Business innovation

Date: 2015-10-07; view: 508.

Innovation has become the new theology.

Yet there is still much confusion over what it is and how to make it happen.

(1) Innovation has become the industrial religion of the late 20th century. Business sees it as the key to increasing profits and market share. What precisely constitutes innovation is hard to say, let alone measure. It is usually thought of as the creation of a better product or process. But it could just as easily be the substitution of a cheaper material in an existing product, or a better way of marketing, distributing or supporting a product or service.

(2) One way to describe innovation is to explain what it is not. The husband and wife who open a sandwich bar opposite a new office block may be gambling their life savings, but they are not innovating. The Japanese electronics firm that launches a niftier video camera is merely cramming its distribution channels in a bid to push competitors' goods off the shelves. The drug firm that makes a generic version of a blockbuster ulcer pill is simply cashing in on the expiry of a rival's patents. All these are strictly business ventures, not innovations.

(3) Innovations not only break the mould, they also yield far better returns than ordinary business ventures. To appreciate the difference between opening yet another hamburger joint and innovating in earnest, consider what McDonald's did. It standardized the product, designed entirely new cooking procedures and trained its people meticulously, thereby giving customers something they had never had before—a high-quality hamburger sandwich, delivered with the speed of just-in-time preparation, in hygienic surroundings, at a knockdown price. McDonald's created not simply a new product, but a whole new market category. This was innovation of the highest order.