A very important fourth type of innovation (3 min video)

There are different types of Innovation. Australia for years now has been obsessed with Company Innovation, working to make things more optimised and efficient in an effort to drive costs lower. Finding new ways to take labour out of the product and service offering has been a national sport. We serve our own petrol, use ATMs instead of tellers and scan our own groceries whilst inquiry lines have been shipped overseas.

Some companies have focused on Product Innovation in an effort to gain market share from a market leading product. When it goes well, its worth its weight in gold. Just ask Arnott’s about their Tim Tam which hit the market in 1964 and was named after the winner of the Kentucky Derby in 1958.

Still other companies have been enamoured with user centered design towards Customer Innovation. Encouraged onwards by the waves of startups putting this at the front of their thinking.

They all work and they are all powerful. But we have been missing out on a fourth type of innovation, Market Innovation. Watch this video for more…

 

Entrepreneurs and Intrapreneurs alike would do well to spend more time innovating their market by innovating their business models. Business Model Innovation is the tool to create new markets or alter the prevailing norms in existing ones, which is usually where disruption comes from.

Video Transcript

With so much focus on innovation at the moment, I think it's really important that we think about the different types of innovation that exist. Company-based innovation has been around for a very long time, and where we have spent a lot of our time in the last few decades. The idea that we want to make our internal processes more efficient, more optimised, and we do that via process innovation. A great example of that is what Toyota had done through the '70s and '80s around empowering their workforce in their production lines to make changes, to make improvements, and this often drives costs down. That's been a big focus of a lot of companies.

When we say the word "innovation" we also often think about inventing something or building something new, the new mouse trap. A company really well-known for that would be Apple, or someone like Arnott's inventing the next Tim Tam. When you invent a new product, it's great. Customer-based innovation comes from observing customers, how they interact with products and services of yours, and you might think of a new way you can help them. Another way that we get customer innovation is asking for feedback, and saying, "What do you need? What do you need better?" We come up with improvements and innovations that way. So through observing user experience and/or asking for feedback from customers, we can get some innovation.

So if this is "build it and they will come" kind of area, then this area is often the faster horse, what the customer wants. We're not spending enough time on market innovation, and a lot of the disruptors that have made breakthroughs in markets have not invented anything new. Uber did not invent rides or passengers or new cars, or location-based technologies on phones. They leveraged location-based technology on phones to disrupt the market. So market innovation is a fourth area, and not a lot of time has been spent and not a lot of tools have been put in place, and frameworks been invented, around doing this better.

Business model innovation is the way a lot of companies can get faster growth without coming up with the next mousetrap. So if you think of it like this, if you think your product is your weapon, and weapons can win wars, right? Gun beats a bow and arrow. But market innovation's about strategy, it's about changing the way either you work in your company, or the way customers operate in the market. Just like Airbnb is another example. Airbnb didn't invent rooms or stays or internet bookings, but they changed ... completely changed the way a market operated. So business model innovation is a major tool for the future, and frameworks around business model innovation for market innovation are going to be key. So we need to shift a little bit from here up to market innovation.

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