First things first: What does innovation actually mean? We describe it as creativity, yet the kind that creates business impact. Yes, innovation covers brainstorms about new ideas and technologies, but the key goal is to ensure sustainable growth. An innovation strategy enables you to introduce both small-scale and radical changes in your processes and offerings to provide customer experiences that can sustainably outperform your competition.
Companies often start to acknowledge the power of innovation once they feel the hot breath of the market or competitors in their necks. Only when they notice they are almost being outperformed, they start moving. But for innovation to work, the existence of an innovative culture is key. Getting there, however, requires time. Yet it’s the only sustainable way to achieve a growth focus and to stay ahead of your game.
In an ideal situation, companies demonstrate a proactive attitude, meaning they have already completed innovation exercises and have their blueprints ready for roll-out. Such businesses think like chess players: always two steps ahead. Based on the status of the game, they create both ‘attack’ and ‘survive’ strategies. They know how to act immediately, rather than having to start reflecting once they’re confronted with a specific market situation.
When would be a good time to start with innovation, you ask? Yesterday.
Incremental vs. disruptive innovations
At The House of Marketing, we distinguish 2 types of innovation: incremental and disruptive innovation. We gathered some examples to make the difference more tangible.
Incremental innovation refers to the introduction of small-scale improvements to your existing products or services to maintain or improve their value. Think of the addition of a new feature or the development of a line extension. They don’t require radical breakthroughs, but rather stretch the use and capabilities of existing technologies and business models. Incremental changes usually involve a low level of uncertainty and risk, which is why they’re by far the most popular innovations out there.
Coca Cola is a powerful example of incremental innovation. The company originally came to life two centuries ago, but has remained relevant by surfing along on emerging trends and frequently offering something new to its customers. A twisted mango diet coke or a vanilla Coca-Cola, anyone?
Belgian newspaper Het Laatste Nieuws recently launched a payment chatbot on their company website and Facebook Messenger. Customers can rely on the bot to complete their subscriptions, including payment. Results show that the replacement of traditional redirects with a conversational interface has boosted mobile conversion rates significantly.
Disruptive innovations move beyond incremental changes. For the sake of clarity, we distinguish 3 types: business model innovations, radical product innovations and technological innovations.
The former refers to the implementation of a new business model in an existing company. Such model aims to increase the actual economic pie, either by attracting new customers or by encouraging existing customers to consume more. While business model innovators redefine current products or services and the way they’re offered to customers, radical innovations deal with the creation of new-to-the-world products that disrupt common consumer habits and behaviors. Disruptive technologies, in turn, are unexpected technological breakthroughs that overturn existing products and markets. They rarely emerge from large established organizations and usually appear prematurely, meaning early adopters notice a decrease in their performance at the very start.
Zozo, a Japanese retailer realized a disruptive innovation – a radical innovation to be precise. Billionaire and future lunar passenger Yusaku Maezawa investigated the actual problems clients were facing when buying online, one of them being sizing. Raise your hand if you’ve ever been doubting about sizes and size charts or if you’ve been annoyed by the hassle of having to return your parcel. His solution for your suffering: a free of charge Zozo bodysuit with stretchable markers, which are read in the Zozo app to deliver detailed measurements of your body. The results allow you to order custom-fit clothing, right from your couch.
Another example in the disruptive category: Did you know YouTube started off as a video-based dating service? Users could share brief videos describing their ideal partner while browsing for matches. Yet 5 days after its launch, no one had uploaded a single one. The co-founders changed their business model, capitalized on their technology and transformed their platform into a powerful host of all types of online videos. More than a decade later, generation Z can’t imagine life without YouTube.
S-curve: where are you?
A concept that helps you to determine the need for an innovation strategy focusing on incremental or disruptive changes, is the innovation S-curve. It’s a technology life cycle, applied to determine the performance of your company, product and efficiency.
At the very start of the lifecycle of your products and applied technologies, you notice an adoption phase, followed by a steep growth phase once your technology and performance are on point. Later on, your product or service enters a stagnation phase. In the latter stage, you’re squeezing the last drops of innovation out of your existing products, tools and technologies, although the business impact uplift remains limited compared to the resources you invested.
