Inspiration or Perspiration

A century ago, Thomas Edison thought deeply about what drives invention or, as we call it today, innovation. One of his famous sayings, “Genius is 1 percent inspiration and 99 percent perspiration,” stresses that innovation involves more than just great ideas. Edison knew from his own experience that the systematic hard work of trial-and-error experimentation paid off. His inventions, like the lightbulb and the phonograph, emerged through thousands of attempts as he refined the process step by step ().

Thomas Edison knew breakthroughs do not come from “lightbulb” moments (pun intended). His quote captures this concept perfectly.

Personal Creativity

Not everyone considers themselves creative, but most of us do have the ability to be creative. We use our creative minds more often than we think.  Whenever you solve a problem, try something new, or give advice to a friend, you are probably using creative thought.

Just like doing physical exercise to work out your body, sometimes you need to do mental exercises in order to work out your mind. Play the video below to learn about the following eight creative thinking tips you can put into practice to help boost your creativity.

1. Schedule Creative Free Time
2. Set a Timer
3. Think Quantity Over Quality
4. Become an “Idea Machine”
5. Switch Up Your Routine
6. Look at Something Familiar Through a New Lens
7. Read More Often
8. Freewrite More Often

Play the “8 Creative Thinking Exercises to Boost Your Creativity” YouTube Video below to see if there is an exercise to boost your creative thinking. Transcript for “8 Creative Thinking Exercises to Boost Your Creativity” Video [PDF–New Tab]. Closed captioning is available on YouTube.

There is a misconception that creativity is this thing that happens in the shower, a strike of lightning that you get out of nowhere, but the reality is creativity is not a moment in time, it’s a process and it takes time to develop.

If you were to generate a list of possible solutions to any given problem you may notice that the first few on the list will be similar to ideas other people may also come up with, but as you get to the bottom of the list you may find your ideas become more unique.  This is because we solve problems every day in our lives and we are good at it.  If I asked you how you will get to work today since your car is being repaired at the service center, you might say, “I’ll get a ride with a friend,” or “I’ll take the bus,” or “My mechanic loaned me a vehicle.”  If I then asked you to think of some other ways you might get to work, I’m sure your ideas will become more novel as you provide additional possibilities.  These novel ideas may not always be feasible, but while you are brainstorming new ideas, don’t judge them for feasibility, just get the ideas first (quantity), then later evaluate each idea on how well it resolves the problem or takes advantage of the opportunity.

SCAMPER Technique for Brainstorming

Creative thinking and problem-solving are essential parts of the design process to turn ideas into innovation and break the barriers against creativity. One of the successful methods used in creative thinking is the SCAMPER technique. While there are different creative thinking and problem-solving techniques such as reversed brainstorming, Hurson’s thinking model, the Six Hats of critical thinking, and Lego Serious Play, SCAMPER is considered one of the easiest and most direct methods. The SCAMPER technique is based very simply on the idea that what is new is actually a modification of existing old things around us.

What does the SCAMPER acronym stand for?

• S–Substitute (e.g., components, materials, people)
• C–Combine (e.g., mix, combine with other assemblies or services, integrate)
• A–Adapt (e.g., alter, change function, use part of another element)
• M–Modify/Magnify (e.g., increase or reduce in scale, change shape, modify attributes)
• P–Put to other uses (e.g., more than one way to use, more than one function)
• E–Eliminate (e.g., remove elements, simplify, reduce to core functionality)
• R–Rearrange/Reverse (e.g., turn inside out or upside down)

Click on the information icon beside each of the letters below to learn more about SCAMPER.

Transcript for “SCAMPER” H5P [PDF–New Tab].

Creativity exercises offer many benefits for individuals, groups, or companies who use them, including the following:

Team Creativity

Team creativity is based on having open debates, and a free flow of ideas. For that to happen, trust must exist among team members. Where trust is lacking–so will creativity.  During brainstorming sessions, it is important to let everyone know that no idea is bad, no one will be judged, and all innovation comes with some risks. Listed below are a few ideas on how to enhance creativity and collaboration in teams, as well as a list of some of the threats that may impair team creativity.

Enhancing Creativity and Collaboration in Teams

1. Complementary Skill Sets. Collaboration works best when team members have complementary and diverse skill sets required to complete the project. Companies may also consider collaborating with customers, experts in the field, or experts in technical, design, marketing, and finance areas.
2. Appreciating Others.  Engaging in purposeful conversations and the ability to resolve conflicts are essential ingredients for collaboration. The team needs time to get to know each other not just as professionals, but as human beings, to build trust through informal social interaction.
3. Open Communication. Encourage people to voice their ideas and opinions. Team members need to know it is okay to share their ideas and opinions, and that this is actually valued. When team members feel comfortable sharing their thoughts, it’s more likely to foster the kinds of discussions required to generate creative solutions.
4. Facilitate Diverse Ways of Working. People have their own ways of doing things. Some people like to work in teams; others prefer to work alone. Some enjoy using a pencil and notepad to jot down their thoughts, while others always make notes on their tablets or make voice recordings on their phones. Managers and team leaders need to allow people to choose how they work – as long as they do their jobs and do them well – they’re happier, and that can prompt more creativity.
5. Prevent Internal Competition. Competition for a promotion, pay raise, bonus, or anything else among team members has a negative effect on team creativity. Team members will try to promote their own ideas, or even not share ideas within the team, and rather share them outside the team with the team leader, or upper management. No internal competition among team members should exist.
6. Establish Ground Rules. Include rules such as “nobody gets to monopolize the conversation,” and “nobody gets to be quiet all the time.” Establish what happens when someone is late to a meeting. Will you allow using computers and phones in the meeting (hint: do you want their full attention or not?) Make sure you keep a “parking lot” list of things so you do not forget any ideas.

Threats to Team Creativity

Social Loafing: This is the tendency for group members to slack off. These members may think their ideas are dispensable or may see other members working hard, and believe they do not need to contribute.

Conforming: Members may conform due to the desire to be liked. If they believe their teammates will be critical of their suggestions, they will be more likely to agree rather than disagree.

Production Blocking: This can occur when members cannot express their ideas because others are expressing their own. When working alone, individuals can work without interruption of thought, whereas when working in a group, members may forget their ideas or may not get time to speak.

Performance Matching: When working in a team for an excessive amount of time, members will start to develop the same tendencies. Members that achieve higher ideals than the group may lower their standards, whereas members that work at a slower pace may increase their efforts. Overall, the team will plateau and may find it more difficult to generate unique ideas over time.

Team Ideation Session: Graphing the Process

What happens in our thinking process when we are given a problem to solve in a specific amount of time?  As described by Stefan Mumaw in the LinkedIn Learning, Creativity Boot Camp course. If we graphed this ideation process for a group trying to solve a problem or take advantage of an opportunity, we would see a graph (refer to Figure 2.1 below) that at first has many ideas, but after a short period of time the group feels they have exhausted all the good ideas, and the ideas dwindle almost to a halt.  What happens next, is that someone offers a different, silly, or absurd idea, then more ideas come from that idea and the tide has turned. These ideas are more unique and are often the best ideas that get generated during the session and they appear on the graph after initial ideas have dwindled. The graph resembles the letter “M” with the first arc being higher than the second arc. This graph shape is known as the shape of ideation because it consistently reveals itself this way.

