Innovation Defined

Over the past few years, I have written several books on innovation, totaling close to a quarter million words. I went back and looked, and in not one of those books do I actually define what innovation is. That’s a glaring oversight. After all, you can’t implore readers to be better at something without telling them what that something is.

For a word that is thrown around so much, innovation lacks a clear and consistent definition. In August 2010, a popular innovation blog posted an article listing twenty-five separate definitions.¹ The author was certainly trying to be helpful by producing the list. But how would twenty-five often contradictory definitions help anyone actually do anything with innovation?

The New Oxford American Dictionary describes innovate as “make changes in something established, especially by introducing new methods.” That’s not a bad starting point. But I go with something even shorter: “Something different that creates value.” Five words. That is the definition of innovation I will use for the rest of this book.

Hidden in that simple statement are a few nuances. For example, it is important to clarify “different” according to whom. Innovation is in the eye of the beholder. The innovation target—whether it be an end customer, a supervisor, a spouse, or a friend—should be the one who considers it different. And what does value mean? In my language, value means some kind of measurable result—whether it be profit, improved performance of a process, a measurable effect on someone’s life, or something else entirely.

Note a few things that are not in my definition. The word technology doesn’t appear; innovation comes in many flavors (I’ll discuss this more later). Note the absence of the word creative or the phrase never been done before. It is always important to separate creativity and invention from innovation. There is a popular conception that innovation is all about a creative idea. Creativity is a piece of the innovation puzzle, for sure. And creativity, of course, can help the innovation process. But innovation is a process that combines discovering an opportunity, blueprinting an idea to seize that opportunity, and implementing that idea to achieve results. Remember—no impact, no innovation.

One way to visualize the difference between innovation and creativity is to compare Leonardo da Vinci and Thomas Alva Edison.² Both men were geniuses. If you read through da Vinci’s notebooks, you can’t help but be blown away by his ability to see the future. He had sketches of devices that look a lot like modern helicopters. He mapped out the human body in remarkable detail. He was a creative genius. Did his ideas meet our definition of innovation? No, because those ideas didn’t create value in da Vinci’s time. And that’s important to remember, because when we set out to innovate, we should make sure we don’t fall into the trap of turning it into an academic exercise where we think, think, think, but never do. The doing is the thing.

Edison did. He is the consummate innovator. The stock ticker-tape symbol, phonograph, incandescent light bulb, and modern motion-picture industry all had their roots in Edison’s labs in New Jersey. They all were different. They all created value. And that, my friends, is an innovator.

Three Innovation Stories

Let me introduce my grandfather: Robert N. Anthony Sr. My grandfather was inducted into the Accounting Hall of Fame in 1986. Such a place exists! The Ohio State University created it in 1950. As of 2010, it had more than eighty members.³

The primary reason my grandfather (who passed away in 2006) resides in the Accounting Hall of Fame is because in his career he wrote close to thirty books on accounting. Most of them were academic and carried titles like Management Control in Non-Profit Organizations. I don’t recommend that book to normal people. My grandfather generally wrote for people seeking deep expertise—people who really wanted to develop mastery over a subject. People who would take a year or two out of their career to enroll in an MBA program and study with an expert like my grandfather.

My grandfather built a nice business model for himself. He taught at an MBA program. He received royalties on his books. And he received fees from companies that wanted to draw upon his expertise.

But in the early 1960s, he had an insight. He was only reaching a very narrow group of customers—the expertise seekers. There was an entirely different—and substantially larger—market he was ignoring. This was the person who wanted to be conversant in accounting. Such a person didn’t need to be an expert, but needed to know the meaning of the words on a financial statement.

My grandfather knew that having an impact on this audience would require something entirely different. In 1962, he introduced a book titled Essentials of Accounting. It differed sharply from his previous work. Instead of dense text to accompany expert instruction, Essentials was a do-it-yourself workbook. Readers could go through, fill in blanks, and learn by doing. By the end, they knew the difference between a debit and a credit. They knew common terms like accounts receivable. And they had a good sense of how to read basic financial statements.

