Archive for the 'innovation' Category

Eruptive Innovation Trumps Disruptive Innovation

Over the last 35 years, I’ve researched the fields of innovation, leadership, strategy, and many related areas by reading hundreds of excellent books and thousands of articles, and most important, talking with literally thousands of business executives and top managers.Innovation Hierarchy

I challenge you to find an executive of a Fortune 500 company who disputes that innovation is the fuel for growth. On the other hand, with a few exceptions, almost all rate their own companies poorly at it. And rightly so. Clayton Christensen and Michael Raynor in their book The Innovator’s Solution report: “Study after study concludes that about 90 percent of all publicly traded companies have proved themselves unable to sustain for more than a few years a growth trajectory that creates above-average shareholder returns.”

Business gurus speak of quite a few levels of innovation. From my research, I’ve developed a new framework that I call the Innovation Hierarchy. We’re all familiar with the first four levels of the Innovation Hierarchy:

  • Level One is Sustaining Innovation: Regular improvements that keep you moving forward, but not necessarily ahead of the competition. Keeping up with the Bezos, so to speak.
  • Level Two is Incremental Innovation: Medium-sized improvements that benefit both your customers and your company. This can keep you slightly ahead of the competition, or if you are behind, help you catch up a bit. But, as shown in my previous cartoon, if a rogue wave of innovation hits your industry, you’re sunk.
  • Level Three is Breakthrough Innovation: This is not based on novelty. As I define it, “breakthrough” results in step-change in both customer value and a company’s financial performance.
  • Level Four is Disruptive Innovation: Coined and defined by Clayton Christensen of Harvard Business School in 1995, it is game-change in an industry or a field such as education or health care. It is often created by providing the same or much better value to customers at a massively lower cost and price.

There is no question that disruptive innovation can change the rules of an entire industry, and rapidly create new winners and losers. Up until now, it has been the dream of any business wanting to win big. I would argue, though, that there is yet a higher level of innovation – a fifth level of the Innovation Hierarchy …

  • Level Five is Eruptive Innovation: It doesn’t just change an industry. It creates change so big and broad that it affects the world, the planet, society at large. History is replete with hundreds of eruptive innovations. Most advancements of mankind were due to one. Examples include fire, wheel, agriculture, ship, railroad, automobile, semiconductor, computer, robot, Internet, Cloud, and the smart phone. These do not just change industries; they change humanity.

The value of any framework is that it serves as a gauge to help you understand where you are and as a guide to show you what more you can achieve. Many businesses set their sights on achieving Breakthrough Innovation but most accept Incremental Innovation as “good enough.” After all, achieving Breakthrough Innovation takes vision and the ability to think and act “out of the box.” Yet beyond Breakthrough, there is no question that Disruptive Innovation can change the rules of an entire industry, and rapidly create new winners and losers. Until now, Disruptive Innovation has been the dream of any business wanting to really win big. Yet few businesses aggressively seek the even higher level of Eruptive Innovation. Truly visionary business leaders accept nothing less than Eruptive Innovation.

So what level of innovation is your company striving to achieve?

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Innovation Amplitude: Succeed Even in this Tough Economy

Why do some companies consistently outperform their competitors? It’s because they innovate and execute better than the rest. Peter Drucker once said, “The enterprise that does not innovate inevitably ages and declines. And in a period of rapid change such as the present, the decline will be fast.” Poignant in past times, and even more imperative today amid today’s brutal economy and hyper-competitive markets.

What is the secret of these master innovators such as Apple, GE, HP, P&G, and Virgin? Fifteen years of research studying remarkable leaders and innovative organizations has revealed to me it is one thing. They have much greater Amplitude. In mathematics, Amplitude is the height and depth of a wave, which generates its intensity. In the X-Games, judges and spectators often use the term Amplitude to describe the heights of the jumps of skiers, snowboarders, BMX bikers, and skateboarders, as in “Boy did he get some amplitude!.”

