Axel Schultze

Genuine Innovation versus Improvement

Terms like incremental innovation, gradual innovation, or architectural innovation have been coined and used to look like being innovative. Turns out, using those terms is the worst decision one can make. Companies need to be actively improving their existing products and services. AND in today’s time and age, companies need to decide if they want to engage in innovation. But one is as different from the other as apples and oranges (Äpfel und Birnen).

Let me explain the most significant differences between genuine innovation (real innovation) and improvements:

How genuine innovation began

Genuine Innovation versus Improvement - the beginningAround 12,000 years ago, we not only improved how we sharpened and used stones or threw wood formed into a spear but also made a breakthrough in survival techniques. Homo Sapiens began to farm. For 300,000 years, we were hunters and gatherers. But the food was almost abandoned once we understood how corn grows and how we could seed and water the seeds. Thanks to the innovation of farming, there was more corn and wheat than the people who planted it could consume. At that time, some people invented plows to farm better. Others focused on building more robust tents and huts to store the harvest. They traded their work for the corn others grew. The invention of farming allowed us to specialize. The most massive elevation in how humans did things.

Still, today, a genuine innovation elevates how people do things to a degree far above and beyond general improvement. Every innovation sparks new opportunities, jobs, and on top new innovations. It allowed us to overcome limitations like lifting more than our body could stem. Dive longer than any human could before – even reach out into the Universe. Every genuine innovation is a solution or product created from scratch in all its aspects. A new product with new and never seen before functionality and today, most likely a new business model will quickly accelerate the company to a market leader. Bringing such a product to market, teams usually also use new ways to sell it, new ways to market it and create a new customer experience. With such a new solution, customers experience a new, easier, faster, or safer way to do things.

After a few years, genuine innovation is typically far more profitable than any comparable solution. It has a significant competitive advantage and attracts top talents, new customers, and even the corresponding capital market. Apple, Google, Samsung, and countless other disruptors are part of the most profitable company list. At Apple, developing a new computer, then iTunes, then the iPhone means heavy lifting. But profitability leads to new and equally profitable products and so forth. We see a similar pattern at “Musk Enterprises,” where it’s less prominent but equally diverse with Tesla, SpaceX, StarLink, etc. It isn’t just the product genius – but also the business genius to innovate continuously.

Examples of Genuine Innovation

* A rocket may be considered as just another aircraft. But a rocket like a Saturn V can go far higher and faster than any other air vehicle.

* Uber may be seen as just another Taxi. But with an Uber, you know the cost of the ride before you get in, and the driver cannot cheat. You don’t need to pay cash, and the driver does not have the theft risk.

* A Tesla can be seen as just another automobile. But the electric motor combined with high-performance batteries is more environmentally friendly, uses renewable energy, and can be charged wherever an electric power grid is, not restricted to old town centers. It has an entirely new digital experience and can be purchased online without an overly complicated selection of option packages.

* A fully digital bank like N26 is built from the ground up for the best digital experience. Users can make all transactions themselves, anytime, anywhere, and in any transaction. Transparent costs and easy to track. It elevates the user experience by order of magnitude.

Improvement Comparison

* A faster, more comfortable airplane may be a nice improvement, but it cannot reach other planets.

* A better Taxi system would still have the massive overhead of a local taxi organization, still dependent on the drivers’ orientation skills. It must still be paid with standard payment systems, different in most countries. And altogether is still not as easy and trustworthy.

* The next car model may look nicer, is more comfortable, and may have more power. But it still has a combustion engine and a proprietary car computer system. The complex way of selecting and buying a new car also needs to be considered. Selecting the features from conflicting packages impedes the process.

* E-Banking in a conventional bank is still just a conversion of their complex standard processes. The old processes requiring manual reviews have usually not been optimized and are not even part of their e-banking.

In all the examples, improvement is necessary – or complete disruption.

