Untangling Innovation – Part I (Definitions)

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 [This article was simultaneously posted on LinkedIn January 27, 2015]

Introduction

This post is the first in a series that are intended for scientists and engineers who have been primarily focused on their technical subject matter and have not had a chance to explore management and innovation very much. If that is you, and you have recently encountered management initiatives aimed at fostering innovation, stimulating new product discovery, or encouraging you to be more entrepreneurial, then read on.

Experienced technologists know that business management initiatives come in ‘waves’. Many of us (that are old enough) experienced first-hand several quality initiatives (Deming, ISO-9000, etc.) beginning in the 20th century, followed by productivity initiatives (e.g. Six Sigma) continuing into the last decade or so. More recently, innovation has become the initiative du jour. To give just one recent example of interest in this, the Harvard Business Review made innovation the cover story for its December 2014 issue. Management interest in innovation has to do with goals for organic business growth and competitiveness along with surging interest in entrepreneurship.

When technologists without formal training in innovation encounter these initiatives, they can become wary as it is easy for them to assume that they have already mastered innovation. After all, technologists are typically trained in the scientific method and have a primary goal of discovering or developing new knowledge & technology. But, this assumption is incorrect. The discovery of new knowledge, or even the invention of new technology, does not necessarily comprise innovation. Unless technologists have made a point of looking into recent thinking on innovation and entrepreneurship, they may be unaware of some important ideas.

This post and several planned to follow it are intended to help in this area by providing some introductory information. Many experienced technologists and technical managers will be familiar with this material, and I ask their indulgence. Should they read this, perhaps they can share their perspectives in the comments.

Defining Innovation

The place to start is with a definition of innovation. This is important because it is easy for a scientist or technologist to assume that technology alone—an invention—defines innovation. This is simply not true, and anyone thinking that innovations are invariably driven by technology (in the sense of hard sciences, hardware—electronic or otherwise, manufacturing processes, etc.) should rethink their position.

The fact that innovation involves more than just technical novelty and invention is reflected in one of the classic formal definitions of innovation from the 20th century:

“Innovation is the market introduction of a technical or organizational novelty, not just its invention.” – Joseph Schumpeter

Schumpeter was an economist, so his definition was tied to the market. The more fundamental point, however, is that an innovation does not occur until some novelty (technical or otherwise) is (successfully) introduced to the market—in other words, until it is adopted. Thus, the use of direct current to meet needs for large-scale electric power distribution (promoted by Edison) was an invention, but it was the use of alternating current (promoted by Westinghouse) that gained widespread adoption and, therefore, became an innovation. Further, note that Schumpeter spoke of the introduction of a, “technical or organizational novelty.” The key point is the novelty, not whether it is a purely technical matter. Novel approaches to government (for instance) like the rule of law, or democracy, or bicameral legislatures comprise non-technical novelties that have been adopted and, therefore, become innovations without resort to anything normally considered to be technology. The last key element of Schumpeter’s definition is the market. He was an economist, so for him innovations were most interesting when they occurred in markets, but it should be obvious that it is adoption by any group of individuals or organizations that counts, and that this encompasses markets.

To cast Schumptetr’s definition of innovation in another form, taking into account the work and ideas of several other persons as well:

Innovation is the creation of novelty—an improved product, process, technology, idea, etc.—that is adopted by some group, such as a market, government or cultural unit.

To make a related point, innovation is the last step in a process of converting new, basic knowledge into something that creates value for users: As new basic knowledge is developed or discovered, it provides the means to accomplish new outcomes through inventions, which if they are perceived as better and then adopted by sufficient persons or groups become innovations.

Defining Product

Management initiatives for innovation within businesses—which is the relevant venue here—are usually focused on using innovation to create new products (or, business models, which is a related topic), which in turn drive revenue and (ideally!) bottom line growth for the business. Thus, it’s also relevant to define the term ‘product’ here. Like innovation, this is a concept that seems intuitively obvious, but which benefits from a formal definition. This also helps by defining the goal of innovation within businesses: satisfying previously unmet user needs.

