Sometimes in conversation you suddenly run straight into a conceptual brick wall. You seem to be discussing the same topic, but somehow you are approaching it from such different positions that there seems to be ‘your topic’ and ‘their topic’ with no link between them at all. It leaves you scrambling to understand where the disconnect comes from.
Innovation seems to be a topic that generates more than its fair share of these ‘whiplash’ conversations that challenge your assumptions and thinking, making the world briefly spin around.
A factory from thin air!
I was asked a while ago which innovation I was most proud of being involved in. I quoted some work we did on manufacturing in the chemical company Unichema International. Unichema used batch processes to manufacture a range of industrial chemicals. A batch process is rather like a cooking recipe; ingredients are mixed together at the start of the process and reacted together to produce the final product. To make more you simply make another batch. In contrast a continuous process makes a standard product all the time in a continuous flow. Continuous processes are good for making very large volumes of a small number of products, and batch processes are more often used to make smaller amounts of a wide range of related products.
The problems that Unichema was facing were:
- A production bottleneck that could only be fixed by expensive capital investment
- Introducing new products was slow and expensive
- The company could be more successful if it was more agile and flexible in producing tailored products for customers
“…we created the extra capacity of a complete duplicate factory with no capital investment”
So we built a complex process model that allowed us to explore alternative recipes. A new computerised test rig enabled us to scale production directly from a single lab trial to full production. Putting the two together we were able to nearly halve batch times and radically reduce the cost of creating a new product.
We effectively created a whole new factory out of thin air. Let me repeat that; we created the extra capacity of a complete duplicate factory with no capital investment. Wow!
That innovation allowed us to serve existing customers better, address the needs of a whole new group of customers we could not reach previously, and offer a much more flexible and agile service.
I am proud of that innovation because it is compact, easy to explain, and made a major difference to the company and its customers.
But that’s not real innovation
When I told the story the response was dismissive; “Yes, but that’s just a process improvement, it’s not a real innovation!”
My jaw dropped. “So what do you consider a real innovation?” – “Putting a brand-new product into the hands of a customer. Something that changes them”.
Well yes, that would certainly be an innovation, but is it the only kind?
You can innovate in every part of your business
To me innovation is about reducing a new idea to successful practice. That idea may be new to you, new to your sector or new to the world. It can be in the product, the service, how you interact with the customer, how you create the product, how you manage the supply chain, or in any other aspect of the business.
All represent ways to achieve greater customer reach and greater customer satisfaction. In a business the only test of success for an innovation is – will somebody buy the product or service that you offer?
There are basically two ways you can improve the profitability of a company. You can sell more and boost the top line, or you can reduce costs. Innovation helps you do both, the one often reinforcing the other.
Increasing demand for PV panels has encouraged a multitude of innovations that reduce cost. The levelized cost of energy from PV has dropped by 70% between 2010 and 2016. Lower costs encourage more customers into the market, which in turn creates the justification for more innovation that reduces costs further.
A new product category, such as smartphones, grows the top line by adding new customers. At the same time, it creates the desire for lower costs, because then there would be even more customers. New business models, such as buying your mobile phone through a contract with your mobile network company so that your up-front cost is lower, bring new types of consumer into the market.
Different innovations for different business issues
Innovation ebbs and flows naturally through a business. Now we need new products, now we need to reduce costs, now we need new services to add to our customer offer, now we need a better way of engaging with our customers, now we need a different way to finance our business.
No one (I hope) thinks that Amazon is not innovative because it is really just a mail order business. Or that Uber is not innovative because it is really just a taxi company. Both have successfully changed our perception of what those categories mean. It is still ‘mail order’ or a ‘taxi service’, but the user experience and the user proposition has been dramatically extended and improved.
So let’s have no snobbery about innovation. You can innovate in any aspect of your business, and you should be looking for innovation opportunities in every aspect of your business. If you only focus on product and service innovation, you miss opportunities to improve elsewhere. And if you only look for radical or breakthrough innovation, you miss the hundreds of incremental improvements that keep your business sharp and moving forward.
Whatever your business challenge, innovation will be part of the answer.