Those examples give only a rather superficial insight into those differences. Under the hood, it is even worse. Mergers with brute force IT integration have made the product in financial services companies far more complicated than easier. Those companies often still today think it’s their human experts that make the difference. Of course, those experts are also needed in the future. But the real difference is a hyper-fast and super-easy transaction system for billions of people. Similarly, in the energy sector. Most oil and gas companies need to change towards renewable energy. And most follow what already exists: Solar, Wind, and Water. Disruption would be focusing for instance on the earth’s core. Our planet’s geothermal energy reservoir is good for at least a billion years. It can constantly deliver millions of petawatt of energy. It is independent from day and night or cloudy or sunny. It is independent of wind and independent of the necessary gravitational force of water turbines. Of course, it is not easy, but innovation is never easy. That is the reason why genuine innovation is always profitable and pseudo innovation is always under high pressure from the competition, high pressure on profitability and there is always a country that can deliver cheaper.

Genuine Innovation versus Improvement

Genuine Innovation Pseudo Innovation or genuine improvement
Team qualification Diverse backgrounds with specific cognitive abilities Dedicated innovators Experts (Tech, Bio, Chem…)
Timeline   5+ years     Months/Years
Budget     Small but scaling   Higher budget, shorter terms
ROI  7+ years          1-2 Years
Impact  Market Leadership Business as usual
Capital market Increasing MarketCap Declining MarketCap
Biz Transformation High    None
Expanding markets Possible and likely Rather shrinking
Declining demand  Can be compensated Accelerates the degradation 

This tables tells a very important story: Engaging in innovation or remaining in improvement mode has significant financial and strategic implications. And the decision to go in one or the other direction, can only be made by CEOs and their board.                              

Making the distinction between genuine innovation and improvement is strategically important for the respective team that should either innovate or improve. A leadership position such as “we need to be more innovative and you, team, have to figure out how to do this”, cannot lead to success.  

Goals, processes, team composition, financing ways to go to market, and production flow are all fundamentally different between the two types of product development. As long as a company mixes both terms interchangeably, the result is worse than focusing only on improvements. But to stay relevant modern businesses need to do both: Continue to improve the products and services they have and with a different team to develop the next breakthrough innovation.

 

Genuine Innovation versus Improvement

GENUINE INNOVATION
At least we at BlueCallom consider Breakthrough innovation, groundbreaking innovation, disruptive innovation or radical innovation all the same thing. All of that is genuine innovation. And everything we do as a business, is to empower people to make genuine innovation a reality in very timely order – six to 9 months. 

PSEUDO INNOVATION
At the same time, we consider the terms incremental innovation, gradual innovation, architectural innovation as pseudo innovation. It is misleading for innovation teams when they are tasked to make incremental innovation. Moreover, it is dramatically harming their career because when hired at another company, they can present nothing but improvements – which is a given in companies since the beginning of the industrial revolution.

I’d love to hear your opinion or experiences.

And if you want to discuss live, in person with innovation thought leaders from  across Central Europe, please join us Nov 3 in Zürich, at our first BlueCallom Innovation Night, a pure networking event.

 

/0 Comments/by
Axel Schultze
,

Stop idea hunting for innovation

Stop idea hunting for innovation

Creating breakthrough innovation is still the holy grail or even a mystery to most innovation teams. It is perceived as random, serendipity, and accidental. Hoping to get innovative solutions that transforms markets from some magical “ideas,” means waiting for a coincidence, but winning the lottery would have far more chances to succeed than “finding” the right idea. Is this the end of an innovation center? Yes, already in many corporations. But it would not have to be that way. It is only the end of idea hunting, trend scouting, startup observation or acquisition, and similar activities. 

REVISE YOUR INNOVATION APPROACH

Every market, every ecosystem, and every target audience has large amounts of unsolved problems. Solving those problems is what most unicorns do today. Lack of understanding of problems and needs is also a prominent reason less than 10% of startups make it to their initial round of funding.

