Glossary
BREAKEVEN ANALYSIS: A financial method for determining how much (or how much more) you need to sell of a product or service in order to pay for a fixed investment—in other words, at what point you will break even on the cash flow produced by the new product or service.
BREAKTHROUGH INNOVATION: See Radical innovation.
BUSINESS CASE: The information and argumentation needed to demonstrate the merits of an innovative idea to management and other stakeholders.
CATCHBALL: A cross-functional method for accomplishing two things: idea enrichment/improvement and buy-in among participants.
CHAMPION: A person who assumes responsibility for moving a promising innovative idea or project along a path toward the market. The champion need not be the idea’s creator, but must have the enthusiasm and commitment needed to promote and implement it on the road to success.
COMMUNITY OF INTEREST: An informal group whose members share an interest in some technology or application.
CONTRIBUTION MARGIN: The amount of money that every sold unit contributes to paying for fixed costs. It is defined as net unit revenue minus variable (or direct) costs per unit.
CONVERGENT THINKING: Thinking that evaluates new ideas to determine which are genuinely novel and worth pursuing.
COST OF CAPITAL: The weighted average cost of the organization’s different sources of capital, both debt and equity, expressed as a percentage.
CREATIVITY: A process of developing and expressing novel ideas that are likely to be useful.
DIFFERENTIATION: Deliberately setting one’s product or service apart from those of rivals in a way that customers value.
DISCONTINUOUS INNOVATION: See Radical innovation.
DISCOUNTED CASH FLOW (DCF) ANALYSIS: A method for determining the monetary value of a commercial idea or cash flows over a particular span of time based on time-value-of-money concepts.
DISCOUNT RATE: In discounted cash flow analysis, the annual rate, expressed as a percentage, at which a future payment or series of payments is reduced to its present value.
DISCOVERY-DRIVEN PLANNING: A method of evaluation in which decision makers focus their attention on the assumptions that must prove true if the venture or innovation is to reach an acceptable level of profitability.
DISRUPTIVE INNOVATION: An innovation that brings to the market a new and different value proposition with the potential to upset the status quo in a competitive market. A term coined by Clayton Christenson.
DIVERGENT THINKING: Thinking that breaks away from familiar or established ways of seeing and doing.
EMPATHETIC DESIGN: An idea-generating technique whereby innovators observe how people use existing products and services in their own environments.
EXPERIENCE CURVE: A concept that holds that the cost of doing a repetitive task decreases by some percentage each time the cumulative volume of production doubles.
EXTRINSIC REWARD: A reward that appeals to a person’s desire for attainment distinct from the work itself: a cash bonus, a promotion, or stock options.
FIXED COSTS: Costs that stay mostly the same, no matter how many units of a product or service are sold—costs such as the cost of product development, insurance, management salaries, and rent or lease payments.
GROUPTHINK: A phenomenon often observed in cohesive or homogeneous groups that produces unanimity of opinion, resistance to contrary viewpoints, and antagonism to group members who disagree with the prevailing view.
HURDLE RATE: The minimal rate of return that all investments for a particular enterprise must achieve.
IDEA FUNNEL: A concept used in product development to illustrate how many innovative ideas are gradually reduced down to a very few that proceed to commercialization.
INCREMENTAL INNOVATION: Innovation that either improves on something that already exists or reconfigures an existing form or technology to service some other purpose. In this sense, it is innovation that exploits some existing form.
INFLUENCER: An individual who provides advice and information to key stakeholders and decision makers.
INNOVATION: The embodiment, combination, and/or synthesis of knowledge in original, relevant, valued new products, processes, or services.
INTERNAL RATE OF RETURN (IRR): The discount rate at which the NPV of an investment equals zero.
INTRINSIC REWARD: A reward that appeals to a person’s desire for self-actualization, curiosity, enjoyment, or interest in the work itself.
KAIZEN: A philosophy of continuous process improvement that encourages everyone, at every level, to seek out ways to improve what they are doing.
LEAD USER: A company or individual whose needs are far ahead of market trends. Lead users often modify off-the-shelf products to suit their special needs.
NET PRESENT VALUE (NPV): The present value of one or more future cash flows less any initial investment.
NETWORK EFFECT: A phenomenon in which the value of a product increases as more products are sold and the network of users increases. The telephone was an innovation that benefited from the network effect.
OPEN MARKET INNOVATION: The practice of reaching outside one’s company for new product and service ideas.
OPINION LEADER: A person respected for his or her expertise, judgment, and insights. This is the “go-to” person to whom others turn when seeking information or making decisions. The opinion leader’s endorsement of an idea lends credibility and helps accelerate its acceptance.
OPPORTUNITY RECOGNITION: A mental process that answers the question “Does this idea represent real value to current or potential customers?”
PERCEPTUAL MAPPING: A market research tool used to compare products or product ideas against the perceptions of customers. A perceptual map is (usually) a two-dimensional space on which alternative product or product ideas are plotted against their attributes or the primary needs of customers.
PORTFOLIO MANAGEMENT: A methodology widely used by both corporations and individual business divisions to create a proper mix of new product/service or technology projects.
PREFERRED THINKING STYLE: The unconscious way a person looks at and interacts with the world. When faced with a problem or dilemma, a person will usually approach it through a preferred thought style.
PROCESS REENGINEERING: An improvement concept that aims for large breakthrough change—either through wholesale change or the elimination of existing processes.
PRODUCT (SERVICE) PLATFORM: The functional core of a product—usually described as the subsystems and interfaces that form a common structure from which many derivative products can be efficiently developed and produced.
RADICAL INNOVATION: An innovation that represents something new to the world and a departure from existing technology or method. Also referred to as breakthrough and discontinuous innovation.
S-CURVE: A curve plotted on a two-dimensional plane that models the performance or cost characteristics of a technology change with time and continued investments. The plan’s horizontal axis reflects time and investment, while the vertical axis indicates product/service performance or cost competitiveness.
SKUNK WORKS: A team of people brought together to generate an innovative solution or to solve a particular problem. In some cases, these are sited in remote settings to keep team members focused on their mission, to minimize interference from the rest of the organizations, or to maintain secrecy.
SPONSOR: Usually a senior person who holds a position of power and who controls some level of resources. This person often provides help with implementation problems and suggests ways in which the champion can present an idea most effectively to management. The sponsor frequently works behind the scenes to supply resources and to protect it from premature extermination.
STAGE-GATE SYSTEM: The stage-gate system is an alternating series of development stages and assessment gates that aims for early elimination of losing ideas and faster time-to-market for potential winners.
SUSTAINING INNOVATION: An innovation that improves the performance of established products. The term was coined by Clayton Christenson.
TEAM ROOM: A dedicated physical space within which full- or part-time members of a work team can congregate to do their work, share information, brainstorm, and so forth. It serves as a central “node” in the communication network that holds participants together and facilitates the information and idea sharing.
TRIZ: Acronym for theory of inventive problem solving, which systematically solves problems and creates innovation by identifying and eliminating technical contradictions.
VARIABLE COSTS: Those costs that change with the number of units produced and sold; examples include utilities, labor, and the costs of raw materials.