Almost 90% of executives believe that innovation is essential to their organization’s success. Rightly so because innovation impacts the business in many ways.
It’s interesting how innovation has been a buzzword since the Industrial Revolution yet up to now, it has not lost its ability to elicit ooohs and aaaahhhs from people. A lot of companies would have this as part of their values, mission, and thrust as it is normally a cue for growth and modernization.
Despite the familiarity and ubiquity of the term, a number of Acumen’s clients still admit that this remains to be an area they need help in understanding, building capability for, and imbibing in their company culture.
Now before you dismiss this as just another Innovation article that talks about creativity, ideation, open-mindedness, looking at things in a new way, or, everyone’s favorite nowadays – AI, let me assure you that what will be taken up here are not JUST the usual and the givens, rather, I will talk about how innovation can be made relevant, strategic, and inspiring.
Innovation can be understood in two ways: as a process and as an outcome. In my Innovation and Design class at the University of Asia and the Pacific, I define innovation as both a process and an outcome — it is the development and introduction of new ideas, methods, technologies that give birth to new products, services, processes, user experience, and channels or touch points.
Almost 90% of executives believe that innovation is essential to their organization’s success. Rightly so because innovation impacts the business in many ways: (1) It creates new market spaces for companies, thereby adding revenue streams; (2) It keeps the company dynamic and relevant, which stops the target market from leaving the brands or the company’s user base; (3) It addresses inconveniences and barriers thereby improving the state of the category or industry; (4) It addresses business gaps or portfolio gaps in the company thereby improving or protecting revenue growth; (5) Increases frequency and usage of products; and (6) Breakthrough innovations change the dynamics of the category and enhances customer experience, resulting to heightened customer satisfaction and happiness.
Why would one then choose to be static and de-prioritize innovation?
The answer: Inertia and fear of failure.
SOME WHO PLAYED IT SAFE
We see a lot of businesses fail because of the lack of appreciation for innovation. While these companies perhaps think that they are saving their companies from disaster by playing it safe, we have seen a number of examples of this that have made the rounds of business publications and university case studies.
Kodak: Kodak was the global market leader in pictures or film photography for most of the 20th century, reaching its peak in the early ‘80s. By mid-‘80s, Kodak was starting to feel the threatening presence of their competitors who started introducing new technologies. Its story was a classic tale of being too attached to or too in love with its current strength and brand identity – which at that time was FILM. In 1975, Kodak engineer Steve Sasson developed a digital camera prototype for the company but management was too scared to launch it for fear of losing shares from film to this digital product. But the digital products of competitors such as Sony were exactly what hastened Kodak’s downfall.
Blackberry: There was a time in the corporate world when Blackberry was THE issued phone of multinational companies. Most of the executives (myself included!) lived with their Blackberry phones buzzing relentlessly as they stayed connected with both work and friends 24/7! This was the start of work encroaching even on personal time such as weekends, as it was so easy to send instant messages and view and answer email messages anytime, anywhere. But Blackberry basically ignored the touch screen technology of Apple when it gained popularity in 2007, perhaps thinking that it was just a consumer trend that would not threaten their stronghold among enterprises and business executives. Theirs was a story of complacency. By the time they took the threat seriously, the iPhone was way ahead and they were struggling to launch touchscreen devices. They came up with the BlackBerry Strom and BlackBerry 10, but both were not successful in chipping off some shares from Apple and Android-powered touchscreen phones.
Toys R Us: Toys R Us used to be these giant stores where kids and parents can spend a lot of time looking for that perfect prize, gift, or treat! Mention Toys R Us to an ‘80s kid and their eyes would surely light up. It was almost like Disneyland! I think you will agree that nowadays, it does not have the same ubiquity and effect on kids and kids-at-heart anymore. While we still have some stores around here in the Philippines, it has scaled down in size and most stores in western countries have closed down. Theirs is a story of the inability to understand the changes in consumer behavior and user experience. Children of the new millennium are both big on in-store user experience and of course the digital option of availing the products. For brands that choose to keep their brick and mortar, in-store experience is crucial. Retail shops such as those of tech firms like Apple or sports stores like Decathlon have been redesigned – providing comfortable couches, browsing areas, or wide spaces for testing out the merchandise to raise the level of customer experience.
Toys R Us, on the other hand, continued on with the traditional way of merchandising and stocking of inventory. They could have taken inspiration from the Apple stores and allow the customers to test and play with the gadgets. Decathlon allows their customers to ride the bikes, jump on the trampolines, test out scooters, right inside the store.