The book, now in its tenth edition, has sold more than a million copies. That’s not Stieg Larsson, of course, but for an accounting book, that’s pretty darn impressive.⁴ My grandfather didn’t sit still, either. Always an eager adopter of new technologies, he introduced in the early 1980s a computer-based version of Essentials. One of the early beta testers was his then eight-year-old grandson (me).

My grandfather made accounting simple, accessible, and affordable. He reaped the benefits of innovation.

So too did Lizzie Jury. I learned about Jury when Innosight was doing work for Turner Broadcasting System, Inc., the cable broadcaster that owns CNN, TNT, TBS, Cartoon Network, and a range of other television channels.⁵ In the mid-2000s, Jury was a senior librarian working for CNN. Her job was generally reactive. As journalists were developing their stories, they would contact her looking to verify specific facts on news topics.

She wondered if there was a better approach. What if she could be more anticipatory? She began assembling preverified facts on important topics in the news. She put these “Fast Facts” on the company intranet, making them instantly accessible to journalists.

Think about how this relatively straightforward move from being reactive to being proactive would help Turner Broadcasting. The improved process allowed journalists to verify facts more quickly, leading to more efficient news production. This could allow CNN to get stories on the air faster—always a critical factor in an industry where the rule of thumb is “faster than anyone better, better than anyone faster.” The overall operational improvement would free up resources to pursue new opportunities, helping the company to create new growth.

Lizzie Jury made it easier for journalists to get the facts they needed. She reaped the benefits of innovation.

The third story turns back to my family and my older sister Michelle, who has a gift with children. She is the proud and doting mother of two girls and a boy, all of whom learned to sleep through the night at very young ages.⁶ Through the years, she has received many requests from other young parents looking to sleep-train their children or, later, to accelerate the pace with which their children learn to read. My sister could easily have just responded to each request individually. But she started collecting and collating individual e-mail conversations. Then when someone e-mailed a new request, not only did the parent get a specific answer, but he or she also received my sister’s “manual” for child rearing.⁷ In business jargon, my sister crowd-sourced a peer-to-peer manual to minimize the frustration of young parents.

My sister has helped hundreds of people more effectively raise their children. She—and her friends and family—reaped the benefits of innovation.

Types of Innovation

These three stories show how innovation comes in many guises. Just like the blogger who identified twenty-five ways to define innovation, there are dozens of ways to categorize innovation and hundreds of stories to tell. If you read the literature, you will see words like incremental, radical, sustaining, disruptive, competency-creating, and many, many more.

I find it helpful to look at innovation in one of two ways. The first is the innovation’s strategic intent. Consider Procter & Gamble, the consumer packaged goods company responsible for Pampers, Pantene, Tide, Fusion, Ariel, and dozens of other megabrands. The company follows four strategic intents in its efforts to grow revenue:

• Find better ways to market and promote existing products. For example, in the mid-2000s, P&G started running a series of commercials about its popular Swiffer line of quick-cleaning products. The commercials, internally called the breakup campaign, showed women “breaking up” with traditional cleaning methods (mops, brooms, and so on) to use Swiffer. The intent was to show consumers that Swiffer wasn’t just for quick cleans between “real” cleans, but a cleaning solution on its own. At the time only about 10 percent of consumers had ever tried Swiffer, and P&G hoped the advertisements would boost that rate. P&G calls this strategy commercial innovation.
• Incrementally improve existing products and services. You might think that one of the most challenging innovation jobs must be to discover new paths to growth for laundry detergent in North America. After all, the product is ubiquitous, and P&G’s flagship Tide brand has dominated the market for years. But during the 2000s, P&G increased sales of Tide significantly by introducing dozens of new varieties of the detergent. Some of the varieties featured new scents; others combined Tide with other popular P&G products like Downy fabric softener. P&G calls this sustaining innovation. In P&G’s language, these are the “-er” innovations (better, faster, cheaper).
• Introduce a breakthrough in performance in existing categories. In 2005, P&G purchased razor king Gillette for $57 billion.⁸ P&G was impressed by Gillette’s soon-to-be-launched Fusion razor and razor blade combination—the world’s first five-blade razor (technically, it has six: five on its face and a sixth on the top for trimming). By offering sharply better performance, Gillette increased its already substantial lead in the category.⁹ The Fusion became the fastest brand in P&G’s history to reach $1 billion in sales. P&G calls this kind of category step-change transformational innovation.
• Create a new category. In the late 1990s, P&G’s household care division launched two new brands—Swiffer and Febreze. Swiffer in essence created the quick-clean category—a range of simple devices with disposable elements that made cleaning quick and easy. Febreze allowed consumers to remove odors in hard-to-clean fabrics such as carpets or couches and created new ways to deodorize and refresh the air in rooms. As of this book’s writing, Swiffer’s annual revenues had crossed $1 billion, with Febreze closing in on that magical ten-digit number. P&G calls this disruptive innovation.

