Innovation Learning Series: What is Innovation?
The writer’s first thoughts about innovation were ‘geek stuff,’ another buzzword; how is it relevant? And what exactly is it about? However, due to the sheer fortune of working in a firm that helps organizations unravel all things related to concepts like the future, digitalization, transformation (ha-ha! another buzzword), there has been an opportunity to understand the topic at the most basic level.
This article and subsequent ones in this series aim to engage the reader and walk through what innovation and related concepts mean, especially from the angle of simple things that often get missed.
What is Innovation?
For a start, your simple, helpful, free from ambiguity definition is — innovation is bringing new things into the world, while a second-order description is innovation is creating value by applying new solutions to meaningful problems.
From a beginner’s perspective, the three keywords/phrases in the second definition are new — if it is not new, what is being carried out is probably optimization rather than innovation; the next is creating value as innovation is expected to add a new dimension of performance. Finally, the phrase solutions to meaningful problems speak to the imperative of helping the ‘consumer’ of a particular solution carry out a job to be done. So, for something to be categorized as innovative, it must embody the three phrases.
However, there is also the misconception that only newly created products or business ideas can fulfill the above criteria: newness, value creation, and meaningful problem-solving. That isn’t necessarily correct, and the carefully considered examples that follow begin to describe the common layers at which innovation can occur.
- Innovation is doing things more efficiently, faster, and cheaper: In the early days of GSM technology in Nigeria, amidst the intensely contested race to acquire as many subscribers as possible, the leading service providers Airtel, MTN, Globacom committed vast amounts of logistics and capital to erect masts across the country. A curious trend was individual masts owned and operated by these telecommunication companies situated within proximity of each other in a newly expanded territory. Eventually, the idea of sharing the ownership of a single mast in a particular area, splitting the costs of installation and operations among three partners, and without compromising on the capability to deliver telephony services to customers led to a more efficient, faster, and cheaper process of expansion. This switch and the consequent reduction in costs without compromising service delivery describes the process or efficiency innovation.
2. By far, the most common view of innovation activity is the bringing of new, never-existing products to the customer. PayTabs, a Middle Eastern Fintech company, created a financial solution for business owners that helped them manage their startup, web store, and online enterprise. One of the critical things PayTabs introduced to its users is the subscription business model, which has helped their customers optimize their costs, customize their payment plans, and maintain a predictable revenue stream. This describes product innovation.
3. Market creation innovation: The idea that a single organization can control production and simultaneously direct demand is something one can imagine as difficult for a government not to talk of an agri-business startup. However, Twiga Farms took this challenge on by integrating convenience, quality service, and customer service to enable a business model that addresses the demand for quality food at affordable prices, and in doing so, the business has become a single platform that joins food producers, packhouses, and transportation systems.
Among the successes of this business-to-business (B2B) marketplace platform whose vision is to provide a complete supply chain are farmers reporting a reduction in post-harvest losses of up to 50%. A vital feature of the market-creating innovation is the positive network effects on jobs that cut into unrelated sectors. Since its inception in 2013, in addition to farming, Twiga Foods has created income-earning opportunities in sourcing, finance, technology, logistics, and administration. This wealth creation outcome of the Twiga Foods business model is one of the outstanding aspects of the organization, whose primary goal is to eliminate hunger and food security.
One way to understand the three layers of innovation outlined above is to represent them visually based on two dimensions: the use of technology and impact on the market. The following visualization helps to do that.
Moving from understanding to action
Following the precise definition of innovation is the need to focus on the reader, its importance to organizations, and their continued relevance.
As free markets go, a constant of every organization across its lifecycle is competition. Amidst intense competition, a common fallback for companies is the review of their pricing strategy. Still, to do that successfully, it should be preceded by developing innovative and efficient processes that cushion any eroded margins due to a reduced price of offerings.
A good example of price strategy innovation — using a low-cost strategy to establish competitive advantage is often referred to as ‘satcheterization.’ Targeting customers with waning purchasing power and lower incomes, milk sachets were introduced to the Nigerian market by Cowbell (Promasidor), cornering a portion of the market that couldn’t be adequately served anymore by existing market leaders such as Peak and other elite milk brands. Within a short period, Cowbell built its product pyramid upwards from the mass market and cut into the market share of pre-existing leading players.
Therefore, choosing a feature such as pricing innovation as a means of differentiation can require the development of unique features to provide an edge against the competition.
What will we like to see in more organizations?
Innovation is a process more than an outcome. It is the path chosen to solve a problem. Though not every initiated activity or program leads to successful innovation, the key is to see innovation as a means of creating value and building capacity to solve significant problems.
When organizations actively start seeking out better ways to solve new and existing problems, they develop a culture and build team capacity primed for rolling out innovative solutions.
Getting started on a personalized innovation program is as easy as considering any of the following:
- A new way to get your products to your clients
- A new design to respond to customers’ demands
- An efficient layout to lower your production turnaround time
- A new design for your products will meet green standards, thereby improving market position and giving an edge over competitors.
Whichever method is chosen, the essence of innovation should always be seen as “…creating value…new solutions…solving meaningful problems.”
In the next article in this series, we’ll share thoughts on/about “Innovation trends,” If you would like to discuss new ways to think about your business model or start an innovation program, send us a message at email@example.com.
Also, kindly share, drop a comment; let’s know your stance about innovation and its place in today’s business.