The Shape of Ideation

Barriers to Creativity

Below is a list of some of the things that can be barriers to personal, team, and organizational creativity.

1. Functional fixedness. You see objects, components, and things around you, and you can’t imagine them doing different functions than what they’re designed to do.
2. Structural fixedness. You find it really hard to imagine objects having a different structure than what you’re used to.
3. Relational fixedness. You find it very hard to imagine two objects having a relationship that wasn’t there before.
4. Self-censorship.  Get the critic out of your mind. Stop telling yourself your ideas are not good enough.
5. Micro-Management. Micro-Management stifles a person’s ability to be creative as micromanagers provide too much detail related to how a particular task or problem should be tackled. This reduces the ability for the person to think for themselves and add their own creative flair.
6. Overthinking. Overthinking about a problem or task uses the logical conscious side of our mind. Often creativity comes from the subconscious mind so rather than overthinking it might be wise to go for a walk or simply start daydreaming.
7. Concerns about Image. Image risks are where people worry about the impression that people will have of them after suggesting an idea.
8. Lack of Time. Lack of time and/or opportunity. People often feel that they are too busy with their day-to-day efforts to have time to focus on being creative. Resolve this by setting some planned time aside each and every day for creative efforts.
9. Lack of Sleep. Lack of sleep not only forms barriers to creativity but to most other things too! Try and lead a healthy well-balanced life with lots of exercise and water and healthy nutrition.
10. Criticism. Criticism from others can off-put you from proceeding any further with your ideas. Try and dismiss negative thinkers or win them over by demonstrating the validity of your idea with a prototype.
11. Rules, Policies, and Procedures. If the organization that you work in has lots of rules, policies, and procedures then these can sometimes stifle creativity due to the bureaucracy that they create. If you can’t advance your project forward without five signatures then you will find it difficult to maintain momentum.
12. Fear of Rejection. Just having that underlying fear that others will reject your ideas can be a barrier to creativity. Work with your passions, enjoy your creative moments, and don’t let others put you off.
13. Stress. Stress is not only a distraction that drains the energy we might channel into being creative, it is also very bad for our health and concentration.
14. Lack of Motivation, commitment, skills to perform creative tasks, or employee preparation to persist.
15. Lack of organizational or managerial support or sufficient resources for creative work.

Importance of Creativity and Innovation to Business

Creativity fuels innovation. Creativity is a thought process, while innovation is an action.  For a business to survive it needs both. Some of the top reasons businesses nurture creativity and innovation include:

1. Innovation helps organizations grow.
2. Innovation keeps organizations relevant.
3. Innovation helps organizations differentiate themselves.
4. Innovation increases productivity in the workplace by sparking excitement and feelings of purpose in employees.
5. Innovation improves a team’s problem-solving skills by challenging the team to dive deeper and develop novel solutions.
6. Innovation helps organizations position themselves as innovators in the marketplace.
7. Innovation helps organizations generate more profits.
8. Innovation helps organizations reduce expenses.
9. Innovation helps organizations attract employees, investors, partners, and contractors.
10. Innovation helps organizations gain a competitive advantage.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

The New Service Landscape

Service innovations take place across all industries and around the world. Of course, this involves service firms, but product-based companies can also develop service innovations.  A service innovation changes the way customers are served to create value for customers and revenue for the company.  Through a new service innovation, a company may increase its revenue due to existing customers spending more, improved positive company image, referrals, etc.

“Innovation of any kind is important as it is a significant step forward. Without innovation, all businesses and processes would be stagnant. Innovative services help businesses have the edge over their competitors and, thus, gain a higher market share. This leads to higher profits and a loyal customer base.” Many service innovations involve employing digital and technological innovations to offer a satisfactory customer experience, or they aim to simplify existing customer processes to enhance ease and speed. Service innovations might also offer customers added value through designing new services or programs, or through coupling services with product purchases. An interesting thing about service innovations is that they are often combined with other types of innovations (e.g., product and technological).

The service sector accounts for 75% of Canadian jobs and 78% of the country’s GDP. The sector includes the following sectors; transportation, economic, health care, construction, banking, communication, retail, tourism, and government. As a vital part of the Canadian economy, the most popular sector is retail with some big franchise names including Walmart and Future Shop. In recent years, the financial services, real estate, and communications industries have grown exponentially, especially in the business hubs of Vancouver, Montreal, and Toronto.

Four Evolving Trends in Service

The nature of services and the pace of change have shifted dramatically in recent years, and mastering the traditional aspects of service delivery will no longer be enough. To seize the opportunities, companies must learn to tap the potential for service innovation made possible by four evolving trends.

1. Higher customer expectations. More than ever, consumers demand greater involvement, customization, personalization, and mobility from services—with immediate results. When they see cutting-edge service innovations in one industry, they expect to find them in others as well; witness the spread of self-service kiosks from airline check-ins to the retailing and hospitality industries.
2. The rise of the mobile Internet. Just about everyone has a cell phone today and the number of apps is extensive. The resulting mobile and self-service possibilities are transforming service delivery. Uber’s disruption of the taxi business is just one prominent example. Advances in digital payments are increasingly spurring mobile commerce, with far-reaching implications in financial services and retailing. Remote access and monitoring in healthcare are also potential game-changers made possible by increased connectivity. The proliferation of smart devices unlocks growth opportunities, reduces the cost to develop services, and dramatically lowers barriers to entry.
3. Big data and advanced analytics. Companies such as Amazon and Harrah’s are known for using customer data to personalize and tailor their services. Continued advances in analytic capabilities allow companies to draw insights from massive, previously untapped sources, leading to new service possibilities.
4. The Internet of Things (IoT). The prevalence of connected devices opens up possibilities for proactive, even “touchless” service, as well as new commercial models quite unlike the traditional fee-for-service one.

Service Innovation Examples

Listed below are a few examples of service innovations. Can you think of others?