Imagine you have a great idea that just popped into your mind and want to create a business with it. You craft a concept, maybe a prototype, and try to get funding from an investor. Any decent investor will ask these is first two questions: a) Who is your team? B) What problem are you solving?

Idea hunting

Problem-solving
1) Who will be your customers? 1) You will understand almost immediately who the potential customers are
2) Why should they buy your product 2) The solution to the problem is why they should buy your product.
3) Why will they want it? 3) They want it to improve their work, life, or entertainment.

 
4) How many people will want the solution (market size) 4) You size the market by knowing who and how many have the problem.

 
5) How big is their appetite at the moment? 5) You can directly ask them how big their appetite is to buy it.
6) Do they have to change their behavior? 6) You can explore if there is any behavior change they need to make.
7) How significant will the impact be on your customer? 7) You can ask your current customers about the impact.
8) What would be their current or potential alternative? 8) You can explore your competitive advantage.
9) What would be your value proposition? 9) You can define a value proposition even before prototyping.

 
10) What would be your business model? 10) You can have a unique business model when you go to market.
HIgh uncertainty
Low likelihood to get product market fit
Very high failure rate
Very low likelihood for innovation financing 
High certainty for a needProduct market fit can be quickly tested
Much reduced failure rate
High likelihood getting finance




Innovation Center Decision
While entrepreneurs may still try their ideas whether they get funding or not, for an enterprise, it is almost irresponsible to go on an idea hunt or idea-scouting to find random ideas. The probability that the “idea” is helping transform markets, transforming organizations, and bringing a significant elevation in how people or customers do things is extremely slim. Why bet resources on the least likely path to success?

Instead, when focusing on significant existing problems, most of the top 10 questions are answered based on the fact that there is already a consequential problem identified.

 

INNOVATION RISK PREVENTION

Shifting from idea hunting to problem-solving is essential to innovation risk prevention.

Why spend time, money, and resources to find a market that possibly doesn’t even exist or not know if the idea solves a problem? Focus on solving already existing significant problems.

Why you and not others?

Because usually, companies from all corners of the earth are not interested in solving problems but in selling what they have. Startups, on the other side, don’t want to build another existing solution but solve problems nobody is addressing. And as such, most successful startups grow into enterprises by doing precisely that. And on their way to the top, they displace older enterprises that were created before them.

The risk to get one day being disrupted and displaced is larger than the risk of failing to invent new solutions. But the remaining risk of failing can be significantly diminished when moving from idea hunting to solving existing and known problems.

Known problems can be managed – ideas cannot.

Moreover, once you have identified a significant problem, the anticipated outcome will be initially unknown, but the goal is so clear that you can strategically manage the innovation process. Market research, problem identification, ideation, concept validation, etc. Such an innovation process dramatically reduces the risk further. Neuroscience and Neuro Innovation help us understand how ideas for solving problems are composed; it helps us market into early adopters and finally re-invent so you will never stop innovating.

CAPITAL MARKET SHIFT

The capital market is a significant driver, shifting companies to embrace innovation, product and business model advances, and competitive advantages. Highly innovative companies like Tesla have a valuation allowing them to buy the Mercedes among all automobiles: Mercedes Benz. And this is one of the key motives for the C-Level to turn their otherwise well-running business into an innovative enterprise. Executives know that one of those random ideas will never create a billion-dollar market. They also believe that an idea, no matter how cool it may sound, cannot provide a significant competitive advantage to move the needle of their market cap.

Summary

  • Reducing innovation risks by moving innovation from idea hunting to strategic and targeted breakthrough innovation efforts that are solving existing significant problems makes all the difference. 
  • Methodical innovation not only teaches how to make the start of an innovation effort smarter but also how to manage many other aspects including team assembly, innovation strategy development, concept validation methods, innovation financing, and much more. 
  • Modern innovation frameworks additionally increase manageability and success predictability not only in the solution creation phase but during the equally important innovation-to-market and scaling phase.

