Innovation explained and a word of caution

Buzz words have a way of cropping up with the weight of unrealistic expectation, like Santa, but with a sack full of blunt razor blades. One buzzword which I am most wary of is ‘innovation’. Given that I have been in the fields of creativity and business innovation for over 30 years I really feel the need to explain the concept and the different forms to you.

The most important thing you need to know is that innovation is a risk. It needs to be carefully planned, costed, managed and the risks mitigated. It requires large amounts of money and programmed effort, and it can damage the bottom line.

It is not something that should be done as a ‘refreshing change’. I have watched one very profitable brand vanish from the shelves due to ill-considered innovation and seen another pull back and reinstate its old form within two weeks as a result of plummeting sales.

There are three broad types of innovation. The first is ‘continuous innovation’. The second is ‘continuous dynamic innovation’. The third is ‘discontinuous innovation’, often known as disruption.

Continuous innovation is the regular phenomenon of minor changes to products and services, for instance label changes, pack sizes and service features. Both the failures I mentioned above were in the realm of label changes, so be wary. Consumers become attached to symbols and a change may perceptually equate to an unwelcome change to the product.

Dynamic, continuous innovation consists of ongoing continuous changes to a product or service, for instance the ongoing changes to chips and cameras seen in mobile phones.

Discontinuous innovation, or disruption, fundamentally alters the market and its environment. Think of the introduction of cash dispensing machines for banks or internet banking. Discontinuous innovation, the ‘big win’, is the area most associated with innovation. Counterintuitively, this innovation holds the lowest risk, as the base market and offering is not affected if it fails.

The baseline for innovation should be the consideration set, the range of choices facing the consumer. If the consumer does not accept the innovation there is a major risk of substitution and loss of market share. This means that before the innovation is implemented, the consideration set and the consumer must be fully understood, probably with insight which should be confirmed with research.

Allow room to pull back. Do not replace a functional product with an innovated product until you are absolutely certain that the innovation will not be damaging to turnover. This also has to consider the costing of the innovation. The obvious tactic is to limit the implementation to a trial basis in a small subset of the market or a localized outlet.

Be aware of the consumer within the context of the adoption phase. Early adopters may influence the market, but peak sales will be found in the cumulative spend of the early and late majority, so that should be an important facet of research.

The trick will be to create an environment that is flexible enough to allow for innovation in a considered and tactical manner. If innovation is driven by boredom with existing but workable products and services, which is often the case, it is likely to fail.