The average life expectancy of a company is a tenth of what is was in the 1950s, indicative of a faster, more competitive business environment in which those that fail to keep up are simply left behind.
Most companies are launched on the back of product or service that does something different or more effectively than anything else that is available, and so when they begin trading they are the very definition of new thinking.
However, these companies often quickly become defensive as they seek to maintain their customer base and market share, and before you know it these new thinkers have become regressive operators.
What, then, must companies do to prevent this from becoming their fate?
The answer is that they must innovate.
‘Innovation’ – to some it’s a buzzword, but it is actually a business essential.
Innovation is the process by which a company finds a way to deliver better value to its customer base, using new techniques and often new tech to deliver an idea that – when done well – completely transforms its products, service or operation.
But 94% of executives believe that they are not innovating effectively, so how can a company develop innovative ideas?
Why should you care about your capacity to innovate?
At a basic level, you should care about your capacity to innovate because other companies do.
63% of companies now have a Chief Innovation Officer (or equivalent) to drive and oversee the development of new ideas, showing that failure to follow suit at the very least hands your competitors the competitive edge.
Customers like innovation, normally because innovation delivers more value to them. It improves the product that they purchase or the service that they get.
A company that fails to innovate therefore risks losing their customers, as every day in which new ideas are not being developed is a day that a rival product or service that has could emerge.
Failure to innovate risks your business being left behind and losing what market share it had, with the fall in revenue being catastrophic.
It is estimated that half of today’s S&P 500 companies will be defunct by the next decade. But it’s not just customers that like innovative companies – employees also like to be on board with a company that pushes boundaries and changes the way that it works, often because a company that does so is listening to ideas and initiatives from within.
A company’s employees are its greatest asset for many reasons, not least because they operate the business day-to-day and ensure that there is revenue.
A motivated, encouraged and capable staff is invaluable, and so preventing their stagnation in a backwards-thinking work environment is very important.
Beyond competition and work culture, innovation also offers an opportunity to become more productive, reducing costs and increasing turnover.
Take automation, for example. By automating low-impact or low-skilled tasks – or even the high-impact ones, with the right solution – a company can free up capacity to improve, broaden, or simply expand the service they offer.
Innovation has the potential to improve a business’ chances of survival on multiple fronts. So how can you source an innovative idea, and how can you develop it into a marketable solution?
What is an innovative idea?
There is often talk of innovation being a creative process, something that can only be achieved by a true artist.
However, it’s important to push back on this and assert that innovation is not creative but scientific - or at a concession is scientifically creative. Innovation is about utilising structure and process in order to uncover the original resources and opportunities for adding value endemic within every company.
Granted, the idea that becomes an innovation may arise from creative thinking, but even creative thinking is something that benefits from a precise and pre-conceived structure, both direct and environmental.
The most obvious starting point for innovative ideas is the ‘brainstorming session’, but consider what happens in the absence of guidance or structure – a whiteboard full of lukewarm, barely original ideas, with any potentially interesting ones crossed out by a majority consensus ruling them too risky, expensive or irrelevant.
However, if a bit of structure is applied to proceedings, all of a sudden the landscape changes dramatically.
Consider the benefits of imposing the following on any brainstorming session:
- An open-ended question to focus thinking on a problem
- Context to give an understanding of the importance of solving the problem
- Background information (Who? What? Where? When? How?) to encourage detailed think
- A suggested success criteria
By ensuring that these parameters are in place you have created a controlled environment in which free-thinking is actually given greater encouragement, by being given focus, location, and conditions – how can you think outside of the box if the box isn’t defined?
These are just some extremely basic examples – many companies have taken this logic much further. The development of break out spaces or open-plan offices is, for the large part, an attempt to make ‘creative thinking’ formally part of the workday, creating an environment in which expansive thinking is consciously cultivated. Some even offer incentives to facilitate expansive thinking.
However, an idea is not an innovation until it has been seen through to a solution. The question, therefore, remains – how do develop an innovative idea? How do you get from digital innovation to digital solution?
Business experiments
Think of any product that you might consider ‘innovative’ – the idea that germinated the product was not immediately grasped with both hands and rushed to the production floor. It was instead subjected to rigorous and varied testing, to verify if the idea was viable or even wanted.
It’s not enough to just have an idea – will it yield results, and will those results represent a significant increase in value to your business?
These tests have become known as business experiments, and there are a few broad categories that such experiments fall into:
Concept Testing
A really important test: is the essence of the idea – the ‘why’ at its heart, the reason for its existence – of any relevance, interest or importance to customers?
Concept testing is customer feedback, and is obtained through interviews, focus groups, or market research. This should be done exhaustively at the beginning of any test process, but it should be continually carried out throughout development. New assumptions around an idea or the business will always be being uncovered and should always be concept tested.
It should also be deployed alongside any prototype testing, providing qualitative user data to be compared with prototype’s often more quantitative findings.
A ‘mock-up’ (a full-likeness incarnation of a product) is a tangible hybrid of a prototype and a concept test, being a part-developed product built for customer feedback.
