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Professors Peder Inge Furseth and Richard Cuthbertson are the authors of the text we are presenting this week. It offers alternatives for your company to make proper use of its innovation budget. Check it out!
Currently, public and private companies spend billions of dollars every year in pursuit of innovation. This spending would generate more value, including for society, if the success rate of innovation were higher. Many projects lose money, frustrate employees, and go nowhere. But is there a way to increase the success rate of projects without spending more?
Furseth and Cuthbertson think so. The professors argue that innovation projects often fail because resources are spent on the wrong type of innovation. Too much money is spent on attention-grabbing activities, such as hiring new people, investing in new technologies and infrastructure. It is much less obvious to investors, and generally more difficult, to allocate resources to redesigning an existing service system, introducing new customer experiences, or developing a better business model. The return on these investments can be much greater.
According to the authors, innovation needs to be considered in two ways: the capacity for innovation and the ability to innovate.
A innovation capacity Innovation capacity is the organization's potential for innovation. This is the easiest thing to buy, and organizations tend to spend heavily on resources. This includes technology and people, as well as tangible, intangible, and financial assets. Most investments in innovation, such as product improvement, technology, and research and development, aim to strengthen the organization's innovation capacity. Today, every company, regardless of type, can have innovation capacity. People can be hired through the sharing economy; technology can be rented by the hour; funding can be sought. But it's important to understand that capacity alone is insufficient to create new, meaningful, and sustainable value for customers – no matter how large the capacity.
That's where the innovation abilityThis term describes the more challenging aspects of value creation, such as new customer experiences, a revised service system, or new business models. An organization may have many people involved in innovation capability, but may still face obstacles in increasing innovation capability because capability alone does not invent or implement a new business model or a better customer experience.
The authors reached these conclusions after conducting case studies in companies such as Nokia, Kodak, Borders, Amazon, Apple, and Xerox. Together, these companies spent billions on innovation. But, although the latter three spent relatively less on innovation, they spent their innovation budgets more wisely, choosing to invest in skills rather than innovation capacity.
From 2007 to 2010, Nokia was an example of a corporation with a great capacity for innovation. Nokia always offered technologically rich, feature-rich mobile phones – in fact, Nokia invented the smartphone. Nokia offered a touchscreen smartphone two years before Apple's iPhone. However, Nokia stuck with the Symbian operating system despite knowing its weaknesses in the eyes of the consumer. Nokia had the resources to develop a new operating system, but chose to stay with Symbian. As a result, Nokia became increasingly less able to create new product value. At one point, Nokia manufactured 90 different mobile phones. Their functionality evolved from one model to another, but most phones were an example of innovation driven by the company's capacity for innovation.
In short, technology was a strong point for both companies, but Apple did a much better job connecting its technology to a service system that offers new customer experiences through a relevant business model. Developers outside of Apple were able to sell apps through iTunes and the App Store. Apple retained 30% of sales made by external developers. The sheer number of apps created provided a wide selection of new customer experiences.
Nokia launched the OVI Store globally in May 2009. However, the company failed to match the service system provided by the iPhone in combination with iTunes and the thousands of applications that had already been developed. The OVI Store was discontinued in 2015.
Kodak is another example of a company that spent the majority of its resources on innovation capability drivers. The company became famous for spending over four billion dollars developing the digital camera, but chose not to develop a new business model to convert that innovation capability into innovation skills and, as a result, failed to capture the value of what it invented.
On the other hand, Xerox invested in customer experiences, creating greater value, expanding its platform, resulting in increased revenue. In 2011, two-thirds of Xerox's revenue came from products or services. Xerox embraced the digital age and developed a series of technologies that enable the company to transform into a service company. Kodak, in contrast, tried to postpone this transformation as much as possible, avoiding the development of its service system, customer experiences, and business model.
Three lessons for creating value:
[vc_column_text][/vc_column][/vc_row][vc_row][vc_column][info_list style=”circle with_bg” icon_color=”#1fb6ed” font_size_icon=”24″][info_list_item list_icon=”Defaults-chevron-right”]Organizations should spend less on developing innovation capacity. Even if your organization increases the number of people working on innovation initiatives, there is no legitimate reason to believe that the organization will create even greater value.[/info_list_item][info_list_item list_icon=”Defaults-chevron-right”]To succeed with innovation initiatives, companies need to consider innovation capabilities: the business model, customer experiences, and the service system. Even if an organization has a new idea, a new technology, a new product, or a new service, none of them will necessarily increase the success rate of Organizational innovation, unless the ability to innovate changes one or more of the value drivers.[/info_list_item][info_list_item list_icon=”Defaults-chevron-right”]The thinking and practice of innovation should start from the premise that successful innovation is driven by the creation of shared value. Innovation should be value-driven. Public and private companies should create value for a network of stakeholders.[/info_list_item][/info_list][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Finally, a company may have the same idea, product, service, or technology as its main competitor, but to win in the market it needs to develop a new business model and must provide a customer experience or service system to ensure its market differentiation and ensure that the budget is being used efficiently.[/info_list_item][/info_list][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Finally, a company may have the same idea, product, service, or technology as its main competitor, but to win in the market it needs to develop a new business model and must provide a customer experience or service system to guarantee its market differentiation and ensure that the budget is being used efficiently. appropriate.
