Innovating markets, business models, products and experiences
Whilst creativity is about divergent thinking – opening up to explore new perspectives, make new connections, generate more ideas – innovation is about convergent thinking – evaluating the best ideas, focusing on making them practical and profitable, then making them happen effectively.
In my book “Creative Genius” we explore Leonardo da Vinci’s 8 principles, then apply them to today’s business world: being curious, exploring margins, reframing context, visualisation, resolving paradox, balancing art and science, making new connections and being alive.
I explored innovation with Sir Richard Branson, and the culture which he seeks to create across his Virgin companies, he reached for a pencil and paper and jotted down his equation of life … A+B+C+D (Always Be Connecting the Dots). Its not about creating newness, but making sense of what you have, maybe in fragments and different places, but can be shaped in new and interesting ways.
We spend much of our time collecting dots – seeking new insights, reading more books, generating more ideas – but too little time connecting dots. This requires confidence and creativity, to think bigger and laterally.
“The magic of connecting dots is that once you learn the techniques, the dots can change but you’ll still be good at connecting them.”
Indeed we live in an incredible world with so many great sources of ideas, insights and inspirations. I spend my exploring the world’s most innovative companies, the new markets which they shape, the business models which they develop, the new experiences they deliver to customers. There are so many ideas out there.
We have so many dots to connect …
- Connecting ideas with different ideas to create new and unusual concepts
- Connecting diverse people to combine talents, experience and perspectives
- Connecting customers with business to gain insight and engagement
- Connecting partners with business to gain capability and reach
- Connecting customer needs and wants, to solve bigger problems
- Connecting ideas from different places, across geographies and sectors
- Connecting products and services, into richer customer experiences
- Connecting markets in new ways, to operate different and better
- Connecting business with new business models to be more profitable
- Connecting media, channels and market networks to amplify the impact
- Connecting customers with customers to build richer communities
The real skill is to see the bigger picture, the bigger space in which you can make the new connections – and then to make new connections – interesting, unusual, distinctive, better. Even if at first you question how will it work, how will it make money, don’t be disheartened. By adding more connections you will soon find ways to implement and sell your uniqueness, often in ways you never imagined.
Innovation in most companies is still mostly about products and services, whereas innovation has most impact when applied to business models and customer experiences. We therefore focus on business innovation, driven by your purpose and opportunity, and by thinking hard about what is the problem we are trying to solve, and the impact we want to make.
Innovation is therefore particularly about five important factors, looking across the whole business to open up, and then close down:
- Design thinking – embracing “insight” to understand the deeper motivations and aspirations of customers, through deep-dive immersion with individuals, connecting analytics with observation and intuition. Design thinking is about better defining the challenge – problem, opportunity – then being more human, creative and real in solving it.
- Making connections – fusing ideas to create richer “concepts”, but also learning from other places, from “parallel” markets where the same customers are already embracing change and new ideas, and then applying to your own market, as a pioneer. Connecting initial ideas into concepts makes them stronger and more distinctive.
- Creative disruption – how to be different, to challenge the conventions, break the rules, and redefine the markets in a different way – for example by technological simplification, or new customer behaviour. This creates rethinking – changing the who, why, what and how – and can potentially recalibrate the market.
- New business models – more dramatic and sustainable innovation usually involves changing the way the business works – in particular through new partnerships, and creating new revenue streams built around a strong value proposition at the core – this focuses on value propositions and business model design.
- Accelerating action – facilitating your best ideas to market better and faster, through challenge and support, bringing your best people together, adding external ideas to internal expertise, and disciplined process. This includes “lean thinking” techniques from minimal viable products, prototyping and then vortex market adoption.
10 types of innovation
After evaluating thousands of practical business innovations over recent years, researcher Jay Doblin found that that most breakthroughs don’t necessarily stem from engineering inventions or rare discoveries. Instead, he categorised innovations within 10 distinct dimensions.
