Sustained competitive advantage comes from innovating how we innovate. That’s the essence of real innovation.
In the past, new products and technologies consumed the vast majority of the innovation air-time. That’s no longer the case.
The most innovative companies today realize that competitive differentiation comes as much from how they innovate as it does from what they’re innovating. Here are five trends shaping the world of innovation itself that anyone can apply to their business:
#1: Co-Create with Customers
Thanks to Facebook and YouTube, almost 10 years ago Time Magazine named “You” as their Person of the Year. Our collective 15 minutes of fame didn’t end there.
The convergence of ubiquitous Internet access, mobile devices, and social networking has created an environment in which customers are front and center. Companies now realize that innovation is a team sport in which their customers need to play a direct, if not lead role.
Vans, the classic yet youthful shoe brand, provides a fully customizable shoe-building experience on their website. Customers literally start out with a blank canvas and design dream shoes that they can “share” with friends and family.
More and more, customer co-creation will be seen as one of the best sources of creating what customers really want – because customers create it for themselves.
#2: Create an Experience
You know that design has found its place when Fortune 500 companies like Samsung, Ford, P&G and others instill Chief Creative Officers and Chief Design Officers to lead their innovation efforts. Whereas design used to be equivalent with industrial design, its scope has expanded to include experience design. Experience design involves the practice of designing products, services, events and environments with an emphasis on the quality of the customer experience, not simply on form or functionality.
Unilever, for example, recently spun-off an experimental retail store it created called Rituals. The store isn’t organized by rows of products, but rather the personal “wellness” experience. Product names, colors, packaging and promotion are all geared toward the consumer’s desired emotional state and include areas focused on “relaxing,” “energizing” and “purifying.”
Experience innovation provides a broader lens with which to view customers’ needs and desires, which can help pinpoint the “touch points” that will deliver true surprise and delight.
Services now account for about 80% of US output (GDP) and over 70% of output from other industrialized nations.
Companies like Facebook, Square, OpenTable, and others have proven that great service business models can be build upon web and mobile technologies. But as I described in my latest article for FastCompany, “servicizing” is as much about reinventing a product-based business model as it is about creating new services.
Rolls Royce, for example, sells more than cars; they also sell airplane engines. When they modified their sales model and introduced service fees based on “uptime” (the actual time the engines are flying in the air), their airline customers were elated. Airlines prefer to pay as their own cash comes in from their passengers and cargo instead of buying an engine up-front. Rolls Royce sells “hot air out of the back of the engine,” not the actual engines.
Servicizing isn’t about creating customer support or training for existing products. It’s an entirely new way of thinking about customers and the value they desire.
#4: Profit with Purpose
With climate change, the looming healthcare crisis, rampant childhood obesity, and other social ills, we’ve finally seen the light (or at least the glimmer of a candle): business should be able to make money while at the same time providing a broader benefit to people, the community and the environment.
It’s not just the Ben & Jerry’s or the Patagonia’s of the world who are blending social responsibility with business. WalMart, once known for its business ruthlessness, has become an unexpected model by gathering more than 1,000 leading suppliers to review goals and expectations for creating a more environmentally and socially responsible global supply chain. Schools like Oxford, Cornell University and Dartmount College are creating a host of programs to help students create businesses that support the triple bottom line (people, planet and profit).
Profit and purpose are no longer mutually exclusive. They’re becoming intertwined as a source of competitive advantage.
#5: Build Your Innovation Network
Innovation was once the role of a handful of people “at the top” or in R&D. Open Innovation and Open Business Models will continue to drive new opportunities using external networks. More and more, the job of innovation has expanded to include employees, customers, partners and anyone else who has value to contribute.
Kimberly-Clark’s Huggies Mom Inspired program solicits new business ideas directly from “mompreneurs.” The company also promotes one-day “expert acceleration sessions” that bring hand-picked outside “thought leaders” face to face with business teams to bust mental models and create game-changing strategies.
To harness innovation networks, it’s vital for companies to rethink the traditional command and control structure. The goal is to tapped into internal and external resources to quickly ideate, iterate, prototype and launch new ideas.
Here’s one final thought… Just like today’s world, innovation is complex. While new products, services and technologies are always important, the field of innovation is about much more. Sustained value creation relies on innovating how we innovate. That’s the essence of real innovation.
Soren Kaplan is the bestselling and award-winning author of Leapfrogging and The Invisible Advantage, an affiliated professor at USC’s Center for Effective Organizations, a former corporate executive, and a co-founder of UpBOARD. He has been recognized by the Thinkers50 as one of the world’s top thought leaders in business strategy and innovation.