I listen to a lot of presentations on innovation. More accurately, I hear the word innovation sprinkled in presentations like grated Parmesan on spaghetti. Like the cheese, mentioning innovation is supposed to make something taste better by its inclusion. Too much though and it hides the original flavor of the dish – which I sometimes think is the intent. It’s rare when a presentation talks about innovation and actually addresses innovation. This tendency to use innovation as a buzzword makes me highly suspicious of any presentation that mentions it extensively. So, when I was invited to a webinar on innovation from IBM I was doubtful that it might really be about innovation. I admit to being pleasantly surprised.
The presentation from the IBM Institute for Business Value Strategy & Transformation (IBV) was entirely about innovation. While there was a lot of information derived from 2012 their survey of CEOs, I was most impressed by the framework they developed for thinking about innovation and business value. In a nutshell, they identified three distinct types of innovation that drive business value. They are:
- Product Innovation – creating product differentiation and market disruption.
- Operational Innovation – creating efficiencies through new business processes.
- Business Model Innovation – creating new ways to do business and new ecosystems to support it.
It’s a simple way to look at innovation but helps bring focus to a subject that typically seems like meaningless management malarkey. Of course, how a company innovates is still a matter of debate, as is how effective are innovation efforts. This framework for thinking about innovation, however, gives a target for those efforts. It’s unlikely that a company, even a big one, can do all three at once without becoming confused and disorganized. An understanding of how a company best innovates is also key to overall company strategy.
Take cloud applications. I’ve seen a number of companies that wrongly view cloud applications as a product innovation. In fact, cloud applications, or Software-as-a-Service, does not change anything fundamental about enterprise applications. Features of cloud applications directly mirror the features of their on-premises brethren and sometimes are direct analogs. In fact, cloud applications are a business model innovation. They change how software is delivered and paid for. The ecosystem is different, pricing strategies different, and even the enterprise buyer may be different. It makes sense to treat cloud application as a change in how business is conducted not like a new kind of product.
Mobile application strategy, on the other hand, should revolve around product innovation. The platform is new and what can be done with mobile devices is still evolving. The design philosophy of all applications is changing because of the mobile experience. Yet, mobile applications still, for the most part, follow the original software business model. A consumer pays for single user license or the app is a free an add-on for a conventional applciation. The vast majority of mobile applications are still downloaded and installed locally like on-premises applications.
Innovation is being hailed as the way to success in the current economy. So much is attention has been placed on product innovation. It was great to have IBM IBV point out the other ways companies can create business value.