6 myths about innovation

In today’s competitive environment, you are either different, or you are the cheapest. And innovation is necessary to be different.

That is why innovation has become one of the strategic priorities of major companies. Year after year we see how budgets in this area are rising; however, many companies are facing a harsh reality: The investment is not translating into results.

Traditional companies, designed to think about operational efficiency, are now forced to move on to a new terrain for which they are not prepared: the grounds for change.

What is to not innovate?

Few executives from these companies understand the concept and it is very common to encounter some of the errors included below.

NO = R&D

The most traditional R&D problem is that it happens “in a laboratory”, far away from customers and disconnected from the company’s strategy. Innovation must take place close to customers and the business.

NO = creativity

Major companies have normally already made dozens of hackatons and encounters with Start-ups; the least they lack are ideas. The problem is that these ideas do not come to anything. Innovation is turning these ideas into business models.

NO = new technologies

We love technology fashions, but technology is just a subset of innovation, which must use technology to create value.

NO = invest a lot of money

Innovation is expensive if you only use the traditional budget management model. Properly understood, it must serve to quickly and cheaply test ideas. Then escalate (in this order).

The budget allocated must function as a venture capital, making incremental investments in subsequent rounds depending on the maturity of the companies it invests in.

NO = great risky idea

This mentality does not imply betting on a single idea, of those that can mortgage your company if it goes wrong, nor does it necessarily imply gobbling your current business. Innovation involves trying many ideas assuming that many will not go anywhere.

The choice of ideas must operate as a venture capital diversifying its portfolio to minimise risks.

NO = department

Innovation is not an isolated group of persons within the company, it is more about attitude. Although we can say that it requires specific profiles to drive this attitude throughout the company.

What is to innovate?

But then, what is innovation? I like this definition I found in the book The Corporate Startup:

The creation of new products or services that bring value to customers. And the ability to do so with a profitable and sustainable business model.

This definition includes three essential conditions:

  1. We are not just talking about disruptive innovation, but it has to be something new, at least for the company.
  2. It has to be useful to customers, we are fed up with spending money on things customers do not need.
  3. It has to be a profitable business and sustainable business model over time. Not from day one, but it must become a new source of revenue for the company in the long run.

With this vision, we can say that innovation in established companies does not need any more ideas. In these companies, ideas and talent are commonplace. Where they usually fail is when turning these ideas into reality, and what they need is:

  • A dedicated process.
  • Specific change metrics; not execution.
  • Autonomy to decide quickly.

Because, if innovation does not turn into money, there will not be any money to finance it.

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