What I discovered is that remarkable leaders and organizations have immense Intellectual Amplitude as well as enormous Emotional Amplitude. They apply them by:

1.        Digging deep with intellect and compassion to identify and excavate unmet market needs ahead of competitors (negative Amplitude)

2.        Leaping high with ingenuity and passion to develop imaginative solutions (positive Amplitude)—whether they be products, services, or other advances

3.        Completing the process by testing and selecting the best concepts to implement, and marketing them with the same innovative zeal as they employed creating them.

The sum total of this process is an organization’s Innovation Amplitude. And it can be measured, understood, and with this knowledge, increased. I have presented this concept to over 10,000 CEOs and managers around the globe and have received 99.9% confirmation that it’s the real deal.

What about the non-innovators? People and entire companies are sometimes accused of “thinking inside the box.” Well, the box is not just a metaphor. I claim it is real: a low Amplitude. So the challenge is to lead your entire organization out of the box by increasing its Innovation Amplitude.

Innovation is change for the better. Change management expert Rosabeth Moss Kanter stated: “Mindless habitual behavior is the enemy of innovation.” British politician Harold Wilson put it even more strongly: “He who rejects change is the architect of decay.”

Some today contend the USA is losing its competitive edge. Competitive strategy expert Michael Porter says, “Innovation is the central issue in economic prosperity.” In this age of innovation, we all need to work together to do two things:

1. Discover America’s inner strength

2. increase America’s Amplitude.

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Innovation through Fusionomics

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One avenue to strategic innovation is to slam together separate technologies or methodologies and see what you get. I call this “Fusionomics.” Think about Tex-Mex food and the mobile phone. Fusionomics is about to happen again. Get ready to have your iPod or iPhone be your game controller. One will be able to wave their iPod or iPhone like a motion controller for game consoles, similar to the Nintendo Wii technology. Social Gaming Network (SGN) has risen in visibility as a result of its iPhone and Facebook games. Now they are fusing web gaming and the iPhone in the iFun technology, and releasing its first free cross-platform game, iGolf. SGN CEO Shervin Pishevar describes their innovation as “the first time the mobile world, the Web world and social gaming have united liked this. This is like having a Wii on the go or a Wii in your hand.”

In my book, Corporate Imagination—Plus, published by The Free Press imprint of Simon & Schuster, I explained several strategic innovation techniques. One method I detailed was “seeking combinations.” Fusion is a classic approach to creativity; things that already exist are linked together, in a marriage of thoughts.

In the food industry, in which I do extensive work, consider the examples of wine coolers, toaster waffles, milkshake breakfasts, chunky soups, and all of the “lite” foods. Additionally, years ago Procter & Gamble created an innovative new laundry product from two existing but separate products, a combination of detergent and fabric softener, named Bold 3. The products were commonly used together when washing clothes already, but required the purchase of two separate products; they just combined them in one product for a compelling marketing hook. How did the rest of their competitors miss this obvious combination?

Seeking effective combinations of existing products, yields innovative concepts and  powerful marketing niches; think cross-promotion sales and merchandising, retailer branded credit cards, and cross-over vehicles.

Examples abound. From a technological perspective, the key to relational databases, the fastest growing segment of the software industry, is the power of the programs to relate two different files of data, so long as they have some element in common.  Ever hear of a company that broke ground seeking combinations in this area named Oracle? Larry Ellison, the company’s driven CEO, is a remarkable breakthrough leader.

On a personal note, my thirteen year old twin boys, Eric and Ryan, and their two friends conceived the germ of the Wii concept six years ago in our family room when they were seven years old. I walked in one day and found them lined up watching Star Wars and in unison replicating the laser sword battle scenes with their toy light sabers. I asked them if they’d like to do this with their Sony Playstation, and they asked how. I said it would take a few years. In my next leadership development training session at the largest computer game publisher in the world, I offered the idea for free, and I recommended they partner with Sony and develop it. I repeatedly voiced the idea in each annual session with this company. For whatever reason, no action was taken on the idea and three years later, near-dead Nintendo launched the Wii, and subsequently screamed to the top of the computer game console industry, right past Sony. It broke my strategic heart.