO tripled its sales to girls.

Low-Risk Experimentation

In the past, LEGO wouldn’t have launched any “risky” products that could smear the brand’s reputation for quality. But that’s precisely why Knudstorp created Future Lab – so mistakes can be made relatively cheaply and vast amounts can be learned. For example, LEGO Universe, an online game that resembled World of Warcraft, was discontinued just over a year after its launch as they weren’t able to build a satisfactory revenue model. The experiment barely damaged LEGO’s reputation whilst providing multiple key insights and learning lessons to establish the company in the digital world.

In February 2015, LEGO launched a new game – LEGO Portal Racers – in partnership with augmented reality company Metaio. The game uses an Intel RealSense camera and depth technology to allow users to play without using their hands, instead of using head movements to steer left or right. The original idea was to have kids build their own vehicles out of bricks and scan them into the game, but it remains a digital-only experience for the time being. Like LEGO Fusion, it is a means for Future Lab to understand and experiment with new technologies.

Few businesses have mastered the digital/physical experience but LEGO’s ability to experiment quickly, cheaply and under the radar means it can continue to evolve, discover new forms of play, and delight its fans.The Leadership Network. (2016, November 7). 5 sustainable innovation practices that saved LEGO.  https://theleadershipnetwork.com/article/lego-sustainable-innovation#:~:text=5%20Sustainable%20Innovation%20Practices%20that%20Saved%20LEGO%201,Products%20for%20Girls.%20...%205%20Low-Risk%20Experimentation.%20  

So what can we learn from the ups and downs of innovation at LEGO?

1. Innovation without direction is risky.
2. Innovate close to the core first.
3. To experiment and test ideas in a safe way, without damaging your brand reputation, start with small projects and small budgets, then test, learn and improve.
4. Disrupt yourself – build the next big thing before a competitor does.
5. Foster open innovation and listen to the wisdom of your customers.
6. Build an innovation culture that gives people the freedom to be creative, as well as the direction and focus needed to deliver profitable innovation.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were  utilized to cite references throughout the chapter and generate a list at the end of the chapter.)