Breakthrough Innovation

Dr. Hitendra Patel, Professor of Innovation and Growth at Hult International Business School and a leader of Monitor Group’s Innovation practice examines how many companies have achieved phenomenal growth through innovation and gives advice to those companies struggling to replicate these successes.

Innovation is a key concern for CEOs. Our recent global survey on innovation indicated that while 90 percent of CEOs felt that innovation was important to their companies’ goals and ambitions, only 10 percent believe that their companies were doing a good job innovating.

Even more revealing was that most still considered innovation to cover only R&D, patents, technology, product and processes. Contrast this with the definition of innovation used by successful leaders which includes changes across the following additional elements:

• How the offering is made (technologies, processes, materials or assets)
• How the offering is defined (product, packaging, service, brands or experience)
• How the offering is delivered (logistics or channels)
• When and where it is offered (location or occasion)
• Who it is offered to (market segments)
• What business model to use (pricing and terms)
• How partners & networks are used (alliances)

Our examination of hundreds of innovations when compiling a book called the 101 Innovation Breakthroughs confirmed that a 10x improvement in any one of these elements often leads to a breakthrough innovation. However, what was even more interesting was that hard-to-replicate innovations are typically generated by changes across a combination of three or four of these elements.

The classic example of this is Apple iPod/iTunes or Enterprise Rent-A-Car, each a leader in their respective markets. In both examples, the companies do not focus only on product but across a combination of innovation elements to deliver a very unique customer experience in terms of occasion, location, channel and pricing.

Hult International Business School, is another example of innovation that goes beyond its traditional definition. MBA programs generally focus on students from Western Europe and North America even though growth and opportunity are often found outside of these regions. Hult has reached beyond its home base in Boston to establish campuses in Dubai and Shanghai offering free student movement within all three locations. Students enjoy a unique experience and are located closer to regional recruiters. This “systems” approach to innovation leads to a more compelling value proposition for students and recruiters that is difficult for competitors to replicate.

Another interesting observation we were able to make is that innovations tend to be aligned with one of the following seven mega-themes:

The world is flat – anywhere, anytime, for everyone: The power of the internet with its revolutionary new search engines and the pervasiveness of mobile telephony services were a driver of at least half the innovations.

Communication is ubiquitous – find, connect, and transact: Finding interested parties, connecting their needs, and conveniently enabling their transactions . Ebay embodies this concept, linking buyers and sellers worldwide.

Mass customization – make us all feel special: Customizing comfort and convenience is an innovation theme embodied in Heavenly Bed and Bath concepts at the Westin Hotel and in the Toyota Scion.

Comfort and convenience – superplease without the frills: Simplifying the “purchase and use experience” has enabled innovators to create powerful retail experiences. Aldi simplifies brand choice in the supermarket while MinuteClinic offers basic health care solutions to everyday problems.

Give away the lamp and sell the oil – make the market fast: A large set of innovation breakthroughs follow the model of giving away an item upfront to make money from the refills. For P&G it’s the Swiffer for mopping floors and for Brita it is the filters for great tasting water.

Green and natural – sustainability sells: Like BP Solar with distributed solar panel technologies in the Philippines, many companies have found that sustainability is now a key underpinning of innovative products and services around the world.

Co-create and shout it out – silent no more: Many innovations are built around becoming more visible to the end-consumer, such as Intel’s “Intel Inside” campaign

There are three suggestions for companies that are struggling to innovate: (1) Make innovation a strategic imperative for your organization, (2) Look for high-growth opportunities within one or more of the above seven themes. (3) For each growth opportunity, develop innovative ways to combine business elements (beyond product and processes) to achieve differentiated and compelling offerings.

Companies and institutions like Westin Hotel and Hult International Business School are doing just this to create sustainable and differentiated growth that is hard to replicate.

The only question remaining is: are you ready to innovate and grow?