In the board room improvement beats innovation. That’s why Lean and Six Sigma are so popular. Effective innovators pick the right moment, when ‘improving only’ is a bigger risk. Read here why ….
Innovation is a vague word. Everybody agrees that is all about something new. But wait until you ask “what do you mean by new….?” Let’s take as example the iPhone of Apple. Which of the following 10 new iPhones of Apple do you consider an innovation?
1. the first iPhone: June 2007
2. iPhone 3G: with 3G en gps.
3. iPhone 3Gs: with video.
4. iPhone 4: with a modern design and a lot more pixels.
5. iPhone 4S: with an improved camera and ‘Siri’, the digital assistent.
6. iPhone 5: with a large screen and lighter aluminium cover.
7. iPhone 5s and iPhone 5c: with cosmetic changes and ‘touch-identification’.
8. iPhone 6 and iPhone 6 Plus: with a modern design and in a larger version.
9. iPhone 6s and iPhone 6s Plus: with some small improvements.
10. iPhone SE: smaller and a bit less expensive.
Well? I think that only the first iPhone is an innovation. All other 9 iPhones are improvements of the original. In my view there are clear differences between improving and innovating.
Innovation versus Improvement
- discontinuous versus continuous;
- ‘in jumps’ versus ‘in steps’;
- ‘uncertain outcome’ versus ‘certain outcome’;
- ‘in all directions’ versus ‘straight ahead’.
- ‘vague and iterative’ versus ‘clearly structured’.
- ‘high risk’ versus ‘low risk’.
- ‘big investment in time and money’ versus ‘small investment in time and money’.
- ‘for the day after tomorrow’ versus ‘for tomorrow’.
You innovate in high risk jumps
You improve in small steps according to a planned process with a clear goal. With a small investment and a little chance of failure, you attain an almost certain outcome on short term. Real innovation happens now and then. It’s often a vague iterative process with an uncertain outcome on longer term. Innovation demands a bigger investment, both in time and money, while you are not sure what will materialise in the end. Lots of organisation have started continuous improvement programmes. They are using ‘Lean’ and ‘Six Sigma’ successfully making small steps with little uncertainty. And that’s what we like. Improvement is very popular and beats innovation.
The origin of all the opposition to innovation is that in essence most people and companies avoid risks. Moving beyond what they normally do makes them uncertain. In my lectures on innovation I ask, “Who of you wants to be an innovator?”. Most hands go up in the air. When I follow up with, “Who of you wants to run a personal risk?” a lot of those hands go back down. For corporate innovators it’s very frustrating when you’ve been assigned to come up with great new ideas only to see nothing materialize because the same managers who gave you your assignment say ‘no’ to every idea, business case or prototype you present. The reason why so few real innovations hit the market is that people are risk averse. Most of us, also your leaders, will approve real innovations when we are aware that improvements cannot generate any growth anymore. I like to quote the CEO of BMW AG, the German luxury car producer, Dr.-Ing. Norbert Reithofer. When asked why BMW started the risky E-car project with the BMWi-3 and i-8 he responded very honest: “Because doing nothing was even a bigger risk”.
As effective innovator, you have to pick your moment. There are two sweet spots when innovation can beat improvement.
In practice, I see those who want to innovate and those who need to innovate. I call those who want to innovate the active innovators and the ones who need to innovate the passive innovators. As you can see in the chart their roles are defined by the moments they really innovate their business. Every company, business unit or product has its lifecycle of introduction, growth, maturity and decline.
Active innovators, who want to innovate, give innovation priority at the end of the growth stage. Before they reach maturity they want to innovate, often for several reasons simultaneously:
- To keep their revenue stream growing;
- To maintain an innovative mindset;
- To boost internal entrepreneurship (intrapreneurship);
- To address changing needs and wants of customers;
- To lead in technology;
- To expand their business by new business models, distribution channels and customer groups;
- To anticipate on new governmental regulations or a market liberalization.
Reactive innovators, on the contrary, wait. They wait until they get hit by a crisis, their markets saturate or get disrupted by new technologies and/or business models. They reorganize, lay-off people and prioritize innovation only at the start of their decline stage when they need to innovate. They need to innovate most often with only one goal in mind: to stop revenues and profits from falling and build a new future for their organization.
Both types of innovators have their own challenges. The good news for active innovators is that there are plenty of resources available as the company is doing well at the end of the growth stage. Their challenge is to cope with a lack of urgency at the operational level of the organization: “Why should we innovate? We’re damn busy and doing great!” The good news for the reactive innovators is that there’s great urgency also at the operational level of the organization, as there’s often been a collective layoff due to the business slow-down. Their challenge is compounded by both a lack of resources and a lack of time, as they will have to move quickly.
The central question is not if you should innovate. It’s WHEN and HOW you start and lead innovation effectively. My tip is to pick the moment innovation has a chance to beat improvement. Wishing you lots of success on your innovation journeys.