1. Passenger Transportation. Uber and Zipcar are disrupting the passenger transportation industry. Uber says, “In addition to helping riders find a way to go from point A to point B, we’re helping people order food quickly and affordably, removing barriers to healthcare, creating new freight-booking solutions, and helping companies provide a seamless employee travel experience. And always helping drivers and couriers earn.” “Zipcar is a car sharing service that Antje Danielson and Robin Chase founded in 2000 in Cambridge, Massachusetts. Members of the service can rent cars by the hour or day, accessing the vehicles using a special card (called a “Zipcard”) or the company’s mobile app.”
2. Improved Customer Experience. Tim Hortons and many other companies provide loyalty programs to their consumers. When the customer places an order they gain loyalty points and when they get enough points they can use them to purchase products.  The app is a service innovation for customers as it improves the customer experience and adds value to their transactions.  The app is also a technological innovation as well as a process innovation because when customers use the points program it changes the payment process for customers and employees, and the technology integrates with the payment system which allows the company to gather data about consumer purchases and preferences.
3. Personalized Hotels. Airbnb’s business is primarily based on making connections between buyers and sellers. They partner with people providing accommodations and they sell their services under the Airbnb brand. This creative entrepreneurial innovation allows people to travel and stay at different host locations, connecting them in advance. Airbnb is giving tough competition to the hotels in the hospitality industry, thus disrupting the industry, and forcing the existing way of doing things to evolve and the existing companies to innovate to keep up.
4. Personalized Entertainment. Netflix produced a series of disruptive innovations that revolutionized how people get their daily dose of entertainment at cheap prices. “Everything Netflix does is driven by data and powered by smart AI algorithms. The company is always brainstorming and testing ideas to ensure that whatever is disseminated on its platform matches the exact thought process of its users. And, its efforts are pretty much evident.”
5. Two Services in One. Need a snack on the go? Forgot your toothbrush or charger? It’s not a problem, some taxi companies in the United States, China, and India are installing in-car mini-convenience stores. “Cargo in the US started providing snacks on Uber in 2016. In China, two companies — Mobile Go and GoGo+ — are spreading the business across the country.” The simple solution shows that innovative ideas don’t need to be flashy as long as they meet customers’ needs. Providing items to customers when they need them most solves a major pain point.
6. Personal Shopper with Delivery. A decade ago, Instacart introduced a new model for online grocery shopping and convenient home delivery. Today, the company provides service for more than 1,100 retail banners across more than 80,000 locations. Instacart’s intuitive, simple solutions for retailers, customers, brands, and shoppers are transforming how the world shops, eats, and lives. You might be able to think of a few other companies that offer similar services.  Many retailers and restaurants provide online ordering with delivery, and this may be a new service for some, but online ordering with delivery has been around for many years. Online shopping came about in the late 1990s with Amazon and Barnes & Noble both emerging as early leaders in the marketplace.
7. Mobile Personal Service. Pet grooming is a mobile service for your pets. “VIPets is a full-service spa on wheels. We offer the ultimate convenience: grooming at your doorstep. No more crating and waiting for your cat or dog. Our experienced groomers will come to your home and give your pet a caring, stress free, cage free pampering experience with one-on-one attention.” “Tesla literally meets customers where they’re at by going to the customer’s home and fixing issues on their car. It’s convenient for the customer because they don’t have to sit around a repair shop and it can be scheduled on their own time. This is an example of excellent customer service.” You might envision how mobile services could work in many fields, for example, doctor service in your home, personal chef, house cleaning, yard maintenance, hair styling in your home, and so many other others. Mobile services can be critical for those people who may be housebound.

Discover What Customers Want

Many companies start their service innovation journey at the wrong end. They look at their existing services and try to find ways to improve them. For a more promising approach through service innovation, they should begin by asking the following questions.

1. How can we relieve customers from activities they do not like to perform?
2. How can we enable customers to perform activities they cannot do without our service?
3. How can we make it easier for customers to do what they need or want to do?

In order to create break-thru innovations, a company must do more than just add an element or a single attribute to an existing service or product.  Unfortunately, most of the customer surveys businesses use today are trying to do just that, evaluate customer satisfaction based on current attributes. When you ask a customer what they want from their car mechanic they might say, “to pay less,” “to know my car is repaired and safe to drive, peace of mind,” or “to be quick and save me time by getting me back on the road again.”  In order to successfully innovate, a business must have a very clear and systematic understanding of what they do and how the customer benefits from it.  For example, if the bank offers a drive-through ATM, which is an attribute, the benefit to the customer might be that the bank helps them to save time. If the bank stays open until 10 p.m. they are meeting the customer’s need for convenient hours of service. There is often more than one relationship between the attributes and the benefits. For example, a drive-through ATM may not only offer time savings but also safety, or it increases personal mobility and freedom for handicapped customers who cannot walk to the bank. When you meet with customers to find out what they really want it is helpful to take notes, ask questions, and separate attributes from benefits. If an attribute is not a benefit to customers then you may need to consider removing it.

Link Attributes to Benefits

Linking (also known as laddering) product or service attributes to benefits and benefits to customer values helps companies sell products and services to customers. Customers seek attributes in products and services that bring them the benefits they value, and they will not pay for attributes that do not bring them the benefits they value.  The formula for customer value can be written as (Total Customer Benefits – Total Customer Costs) = Customer Value, or (B – C = CV). Refer to Figure 3.1 below for a list of customer-perceived benefits and customer costs.

Increase Customer Value

Below is a list of five tips for how organizations can increase value for their customers.

1. Evaluate your customer experience. Make it convenient for the customer to buy, and provide options in how the customer wants to buy and pay.
2. Focus on more than price. Reduce the price, or don’t, but provide something extra over the competition (this could be improved service, better attention, community, improved quality, warranties, and other add-ons to the product or service).
3. Collect customer data. Consider surveys, focus groups, observation, trends analysis, buying behaviour, needs/wants, and preference history.
4. Target your most loyal customers. Keep these customers by providing the benefits that bring them value.
5. Segment your customer base.  Different segments have different needs for different benefits.

Figure 3.1 Customer Benefits versus Customer Costs

Explore the Concept – Attributes, Benefits, Values

If you were to purchase a pair of new running shoes, which attributes would bring you benefits that you consider of value? Refer to Figure 3.2 below for a list of running shoe attributes that may bring customers value.

Product and service benefits are the features that are most important to the customer. More often than not these are conceptual and change according to the individual shopper or customer segment. Different types of customers will find different attributes valuable.  Some may like the no-tie laces (maybe they have problems with dexterity), while others may be more enticed to buy because of the recycled soles (maybe they have a concern for the environment).  A company will segment its customers and devise promotions to emphasize the benefits that may be of value to specific target groups.  For example, an older adult may like the extra cushioning and water-repellent attributes, and they may also hope to find arch support.  A business can create a customer segment for persons 60 years and older and survey these customers or potential customers to determine which attributes would bring benefits of value to that customer segment, then design products and services to provide those benefits.  Offering products or services customers do not need or want will mean the innovation will probably not be successful.

 

Figure 3.2 Running Shoe Attributes

 

Now imagine that this same company also offers three services with the purchase of this running shoe: 1) As a customer of the company you can join a loyalty program to collect points and when you have a certain number of points you will receive a discount on your next purchase.  2) This company also offers a running club for customers, in which customers join the group and go running with other avid runners each week. 3) There is a warranty for one year that covers any product defects or issues such as not fitting well or sole wearing out too quickly and they will repair the shoe for free.

Which of the above service attributes would be a benefit to you?  Which brings you added value? Which of these services would you consider of no benefit or value to you?  Why? Can you think of someone else who might enjoy the benefit of these services?

The Customer: The User, The Buyer, The Payer

First, you need to understand the customer roles – user, buyer, and payer. The user, buyer, and payer may not always be the same customer.  When you go to the store and buy groceries, you are the user, the buyer, and the payer because you will use the groceries, you selected the store to shop at, and used your credit card to pay.  Now imagine that you are buying groceries for your grandmother who asked you to purchase a few items on a list at a grocery store, and she gave you her credit card to pay for the items.  In this scenario, she is the user and the payer, and you are the buyer as you selected the grocery store to shop at. If she had sent you to a specific grocery store then she would also be the buyer, and you would be the lovable delivery person.

If you attend a marketing convention out of town as approved by your manager, the payer of the hotel room is your employer, the user of the hotel room is you, and the buyer of the hotel room is the marketing association since it determined where the conference would be and which hotels would hold rooms for convention attendees.

Another example; if you work in the procurement department at a hospital, your job would be to buy the materials needed by surgeons to conduct surgeries. The surgeons are the users, and the payer is the hospital department that Accounting charges when the invoice is paid.

