What is Innovation?
Innovation is defined as the creation of a viable new offering. Innovating requires identifying problems that matter and moving through them systematically to deliver elegant solutions (Keeley, L.). Innovation is a practical creativity and how to make new ideas useful. Seeing what others do not see; seeing what does not yet exist. (Max Mckeown)
Why Innovation Matters?
We all understand that a startup will go through a research stages, such as per-venture and startup, before it is built as a company. Innovation is supposed to play a key role in successfully completing each stage, support the business to grow and win the acceptance of the market and customers. Without applying the right innovation system, a startup will have little chance to succeed and grow. It is better to first understand each stage of a startup development before we think about the right innovation solutions.
- The Pre-Venture Stage: The business is an early stage and before it gets financed and implemented. At this stage where idea concept (problem/solution) is being developed & tested but before the product/market is tested. Actually the business eventually in a research stage trying to choose and test the compelling idea concept.
- The Startup Stage: A startup is usually working to create the business and make it viable. At this stage, a business has tested the business idea concept, received seeds fund and has been working to develop the product/service and complete the product/market test. This stage is also considered as a research stage trying to develop and test the commercial offering.
- The Growing Stage: A startup is looking for a growth and it will usually set a strategy (i.e. the business model) that describes ways to enabling a growth. At this stage, a business has successfully tested the business concept (problem-solution fit) and tested the market (product-market fit) and has been working to generate a growing revenue. Also, at this stage the business is being created & gather some details on the business and market and in the run to grow and sustain. This stage is considered as a building company stage, where various resources are acquired and business is commercially run.
Innovation is immensely required for the startup during different startup stages. The key needs for the pre-venture stage will be innovative design thinking, ideation and problem-solution fit. For the startup stage, there will be the needs for innovative product service and commercial offering. At the growing stage, there will be a focusing effort in innovative business model, customer development and engagement. The system, processes and resources for managing the innovative changes must be will defined and performed to win the market.
What are the Innovation Tactics and How to Apply?
Pre-startup stage (Ambition: Business discovery)
- Conduct a customer mapping: Select the customer segment and analyze their job aims (professional, social and emotional), pains (undesired outcomes, obstacles and risk of failure) and gains (required, expected, desired and unexpected).
- List job aims, pains and gains: prioritize the pains & gains as based on to-do business opportunity, importance and urgency basis.
- Select a challenging pain and test it with potential customers:To accept the picked-up pain and move to another stage, you should collect strong evidences that potential customers accept the problem and perceive it as important and urgent (highly wanted).
- Value mapping: For tested pain, value mapping will be carried out to define the right solution for the pain as Value Proposition ( gain creator, pain reliever and the product).
- Prototype the solution or the idea concept: Try to make your idea concept as visible and visual.
- Problem/solution test: Get your developed solution and test it with potential customers as based on certain criteria for acceptance or rejection and collect evidences from the potential customers that they are willing to buy your product.
The startup stage (Ambition: Business validation)
- Product development: Begin with a prototype or sketch or a brochure (listing features, functions & benefits) for the product concept and get it validated with the potential customers and reiterate this process till your reach into a Minimum Viable product MVP.
- Product/market fit: Arrange your product with commercial offering and test it with potential customers and get evidence that they will buy it.
The company-building stage (Ambition: Business scalability)
- Open invitation: encourage other people to work with you and bring new ideas and offerings to your customers. (Ambition: change the known). Example: Procter & Gamble.
- Collaborative consumption: leverage connectivity to upend traditional forms of ownership and change the way customers relate to your goods and services. (Ambition: change the boundary). Example: ZIPCAR.
- Free-based: giveaway basic offering for free to attract many users and then make money off of them in multiple ways. Ambition: change the known. Example: LinkedIn & ZYNGA.
- Radical optimization: move beyond operational efficiency to make it painful for other firms to compete with you. Ambition: change the boundary. Example: CEMEX.
- Predictive business: mine data to model behavior and breakdowns, allowing to make promises, predict outcomes and drive efficiency for customers. Ambition: change the boundary. Example: GE Aviation.
- Profit model:
- Ad-supported: provide content or other services free to group of users while selling advertising to other customers.
- Auction: allow customers to set the prices of goods and services.
- Bundling pricing: sell in a single transaction a bundle of goods or services.
- Cost leadership: keep variable cost at lowest and sell high volumes at low prices.
- Disaggregated pricing: allow customers to buy exactly what they want.
- Financing: capture revenue and payment other than cash upfront and from structured payment plans and after-sale interest.
- Flexible pricing: applied different prices for an offering based on demand.
- Freemium: offer basic services for free while charging a premium for advanced features.
- Licensing: sell rights to use a service for a specific term.
- Membership: charge fees against set of benefits.
- Subscription: charging customer upfront to have access to the products or services over time.
- Alliances: share risks and revenues to jointly improve individual competitive advantages.
- Collaboration: partner with others for mutual benefits.
- Complementary partnership: partners with non-competitors ( complimentary product suppliers) for mutual benefits.
- Coopetition: partner with competitors.
- Franchising: license business principles to paying partners.
- merger/acquisition: combine two different entities to gain access to capabilities and assets.
- Open innovation: obtain access to patents from other companies to leverage, extend and build on expertise.
- Supply chain integration: partner with company’s supplier.
- Asset standardization: reduce operating costs and increase modularity.
- Competency centre: cluster resources, practices and expertise into centres that support functions across the organization to increase efficiency.
- Corporate university: provide training to employees.
- Decentralized management: devolve decision-making governance closer to the people or business interfaces.
- Incentive system: offer incentive schemes to staff .
- It integration: integrate technology resources and applications.
- Knowledge management: share relevant information internally to reduce redundancy and improve productivity.