The other way to categorize innovation is to look at the type of innovation. For example, Apple sometimes introduces new products, such as new versions of its music players, computers, or mobile devices. The company has also introduced new ways to distribute its products and associated content, like its iTunes music store or App Store for mobile phone applications. Apple has created entirely new revenue models, such as selling individual songs for low price points. Companies can innovate their processes, too, as Turner Broadcasting did with its Fast Facts program. Big or small, all of these kinds of innovation are something different that created value. And while there are plenty of examples of innovation that involve technology, many others involve ways to market, sell, promote, act, or organize.

Who Needs Innovation?

We often think that innovation really matters only to a small group of people, like corporate leaders steering their companies through changing industry conditions, entrepreneurs hoping to create the next big thing, and research scientists dutifully developing the technologies to enable both. But the innovation imperative is shared by all of us.

The sheer volume of self-help books, daily talk shows, executive coaches, and professional advisory firms suggest that people feel the need to change as they never have before. Perhaps that’s not surprising, given how quickly our world seems to be changing today. Step back to the year 2000. There were no online social networks like Facebook and MySpace. In 2000, people largely communicated by e-mail and telephone. A few leading-edge users sent quick text messages to each other using their mobile phones, or via an instant-messaging software application. A few people had begun to capture their thoughts in online journals that today are called blogs. There certainly was no user-contributed video site, like Google’s popular YouTube. Google itself was still in its infancy in 2000, with annual revenue of $19 million dollars (Google makes that much revenue in a few hours today). Apple was still Apple Computer, Inc., a niche player in the personal-computing market, with a market capitalization of about $3 billion (as opposed to today’s $300 billion-plus). China, India, and Brazil were on the fringes of the world economy. If you wanted to read a book like this, then you bought, or were given … a thing … with physical pages. Today, many of you are probably reading this on a Kindle, an iPad, a Nook, an iPhone, or some other electronic device. Back then, the government was arguing that Microsoft was an unassailable monopoly that needed to be broken up (from January 1, 2000, to January 1, 2010, Microsoft’s stock declined by close to 40 percent). The United States was a hegemonic superpower that could enjoy its “peace dividend” as a result of the “victory” in the Cold War. The world has changed a tremendous amount in a decade.

While it’s very hard to know for sure what the future holds, technology continues to advance at a rapid clip. Economic or political shocks might reverse a seventy-year trend toward more closely connected markets, but it is hard to imagine emerging economies stepping off the world stage. Certainly, the continued rise of communications technologies will make distributed collaboration and communication easier.

We all have to deal with innovation. In his 1996 book Only the Paranoid Survive, legendary Intel Corporation CEO Andy Grove put it well: “Strategic inflection points offer promises as well as threats. It is at such times of fundamental change that the cliché ‘adapt or die’ takes on its true meaning.” The increasing pace of change means that these times of fundamental change are ever present; the new normal is perpetual change.

