12 different ways for companies to innovate

Companies with a restricted view of innovation can miss opportunities. A new framework called the “innovation radar” helps avoid that.

Faced with slow growth, commoditization and global competition, many CEOs view innovation as critical to corporate success. But what exactly is innovation? Although the subject has risen to the top of the CEO agenda, many companies have a mistakenly narrow view of it. They might see innovation only as synonymous with new product development or traditional research and development. In technology-based industries, for example, most firms focus on product R&D. In the chemical or oil and gas industries, the emphasis is on process innovations. And consumer packaged-goods manufacturers tend to concentrate on branding and distribution. But if all firms in an industry are seeking opportunities in the same places, they tend to come up with the same innovations. Thus, viewing innovation too narrowly blinds companies to opportunities and leaves them vulnerable to competitors with broader perspectives.

In actuality, “business innovation’’ is far broader in scope than product or technological innovation, as evidenced by some of the most successful companies in a wide range of industries. Starbucks Corp., for example, got consumers to pay $4 for a cup of latte, not because of better-tasting coffee but because the company was able to create a customer experience referred to as “the third place”.

In fact, a company can innovate along any of 12 different dimensions with respect to its (1) offering, (2) platform, (3) solution, (4) customer needs, (5) customer experience, (6) communication, (7) process, (8) value capture, (9) management (10) supply chain, (11) channel, (12) ecosystem.

Nissan Motor Co., for example, has innovated along the platform dimension, using essentially the same small engine block to power a variety of models, including an upscale mid-size sedan, a large sedan, luxury sedans, a minivan, and a sports coupe. Enterprise Rent-A-Car has innovated along the customers and presence dimensions, placing car rental locations in the neighborhoods where people live and work rather than at airports. Together, the 12 dimensions of innovation can be displayed in a new framework called the “innovation radar,” which companies can use to manage the increasingly complex business systems through which they add value.


Source: Based on Mohanbir Sawhney, Robert C. Wolcott and Inigo Arroniz – Jiyao Chen & Mohanbir Sawhney | sloanreview.mit.edu & hbr.org & Kellogg School of Management | April 1, 2006 & 2010