A deep understanding of the three roles is crucial for innovation success. The user, needs the right materials, in the right place,  at the right time.  They need the materials to do the job they are supposed to do.  The buyer requires a catalogue of all the materials the supplier provides, the prices, and the uses of each product or service. They need to know about warranties, inventory in and out, repair or replacement options, time for delivery, etc.  They must also understand the needs of the users and communicate with them. The payer needs to know what was ordered and if the full order was delivered and which department is paying for the order. They also need to know the budget maximum and communicate this information to the buyer.

When a business tries to understand the customer’s needs they must be specific–they must understand the user’s needs, the buyer’s needs, and the payer’s needs since they might be quite different.  When a company defines a new service innovation the best innovations are those that simultaneously improve the job to be done for the user, the buyer, and the payer.

Aligning Service Innovations

Organizations must align service innovations with the company mission, vision, values and goals as well as with customer expectations. The Customer Star framework (below) helps executives and entrepreneurs align their decisions and actions around what customers really want.

Align with Company Brand

Companies need to align service innovations with the company’s mission, vision, values, and goals to retain existing customers and obtain new customers.  Sharing with customers the company mission, vision, values, and goals will help set customer expectations around product and service offerings and attract customers that want the company offerings.  There is not much sense in offering a sauna at a fitness center if the customers would not use it or if the mission of the fitness center is to offer a quick workout at a low price.  Adding a sauna might be expensive and there would be considerations around safety and hygiene, so not a cheap innovation to implement.  Adding a sauna would probably not bring the benefits the fitness center customers would want; therefore, they would not pay extra to use it, so the company may lose money on this innovation.  If the fitness center is a place that promotes luxury and various spa treatments as service offerings after a workout, then a sauna may be right in line with the company’s mission and vision, and it would bring added value to the customer segment that frequents the fitness center.

To confirm this assumption, the fitness center would need to conduct research through customer surveys or focus groups, for example, in order to gather customer feedback. Psychographics are all about understanding customers’ lifestyles, values, beliefs, and optimizing marketing to demonstrate to customers how the company can fulfill these psychographic variables by providing the benefits sought thus providing customers value.

The fitness center would also conduct a competitive analysis to see if saunas are offered at competitor locations in the area. The company would examine costs and expected returns on investment as well as internal and external strengths and weaknesses, opportunities, and threats (SWOT).  The company might conduct a PEST analysis as well to determine if this innovative idea for a new service offering will be successful. After the research is complete and the results analyzed the company management team would decide if this new service innovation is feasible.

Align with Evolving Customer Expectations

Key areas of customer service have evolved, including the emergence of analytics, personalization, and employee engagement. Companies that thrive in an era of rapidly evolving customer expectations need to align their initiatives accordingly. It’s about going beyond short-term goals to building a self-sustaining customer-centric organization. The companies below are not only part of the service industry — they are also shaping its future. By extension, these and other companies like them are changing the way we live our lives.

1. Facebook, Twitter, Yelp, et al.  Social media sites should be recognized for their role in changing the service industry. Customers are increasingly turning to online outlets to share reviews, ask questions, and solicit feedback from brands that play a role in their lives. These interactions provide companies with an opportunity to learn more about their customers so they can better tailor their services to consumers’ needs.
2. Motif Investing. The personal finance industry doesn’t exactly have a reputation for innovation. Motif Investing is the exception that proves the rule. The company is making investments accessible to a broad segment of the population by creating an investment structure that is affordable and easy to understand.
3. Noma. The restaurant has both driven innovations in the food industry and capitalized on them. Led by world-renowned chef René Redzepi, Noma embodies the farm-to-table movement by utilizing local and wildly sourced ingredients, avoiding GMOs, and emphasizing quality at all costs. In the process, it’s put Nordic cuisine on the international map.
4. City CoPilot. More and more individuals and companies are enlisting personalized service from concierge companies—and not just when they’re staying in a hotel. City CoPilot and other innovative concierge companies have moved these services beyond the hotel lobby. Whether clients need assistance with luggage storage and delivery, package acceptance, airport transportation, finding discounted tickets to tours and attractions, or something else entirely, this new brand of concierge is here to make people’s lives easier at all times.
5. UberEATS. Uber has already transformed the service industry with its innovative approach to transportation, but the company isn’t stopping there. It’s now attempting to disrupt the food delivery market with UberEATS. The company has more opportunities for distribution than any other business in the market, and thanks to its pre-existing name recognition, they have had an easy time identifying partners in the restaurant industry. It’s a winning combination that’s threatening even the companies that have long sat at the top of the food delivery chain. 

The service industry entails a vast variety of services ranging from food delivery to digital investing tools. Still, these companies all share something in common. They’re innovating existing services and transforming the country’s economy in the process.

Alignment Tool: The Customer Star Framework

The Customer Star framework created by Stefan Michel helps executives and entrepreneurs align their decisions and actions around what customers really want. In order to successfully implement any service innovation, a firm must make choices in regard to each point of the customer star. Those choices must then align and support each other.  When you apply the Customer Star Framework you can begin with any of its points. Service innovations may fail when the eight dimensions of the customer star are not in alignment. Refer to Figure 3.3 for an example of the Customer Star Framework.

Figure 3.3 Customer Star Framework by Stefan Michel

When using the Customer Star Framework to check service innovation alignment, a company must ask the following questions about the eight dimensions.

1. Customer Segments. Which current and future segments can we identify in our market?  Which of these segments are we interested in? How do we serve different segments differently?
2. Positioning. What does our brand stand for?
3. People. What are the employee skills required? What is the leadership style and how does it shape the culture in the organization?
4. Information/IT. How do we use the Internet and other IT systems for gathering, storing, and disseminating data? Which analytics do we use to convert data to insights?
5. Products. How do we innovate, manufacture, and distribute our products? How do we customize our products to each customer’s needs? How do we bundle our products with services?
6. Operations. How do we design and manage our processes in all phases of the customer relationship? How do we link customer-facing processes with back-office work? How do we handle variability in terms of customer needs and demand/supply cycles?
7. Partners. In addition to suppliers and distributors, which partners are essential to serve your customers?  What is our organization’s role in providing customer value in the partnership?
8. Profit Model. What are our major revenue drivers, and what are our major cost drivers? How sensitive is the profit model with respect to fluctuating demand and costs?

For example, if you operate a 4-star resort then you need to be sure that your products are of high quality, your employees understand how to provide excellent customer service, and the services you offer at the resort are what your target customers want, thus, will pay for.  If you put a fast-food restaurant in a prestigious, high-class resort, the customers may frown upon it, as they want fine dining and they have expensive tastes.  You may need to go back and determine your resort’s positioning dimension.  If you position the company as prestigious then you need the other dimensions to align with that in order to obtain and retain the customers in the segment you are seeking.  Some brands that are thought of as prestige or luxury brands include Apple, BMW, Gucci, Ritz-Carlton, Tiffany, Rolex, and Cartier. If your resort is to be considered a luxury or prestige resort then you would want to align the eight dimensions accordingly, otherwise, your service innovation may fail to meet customer needs and expectations.  On the other hand, if you operate a resort that is considered a fair-price, economy-class resort, then you would position your resort that way in your marketing efforts and you would serve the needs of the customer segment who would be spending their money in this type of resort.

