October 21, 2015

This is how great innovations are created

Innovation is essential for business success. It is said that all innovations can be categorized into three groups or ‘horizons’ based on what you are aiming to solve, and on what timeframe:

  • Horizon one represents the company’s core business at present. Here the aim is to come up with a better solution to an existing issue, not necessarily create something that is brand new or has never been seen before. The objective then, is to improve existing products, services and processes in order to extend their lifecycle and maximize the remaining value. Often a large part of companies’ R&D budgets is allocated to specifically implementing these types of innovations, as their main goal is to keep the business up and running and help the company stay in the race.
  • Horizon two encompasses a situation where the target is to find a new solution to an existing issue. In this case, the desired outcome is the creation of brand new products and services that become the company’s new core business in the future, and which perhaps may even revolutionize the whole market. Spotify and iPod are great examples of these kind of innovations, as both of them revolutionized the music industry in their time. Usually, implementing innovations in this framework is something companies don’t invest in as much as in the ‘Horizon one’ scenario, even though in case of success the expected return is remarkable.
  • Horizon three innovations are most likely generated through research projects and pilot programs. In these cases, the solution as well as the challenge itself are yet to be identified. The objective here is to create solutions whose lifecycle will not begin until a few years into the future.  These innovations are the kind that will potentially change the nature of the entire business.

But what is the best way to yield actual innovation? Needless to say, there are probably as many answers to that as there are creative minds pondering the question. However, one factor undoubtedly rises above the rest, when looking for the elements that contribute to the commercial success of innovations:  emphasizing the commercial perspective of the innovation, rather than the technical.

The purpose of technology is to enable the business idea behind the innovation. Particularly in today’s digitalized world, we should reconsider even some of the old business ideas to re-evaluate their commercial potential in relation to the current technology.

Innovation is also about creating the optimal ecosystem. The supply chain of a product or a service is usually a complex network that joins together different functions and people from all kinds of backgrounds.  A so-called super cell, where everyone shares the same vision but still has their own role and contribution to make, is a favorable climate for innovation.

In addition, being able to create the right ecosystem is vital in terms of time-to-market, which refers to the length of time it takes to develop an idea into a product ready for sale. Each component in the super cell needs to cooperate seamlessly with the others in order for the innovation to be able to hit the market at the right time. Those who specialize in analytics also need to have an understanding of the market and be able to provide, for example, the right kind of information from the collected data.

In summary, an innovation starts with a feasible business idea that needs to have fertile ground to grow into a successful business. And although it doesn’t hurt to have the stars aligned in the right way, you also need a lot of hard work and most likely a few failures before getting it right. 

You can also read my colleague Taneli Tikka´s blog post:  How a big company can innovate like a start-up.


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