- Organizational design: make functions and align infrastructure with core qualities and business processes.
- Outsourcing: assign to a vendor responsibility for developing or maintaining a system.
- Crow-dsourcing: outsource repetitive or challenging work to a large group of semi-organized individuals.
- Intellectual property: use a proprietary process to commercialize ideas in ways that others can not copy.
- Lean production: reduce waste and cost of production.
- Logistic system: manage the flow of goods, information and other resources between the point of origin and the point of use.
- On-demand production: produce items after an order has been received.
- Predictive analysis: model past performance data and predict future outcomes.
- Process automation: apply tools and infrastructure to manage routine activities.
- Process efficiency: create or produce more with less resources.
- Process standardization: use common products, procedures, and policies to reduce complexity, cost and errors.
- Product performance:
- Added functionality: add new capabilities to an existing offering.
- Conservation: design your product so users can reduce materials or energy.
- Customization: enable altering to suit individual requirements or specifications.
- Ease of use: make your product simple, intuitive and easy to use.
- Engaging functionality: add unexpected features or capabilities to an existing offering.
- Environmental sensitivity: create offerings that do no harm to environment.
- Focus: design a product or service for a particular audience.
- Styling: impart noteworthy style, fashion, or image to create a product that customers covet.
- Superior product: develop an offering of exceptional design and quality.
- Product system:
- Complements: sell additional related or peripheral products or services to a customer.
- Modular systems: provide a set of individual components that can be used independently but gain utility when combined.
- Product bundling: put together several products for sale as one combined offering.
- product/service platform: develop a system that connect with other partner products and services to create a holistic offering.
- Added value: include an additional service or function as part of the base price.
- Guarantee: remove customer risk of lost money or time from product failure or purchase error.
- Lease or loan: let customers pay over time to lower their upfront costs.
- Loyalty program: provide benefits to frequent and high-value customers.
- Personalized service: use the customer’s own information to provide perfectly calibrated service.
- Self-service: provide customer a control provision over their activities.
- Superior service: provide higher quality, efficacy that competitors’ offering.
- Try before you buy.
- Supplementary service: offer ancillary services that fit with your offering.
- Diversification: add channel to existing channels.
- Experience centre: create a space where customers will have the chance to try using your offering before they buy them.
- Flagship store: create a retails outlet to showcase quintessential brand and product attributes.
- Go direct: skip traditional retail channels and connect directly with customers.
- Indirect distribution: use others as resellers of your product.
- On-demand: deliver goods in time whenever or whatever desired by customers.
- Pop-up presence: create a noteworthy but temporary environment to showcase and or sell offerings.
- Brand extension: offer a new product under the umbrella of an existing brand.
- Brand leverage: allow others to use your brand name to lend them your credibility and extend your company’s reach.
- Co-branding: combine brands to mutually reinforce key attributes or enhance the credibility of an offerings.
- Component branding: brand a discrete piece of the offering to make the whole appear more valuable.
- Private label: provide a product made by other supplier under your branding products.
- Values alignment: make your brand stand for a big idea or a set values and express them consistently in all aspects of your company.
- Customer engagement:
- Autonomy and authority: grant users the power to shape their own experience.
- Experience enabling: extend the realm of what’s possible to offer.
- Experience simplification: reduce complexity and focus on delivering specific experiences exceptionally well.
- Mastery: help customer to obtain great skills or deep knowledge of some activities or subjects.
- Personalization: alter a standard offering to allow a personalized features.
- Status and recognition: offer cues that confer meaning and allowing users to develop and nurture aspects of their identity.
- Status-based: use subtle or explicit cues to confer status to your customers, creating elite groups that engage rabidly with your products and services. Ambition: change the boundary. Example: foursquare a free mobile app that allows users to share what they are doing and where they are.
- Immersion: create environments that captivate and mesmerize customers, fostering new level of engagement and commitment. Ambition: change the known. Example: Cabela’s- sells hunting and fishing goods in showrooms that allow higher customer engagement and connectivity.
- Connected community: leverage the power of social ties to deepen experience and encourage consumers to share common interests, activities and the offerings that support them. Ambition: change the boundary. Example: Harley- Davidson. Managing a lot of community engagement activities specially with their customers.
- value based: make your products stand for something and foster a movement. We all have beliefs, principles or causes. These individual motivations connected us to larger issues in the world at large. Ambition: change the known. Example: Patagonia, sells clothes created in a sustainable way from replaceable resources.
- Simplification: radically ease the complicated, nagging or arcane for customers, allowing them to accomplish things they simply couldn’t have done before. Ambition: change the known. Example: WII, selling gaming machines with superior game play and solutions .
What are the Ways of Engaging with Innovation Tactics?
Your choose first which innovation direction or strategy you want to achieve. Is it changing innovation on known( improvement or extension on existing offerings) or change boundary (new unexpected offerings) or change entire game ( come up with a newly entire offering) . Then, you will need to get engaged with different innovation tactics to achieve any of the strategic innovation selected.
- Anchor and extend: select an innovation anchor( one major innovation tactic), build it up and then look for an extending innovation tactics. This can be applied for innovation types as well. An example to this technique is that launching a touch mobile and then extend on design, camera capabilities and storage capacity.
- Add and substitute: add a new tactic or type and substitute it from existing one. An example to this technique is that launching an android mobile that replaced the old mobile systems.
- Array at random: pick 3-6 innovation tactics (or types) randomly and challenge yourself to imagine new business and offerings that would use them. This is an experimental and fun exercise that will let a group of people brainstorm and try randomly different innovation tactics and testing outcome on the basis of successful offerings that a group of customer compellingly want.
Call for Action:
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Written by: Munther Al Dawood
Enterprise Development Services
Source: Keeley, L. 2013. Ten types of innovation, Willey, USA.