Where to look for innovation

Given the differing nature of the levels of innovation discussed above, it will come as no real surprise that the potential sources of innovation differ. Thus, aligned with the innovation portfolio dictated by a company's strategy, there should be a mix of processes for generating innovation. Based on our own experience at Invetech and on our work with clients large and small from both Australia and overseas, the following are some suggestions for identifying innovation that might be relevant to your business:

Watch the market carefully

Unexpected market or industry structure changes provide potential opportunities (and threats). In addition, changes in demographics, social moods, values, norms, even in lifestyle, may require innovative solutions to emerging needs. For instance, Johnson and Johnson responded to declining birthrates in Western markets by encouraging adults to use their baby products while Gerber, a company focused on baby needs, started selling insurance to over 50s .

Consider immersing yourself and/or a team of market facing and delivery people in your customer's business to gain greater insight. Observing “a day in the life of……” your client may provide valuable data on unmet needs and point to innovative solutions to existing problems. In addition, disruptions in you customer's industry may also yield circumstances where innovative product or services may be just the answer to new or emerging needs. Working cooperatively with leading or innovative customers may also help foster innovation. For example, companies such as 3M and Nortel networks have used the lead user approach, pioneered by Dr Eric Von Hippel at MIT's Sloan School of Management, to generate new products in areas ranging from the wireless internet to infection control.

Suppliers can also provide valuable input

Similarly, your suppliers have a vested interest in working with their market leading customers. The development of strong partnerships with key suppliers will facilitate open discussions addressed at identifying your emerging business needs and identifying possible innovative solutions that integrate the best of both businesses.

Learn from experience

Unexpected success and failures can provide new and potentially valuable information. Don't sweep failures under the table but instead use them to explore what learnings may create innovation in current or new markets.

Take a trip forward in time

Scenario generation or other similar forward-looking techniques provide avenues to new possibilities. Ask questions like “What if, in ten years' time…..? How could that have happened?” In these sessions, it is important to engage a range of input, particularly form different technological perspectives, to ensure that opportunities at the boundaries of existing disciplines can be identified.

Be intentional and focused

Substantial innovation does not just happen – it is a “play” analogous to “M&A” and requires the same focus, quality of process and caliber of team. There are a number of ways to increase focus on the identification and exploitation of innovation:

• Set up an “incubation management arm”
• Establish technology “centres of excellence” around areas selected for pioneering plays
• Establish strategic relationships – it is not within your walls but it is within your reach.
• “Cherry pick” a SWOT-team reporting to the CEO/Exec team
• Establish a separate business unit (eg Holden Innovations)

Don't ignore the possibility for radical innovation

If more fundamental research is undertaken within the company, ensure that it is directed, focused and productive and subjected to a rigorous review and decision-making process. The philosophies employed by Robert G Cooper in his “Stage-Gate” process are valuable even in early stage research. In addition, set up a process of regularly reviewing patents in relevant areas. Regular and focused interaction with academics can also stimulate ideas based on emerging research. A relatively cost effective way of generating more specific research outcomes is to sponsor a PhD student. Participation in Cooperative Research Centres (CRCs) of relevance may also provide access to latest technology trends that may spark innovative product opportunities.

Next Time: We'll investigate how best to incorporate the strategic and business fit into your day-to-day operation.