This change places two levels of stress on each of us. First, the companies at which we work need to adapt. Consider these statistics. During my parents’ lifetime, the life expectancy in wealthy countries has increased by about 33 percent, from sixty to eighty years. During that same time, the life expectancy of large, successful corporations, by some measures, has been cut in half, from roughly forty years to roughly twenty years.¹⁰ Think about what that means. A generation ago, you very well could have been working for the same company your parents worked for, and you might hope to have your kids work there as well. Today, if you work for a large, successful company, the odds are your parents didn’t work there, and your kids probably will never have heard of the company, because by the time they enter the workforce, the company will have stumbled or been acquired. The only way to buck those odds is to innovate.

Many companies I advised in the midst of the 2008–2009 downturn told me they thought they had a choice—bet on innovation and growth, or curtail growth efforts in order to survive. In today’s world, innovation is not a choice. If you do not innovate, you are sowing the seeds of your own destruction. Success requires waking up every day and realizing that today’s sources of competitive advantage will not be tomorrow’s; that the products or services that constitute the core of today’s business might not constitute the core of tomorrow’s business; that success might require walking away from the things that you view as your core competency.

That’s all well and good for companies, but there are equal stresses on individuals. Organizations only adapt if their employees adapt. That means each of us needs to think not just about how we do today’s job better, but about how we change and redefine the tasks that we do. And we have to do this not just in our job, but at home as well. We must learn to adapt to new means of communication between family members. To prepare our children for the hypercompetitive world they are entering. And on and on.

The individual implications of innovation hit home to me when we were looking for Christmas presents for our then three-year-old daughter Holly. My wife suggested getting her a Dora the Explorer toy laptop to encourage her interest in technology. Holly loved the laptop, but she more frequently picked up and interacted with our Apple iPad and played with our Microsoft Kinect. Watching Holly reinforced my belief that the odds that the laptop will be the dominant means of accessing technology by the time Holly enters the workforce are close to zero.

Holly, enjoying her Dora the Explorer laptop.

We all have to come to grips with the reality of an increasingly dynamic world. I’m willing to bet that all of you do your job in some kind of different way than you did when you started working. Look at the seemingly prosaic world of consulting. I joined McKinsey & Company as an analyst in 1996. My colleagues and I received training on how to place acetates on overhead projectors during presentations. There was an art to the practice of managing voicemail.¹¹ One of my managers told me that one source of competitive advantage was our library, where we had stacks of paper reports that were too expensive for individual companies to purchase. We could pore over those reports to find critical data that our clients couldn’t obtain.

That wasn’t so long ago. And it is a safe bet that more will change in the industry in the next fifteen years as technology advances, collaborative networks and emerging markets rise in importance, and entrepreneurs craft innovative consulting models.

Innovation is the imperative of today’s times. We all have to learn to be comfortable with change so that we can do the job that awaits us in the next few years, communicate with our colleagues, and provide the best guidance to our children and other loved ones. We all have to be innovators.

What image enters your head when you read the word innovators? When I ask people who they consider innovators, they typically think of icons like Apple’s Steve Jobs, Virgin Group’s Sir Richard Branson, or Facebook founder Mark Zuckerberg.

No doubt that these people are fantastic innovators. But I suggest that if you want to see someone with a great capacity to innovate, you should amble over to the mirror. Have a look. Yup. That’s you.

Why Innovation Is Attainable

There are three reasons why I believe that innovation is within anyone’s grasp. First, the so-called masters of innovation who we’ll meet in the next chapter have done a great job unearthing patterns and principles that help bring clarity to the formerly fuzzy world of innovation. Putting those patterns to work can allow anyone to markedly improve his or her innovation skills.

