Why Is Innovation So Hard?

Companies centred around products need to innovate to survive. We all know that.

Innovation is hard.

Fossils of corporate dinosaurs who dominated in decades past litter the business world.

Sun Microsystems was an IT giant and an innovation powerhouse for a couple of decades but failed to adapt its innovation efforts to serve a changing market.

Nokia’s share of the mobile phone market went from 50% in 2007 to 10% in 2011, because it failed to keep up with the innovation spurred by Apple’s introduction of the iPhone.

Many companies have lengthy periods of innovation success followed by collapse as they fail to keep innovating, and competitors inevitably take market share from them.

One reason innovation is so hard is the simple fact that not all innovation is the same.

To set yourself up for successful innovation, you must understand what type of innovation you are attempting.

There is a diversity of research on types of innovation.

In the mid-20th century, Schumpeter popularised the term “creative destruction” to describe the way technological innovation can disrupt and destroy existing dominant players. A modern example is the way online publishing is destroying traditional newspapers.

In the 1990s Henderson and Clark looked at the difference in innovating new components (the building blocks of a technology) versus innovating new architectures (the way components are organised into systems or products). They showed– surprisingly – that many organisations struggle with architectural innovation. The reason being that they gather significant architectural knowledge over time and become entrenched in one mode of thinking, so entrenched that future architectural innovation is difficult or impossible without fundamental organisational change.

More recently, observers have noted the difference between business model innovation and technology innovation. In fact, we can represent distinct types of innovation in a quadrant diagram.

Business Model vs Technology Innovation.JPG

Incremental innovations are improvements on existing technologies using existing business models. Volkswagen releasing a new model Passat is an example. Same business model (consumer buying a car) and an incrementally better product (perhaps new features such as lane detection, parking sensors).

Disruptive innovations do not focus on technology innovation at all; they focus on business model innovation to disrupt existing players. Music streaming services like Spotify or Tidal are examples. The technology is important, but not as important as the introduction of new ways to make money.

Radical innovations are major new “components” that fundamentally change the delivery of an existing business model. An old example is the introduction of jet engines to the airline industry. Same business model (selling tickets to people to fly somewhere) but obviously delivering much shorter journey times.

Architectural innovation is the combining of new “components” in a novel way to deliver a new business model. Web publishing of news is a good example. Traditional newspapers have both adapted new technology and implemented new business models.

Why does this matter to product people?

Remember, every product organisation must innovate to survive. Each of the 4 types of innovation covered here demand different product strategies.

Unless you understand the type of innovation you are attempting, you cannot hope to align your product strategy.

For example, the introduction of a disruptive innovation (a new business model) requires an innovation strategy that encompasses far more than just the technology aspect.

Think of Spotify. The strategy for a music streaming service is fundamentally different from a company that sells physical vinyl records and CDs. The way they brand, the marketing channels they target, the relationships with suppliers (the musicians), the relationship with distribution partners (who provide server and network hardware), the way they collect royalties, the way they manage long-term relationships. All of this requires a coherent innovation strategy to align all parts of the organisation: marketing, sales, operations, development.

This shows that an innovation strategy must cover not only the technology, but all the other aspects required for success.

So … Do you understand the type of innovation your organisation is really trying to achieve? It might pay to spend the time to understand this, if only to ensure you have an appropriate innovation strategy in place that covers not just the technology aspects, but also all the other things required to succeed.

Context Is Everything

There is no shortage of advice available for product managers. There are hundreds of websites, blogs, books, courses and experts willing to offer their opinions to whoever will read or watch or listen. A lot of the advice revolves around techniques to ensure that thinking of customers is the central concern of product management. Indeed, if you do not have customers as a central concern, then advice on how to ensure they are will be helpful for you. At least as important as happy customers, however, is aligning product management efforts to what your organisation is trying to achieve. Your organisation exists for a reason and has goals to achieve (and hopefully the goals are explicit), so to be successful the product must help your organisation achieve its goals. Context really does matter.

In a philosophical sense, the idea is to take the time to understand where you are before you set out on a journey: if you don’t know where you are, how can you get where you are going?

What is the context for product management? Each organisation is unique, but we can reduce “context” to a short list of considerations.

First, your goals.

goals

Path to profit

What business model(s) is your organisation targeting, to make money? The choice of business model impacts product. Subscriptions, marketplaces, platforms, brokerage, services, …: the way you commercialise the product impacts what product you build.

Type of innovation

Are you inventing something truly new, or improving an existing thing? A lot of research has been done on removing barriers to different types of innovation, and understanding the type of innovation you are trying to do is a first step to efficiently achieving your goals.

Bigger picture

Are your goals part of a broader industry transformation? The move to music streaming is an example where many players were part of an entire industry shifting to new product technology (and business) models. The history of industry transformations is well researched and lessons can be learnt without repeating past mistakes.

Second, your constraints.

constraints

Scariness

How risky / complex are your goals? Building mission control software for a human journey to Mars differs in complexity and risk from an app that delivers weather forecasts to a mobile phone. Clearly the level of risk and complexity impacts the product management approach.

Maturity

How mature is your organisation? Size: The environment in a lean startup is different to a large multinational corporation. Capability: An organisation without repeatable processes and with no ability to learn from past mistakes is different from one with clear processes and continuous improvement ideas embedded. Product managers in organisations at different levels of maturity need to adjust how they go about their work.

The Iron Triangle

Every organisation and project (and therefore product) will have – in one way or another – time, cost and schedule constraints. Working within these constraints is obviously a consideration for product managers.

What is YOUR context?

Each of the 6 considerations above is a topic in itself. Later blog posts will dive into each of these.

In the meantime, have a think about your context. Do you understand your unique goals (path to profit, type of innovation, bigger picture)? Do you understand your unique constraints (scariness, maturity, your iron triangle)?

If not, try to step back and consider each. It might just change the way your take your product forward.