Children were also shifting from actual toys to digital games. This does not necessarily mean ditching the actual or physical toys but rather just adding a digital interaction to it. Some toy brands, like Build-A-Bear adapted by incorporating a digital factor to it – consumers can customize online and purchase in-store or the physical toy has a virtual life online – you can feed it online, create a house for, and other simulations of real life activities.
Toys R Us did not innovate and continued to simply be a “warehouse” of toys and has actually filed for bankruptcy in 2017.
CORE PRINCIPLES
A lot of books and articles on innovation would be around the areas of creativity, ideation, and AI or digital technology. These are tools and executions but not the end all and be all of innovation. While these are certainly part of Innovation, and the “fun” side of it, I want to highlight STRATEGY and IN-DEPTH CUSTOMER UNDERSTANDING or INSIGHTING as important factors, especially among businesses who are focused on making their innovations count.
Our consultants in Acumen have launched new products / innovations across different categories, industries, and multinational and local brands. We have gone through different terms and processes in innovation – from the traditional ones like Six Sigma or Total Quality Management, which focused on innovating to solve a problem, to Stage Gate Model and Blue Ocean Strategy which were focused on expanding and creating spaces and then Design Thinking and Open innovation which are more customer centered and more collaborative in nature. These barrage of terms need not overwhelm you. There is a way to demystify Innovation and these terms. There are core principles that are shared by all of these models, which have withstood the evolution of terms and visual frameworks.
In all of these frameworks, these are the common core principles:
1. Clear business objectives and goals: Is it to grow the business by x%? Gain market share by x pp? Enter a new category or segment? Increase penetration or frequency?
2. Consumer Understanding: Who do we want to target? Who do we want to talk to and use our products / services? An in-depth description of their behavior, life stage, pain points, daily experiences, dreams, goals, and frustrations is indispensable. This will provide insights as to what possible spaces in their lives our innovation or brand can occupy.
3. Market and Parallel Market Scoping and Understanding: Reviewing the market performance and movement is one of the things that companies should always do to spot shifts, trends, and anticipate shifts and trends. It is important to strike a good balance of being ahead of the market and being relevant. Sometimes, some innovations came in too early and the market was not ready for it.
4. Defining the Innovation Purpose: This is the why or essence behind a company’s innovation purpose. It goes deeper than marketing or objectives of share gain, tapping new segments, or increasing frequency. It is closely linked to values of the company.
For a nutrition company, for example, the innovation purpose is to be the safe and assuring wellness partner of consumers by always providing them with easy, convenient, accessible health and wellness products, updated with the latest and safest technology. Or for a coffee brand, to be the brand that is known to delight their consumers with offerings and accessibility, thereby having the highest affinity among them. Or for a bank, it might be about being the one who leads changes in creating the best customer experience.
The innovation purpose serves as both our anchor and north star for innovation. It may be the same as the Brand Essence or a version of it. With an innovation purpose, even “blue sky” innovations are grounded on something that is consistent with the brand strategy and identity.
5. Ideation: No innovation process is without ideation. The ideation or brainstorming sessions are when we let our creativity and imagination run wild with ideas, guided by the items mentioned above: Business objectives and goals, Deep Consumer Understanding, Market Understanding, and the Innovation Purpose. It is important to have good facilitators for Ideation Sessions who can make sure ideas churned out are Fresh, Relevant, Ownable by the brand, Strategic, and has a potential to be sizeable or to gain traction right away.
6. Testing/validation: This step or principle assuages any fears of failure. This gives the companies an idea of how much of a winning concept the new idea is. It is a process of finding answers to several key questions — “What do our consumers think about it? What are the strengths and weaknesses of the concept? What is the purchase intent score of the concept tested among the target market? Do our consumers or target market believe that we our brand can deliver the promise of the concept? Is it unique? Is it fresh? These are sample questions that when answered with a positive response can give us the confidence to launch our concept.
Innovation is fundamentally about having the confidence to lead and effect change, but it should not be done blindly nor instinctively. Companies must take strategic steps to ensure that their approach to innovation will lead to favorable business results and sustainable growth.
In Acumen, we have the passion for strategic and creative innovation. Couple this with our extensive experience in facilitation of workshops and business consulting, each Innovation engagement with us, whether in consulting or in capability building, is always refreshing and inspiring, leaving us and our clients with a mission to develop and launch new concepts.
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Written by: Chelet Tanjuatco - Client Director, Acumen Strategy Consultants
Chelet is an Adjunct Professor at the University of Asia and the Pacific’s School of Media and Marketing, delivering lessons backed by years of experience in product development and marketing in different industries.
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