A/B Tests
A/B tests are used to test hypotheses (e.g. ‘I think people will prefer it if we do this’). You divide your customer base to test subjects into two groups – one, the ‘control group’, will be subjected to your normal business conditions, while the other, the ‘treatment group’, will experience a variant.
This can be everything from a different website or app function to a fundamental difference in the service being offered. In this way, you will be able to test your hypothesis by comparing the behaviours of the treatment group with that of the control group. Indeed, many A/B tests have a significantly larger control group compared to the treatment group, providing a very large data pool against which to compare treatment group behaviour.
Prototype Test
In many ways an upgraded A/B test, in which a treatment group (or even entire customer base) experiences the idea as a developed product.
The digital solutions industry might develop software to test a single feature, the idea being that this development is a throwaway prototype that is never intended to be anything like the final solution but whose use, nonetheless, will be evaluated.
The more expensive version is an evolutionary prototype, one that will be morphed and changed until it becomes the final product, but the danger here is that it will carry with it untested aspects (or assumptions) that should themselves have been individually tested (perhaps with a throwaway prototype).
Feasibility Test
Will something work? Late testing, when a near-fully developed product is put to a small group of customers. A chance to see whether the original idea has been borne out, and whether it delivers the expected value.
The feasibility test should be done before any large-scale final production, offering as it does one last chance to uncover shortcomings and thus go back to the drawing board before too much time and resource has been spent.
Fundamentally, as with creating an environment in which an innovative idea can be conceived, think like a scientist. It’s very tempting to get consumed with an idea and want to begin building it straight away, but resist that temptation at all costs until you have tested, tested and tested.
Keep your tests simple and focused to help you with extracting useful data from them, and also to make cross-examination of different test results straightforward.
A concise hypothesis is key for any test, and don’t deviate from the question being asked – you can always craft a different hypothesis later and run a different test. A simple, focused test can also mean that test results can be easily compared against existing customer patterns and, in this way, can inspire further tests.
Your control groups are therefore incredibly important, allowing you to put any test results in perspective – what looks significant in isolation can be shown to be unremarkable when compared to existing behaviours.
Your business experiments are integral to developing your innovative idea. Think of the development of your digital solution as a game of American Football, and think of each business experiment as a ‘play’ you deploy in an attempt to break the defence (i.e. the market). Execute each play, see how well it does, and then use those results to craft another play.
Only when every single play you attempt is successful might your solution be ready for production, and even then you should never stop trying new plays (and indeed rerunning old ones).
It should be noted that you should be prepared to honour the results of your plays. If they are unsuccessful, or reveal information that completely contradicts what you think about your business, your customers or your market (your ‘assumptions’), then you must be ready to go back a stage in your idea development, or even abandon your idea altogether.
Your experiments could be flawed, absolutely, in which case redesign and rerun them, but do not trust your assumptions over your findings. Experiments give insight – hopefully at a low cost – and insight is invaluable.
What technologies are driving innovation?
A common question, but let’s nip it in the bud. Yes, innovation certainly appears from the outside to be a technological affair, but that is only because technology is the ‘how’ that allows innovative vision to be delivered. Technology is not, in itself, driving innovation – innovation is driven by new needs being caused by new (or even very familiar) problems.
The innovation that is happening now is no different from the innovation embarked on by early humans – it’s just that modern tech makes it look far more impressive.
Early humans faced a new need in the need to provide food for themselves and their social group, and the solution that was devised was a club, or a net. It was not the ability to sculpt the club or make the net that caused them to be sculpted and made, but rather the problem the new need created.
Innovation is the solving of the problem, not the solution itself.
Good innovation today – even in the technology era – is exactly the same. It is led by the ‘pull’ of problems, not the ‘push’ of solutions. The ‘pull’ of environmental concerns is causing initiatives like electric cars to be conceived and improved, rather than the ‘push’ of electric car manufacturers creating a market out of sheer marketing force.
That’s not to say that this isn’t happening, in the name of innovation, and that it isn’t clouding the general impression of what innovation is. Artificial intelligence is a fine example. Over 90% of online customer interactions are not carried out by some sort of AI – but has that really delivered increased value, to the customer or the business?
Has that actually solved a problem effectively, or has a ready-made, innovative-looking solution simply been added for the sake of appearing innovative?
This is not dissimilar to our early human saying, “Hey, these nets are good,” and so trying to use them to make a house.
A solution has to stem from a need, it must be appropriate to the problem. This is the skill in developing an innovative idea – going through the iterative cycles of testing an idea, of challenging assumptions, until slowly but surely a solution emerges.
It’s a process that needs experience, expertise, and more than a little insight, and so it’s very important that those responsible for innovation are well-selected and well-supported in order to be able to develop any innovative idea into an appropriate solution.
Who is responsible for business innovation?
It should be stated right from the off that, due to the importance of business innovation in keeping a company fresh, trading and ahead of the competition, business innovation must be a priority of top management. Without innovation enjoying such high-level legitimacy it can never be given the time, space and resources that it needs to thrive and, ultimately, deliver.
