A Unified Definition of Innovation

By Jared Gordon

Innovation requires two skills: Being able to see change and having the skills to capitalize on it.

Innovation feels like it is everywhere. It’s discussed in every conference, every blog post (including this one), and every conversation between two people in Patagonia fleeces at a Peet’s Coffee. Through 100s of conversations over the past 5 years at the forefront of innovation, I have come to a conclusion: there is no consensus as to what innovation is. The common definition is “the act of creating something new.” But in a corporate environment, it is commonly understood as “the act of creating something new that works.”

When companies are becoming more innovative, they are looking to achieve two things:

1. Understand the changes that are affecting them and their customers, and
2. Acquire the skills and resources to take advantage of the opportunity the change creates.

There is a long history of companies who were able to successfully innovate. Nintendo began as a playing cards company in 1889. It understood the waves of change, entering the video gaming industry in 1974 and rising as one of the largest video gaming companies in the world. Nokia started as a paper company in 1865 and started getting into phones in the 1960s.

For current companies, the only thing that has changed is that change itself has sped up. It happens more rapidly, so innovation has become more important.

Being Able to See Change

If this were a deck, I would include the Blockbuster logo here. It is the classic story of a company failing to see the changes their customers were going through and the new technologies being adopted by their customers. Other famous examples include Kodak and MySpace.

Large companies have access to the early signals of change in ways no one else does. They interact with thousands of customers every day. Their employees are on the front lines, discovering customer needs and helping them find the right solutions. The larger the organization, the more data they are consuming about their customers and markets.

The challenge is converting the data into insight and the insight into strategy. Without the right organizational empathy, change can happen under your nose and it remains undetected until it is too late. The more traditional data that organizations rely on tends to reflect what has already happened. The empathy and human-centred data, while more difficult to surface, is the stronger indicator of future change.

Easy strategies to ensure you are spotting change early include:

1. Staying close to your edge users — Which of your users are always first? What are they doing now that you should be doing next?
2. Look at the extremes — Innovation tends to occur in two places, the low and the high ends of the market. At the high end, customers can afford a premium best-in-class design, performance, and experience. At the low end, the operational efficiencies and business model novelty needs to excel to drive profitability.

Being Able to Own Change

The Gawd Clayton Christensen presented as recently as 2005 that: “Companies can innovate faster than people’s lives change, the space of sustaining innovation nearly always outstrips the ability of customers to absorb it.” For anyone on the front lines of innovation, this no longer holds true.

The capabilities to own change are:

1. Cross Functional Teams —It is necessary to build small nimble teams representative of all of the disciplines necessary to execute on opportunities. These include business, strategy, design, engineering, etc.
2. Including the User’s Voice in Every Decision — The most common mistake when looking for what is next is making assumptions on what users want and need. Watching them and speaking to them will help an organization understand what they NEED vs. what they WANT.
3. Lean Teams — The most value is generated when a smaller team is fully dedicated to a project vs. a larger team of part time players. How few people can a project get away with vs. how many can we allocate to this.
4. Continuous Innovation Guided by a Long Term Strategy — Innovation for innovation’s sake helps to build the muscle but it does not drive meaningful outcomes. A strategy for innovation is a must. This strategy is a structured view of the future and the steps to create it. When making decisions about products today, this future vision will allow you to sew the seeds of the future product in today’s offering, enabling the product to gradually evolve as technology and capabilities advance.
5. Organizational Freedom to Continue — Asking talented team members to pour their heart and soul into projects then asking them to hand off those same projects is traumatic. In order to cultivate the sense of ownership and accountability required to develop truly amazing products, the teams building them need to know they can continue to build and grow with their products. Creating internal, passionate, product owners will inspire the creation of products that will change the relationship with your users.

Developing these capabilities is not easy. In later posts, we will discuss strategies to get there. At a high level, learn by doing. Model the future behaviours you wish to exhibit by developing a hypothesis and allocating the personnel to test it.

The pace of change is only accelerating so there is no time like the present to take the first steps to becoming innovative. If you want to discuss how we can help you get there, let me know!

Jared Gordon is Head of Financial Services at TribalScale who built his career at the intersection of human need and commercial opportunity. He is a trusted advisor to global FIs on their transition from a product centric world view to a customer centric worldview and helping FIs create new value for their customers. Jared looks to balance his love of building things that scale, with a mediocre backswing and a love of comic books.

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