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DownloadInnovation is more than creativity; it is a process that is structured, with rules and best practices. This summary of HBR’s 10 Must Reads on Innovation gives you some of the key takeaways from experts who take the mystery out of creating new products and services. Here are just a few of the key points you will learn:
Most innovation efforts focus on creating the most profitable results or appealing to affluent markets. However, there is a large market for inexpensive products driven by customers who are looking for more value for their money. The real opportunities in innovation are the ones that create affordability and fill a need for the masses.
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Tata Motors of India is an example of how collaboration created an affordable innovation that fills a real need. The car company worked with other countries like Germany, Italy, Japan, and the United States to create a $2,000 Nano car. Each country contributed cost-effective components that reflected their particular area of expertise. The result of this collaborative effort is a quality-built, more affordable car.
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Innovating requires a partnership between a dedicated team, people focused on creating something new, and the performance engine, teams responsible for established operations. These two groups compete for the same resources while their processes are very different. Friction between these two groups is inevitable, but there are three steps for reducing that friction.
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GE achieved much of their success by offering high-end products across the globe. But the demand for more affordable products forced GE to change its focus. The company had to learn reverse innovation, the process of creating products in an emerging market and distributing them in developed markets.
An unexpected opportunity and management that was committed to reverse innovation helped jump-start GE's efforts. Rural clinics in China were unable to afford GE's ultrasound machines, so a local team built an inexpensive, portable ultrasound unit using a laptop with external hardware and specialized software. The new product created demand across China and helped GE get their reverse innovation efforts up and running.
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Consumers buy products to solve problems and perform tasks. Colleges buy software programs to streamline admissions. Electricians buy meters to test electrical work. Maybe these insights are obvious, but most companies do not look for opportunities from this perspective. Most companies are on the look out for the "next big thing" while plenty of opportunities are right in front of them. Companies can identify those opportunities by using "job mapping."
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Job mapping means looking at all the steps involved in a task. By breaking down each step of a task from beginning to end, a company can find areas of the process that can be improved. This focus on the individual parts reveals areas of opportunity that could be missed when looking at the task as a whole. Using the job map, a company can analyze the shortcomings of a product or service, and begin to create solutions.
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The innovation value chain means looking at new ventures from beginning to end to identify obstacles and opportunities. Most companies do not have a proper process for testing a product's worth or an understanding of adequate funding. By using the innovation value chain, companies can take practical steps to get a product to market.
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Companies know they should innovate, but they are afraid of the risks. That said, much uncertainty can be eliminated by a screening process.
Hurdles too high, scope too narrow
Companies tend to seek out new ideas that will result in premium prices and excellent margins. Innovations that don't project high revenues over a short time are screened out of contention. This focus on significant returns while trying to limit risk means many companies miss the smaller opportunities. Companies must solicit ideas, both big and small, from people inside and outside the organization. The result will be more ideas, increasing the likelihood of finding the ones that will work.
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Controls too tight
The tight controls of an established organization restrict innovation. Innovative teams need the flexibility to react to unexpected results. The "standard operating procedures" of most companies just get in the way. Companies must redesign processes, from how funds are allocated to how performance is measured, to give innovative teams room to breathe. New ideas require new rules.
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Connections too loose, separations too sharp
Creating a new product requires support from the whole company. Innovative teams can feel isolated and end up feeling less valuable because of the lack of support. The rest of the company could feel "out of the loop" or even resentful. The solution is to create connections between the innovators and the rest of the organization. The new venture will have more visibility and gain acceptance by encouraging the innovators to report on their efforts regularly.
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Discovery-driven planning must replace conventional business planning when it comes to innovation. Where conventional planning would tend to see assumptions as facts, discovery-driven planning sees them as guesses that must be tested and questioned. The "discoveries" that result from testing assumptions are critical to creating something new. These discoveries are used to determine the direction and focus of an evolving plan.
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Conventional business planning cannot handle the uncertainty of results or the need for flexibility that are natural parts of innovation. Discovery-driven planning focuses on activity and learning rather than results. The real potential of a new venture is discovered as it develops, a potential that would remain undiscovered by conventional business planning.
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Learning where to look for new opportunities and understanding their potential is an essential step in innovation. With practice, it is possible to spot which opportunities are too risky and the ones that have real potential. Most opportunities come from seven sources:
Most companies want to innovate, but existing financial policies are a difficult hurdle. Companies decide where to invest their funds based on a projected return. They use facts, statistics, and other data to determine if an investment will create profit. However, with innovation, those facts and other data are not available because innovating deals with assumptions. Companies tend to view new ventures using the same criteria as traditional business efforts, so they often find that there is insufficient "evidence" to warrant an investment.
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Without any evidence to support predictable outcomes, many companies choose to do nothing. They assume that the current offerings of their business will continue to produce sufficient profits, so it is easier just to say "no" rather than take the risk. However, by avoiding the risk, companies are also avoiding any potential rewards that can be extracted by innovating. Companies need to develop a better understanding of the innovation process so they can create new rules for how these ventures are funded. These companies must understand that while innovating is unpredictable, it is also something that can be measured, limiting the risk.
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