Targeting Your Innovation Efforts

Companies get better results from innovation by targeting initiatives at the right places.  Given limited time, money, and human resources, here are six areas to focus on:

1. Your Value Drivers:  What activities across your business model create the most value?  Is it operational or commercial?  Who is involved and what departments make it happen?  Use a corporate innovation method like S.I.T. to reinvent the value driver as well as the resources that deliver it.

Procter & Gamble innovated an intelligent screening system that scanned coffee beans imported from any part of the world and selected the right proportions of each to create the desired taste.  This created a huge operational advantage in producing a distinctive product within a commoditized industry.

2. Your Core Competency:  What skill sets create strategic assets?  Strategic assets are those that deliver a sustainable competitive advantage.  By re-inventing these skills and how they are sourced and maintained, companies sustain their advantage.

AkzoNobel, a maker of specialty paint, has a unique ability to color match to near perfection thanks to their skills in chemistry and spectroscopy.  Applying innovation methods to the color matching process would uncover new skills or complementary skills to fortify its strategic advantage.  

3.  Your Potential Acquisitions:  Growth through acquisition is expensive and risky.  Acquisition stifles innovation and distracts management as it focuses on integration.  The answer is to use innovation methods ahead of the deal-making to clarify and enhance valuation.

IBM’s acquisition of Netezza for $1.7 billion seems excessive given the commodization of data warehousing.  By applying a corporate innovation method to the target’s core products before the offer would uncover new or hidden sources of deal value.  Pre-deal innovation either makes the deal more valuable or creates intellectual property to leverage against other suitors if the deal falls through.

4.  Your Customer’s Processes:  How does your customer use your product or service?  Observe and map out the detailed steps of what customers do when they use it.  Use innovation methods to re-invent the way consumers seek and derive value.  This will lead to new product concepts that address these new customer behaviors.

Johnson & Johnson’s medical device unit creates detailed heat maps of how surgeons perform complicated procedures.  The maps reveal the amount of time for each step, the product used, the degree of difficulty, and risk to the successful outcome.  Innovation is targeted at the high difficulty/high risk aspects of the procedure where the most value will be created from breakthrough ideas.

5.  Your Brand Reputation:  What are you most known for in the industry and in the minds of your customer?  Is it superior products, great service to your distributors, fabulous advertising, top people?  Use innovation methods on how consumers perceive your brand to strengthen and reinforce brand loyalty.

L’Oreal’s professional products division leads its industry through servicing salons with product support, training, merchandising, and market insights.  The use of structured innovation methods of how salons operate and service their customers would create new insights and product development opportunities.  Innovating where L’Oreal is regarded as the best in the industry would reinforce its leadership status.

6.  Your Strategic Capabilities:  How does your company win in the marketplace?  What is its “source of authority?”  By innovating the way a company competes, it surprises and outmaneuvers the competition.

Barry Jaruzelski and Kevin Dehoff from Booz & Company describe three strategic orientations: Need Seekers, Market Readers, and Technology Drivers.  “The most successful companies are those that focus on a particular, narrow set of common and distinct capabilities that enable them to better execute their chosen strategy.”  These strategic capabilities can be innovated using systematic methods of ideation.