Issues Outside The Company

Business challenges and customer dissatisfaction are often due to problems, for which the company is NOT responsible, and to solve them, managers will need to think beyond the firm. Organizations may need to partner with external firms to solve problems stemming from the external environment, they may need to adapt processes to meet new government regulations, or they may need to change their business model in order to remain relevant to changing social trends and customer buying behaviours.

For example, many international students who wish to attend college or university in Canada are told by recruiters from their home country that they can come to Canada and work at the same time they attend school.  When the students arrive they find that it is very difficult to be successful in their studies when they are working 30, 40, or 60 hours per week.  Many need the income to pay the bills, they may not have a place to stay, or even understand how much living in Canada costs. Students end up failing many courses due to a lack of time to commit to schoolwork, becoming depressed, and some end up spending far more money than they budgeted for on college course fees when they have to retake courses they failed. While this may not be an issue directly related to the specific Canadian college they attend, it is probably an issue the Canadian colleges and universities need to address with the recruiting agencies in foreign countries.  What might the colleges do to improve this situation? The colleges might implement an orientation course that all international students must take before they arrive in Canada or before they enroll and pay fees at a Canadian institution.  This would set the expectations for students before they spend their money as well as acclimatize students to Canadian culture and Canadian college expectations. Can you think of other possible solutions?

Another example might be a retailer that is always out of stock with specific items.  Customers may become upset or dissatisfied with the retailer when the items are not in stock.  This problem may be an internal issue pertaining to incorrect ordering, but what if the issue is with the supplier?  The retailer will have to decide if they need to switch suppliers, but what if they are locked into a contract, what then?  During COVID many products were in short supply, including bicycles, toilet paper, hand sanitizer, refrigerators, and kayaks.  Production shutdowns sent the price of lumber sky-high. Months spent quarantining led homeowners to spend more time outdoors, some taking on more do-it-yourself (DIY) renovation projects. And the fear of the unknown led to hoarding and stockpiling.

Nearly two years after the pandemic began, the global supply chain mostly stabilized, but there was still one industry where shortages continue to abound: semiconductor chip manufacturing in the auto industry was one of the hardest hit. A semiconductor chip, also called a microchip, serves as the “brain” of modern electronics. With every new model, cars and trucks feature bigger infotainment systems and a host of other high-tech car safety features. Each of these technology-packed features relies on semiconductor chips. Building semiconductor chips is an extremely complex, expensive, and time-consuming process. For that reason, there are only a handful of chip manufacturers in the world, and all of those manufacturers were currently operating at full capacity.

You may have found it hard to visit your favourite retailer, see a doctor, or get into a restaurant during COVID.  This was not the organization’s fault or problem, but a larger national and global problem.  Retailers, restaurants, and other service companies must abide by government health regulations and they took the health safety actions they were told to take.  Some retailers and restaurants began offering services such as pickup, delivery, and online ordering with pickup in the parking lot.  You could order groceries and pull up to the grocer’s location and the staff would load your groceries into the trunk of your vehicle.  Some companies already had those services in place which made it easier and quicker for them to adapt to COVID health regulations. These were some of the service solutions retailers came up with while they were NOT allowed to serve customers in-store or in-person or were restricted on the number of patrons they could have in the physical store at one time.

End-of-Chapter Exercises

 

1. Changes Impacting the Service Sector. Research one of these companies and explain how this company is addressing the changes impacting the service sector: Bank of Nova Scotia, Canadian Tire, PepsiCo, McDonald’s, or IKEA. Does the research relate to this chapter’s content?  If so, what does it say?
2. Service Innovation Examples. Reflect on the statement, “Many service innovations involve employing digital and technological innovations to offer a satisfactory customer experience, or they aim to simplify existing customer processes to enhance ease and speed. Service innovations might also offer customers added value through designing brand new services or programs, or through coupling services with product purchases.”  Use the Internet to locate examples of each of the four types of service innovations mentioned in this statement. Share your findings with your class and professor.
3. Walmart Service Innovation. Conceptualize five ways in which Walmart could innovate its customer service offerings.  Share your thoughts with the class and/or professor.  Do your ideas align with Walmart’s mission, vision, values, and goals?  Do your ideas align with the customer segment that shops at Walmart?  Do you think your ideas will be successful? Why or why not?
4. Nordstrom Customer Insights. Nordstrom is known for customer support excellence. Search the Internet to find information about how the business is using AI-powered analytics and customer insights to transform its digital approach.  Discuss your findings with the class and/or professor.
5. McDonald’s Customer Star Framework.  Try applying the Customer Star Framework for McDonald’s and start with Products=Fast Food and Profit Model=Franchised and Labour Costs=Low.  Fill in the other points on the Customer Star Framework as you can and determine with a partner, your class, and/or professor. Determine if the Customer Star dimensions are aligned. You may wish to review the LinkedIn Learning module, Service Innovation by Stefan Michel who created the Customer Star Framework (you may require a subscription).
6. User, Buyer, Payer Scenarios. Come up with three (3) different sales scenarios, one where you are the user,  buyer, and payer. One in which you are only the payer and someone else is the user and buyer. One in which you are the user and someone else is the buyer and payer. Share these scenarios with your class and professor and see if they agree with your user, buyer, and payer assignments within each scenario.
7. Debate Service Safety. Read this article about how there may be safety issues with taxi cab drivers operating mini-convenience stores within their cabs.  Discuss with a partner whether or not you agree with the issues identified in the article.  Should there be regulation on this service? Why might this be dangerous? How might this bring added value to customers? Would you want this service if you were paying for a taxi cab ride home from a night out? Share a brief summary of your discussion with your class and professor.
8. Services Customers Value. Assume you own a Hair Salon, besides cutting hair, what other services could you offer customers that would be a benefit they would value?  Consider the value for different customer segments.  Discuss with the class and/or professor.

Hair Salon

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Business Process Improvement

Process innovation is probably the least attractive form of innovation. It is the combination of facilities, skills, and technologies used to produce, deliver, and support a product or provide a service. There are many ways business processes can be designed or improved. Process innovation can include changes in the equipment and technology used in manufacturing (including the software used in product design and development), improvement in the tools, techniques, and software solutions used to help in the supply chain and delivery system, changes in the tools used to sell and maintain goods, as well as methods used for accounting and customer service.

Good business processes enable companies to satisfy both customers and employees. Good business processes can drive reliable and consistent results and support company growth. A business process is a sequence of steps progressing toward a business goal. This sequence of steps can be clearly depicted using a flowchart and may also be referred to as a business method.  Developing and implementing business processes can help a company improve efficiency, consistency, and quality. It can also reduce costs and risks. Business processes occur at all organizational levels and some are visible to customers, while others are not.

Types of Business Processes

1. Management Processes: The processes that plan, organize, coordinate, and control all the functions of the business.
2. Operational Processes: The processes that constitute the core business of the organization and create the primary value stream.
3. Supporting Processes: The processes that support the core processes. They help the business create an environment where the core processes can work better. Examples include accounting and technical support.

