Innovation means different things to different people. The definitions range from simply a new idea or invention to bringing that idea to life in a market or even restricting the definition to include only those things that achieve significant change in the world. We often think of innovations as things we couldn’t have imagined before we saw them. Thus innovation and creativity are often closely linked in people’s minds as innovation connotes bringing something new into existence.
The innovations we think of are those things we see as the end result of this creative activity. Apple’s iPod and iTunes, Amazon’s business model, Pixar’s Toy Story, Google Search all resonate as innovations. However, if you talk to someone involved in bringing any of these “innovations” to market you will likely hear less about the “big idea” and more about the many creative solutions required for the myriad problems that had to be solved on the way from the original idea to the commercial success. In fact, you are likely to hear that the “big idea” they started on was not quite the result we are familiar with.
Defining “Innovation”
I propose the following serviceable (meaning I’m not married to it) definition of innovation:
“Identifying problems worth solving and then creatively addressing them to effect a change”.
Notice that this definition does not stop at the initial idea but requires execution to actually effect a change. The first problem identified may be the big idea that resonates in the market and needs solving, but bringing the solution to the market will invariably lead to many other problem solving opportunities along the way and possibly even a change in the original big idea. Figuring out which problems are important to solve, effectively solving them and adapting to what is learned along the way are key elements of the execution process essential for “innovation” however it is defined.
Notice also that this definition does not require that innovation is a product development activity even though this is what innovation is commonly associated with. The definition could equally apply to changing the way people think about recycling and the environment or modifying an internal business process to make the business more effective. Product development, however, is unique in that despite the fact that innovation can occur outside of product development, innovation must occur during product development. Innovation is always an essential ingredient to success in product development as the primary purpose of product development is to bring something new into the market.
What do I mean by “new”? I mean new for your organization, not necessarily new for the world. Even if only new to your organization it will still require the creative problem solving (and the environment that encourages it) important to any innovation whether incremental or earth-shattering. This is another important element of the definition – it makes no attempt to differentiate degrees of uniqueness or impact in the world. This differentiation is a somewhat subjective distraction from the actionable issues. As defined it is ultimately not a thing or a unique event; it is an approach to generating a change. This should be good news for any company aspiring to improve its innovative capability because it allows for evaluation and improvement in this ability without waiting for the success or failure of the next big thing. The ability to innovate in small ways is good practice for the ability to create break-through innovation as it exercises the same muscles with more frequent feedback and a consequent faster learning curve.
Using the “Vitality Index” as a Measure of Innovation
Amongst companies who strive to improve their innovation the most common metric used as a measure of innovation is the “Vitality Index” created by 3M in the 1980s. This index is calculated as the percent of annual revenue generated from new products. New products are defined as those released to market in the last N years where N is typically 3. Note that this measure has nothing to do with the number of patents generated, ideas floated, size of the development team or dollars spent and only indirectly reflects the magnitude of the resulting sales from a given product in that many incremental revenue generators could have similar impact to one large revenue generator. The important element of this metric is that it requires that an idea gets developed, manufactured, marketed, sold, delivered and supported before it can be considered an innovation and contribute to the numerator.
If you looked closely at companies that are not happy with their Vitality Index you will likely find that the projects they choose to invest in either fall short of achieving the anticipated result or take significantly longer than planned to deliver, or both. Some projects never even make it out the door. While it is appropriate that some projects don’t make the cut the failure is when they simply die of organizational exhaustion rather than from a conscious and timely decision to terminate them. There are two high level reasons why projects fall short; (1) it’s a bad idea or (2) poor execution. Companies typically have more good (perhaps not usually great) ideas than they can fund, consequently the vast majority of failed projects fail due to poor execution.
The Vitality Index is a reasonable measure in that a company with a high Vitality Index that continually delivers new products is much more likely to hit a home run when the big idea comes along than a company that can’t get out of its own way to efficiently deliver even the most derivative product.
Working on the underlying elements of innovation execution will allow a company to make the most of any idea they choose to focus on. Improving your vitality index is like improving your batting average – you must work on the fundamentals. You must practice pitch recognition and understanding the situation to decide when to swing and you must work on the mechanics of the swing so that you execute well when you decide to pull the trigger.
Who’s a better offensive player, the guy who hits for a great average with lots of doubles but few homers or the big home run hitter who strikes out a lot? I don’t know and it’s not worth debating. However, I can tell you this: I’d rather have a guy who does it all hitting a fair amount of home runs along with all the doubles and a great average. Is that too much to ask? Marry good pitch selection with great execution and you should be pleased with the result.