Marketing texts like Marketing (Kottler, 2006) define products as, “anything that can be offered to a market that might satisfy a want or need.” For the present purposes, this can be expanded slightly:

A product (or service) is the object of repeated transactions between a vendor and market that mutually create value—utility or benefit for the market and revenue (or increases in other revenue) for the vendor.

Thus, a ‘product’ is something that satisfies a user need (provides utility or benefit) in a way that encourages the product to be created by a vendor for use by the customer. Another way to look at this, which turns out to be very important for new product discovery work, is that customers hire products to help them do jobs.

To go down this road just a little further, it is also useful to distinguish between three general types of product: (a) those that solve problems, (b) those that prevent problems, and (c) those that provide an otherwise absent benefit. Some argue that the last category prevents the ‘problem’ of the absent benefit, but that is semantics. To give examples, an automobile solves the problem of personal mobility, routine maintenance services prevent breakdowns (loss of mobility) and luxury features make the car more comfortable and send a message of success about its owner.

Taxonomy of Innovation

This third section, which is preparation for discussions of approaches to innovation that will occur in subsequent posts, aims to make the point that innovation can occur in many ways. This was already hinted at when innovations were defined as novelties, technical or otherwise. They can also be characterized in many ways. Analyses of innovation (see graphic below) have looked at innovation from a number of different perspectives, and categorized it accordingly. Typical business school faculty (e.g. Andrew Maxwell, while at Temple University’s Fox School of business) identify broad categories for innovation like product, process, service, business model or finance. Workers within Doblin (a consultancy) have broken these down into more specific types. Meanwhile, another academic (Melissa Schilling) looks at innovations according to their character. They can be innovations in products or in processes, they can be radical or incremental, they can enhance or undermine the current competence of an organization or business, and they can be innovations of overall architecture (for instance of a product) or of modules within an existing architecture. Finally, Peter Drucker examined the origins of innovations—the events or information that served to prompt an innovation.

Another important categorization of innovation, omitted from the graphic above because it is a more global distinction, is that between sustaining and disruptive innovation first developed by Clayton Christensen, and later refined by Christensen and Michael Raynor. Both disruptive and sustaining innovations can be categorized with the taxonomy above, but disruptive and sustaining innovations are distinct from one another.

Christensen and Raynor, have very precise and specific definitions for disruptive and sustaining innovation. Raynor gives this definition of Disruptive Innovations:

“Specifically, Disruptive Innovations are defined as products or services that appeal to markets or market segments that are economically unattractive to incumbents, typically because the solution is ‘worse’ from the perspective of mainstream, profitable markets or market segments.” – Michael Raynor

Conversely, Sustaining Innovations appeal to the current, attractive mainstream market and improve upon the current solution. Aside from providing important information on how to manage innovations (fully developed elsewhere by Christensen, of course), Christensen and Raynor further point out that Disruption Theory makes important predictions about innovations: Sustaining Innovations are best developed by strong incumbents within existing, mainstream markets, while Disruptive Innovations are best cultivated by smaller, autonomous organizations that succeed by defining and rapidly growing new markets.

Conclusion

This first, introductory, post in what is intended to be a series of posts on innovation topics for technical entrepreneurs—engineers and scientists working, whether in start-ups or established companies to identify, develop and commercialize new products—provided definitions for innovation and for product, and outlined some different flavors or types of innovation. The most important point of the definition for innovation is that it requires more than just the discovery of knowledge and the conversion of that knowledge into problem-solving inventions. Until adoption occurs, innovation has not occurred. When management initiatives for innovation are introduced, technical entrepreneurs should recognize that they are not necessarily aimed at their core capabilities in knowledge discovery and invention; they are aimed at better focusing those capabilities on meeting user needs for products in ways that will drive their adoption. That is when innovation relevant to business managers really occurs.

[Continue reading the next post on this topic, or read the full whitepaper on this topic, Untangling Innovation.]