Processes are created to support a company’s brand, function, values, and objectives, and may contain sub-process (such as a procedure or checklist). A business procedure is like a step-by-step recipe for how to complete a task and may be considered a simple type of process. A complex process can contain multiple procedures. For example, a procedure for showing a guest to their hotel room is part of the larger check-in process. Companies train their employees to follow processes and apply procedures so as to create high-quality and consistent outcomes for customers. An excellent example of a company using processes to streamline operations and maintain consistency and quality is McDonald’s fast-food restaurant.  McDonald’s operating processes would include taking orders, making food, and serving it to the customers.  The processes for making fries, burgers, and pies are each documented, and employees are trained on these processes.  There are specific, documented, procedures for cooking food items. Machines are used to cook and warm food items and timers are used to enable employees to cook each burger or Egg McMuffin exactly the same way, each time, for every customer.

A simple business process might include the steps an employee follows to take a pizza order over the phone or the steps a college registrar’s office takes to enroll an existing student in a 2nd-semester course.  More complex processes might include the steps required to purchase new medical equipment for a hospital, especially if a new vendor must be contracted, or the steps the Human Resources department takes to hire new employees, which can include multiple steps such as accepting the offer, completing online forms, and reviewing the forms. Human Resources (HR) processes include several different processes and procedures, such as human resources planning, recruitment and selection, hiring and onboarding, performance management, employee development, managing employee leave and holiday requests, compliance with HR regulations, developing HR policies and procedures and disciplinary processes, succession planning, employee offboarding, and redundancy.  Most businesses also have a customer success process which may include a customer onboarding process, a customer problem-solving process, and a customer feedback process. Businesses have many more processes throughout their organizations such as sales and marketing processes, business operational processes, business finance and accounting processes, and more.

McDonald’s is one example of a company that has automated its operational processes, as we can observe in its food preparation processes. Business process automation is a technology-driven strategy to automate a business process in order to accomplish it with minimum cost and in a shorter time. It is extremely useful for both simple and complex business processes.

Some of the benefits of business process automation are:

• Achieving greater efficiency
• Reducing human error
• Adapting to changing business needs
• Clarifying job roles and responsibilities

New employees have a good chance of job success once they learn the business processes. Processes in the kitchen at a restaurant might utilize ingredients, utensils, cooking equipment, recipes, etc. Processes in an office might utilize computers, software, office space, people, documents, etc. Processes in a paper factory might utilize people, machines, safety equipment and procedures, raw materials such as pulp/paper, etc.  Most big companies have hundreds of interconnected business processes. Knowing how to design, manage, and improve business processes gives companies the power to manage and grow the business.

Students may be frustrated when processes are not clearly defined

Good business processes can improve customer satisfaction while missing or badly designed processes can have a negative effect on customer satisfaction. Assume you are a student at a college and you wish to add another course to your schedule, which includes paying additional fees. If there is a good process in place, all employees and computer systems you interact with consistently guide you in the same direction in order for you to complete the process of adding and paying for an additional course. If the process is not clearly designed or it is missing, then employees will be confused and may have their own personal way of doing tasks and systems may not be designed for self-service tasks that enable you to add a course to your timetable.

Business Process Requirements

A good business process meets the following requirements.

1. Provides clear instruction
2. Answers frequently asked questions
3. Teaches new things
4. Measures success
5. Provides corrective actions

Why do bad business processes exist?

1. Assumptions. Often companies assume they know what customers want. It is important to challenge these assumptions through research and analysis.
2. Ambiguity. Employees are uncertain of the process. Maybe the process needs more clarification.
3. Miscommunication. The process may not be communicated to employees and employees develop their own processes.
4. Misalignment. Advertising and actions are not aligned with the goals of the process.

Since processes are interrelated, each process should consider its relationships with other processes. Good business processes always need to be looking forward and require periodic review and revision to keep up with changes in the internal and external business environments.  If a company experiences massive growth, will the processes still be effective and efficient?  If a process is good at supporting 20 customers, does it still work when supporting 200 customers? Some processes cannot be changed significantly due to a lack of availability of technology and tools. Maybe the steps in the process are not the problem, perhaps the company tools and technology need to be improved. Companies need to ensure their processes are built for both present demand and future growth; that processes are scalable.

Lack of a good process can lead to inconsistency, time loss, employee frustration, customer frustration and dissatisfaction, lost revenue, etc. So you can see why it is important to have good processes in place and ensure staff understands these processes and apply them consistently.  Without a good business process company growth and success are difficult to achieve.

Not only is it important to have processes but it is also equally important that these processes be effective and efficient in reaching the goal.  If the goal is to add a course to your college timetable, then the process and procedures you follow to do that should help you obtain that goal (effective) and should do it in a timely and user-friendly way (efficient).   When processes are created with these things in mind, they increase employee effectiveness and efficiency, maintain consistency and quality, and improve customer satisfaction. Customers continue to shop with a business because of reliability in product or service quality, price, design, etc. Employees become good at their jobs because they follow the business process they were given.  Once good processes are established at one business location, the organization can adopt the same processes at multiple locations (just like McDonald’s does).

Cow Path Theory

Figure 4.1 Employees follow the Cow Path when they should be creating a new, more efficient path

The Cow Path Theoryis a theory that many organizations have processes they have been following for years and may not notice that these existing processes may no longer be efficient or effective.  New employees follow the processes they are told to follow and often without questioning them because new employees don’t want to make a fuss or they feel the process must be right because someone in the company developed it and everyone has been following it for years. Existing employees may continue to follow the old, outdated processes because they are used to them and don’t wish to put in the effort to learn something new, or they don’t feel it is their job to question the processes that have been in place for many years. Refer to Figure 4.1 to see how a new path much be a more efficient path for employees to take.

Basically, when leaders follow the cow path they are just doing things the way they have always been done without making changes to it. But there are exceptions to this rule. Just because something has always been done a certain way doesn’t mean that it can’t be improved upon or even replaced with something better. Think about how many times you’ve ordered a pizza. It’s not as though the process of ordering one has changed much in recent years, but it is now more efficient and effective than ever before.  A problem with “cow paths” is that they are so common that no one notices them. The more common something is, the less likely it is that anyone will notice when it’s being done wrong. This means that people who are in a position to change things have little incentive to do so. Cow paths are the result of an unhealthy work environment, where there is no accountability for poor results, and where people are rewarded for failure. Cow paths are usually difficult to detect because they tend to be systemic and non-discriminatory. “Don’t pave the cow path” often refers specifically to businesses that create their own way of doing things in order to innovate and improve on what has been done before.

Process Improvement Steps

The first step in improving any process is setting a goal, then the next step is measuring your progress toward that goal.  If there is an existing process in place then you must ask the following questions. Is the business process currently effective in achieving the goal it was designed to do? Is the original goal still the goal to achieve now? Is the original goal efficient?  If the answer to any of these questions is “no” then there may be an opportunity to improve the business process.

Play the “Business Process Improvement Tutorial for Beginners” YouTube video below for an introduction to business process improvement. Transcript for “Business Process Improvement Tutorial for Beginners” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Measure the Right Things

Before a process can be improved it must be measured so the company will know if the changes have made a difference.  For instance, you will want to know if the changes in results were due to something you did, or something else, or just pure chance.  There is a 50/50 chance that this year will be better than last year even if you make no changes.

Most process improvements have one or more of the following goals: improve quality, decrease lead time (the time between the initiation and completion of a production process), or decrease costs.  Should each goal be measured? Which goal should get priority?  It is difficult to achieve all three goals at the same time.  For example, if a company reduces costs, that may also reduce quality or something else that is important. If time is reduced, that may increase costs.  A company can reduce costs by reducing quality, while higher quality products may take a longer time to produce.