Therefore, it is recommended to have a look at where you are on the S-curve. Is there significant room for growth? If yes, take this into consideration when determining your strategy, so you can scale and grow fast, reaping the benefits of your growth. In case you’re close to reaching the maturity point of your product, tool or service, then introduce a strategy that focuses on the creation of more radical changes. If you don’t, your bottom-line profit will experience pressure, leaving an open goal for competitors to set the new standard in the market and for them to run away with the pie.
Jumping to another S-curve altogether allows you to keep growing, be more disruptive and maintain your competitive advantage. When you adapt your business model or launch a new product or service, a new steep learning curve emerges.
When considering the most used innovation approach, it turns out many companies apply an inside-out mentality rather than an outside-in focus.
Companies with an inside-out look concentrate on what exists within their business on a local or global scale. They believe the answer to sustainable growth lies right there; for example, their machine could work faster or a new packaging technology could reduce operational costs. As a result, prototypes are produced and improved, which eventually drive growth.
Yet there’s a secret to larger growth: start from new, unmet needs of the market and investigate how to address them in an efficient manner. That’s what we call an outside-in mentality, which is key for customer centric thinking. Only when you capture and truly understand the market needs, you meet the requirements to create an impactful and sustainable innovation focus.
Introducing the innovation toolkit
The market need for businesses to transform themselves into innovative companies has increased. Yet many struggle with the starting point or they’re lacking a so-called ‘burning platform’, an issue that encourages immediate and radical change because of critical circumstances. Being aware proactivity is key to create an innovative culture is one thing, but what should your first steps look like?
The House of Marketing created a toolkit to help you with those first steps. Our objectives are the following:
- Creating alignment about your innovation strategy
- Capturing trends and changing needs in the market
- Grasping unmet needs from your customers
- Creating value through an adapted offering aligned with market needs
We developed a process of 4 templates to kick off your innovation journey with low-barrier activities. No need to hold off any longer, you can start using them today.
The templates guide you through a step-by-step flow that will help to transform your company into an innovative business. By using the templates or tools, you impact internal processes. The more you apply them and communicate your findings to colleagues, the more your company will start to embed them into the day-to-day business (structure). Innovation then inevitably becomes part of your company culture.
© Dr. Christine De Lille, TU Delft
Which resources do you need?
- Gather 3 to 5 employees
- Use the 4 templates, pens and post-its
- Calculate 4 to 5 weeks to complete all templates (3 hours per week)
At The House of Marketing, we gathered the above-mentioned templates and implemented them in a flow we created ourselves. The Vision Canvas has an inside-out focus, while the Environment Map and Observation Canvases concentrate on an outside-in view. In the end, the Value Proposition Canvas combines those inside and outside looks. The first one helps you to identify who you are and what the strategic essence of innovation within your organization will be. The second and third guide you to become more market- and customer-centric, while the final one encourages you to reflect upon the way you will create customer value.
Want to innovate like Apple, Coolblue or Zozo? They’ve made use of innovation templates - now it’s your turn!
1. Vision Canvas
The first template, our Vision Canvas, is based on Simon Sinek’s famous Golden Circle entailing the concepts of why, how and what. The canvas encourages you to define not only your company’s vision and mission, but also a vision and mission regarding the innovation strategy. If you skip this stage, you’ll most probably come across a bottleneck when you try to prioritize the ideas to move forward with.
Value of the Vision Canvas
- Creates a point of reference to check whether your ideas are aligned with your company’s DNA.
- Encourages consent about the overall objective to which innovation should contribute.
Way of working
- Gather a core team of 3 to 5 employees
- Let each individual write down the why, how and what of your company
- Present each of the answers and add them to the right part of the canvas
- Formulate a consensus around each of the elements by discussing and clustering answers
- Identify and formulate what innovation should contribute to
Golden tip: Don’t rush through this phase. Only decide to close this canvas once everyone, or at least the majority, is satisfied with the outcome.
Once you finish the first template, you should have an aligned team, a clear direction and a point of reference to guide you through the next steps of your innovation journey.