He then sought to understand which innovation create most value. First he looked at where most companies focus their innovation effort – not surprising, this focused on the offering (product, systems and service). However far greater value was created through innovation in the business configuration (profit model and network), and to some extent, experience.
Here are examples of each type of innovation:
- Profit model: How you make money … the Financial Times pivoted from its traditional ad-driven media model to digital user subscriptions. Others: Gillette, Hilti.
- Network: Connections with others to create value … ARM, the world’s leading semiconductor business doesn’t make any thing, but licenses its designs to a network of partners to make with much great agility. Others: Target, Michael Graves
- Structure: Alignment of your talent and assets … Google’s 20% rule allows employees to work on side projects, that led to the creation of Gmail and Google News. Others: WL Gore, Zappos
- Process: Signature of superior methods for doing your work … McDonald’s franchises were encouraged to develop and launch their own food items, leading to wins like the Egg McMuffin. Others: Toyota, Zara
In the case of McDonald’s, the franchisee insight that led to the introduction of the Egg McMuffin spearheaded the company’s entire breakfast offering, which now accounts for 25% of revenues. Breakfast is also now the company’s most profitable segment.
- Product: Distinguishing features and functionality … Spotify created a seamless music streaming product that hugely outperformed competitors in terms of speed, responsiveness and user experience. Others: Dyson, Corning.
- Product system: Complementary products and services … Apple built an extensive ecosystem of products that work together, creating additional value for users. Others: Oscar Meyer, Mozilla.
Apple has a reputation for innovation, but the product ecosystem highlighted above is an underappreciated piece of the company’s strategy. By putting thought into the ecosystem of products—and ensuring they work together flawlessly—additional utility is created, while also making it harder for customers to switch away from Apple products.
- Service: Support and enhancements that surround your offerings … Amazon Prime comes with free and fast delivery, which can have products to your home within 2 hours in some urban areas. Others: Singapore Airlines, Timpsons.
- Channel: How your offerings are delivered to customers and users … Nespresso locks in customers with its Nespresso Club as well as through ongoing sales of its own single use coffee pods. Others: Birchbox, Nike.
- Brand: Representation of your offerings and business … Patagonia’s brand activism and links to environmental causes gives it a unique position in the outdoor apparel market. Others: Intel, Virgin.
- Customer engagement: Distinctive interactions you foster … Mercedes launched an augmented reality owner’s manual that replaces its traditional guides, personalised with driver and car data. Others: Blizzard, Disney.
In the early days of the internet, online shipping was precarious at best—but Amazon’s introduction of Amazon Prime and free and fast shipping for all members has transformed its online retail. Executing on such a promise was no small task, but today there are 150 million users of Prime worldwide, receiving their deliveries within two hours in urban areas.
The most innovative companies typically innovate in multiple dimensions at the same time.
Nike, is probably a product performance company at its core, producing leading sportswear and equipment for decades. Back in 1985 they innovated by signing then rookie basketball star Michael Jordan to endorse the Nike brand, a trend that continues today.
In 1990, Niketown was launched – a channel innovation, retail as theatre. The flagship stores cost millions, and were clearly never going to produce a return on investment by selling goods in store. Instead the initiative was funded by the advertising budget; the stores could do more to build brand innovation than any ad campaign.
In recent times Nike has launched Nike+, an innovative product system which is integrated into the sportswear range, and allows runners and athletes to track their movements. It also integrated with Apple products in a network innovation. These steps alone touch on half of the ten types, and as a result Nike is consistently one of the leading brand names in the world.
Below, the historic market performance graph shows how companies with more types of innovation further outperform the market.
Peter Fisk on innovation
Peter Fisk helps you to innovate, further and faster. This can be either through fast and focused facilitation using the “Innolab” methodology that brings expert support to help you make the best ideas happen faster, through to the broader challenges of developing a creative culture, and innovation strategy – from capability diagnostics to portfolio management.
Examples of recent clients include
- American Express: Innovation mindset and breakthrough projects, developing a shared process and culture for innovation.