Never try to measure just one number without context.  For example, if sales revenue has gone up, that seems good, but what else is happening?  Was there a sale, were employees reducing prices so they could sell more and gain higher commissions, or has something else affected revenue?  If customer complaints have increased, at first this seems bad, but what if employees have just gotten better at listening to customers and reporting complaints, or maybe you implemented an online complaint process that has resulted in customers being able to submit complaints more easily and this has contributed to the rise in complaints. So never measure just one number.

If you find out that your school’s student satisfaction score is 5% worse than another school you must question what “worse” really means, and whether or not 5% is really significant. Maybe your school is better at other things and worse at one thing.  Maybe it is just that this year your school was under construction and that affected student satisfaction negatively, but usually your school has much higher scores.  Take measurements as a starting point to asking the question “Why?” (Why are these numbers as they are?). This will help you understand the causes of the lower numbers or scores so you can begin to take action.

Implement a Process Improvement Plan

Given how process improvements deliver a range of organizational benefits from better communication to increased profitability, it’s essential to know how to implement a process improvement plan. Listed below are the steps to do so.

1. Identify the improvement opportunity.  Map the current process. Identify the pain points (things that are not working well).
2. Obtain stakeholder buy-in. Clarify stakeholders’ roles and degree of involvement with the process change. Explain the rationale for change.
3. Design the process improvement plan. Determine the changes required to improve the process and decide how you will measure the effectiveness of the changes, evaluate any risks, and identify how the changes will affect the customer experience; for example, introducing a technical solution to streamline the workflow helps, particularly if the solution automates many of the process steps. Transforming processes affects an organization to varying degrees depending on the extent of the changes. If the process improvement is larger than small adjustments affecting a single team, project planning may be needed with a full project plan incorporating the five project management process groups. This includes identifying budgets to cover costs like training and any additional resource requirements needed to execute the changes.
4. Test the changes. Often when designing new processes a company might test in a single department at a single location before implementing the changes in all departments at multiple locations, or before integrating a new technology system with an old technology system.  Take time to test thoroughly and compile measurable results for analysis.  Make adjustments as needed, then when you are sure the new process works according to plan then you can roll it out across the organization.
5. Monitor and optimize. Even after thorough testing, process improvements require daily monitoring in the early weeks of a rollout to catch any issues that may have been missed during the test phase. The monitoring should compare the results of the improved process against the goals identified at the start of the project.  Collect more feedback from stakeholders and continue to optimize until you have met or exceeded all benchmarks for the process.

Once a company improves a process, the reality is that it must review the process again in the future. Business goals, market forces, and new technologies evolve, making established processes and procedures inefficient or obsolete. Rather than execute a big project whenever a change is required, most organizations adopt an approach of small, iterative, improvements that happen routinely over time.

Tools and Techniques for Improving Processes

The tools and techniques most commonly used in process improvement are:

• Problem-solving methodology, such as DRIVE
• Process mapping
• Process flowcharting
• Force field analysis
• Cause & effect diagrams
• CEDAC
• Brainstorming
• Pareto analysis
• Statistical process control (SPC)
• Control charts
• Check sheets
• Block Diagrams
• Flowcharts
• Bar charts
• Scatter diagrams
• Matrix analysis
• Dot plot or tally chart
• Histograms

The most commonly used business process diagramming tools are Business Process Modeling Notation (BPMN), Data Flow Diagram (DFD), and the Unified Modeling Language (UML).  BPMN (Business Process Modeling Notation) is a graphical method of representing business processes within a business process diagram. ​BPMN diagrams help the whole team see the flow of the process.  For example, the process improvement team may be a cross-functional team consisting of various stakeholders, such as technical personnel who manage Information technology, managers responsible for the process as well as managers of other departments who may be affected by the process change, employees who apply the process, and possibly users (customers, clients, students).

Review Figure 4.2 below of a partial BPMN diagram for a Fast Food Restaurant, Customer Order Process.

Figure 4.2 Partial BPMN Diagram Fast Food Order Process

The BPMN above diagrams the process for the current way the customer order process happens (current state).  There are many ways to create this diagram and before starting to diagram the business analyst must first gather information from the stakeholders who implemented, manage, and use the process so as to gain an understanding of who does what, when things get done, how things get done, what is necessary to do and when one step depends upon another (triggers).  Once that information has been gathered and analyzed, the business analyst diagrams the process and then gains confirmation and approval from the stakeholders that the diagram does indeed reflect what is currently happening.

After diagramming and gaining an understanding of the current state of the process (the way things are done),  the business analyst will analyze the process to determine if improvements could be made. They will question the stakeholders on pain points, what works, and what doesn’t, and ask them to share their goals for improvements. The business analyst will then diagram a future state process (what the process will be after the improvements are implemented) and again, gain approval for the proposed changes.  Then the changes are implemented, first on a small scale or in one location only, to ensure all works as planned.  Maybe a few adjustments are made, then the new process is implemented fully.

In the example above you see the partial process you see is diagrammed in a pool called “Fast Food Restaurant Customer Order Process”  Each role gets its own lane (swimlane) and each role is an actor (person or system that is part of the process). The customer can be diagrammed in their own pool or within the company pool.  If we follow the process flow we see that the process begins with the customer (start symbol), then the customer makes a decision (Xor gateway) to either use the drive-thru or go into the restaurant to eat.  After that, the order is placed with the corresponding actor (employee) who then enters the order into the enterprise resource system (ERP) and collects the payment from the customer.  The order and the payment details are sent to the ERP (diagrammed in its own lane (swimlane)).   After that, the process flow comes back together (convergent gateway) and the customer waits for their meal (timer). What do you think the next step would be? That’s sort of a trick question because many things are happening while the customer waits. There are actually quite a few more steps because the kitchen staff would need to prepare the meal, a staff member would get the drinks/fries, a staff member would package the meal, and a staff member would deliver the order to the customer either at the drive-thru or front counter.  These tasks may be done by the same staff member or several staff members. You see there are lots of things to think about when diagramming a business process.  Learning how to diagram processes is a course in itself, but don’t let that stop you from giving it a try.  Check out the chapter exercises below for some ideas.

Process Improvement Methodologies

Process improvement is so important to business success that a number of methodologies have developed over time to address this key concept. Listed below are some of the most common process improvement models.