2. Environment Map Canvas
Once your vision and mission are clear and you’re ready to start your innovation process, the Environment Map Canvas forces you to have an outside-in look. The template broadens your scope by drawing attention to the market, your competitors and emerging technologies. The Gartner Hype cycle is an interesting external source to check, since it shares an overview of technologies that are expected to impact or disrupt the market in the future.
Value of the Environment Map Canvas
- Helps you to fight innovation blindness, which occurs after you’ve worked at a company for about 6 to 8 months. That’s when you start to perceive the performance of your company better than it is in reality
- Provides you with starting points or hooks to identify opportunities that are feasible in terms of timing and scope
Way of working
- Research in team or individually
- Discuss the findings
Golden tip: Force yourself to be a trend watcher, a sociologist or a generation Z-expert – you name it. Try to break down your own boundaries and help others to see the bigger pictures, while encouraging them to be open to change.
By the time you complete this template, you should have an overview of micro and macro trends that will likely impact your business in the short, mid and long term. Such an overview helps you to predict the future and tackle its challenges.
3. Observation Canvas
The Observation Canvas consists of 2 templates: the Preparation and Consolidation Canvas. While the Environment Map Canvas helps you to have an outside understanding on a macro level, the Observation Canvas does the same on a micro level. Rather than the market and competitors, you zoom in on your customers and buyers.
The Preparation Canvas assists you in creating and conducting an observation research. There are multiple ways to gain insights, from non-intrusive (observation) to intrusive (one-on-one interviews) methods, yet the template is applicable regardless of the technique you adopt. Based on your findings, you then note down the pain points and needs regarded as “opportunities to address” on the Consolidation Canvas. The latter serves as an actionable template for further discussion within the organization.
Value of the Observation Canvas
- Provides you with a deep understanding of the behavior of your target market and customers
- Help you to create and conduct research to define pain points and needs
Way of working
- Discuss in team who and what you’d like to investigate, for example the usage or consumption of your product
- Run a first experiment to check whether the outcome meets your expectations
Golden tip: Try to let the observed person tell you out loud what (s)he’s thinking when for example consuming your product. It helps you to capture unmet needs and spot new opportunities.
You should aim for 10 completed Observation Canvases. Check if there are similarities amongst the results. If that’s the case, you can move onto the next phase. If not, you should continue your research until you’ve captured the most important insights.
4. Value Proposition Canvas
The Value Proposition Canvas is the template you use once you have a clear understanding of the needs of your target market. At the intersection of all of your findings, you should respond with your innovation, being a product or service offering that’s aligned with what the market and customers are asking for. That’s what we refer to as a product market fit: you’re certain you’re creating a kind of value the market is in need of.
One of the most famous examples of a product market fit is the Heinz ketchup bottle. Once its makers understood the difficulty of using it a second time, they realized their product design could have been better. Nowadays, we’re all familiar with a bottle that’s been created upside down. The case clarifies the difference between “designing the right thing” and “designing the thing right”.
Both the value and the difficulty of the canvas lies in the switch of outlook. When you note down the needs and pain points of your customers, make sure you wear your customer-centric glasses. Yet with the understanding of your current offering and technologies uncovered in the Environment Map Canvas, you should then change to business-centric glasses. Those allow you to come up with a solution, either an incremental or disruptive one, to meet the needs of your customer.
Value of the Value Proposition Canvas
- Takes the customer insights as a starting point
- Helps to ideate products and services the market is asking for, instead of the other way around
Way of working
- On one side, write down pain points and needs - “jobs to be done” - based on the input of the Observation Canvas
- Try to cluster your findings and determine key elements
- Define products or services that address the pain points or needs, for example “ice cream that melts less fast”
Golden tip: Put yourself in the shoes of your customers or consumers. Walk their customer journey and gain an understanding of their needs. What would make their life easier?
On one side of the template you should have an overview of customer needs to address, on the other product or service definitions that create a market fit and value.
Small steps are instrumental to start transforming your business into an innovation machine. Yet we encourage you to follow a proven 4-step process, to maintain a clear direction and to align your entire team around your objective. After all, it’s better to lead the market than to have to catch up!
If you could use help or guidance throughout your innovation process, don’t hesitate to get in touch with us.