- Aster Atelier: Reimagining the fashion business for one of the largest private label manufactures on the high street, how to be better and go direct.
- Coty: rethinking business models for a very different future of beauty – consumer change, market disruption, finding new growth.
- Canon: FutureBook, creating the future of printing and publishing, positioning Canon as the thought leader of its customers world.
- Erste Bank: How banks can innovate for innovators, by recognising the roles of finance and advice at each point in the start up, and scale up, journey for small businesses.
- GSK: Rethinking healthcare around patients and doctors, from an old model of product-centric selling to a new future of patient-centric wellbeing.
- Vodafone: Creating a global strategy for sustainable innovation, by focusing on what the brand can uniquely enable, through its subscriber network, rather than just do itself.
Here is the 4D innovation process which Peter uses as a starting point for implementing effective innovation capabilities and processes within organisations:
Explore more about innovation
- Book: “Creative Genius: The Business Leaders Innovation Handbook”
- Book: “People Planet Profit: How to Drive Sustainable Growth“
- Article: Never Stop Reinventing
- Article: Innovate like Leonardo Da Vinci
- Article: Finding your Magic
- Article: Innovative Business models
- Workshop: “Business Innovation Lab: insight to innovation to implementation”
- Workshop: “Creative Disruption: reinventing your business and market”
- Leadership tool: “Innovation Matrix: The right innovation strategy for you”
- Leadership tool: “Innovation DNA: Evaluating your innovation approach”
- Leadership tool: “10 Types of Innovation”
- Leadership tool: “Innovation Toolbox“
- Leadership tool: “Design Thinking Process Guide from Stanford’s D.School“
- Leadership tool: “IDEO Method Cards“
- Leadership tool: “IDEO Human Centred Design Toolkit“
- Leadership tool: “IDEO Human Centred Design Fieldguide“
- Leadership tool: “27 Creativity Tools“
- Leadership tool: “Intuit’s Leapfrogging Innovation Catalyst“
- Further reading: “Design Thinking” by IDEO’s Tim Brown
- Further reading: “How P&G Tripled its Innovation Success Rate“
- Further reading: “20 Ways to Test your Business Ideas“
- Further reading: “The Customer-Centred Innovation Map“
- Further reading: “8 Essentials of Innovation“
- Further reading: “Disrupted to Disruptor: Reinventing the core“
- Further reading: “The Open Book of Social Innovation“
- Video to watch: “Design Thinking Explained“
- Video to watch: “Innovation Explained“
- Video to watch: “Disruptive Innovation Explained“
- Video to watch: “Business Model Innovation Explained“
- Video to watch: “Business Model Canvas Explained“
- Video to watch: “Minimal Viable Product Explained“
- Video to watch: “Pivot Explained“
Explore more insights from GeniusWorks:
- Inside Daimler’s Lab1886 … the Stuttgart innovation hub focused on creating the future of mobility
- Inside Disney’s new iD8 Innovation Studios … where the magic of Mickey Mouse lives on with Buzz and Brainstorms
- Inside Medtronic’s Applied Innovation Lab … a focus on improving patient experiences, services and outcomes
- Inside IKEA’s Future Home innovation incubator … from even better Swedish meatballs to flexible rooms
- Inside Nike’s Research Labs … harnessing the spirit of Bill Bowerman to innovate the future of sports performance
- Inside Shell’s TechWorks innovation lab … where there is freedom to fail and to succeed
- Inside HENRi … Nestle’s global hunt for big ideas, named after the pharmacist founder who invented a baby formula.
- Creating a “Growth Factory” … How P&G tripled its innovation success rate, and how you could too.
- Corporate Innovation Ecosystem … how does innovation thrive in large companies
- Compendium of Innovation Methods … Nesta’s compilation of the best tools and methods for innovation
- Innovation Accelerator: 10 frameworks to accelerate your growth … summaries the most popular frameworks