Innovation – A Core Business
Definition of Business Concept
“A business concept or model is a
framework for identifying how your
business creates, delivers, and extracts
Importance of Innovation
• In today's world of discontinuous change, there is
no continuity without constant renewal.
• A survey found that more than 90% of large
organizations are committed to innovation.
• Yet when managers of these companies were
asked to describe their corporate innovation
system, almost none of them could do it.
Reason for the Mismatch
• One explanation is: “Top management is just
paying lip service to innovation and has no
intention of really working hard on it”
• Another -- and far more likely -- explanation is
that senior leaders do not have a clear, well-
developed model of what innovation looks like as
an organizational capability.
• Since they don't know what it looks like, they
don't know how to describe or build it.
• A mindset that most companies have a very
narrow idea of innovation, usually focusing
just on products and services.
• Second, most companies devote much more
energy to optimizing what is there than to
imagining what could be.
• Need to enlarge our view of innovation.
Enlarging Our View of Innovation
• Many managers think innovation = New
• Innovation applies to all business activities, not just
end products. Innovation can be in logistics (Wal-
Mart), Merchandising (Starbucks), Selling (Dell)
• Pioneers rethink the entire business concepts & build
new business models from ground up.
• Today greatest amount of wealth goes to those who
create new business model, create new sources of
revenue based on changing technology, changing
demographics and changing global demand
“True innovation is based on the recognition that a
business concept represents a dozen or so design
variables, all of which need to be constantly revisited
and constantly challenged”
-- Gary Hamel
Managers have to think creatively & holistically about
their entire business concept. In simple words, rethink
“The way we do things around here”
• To question & challenge current business
concepts, managers need to answer:
– Can they describe in any detail the current
business concept of their companies?
– What is the basic value proposition?
– What are the core competencies to focus on?
– What choices have to be made regarding how
integrated (or not) you are as a company?
– How do you define your served market?
Creating for the Future
• Many companies have R&D centers dedicated
for innovation, Marketing works with R&D to
develop new products
– New Pentium chip or a new detergent
• This compartmentalized thinking inhibits
– Makes one think “I don’t have to think creatively or
profoundly” & say “I just have to do what I did
• Innovation outside R&D is often shot down
• Strategic innovation differs from product
innovation. Companies today succeed through
innovative strategies alone.
• Southwest Airlines, Dell, IBM, Ebay etc.
succeeded through innovative strategies –
Without much innovation in the underlying
products or service
New Age companies
• Startups in Silicon valley & elsewhere have gone
beyond R&D for innovation. All departments,
groups have a say on innovation
• Large companies have set up incubators – to test
out new ideas
• Business innovation can come from anywhere –
• Top Management acts like Editors, searching for
new ideas which emerge in the organization,
improving them & Implement them
• To encourage innovation, encourage “What could be?”
type thinking (not “What should be”)
• Innovation goes beyond a specific project
• It is a continuous ongoing process
• Encourage “39+1 > 40” thought process (No, I am not
talking about Inventive accounting)
– Spending time to think how to do a job better gives better
results than working 40 hours/Week
• Innovations need not be risky, but something that
changes customer expectations & competitiveness for
• Google allows employees to work on innovative
projects for 5-6 hours a week
• 3M encourages employees to use office time to
develop of innovative ideas
• Compaq/HP, Wal-Mart, Dell etc: Innovation in
• Intel, TI, Motorola, Yahoo: Product innovation
• IBM’s turnaround is due to service innovation
• Southwest Airlines – A classic example of service
• Only Innovation creates new wealth
• Stock Markets reward only those with
successful innovation – Innovation that adds
value to customers
• M&A, integrating operations and Cost
Cutting has its limitations, in most cases it
is just value recognition & not value
“Life of any business is finite. For companies
to endure, the drive for efficiency must be
combined with excellence in
entrepreneurship. Through the process of
innovation, new businesses must emerge
before the old ones decay”