Making Of

How did we get here? Our own, previous companies and the hundreds of companies we accompanied in their startup phase, later on, were determined to solve one problem – and one problem only. In our research, we could not find a single company that hoped to realize an idea, then find a market for it, and become successful.
The most successful VCs in this world invest only in companies that solve a big problem – for a reason. Our learning: Only when understanding the entire innovation journey from early innovation opportunity discovery, all the way to global scaling, success is very probable. Experimentation is the least intelligent way to innovate.

Axel Schultze, CEO BlueCallom
AI-Driven Neuro innovation solutions 

/0 Comments/by
Axel Schultze
, ,

Innovation Market Dynamics

Innovation Market Dynamics

Before starting to innovate, it makes sense to understand the general market dynamics for innovative solutions. For decades, enterprises struggled when their innovative solutions did not take off within 12 to 24 months and killed the projects. Little was known about innovation diffusion. Everett Rogers coined the term in 1966 but the actual timeline of an end-to-end innovation was too long to even measure accurately. Today we know that any innovation takes and took 7 to 15 years to become mainstream. Obviously, that was a stretch for any enterprise executive. Yet, telephony, TV, personal computer, Internet, Social Media, 3D-Printing, and electric vehicles took, on average, a decade to become mainstream. A normal consumer however does not see that timeline. In 2012 Facebook was a big talk when it went public with horrendous valuations and no profit. “Already” in 2016, just four years later it became an acceptable mainstream platform. People tend to forget that they started in 2004 and took 12 years to become “mainstream”. And Tesla took much longer.

Hoping to have an ROI in 3 years is virtually impossible – why is that?

Why conventional enterprises fail to innovate

It’s not the innovative solution that takes so long to build – it’s the market that takes so long to decide. Agile leaders or agile consumers start to give almost anything interesting a try. It is what keeps them at the forefront of things. The large majority of conservative buyers wait and see and move only when the “New Thing” is tried and tested. Usually, in the early days of a product researchers, analysts and experts see great danger in the new products and delay the market acceptance even further. But when the late majority decides to buy because it seems to be “a good idea” the market opens up to mass markets and volume. It doesn’t matter if it is B2B or B2C. It is the human factor – no matter where they sit.

Leading businesses keep staying on top – time and time again

The people that represent such a leading company are typically early adopters. Just a little more risk-takers. Their experiences with new technology keep them ahead of the competition. When years later the competition catches up, the leaders are perfectly set and experts in the respective technology. And in the next few years, that same game repeats itself.

Why conventional enterprises have a hard time

Of course, they are not stupid, so they could make a leap and catch up with leaders fast. The problem is the composition of people. You cannot jump on every opportunity because who knows what is really successful in the end. Why did the Nokia executives not jump on modern technology? Why did Sun Micro not see the writing on the wall? Why did Nixdorf not adopt in time? Why did Digital Equipment merge with HP and almost both failed? Why did…. the list is long. But the answer is easy: They just did not see it. Far too busy with their own organization instead of having eyes and ears in the market. Trying things that make logical sense instead of waiting until others found it out for them is a terrible price to pay. And that is not only for NOT EXPLORING THEIR OWN SITUATION. IT IS WHY THEY CAN’T INNOVATE and develop a long-term view of what the market needs.

Innovation Market Dynamics Considerations

1) Make yourself familiar with the idea that your innovation will take 5+ years for notable impact in the market.

2) Understand the full scope of an innovation engagement to keep the time to innovation as short as possible. Meaning your innovation team has no time to rest.

3) Have a very robust strategy in place to be able to manage such a long-term engagement with all its changing landscape underway.

4) Never even think of integrating the innovative solution into your conventional sales and marketing operation. The go-to-market approach is far too different.

5) Make sure you have a complete picture of your innovation engagement and the fact that if you need innovation to transform a business unit or an entire business, your innovation will need to produce NEW Billions of Euros to make the transformation successful.

6) Ensure that innovation is led by a Chief Innovation Officer, not by the CEO or any other executive as a side business.

/0 Comments/by