A sustainable competitive advantage. – Geoff Colvin, Senior Editor of FORTUNE, on what every CEO wants

Hate to burst anyone’s bubble, but there is no such thing… on second thought, we’ll come back to that.

Innovation is on the verge of becoming a cliché. On Nike’s recent earnings call, senior execs used the word at least 30 times. Rather than taking a cynical view (… Moi????), take it as a data point that underscores just how important innovation is to competitive leadership.

Before getting to how to drive innovation, let’s level set on perspective. Innovation doesn’t relate to only products and services. Innovation is every bit as relevant to processes, technologies, strategies, business models, new markets, and untapped customer needs. Our favorite is business model innovation, which has the potential to transform your business via a platform that drives exponential growth. Many consider the iPod as Apple’s springboard product, but in fact it was iTunes and its micro-payment model that created the ecosystem and changed iPod’s trajectory from being yet another MP3 player. From another perspective, Google is a technology and product innovation role model… but their revenue is still 90+% advertising related. There’s more to making innovation work than great product ideas.

The highest performing organizations have innovation seamlessly integrated into everything they do, but most orgs have considerable inertia to overcome. So if you want your troops to be effective innovators, break out some time for them. Google had a practice (since scaled back) of making ‘20% Time’ for developing new ideas. Our perspective is that for the things that people really want to do, they can always find the time. [It’s the things that they don’t really want to do for which there is never enough time… seeing your to-do list through that lens will tell you a lot.]

The effort usually begins with ideation, or brainstorming if you prefer. Remember you have to generate many bad ideas to get to the good ones (more in a moment). If you’re stuck on how to start, here’s another idea from Apple. A relatively small team of people asks themselves questions. What doesn’t work, or is harder to do than it should be? What pisses us off? Multi-functional teams consisting of people with a diversity of perspectives and experiences can shed light on things a homogeneous group might never see.

Let’s say you come up with a portfolio of 100 ideas… for the sake of easy discussion, consider:

  • 90 are quickly rejected for any number of reasons
  • 4 are worth considering, but are easily deferred
  • 3 are worthy of investment, but will eat up the investment and never pay you back. Fail-fast/fail-cheap on these so you don’t fail-big.
  • 2 will pay you back with a market rate of return… sound investments and good additions to your business… but not make up for your lost investment in the others
  • 1 has the potential to put you on a higher trajectory and transform your business’ future

Sorting through the possibilities to pursue specific opportunities is too often skipped. Everybody’s enthusiasm clouds sound assessment and they want to jump into action. To get to the best opportunities, manage like a market: shine a light on the opportunities you are considering and find out who wants in on what your internal market sees as the most promising ideas. Once you commit, make sure that money, people, and resources are allocated. Identify the key performance indicators that can be used to objectively measure progress.

The Lean Startup approach is based on the Build-Measure-Learn model, and you can reach out to us if you want the high-level view. Remember that it is a framework, not a cookie cutter recipe. As with most work in the modern economy, run opportunities like projects, with the same disciplined execution. 1% inspiration must become 99% perspiration.

We can’t overstate the importance of a quick prototype or proof of concept. Transforming an idea into something tangible alters everyone’s relationship to it; only then can you get reliable feedback that is essential to inform decisions on what to do next.

That CEO wish list of a sustainable competitive advantage usually imagines an infinitely wide product moat that others may never cross. Knock-offs from fast followers lay waste to that idea. With the compression of business and product cycles, it’s a pipedream for all but a handful. So it’s our point of view that the only sustainable competitive advantage comes being excellent at innovation. Keep exercising that until you become great at it and fulfill the boss’ dream.

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We helped an emerging growth technology services company to expand a line of business by creating alignment across the organization, clarify the value proposition to leverage strengths, focus on training for developing people, and execute the plan, starting.

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