What is Innovation?

Lately I’ve been doing some research in the area of corporate innovation. It’s part of a project I’m working on. So I’ve been reading books like "Sticky Wisdom: How to Start a Creative Revolution at Work" from ?WhatIf! The Innovation Company and "The Innovator’s Solution: Creating and Sustaining Successful Growth" by Clayton M. Christensen and Michael E. Raynor, plus articles by Peter Drucker, Theodore Levitt and others.

They have different opinions on the types of innovation that companies should focus on and the ways to go about making innovation happen. And, of course, what seems like innovative to one company may not be for another.

But what struck me most was that in all my reading there was one consistent element -- that an idea doesn’t count as innovation until it’s turned into reality and makes money.

The ?WhatIf! Innovation Company, the folks behind "Sticky Wisdom" put it this way "Creativity only becomes innovation when ideas become useful -- in the business world that means when a new product or service is launched, or starts to make money."

In other words, no matter how cool or new it is, it isn’t an innovation unless customers use it and are willing to buy it at a price that’s profitable for the seller. (Or -- if it’s a new process or way of doing business -- unless it has a significant and lasting impact on the business model.)

Sounds like common sense. After all, what’s the point of coming up with great ideas if they never see the light of day, or if their day in the sun is only a brief one.

But my guess is that if you asked a cross section of business people for a definition of what qualifies as an innovation you’d get a whole list of different answers. And, if you then asked them what all business innovations have in common, I’d be surprised if they homed in on what all the innovation experts I read agree on -- that an idea isn’t innovation unless it’s commercial. Perhaps because figuring out how to make the idea make money doesn’t seem particularly creative or sexy or ground-breaking (adjectives that often show up in descriptions of innovation), and it takes hard work and requires tough decisions.

Whatever the reason, they’d be missing out on something powerful. And that is the great advantage we entrepreneurs have -- unlike other creative types (writers or scientists, say), we have a lot of control over turning our own ideas into solid innovations. Because we know how important it is to focus not just on how great our idea is but also on the job of any business -- to make money (to earn a profit, generate cash, and produce a return on assets). If we can do that, then there’s no stopping our ideas from making a significant positive difference to our customers and the world.

Comments

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“Research is the transformation of money into knowledge“ and “Innovation is the transformation of knowledge into money”
--Geoff Nicholson, 3M

^Seems you and Geoff are in violent agreement.

I like how succinctly this important idea can be put. When an activity produces money over its sustaining costs, it shows that it deserves to exist. It's interesting how attached we can become to unsustainable activities, though...

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