Three Dimensions of Innovation

Morris, Langdon
December 2013
International Management Review;2013, Vol. 9 Issue 2, p5
Academic Journal
Every business has some forms of competitive advantage, such as size, location, product mix, technology, customer relationships, or many others. However, no matter what advantages a business has today, sooner or later changes in the marketplace cause every competitive advantage to degrade. When this happens, yesterday's advantage may mean nothing. In the face of this problem, there is one critical response: innovation. Innovation enables existing advantages to be maintained and new advantages to be created. In fact, innovation is the only source of sustainable competitive advantage because only through innovation do companies adapt. So, you must ask yourself, How can you make your company an innovator? When you think about innovation, you must first distinguish between two types: continuous and discontinuous. Both are important, but they are managed differently and have fundamentally different objectives. Continuous innovations enable you to keep up with your competitors; successful discontinuous innovations put you into the lead. Managing R&D for continuous and discontinuous innovation is a difficult process, and few companies do it well. Marketable innovations are tremendously elusive. As it turns out, however, there is a right place to look for innovation, but it's a place in which most people don't look. That unique place, that hidden place, that special place, is in front of you each and every day. It is your customers. Your customers know how they want your products and services to be better, and you need to ask them. Whether it is through surveys, face-to-face discussions or just walking through your store and talking to customers, they will probably be able to tell you a lot that you don't already know. To understand the scope for innovation, we put together a table of 32 possible innovation targets that the R&D process can focus on. However, even beyond these 32 targets of continuous and discontinuous innovation, there is also a third innovation dimension, one that we are now beginning to understand. While the 32 innovation targets stand separately, they also, fundamentally, distort your view because by looking at the parts, you cannot necessarily get an understanding of the whole. What if you could look at the problem of innovation as whole, as one thing? What would you see? If you are like most people, what you would see are systems, systems that we call "the economy" and "the market" and "the company," systems in which companies and customers and competitors are all actors, working to optimize their own unique positions. Innovating at the level of this system is called "business model innovation," and it is the leading edge of innovation today. Business model innovation is the most powerful of the three types of innovation. While continuous and discontinuous innovations in products and services are important and necessary, the companies that innovate in the structure of their businesses, particularly in how they define their relationships with customers, become the leaders. Business model innovators look at the market and see something different than others see — they see possibilities that others have overlooked, and they transform those possibilities into competitive advantages, and profits. Properly managed and properly targeted, innovation can lead directly to the bottom line.


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