Second, an important change is taking place in the world of innovation. Put simply, innovation can be done very cheaply. It used to be that innovation was relatively expensive. For example, one case taught in Harvard Business School’s entrepreneurship program describes how Robin Wolaner came up with an idea in the mid-1980s for a high-quality magazine targeting parents. Wolaner’s original plan suggested that it would cost $5 million to develop the idea. Before she attempted to raise that amount of capital, she decided to run a simple market test. She sent a sample issue of her magazine to a set of parents. Each test issue included a reply card that people could return to indicate interest in subscribing. High levels of response validated the market interest in the idea, and Wolaner was off and running. She eventually sold her magazine (Parenting) to Time Life, Inc., for about $10 million. This test cost Wolaner about $150,000 to run.

Contrast Wolaner’s story to the two bright entrepreneurs my colleague and I met in Singapore in September 2010. The duo had an idea for a Web site that would democratize tools used by designers of a type of chip called a field programmable gate array (FPGA). It’s a big market—the companies that sell FPGAs are multibillion-dollar enterprises, and the leading tool providers are big companies, too. The founders had built a functional Web site with real, live tools. They had run a marketing campaign to attract a couple hundred users to the site. The company had earned modest revenues.

“Wow,” we said. “A functional Web site, a marketing campaign, and early revenue. Who are your investors, and how much have they invested to date?”

They looked at each other sheepishly. The total out-of-pocket investment was less than $1,000. They had done the Web site themselves in their spare time. They did focused advertising on Google to attract early customers. Now that’s what I call doing things on the cheap!

If Wolaner was launching her magazine business today (perhaps a dubious proposal in the current media market), there is simply no way she would need to spend $150,000 running tests. You could probably run the same set of tests for less than $5,000 using primarily free or easily available tools on the Internet.¹²

The low cost of innovation affects all of us by giving us more options. Think about weight loss. Instead of just relying on willpower or going to a specialist weight-loss clinic, innovators have given us an incredible variety of dieting applications in Apple’s App Store. One application allows you to take pictures of everything you eat in a given day to get a reasonable assessment of your caloric intake. Or you can buy small, wearable devices connected to online services that show how much exercise you did in a given day, with a whole community of weight-loss seekers supporting you. Further, scientists increasingly throw out new mechanisms to lose weight, with ideas transmitted in a blink of an eye on Facebook, Twitter, and other networking tools.

The third reason that innovation is achievable is that the specific traits and behaviors common to successful innovators are coming into sharper focus. Do you think successful innovators are different in some meaningful way? Most people would answer that question with an emphatic yes. But academics struggled for a long time to isolate those differences. A recent stream of research by Jeffrey Dyer from Brigham Young University, Hal Gregersen from INSEAD, and Clayton Christensen from Harvard decodes the innovator’s DNA. The professors found that a successful innovator is good at what they call associational thinking. That is, good innovators make connections between seemingly unconnected inputs. Watch HBO’s hit show Entourage to see associational thinking in action. It takes ten seconds for the character Ari Gold and the other agents to describe screenplays they are considering. They don’t go through long descriptions of the plot. Instead, they offer a short summary with an anchor analogy (what this movie resembles) and a twist (what makes it novel). For instance, the movie Speed with Keanu Reeves was pitched as “Die Hard on a bus.” Imagine hearing that pitch. You’d say, “Die Hard. Huh. That was a pretty successful movie. On a bus. Haven’t heard that one before. That might be interesting.” In their book Made to Stick, Chip and Dan Heath dubbed this technique the Hollywood pitch.

Sounds great, but can you improve your own associational thinking? The professors describe how successful innovators follow four time-tested approaches to gather stimuli so they can make these connections:

• Questioning: asking probing questions that impose or remove constraints (e.g., what if we were legally prohibited from selling to our current customer?)
• Networking: interacting with people from different backgrounds and who provide access to new ways of thinking
• Observing: watching the world around yourself for surprising stimuli
• Experimenting: consciously complicating your life by trying new things or going to new places

There’s nothing here that you can’t do. My twenty-eight-day innovation program, detailed in part 2, provides further tricks of the trade to help you develop these and other innovation capabilities.

The larger point is that the innovation potential is in all of us. The next chapter, which provides key lessons from a select group of masters of innovation, can help you begin to realize that potential.