The development of an innovative idea cannot be treated as a conventional business project, with pre-defined budgets and deadlines.
The level of business experimentation required alone makes such projections impossible. Innovation therefore needs complete confidence, and management needs to subscribe to its ethos of valuing experiments and thriving on their minutia of insight.
The shift to focusing on metrics to be achieved rather than projects to be completed and to budgeting in terms of percentage of revenue (e.g. 5%-10%) rather than on fixed provision can seem daunting to established board of directors, but that is exactly the sort of shift that is required to suitably empower innovation initiatives.
In larger companies, or in companies where there is a well-established business model in need of maintaining, it can make sense for business innovation to fall to a purpose-built team, one familiar with innovation methods.
This is so that innovation developments are not influenced by other, non-innovative aspects of the business, and vice versa. The danger here is that innovation becomes seen as something outside of the business’ core value delivery, meaning that any ideas eventually developed by an innovation team are adopted with reticence or resistance by core processes.
Furthermore, if other teams have not been privy to the process of challenging assumptions then they may be suspicious or dismissive of any findings, meaning that assumptions are carried instead of being put to bed.
The tendency of business innovation to be driven by digital technology has meant that responsibility for innovation has historically sat squarely with IT teams, and for reasons mentioned above they can be good drivers of innovation as they already have close working relationships with all other aspects of a business.
However, IT departments are themselves in decline, particularly amongst SMEs and small businesses, or those who outsource their systems to cloud or third party systems.
In such situations, responsibility for business innovation should ideally fall to Chief Transformation Officer (CTO), or a Chief Innovation/Information Officer (CIO). It should be stated that it is not necessarily the responsibility of the CTO/CIO to execute innovation developments (although it’s a plus), but rather to embody the principles of innovation development, to drive innovation cycles, and to staunchly advocate all opportunities for innovation.
This can be as much in the managing of outsourced initiatives as in the managing of in-house developer teams.
In fact, outsourcing idea development to digital solution consultants can be a fantastic way for a CTO/CIO to gain access to cutting-edge best practice and knowledge without having to radically alter their own staff or processes.
What is an innovation consultant?
An innovation consultant or digital solutions consultant can be the ideal individual to assist with the development of an innovative idea.
A good digital solutions consultant will be able to provide a complete innovation service, all the way from dissecting your business opportunities to delivering a digital product. All businesses suffer from their own operational biases, and for that reason an external perspective can be extremely beneficial when mapping out business assumptions (also known as ‘defining’ a business).
The naïve outsider can also be invaluable in shattering industry-wide assumptions, able to ask the question 'why are things this way' to lifelong operators that have long-forgotten that there was ever a choice.
- Who are your customers?
- What is your market share?
- What is your core value?
These are all questions that a business can be confident in answering, and yet those answers can all turn out to be untested assumptions in the hands of an adept digital solutions consultant.
The business risk lies in untested assumptions, and so any idea development process should place the testing of such assumptions at the heart of its testing stage.
An effective digital solutions consultant should produce an exhaustive amount of questions when defining your business and/or venture, as it is these questions that become hypotheses for testing.
The process should then move onto the planning of tests, or the ‘designing’ of plays.
This is where a digital solutions consultants’ expertise should become evident, as knowing what plays to deploy in order to test which assumptions are something of an art form, and the key to having an efficient innovation process.
There are many different prototypes or lines of enquiry possible – marketing sites, supplier interviews, low code platforms, spike tests – and each will extract different types of data from different stakeholders or customers.
As mentioned before, each play should also beget another, as its results expose additional assumptions or necessitate a tweak in hypothesis (and, therefore, perhaps a change in test type altogether).
As linear as the progress of an innovative idea seems it requires a cyclical process, and effective testing will necessitate going back to the define phase to ensure that business assumptions still hold out in the light of new findings, or to ask new questions in until-then-not-investigated areas of the business.
After multiple iterative cycles, each gaining more information, the idea may be at the point where it is ready to be built into a digital product.
Even here a good digital solutions consultant should be of invaluable assistance, if not with a team of developers immediately available to them then certainly with contacts that can be.
The advantage of developers sourced by a good digital solutions consultant is that they should be familiar with the latest technologies and best practices, enabling the digital solution that your idea has developed into to be the best and most effective that it can be, and to deliver the most value to your business and your customers that it possibly can.
Final thoughts
Whether you have your own team responsible for developing your ideas or whether you outsource the process, innovation is an absolute must for any company operating today and cannot be ignored.
The development of innovative ideas can be a long, repetitive process, one that is by its design littered with false dawns and scrapped initiatives, but any frustrations and nervousness that it causes must be tolerated as the potential rewards are tremendous.
An effective innovation framework that produces a well-developed innovative idea can not only bring increased profits, can not only create an invigorated workforce, can not only produce an expanded customer base, but also can fundamentally change the way an entire industry behaves and operates... for at least as long as it takes for another innovative idea to be developed.