1. Six Sigma. One of the most famous process improvement frameworks is Six Sigma. It is a set of techniques designed to make business processes more effective and efficient. In addition to establishing a culture dedicated to continuous process improvement, Six Sigma offers tools and techniques that reduce variance, eliminate defects, and help identify the root causes of errors, allowing organizations to create better products and services for consumers.  General Electric, one of the most successful companies implementing Six Sigma, has estimated benefits on the order of $10 billion during the first five years of implementation. GE first began Six Sigma in 1995 after Motorola and Allied Signal blazed the Six Sigma trail. Since then, thousands of companies around the world have discovered the far-reaching benefits of Six Sigma.
2. Kaizen. When applied to the workplace KAIZEN™ means continuing improvement involving everyone – managers and workers alike. This methodology originated in Japan, and aims to eliminate all waste from process flows to achieve a high level of efficiency and productivity. Kaizen is known for its team approach where everyone in the organization shares ideas and works together to keep improving every area of a business. If mistakes occur, the goal is to learn from them as part of the cycle of continuous improvement.
3. PDCA (plan-do-check-act). Plan-do-check-act (PDCA) outlines a four-step scientific approach spelled out in its name. First, identify the problem or opportunity and the improvements you hope to achieve. Once a potential solution is identified, test it safely with a small-scale pilot project. Then, analyze if the changes had the desired impact. Finally, you take action based on your data analysis.
4. BPR. Business process re-engineering (BPR) is a framework that tackles process improvement at scale. Rather than address a small component of an overall workflow, BPR attempts to address issues and eliminate unnecessary steps by holistically redesigning an entire process from end to end. The changes can be so substantial that a change management plantypically accompanies the use of BPR. 
5. Gap Analysis. A gap is a problem, issue, or challenge, and could be an opportunity for improvement. Gap analysis compares two different states of something, the current state, and the desired state. It is mainly used to assess where a company or process is today (current state), where it needs to be in the future (future state), and how the gap between current and future states can be closed. Gap analysis is also known as need analysis or needs assessment.  You can implement this methodology to confront many types of gaps such as gaps in operational processes, product features,  profitability, and labour shortages.
6. Process Mapping. A useful approach that applies careful analysis and a visualization tool to address process issues — or to create a new workflow from scratch — is process mapping. In this method, you create a document that details the steps in a procedure, usually captured in a flowchart. The document allows you to see the entire process and identify areas to change. It then serves as a reference tool for subsequent process changes, or for writing a runbook. 

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Definition of Sustainable Innovation

What is meant by sustainable innovation? Sustainability is the capacity to endure in a relatively ongoing way.  Sustainable innovation means that companies seek out ways in which to sustain continuous innovation/improvement for company growth, competitive advantage, increased market share, etc. The right company structure can help make innovation a sustainable practice. Organizations cannot afford to put resources (time, people, money) into innovating only to have these innovations fail.  Companies structure for innovation to help sustain, or maintain, ongoing innovation in an effort to stay competitive in their markets. Allocating resources appropriately, ensuring feasibility, and reporting a return on investment are important steps in creating a sustainable innovative business environment.

The term sustainability is also used to refer to environmental sustainability.  Environmental sustainability focuses on acting in a way that ensures future generations have the natural resources available to live an equal, if not better, way of life as current generations. Many innovations today are focused on solving environmental issues. The Sustainable Development Goals (SDGs) of the United Nations are broad and ambitious, calling on all countries to make tangible improvements to the lives of their citizens. The ‌goals (shown below in Figure 5.1) ‌encompass social, environmental, and economic aspects.

Figure 5.1 United Nations Sustainable Development Goals

Our world has grown increasingly complex, and it’s no longer enough for individual organizations, companies, or even governments to apply superficial fixes of their own making to chronic problems. Solutions that are not inclusive or do not consider root causes are by definition short-sighted. Short-sighted solutions may not continue to work over time. Societal issues like poverty, social inequality, racial injustice, and food insecurity, to name a few, require a new kind of collaboration between the business, the nonprofit, and the government sectors.

Consumers today care about the world they live in and the people of the earth and businesses need to care as well. The term, Triple Bottom Line is often used to refer to the concept that businesses need to not only be concerned with making a profit but also be concerned about the manner in which they do so.  The three parts of the Triple Bottom Line include considering the impact that business operations and innovation have on societal, environmental, and financial well-being; in other words, people, planet, and profit (respectively).  Consumers put pressure on companies to do good; good for their customers, communities, and investors; good for the planet by reducing pollution or innovating to support the environment and communities; and after doing these things, consumers feel that it is then acceptable for the company to make a profit.  Some business leaders think this is a terrible idea often because operating a business with sustainability in mind usually increases costs.  With that said, many consumers are willing to pay a little more for pet-friendly, environment-friendly, and people-friendly products and services. You may have noticed that many innovations that are good for the environment are also good for people and therefore are supported by the people and will generate a profit for the business in the long run.

Sustainable Innovation Collaboration

The Ivey Innovation Learning Lab is a new approach to learning that builds unique insights from leading academic thinking and peer-to-peer dialogue with fellow leaders. Participants come from business, government, and academia. The Lab consortium knows that the way in which people live and work is being profoundly disrupted. The knowledge and tools of the past will not necessarily help navigate the future, nor solve the urgent and complex challenges facing society and business.

Play the “Shaping the Future of Innovation”, Ivey Business School YouTube video below to learn about the Ivey Centre for Building Sustainable Innovations. Transcript for “Shaping the Future of Innovation” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Difference Between Sustainable Innovation and Traditional Innovation

Both traditional and sustainable innovation involves developing new products, services, or processes. Three core features set sustainable innovation apart.

1. Sustainable Business. Sustainable innovation intentionally aims to “meet the needs of present generations without compromising the needs of future generations.” It requires businesses to actively incorporate issues such as those defined by the United Nations Sustainability Goals. Companies that engage in sustainable innovation think long-term, about aligning with consumer demands for fair working conditions, environmentally friendly processes and products, improvements in communities, etc. These companies understand that consumers evaluate how ethical and sustainable an organization is, and base their decisions on whether or not to support a business on these evaluations.
2. Corporate Culture. Unlike traditional innovations that are mostly performed within a separate R&D department or unit, sustainable innovations are likely to be more successful when they are deeply embedded in the firm’s culture. When sustainability is not part of the corporate culture, the pursuit of short-term profits will suppress sustainability-oriented creative ideas without giving them sufficient time to mature. Sustainable innovation is disruptive because it can result in better business models, improved processes, streamlined resource flows, reduced waste and cost, and create new market segments entirely, making it harder for corporations to defend the status quo.
3. Systems Thinking. Sustainable innovation is more collaborative because it is a cross-discipline concept. Companies must reach out across industries to unlock the value of sustainable innovations. It changes the corporate “value chain” to more of a “value web.” Companies consider how their innovations affect various stakeholders, the environment, and society.

Facilitating Change Through Sustainable Innovation Design

Approaches to Sustainability

The Institute for Manufacturing at the University of Cambridge crafted a chart of increasingly complex approaches to sustainability for designers.

1. Green Design. Green design is the most basic level as it describes design efforts that optimize individual aspects of product design, for example, replacing virgin plastics with recycled plastics.
2. Eco-Design. The next level is eco-design because it goes beyond single materials and focuses on the life cycle of the entire product. For example, selecting low-impact material choices, optimized manufacturing, efficient distribution, and optimized product lifetime.
3. Sustainable Product Design. This approach added aspects of social fairness to the design equation, so it is only at this point that design can be considered to address the triple bottom line.
4. Design for Sustainability. This is the point where design no longer focuses only on design for products but rather a systemic lens is being applied. Design for sustainability includes four domains: design for symbolic and visual communications, design for material objects, design of activities and organized services, and design for complex systems or environments for living, working, playing, and learning. Issues of democracy and justice are also incorporated into this lens.
5. Transformative Design. Includes all of the above and adds the design of entirely new ways of thinking about the human experience in the future. This is often achieved through creating solutions that highlight future ways of living.

Examples of Sustainable Innovations

Eco-friendly Biofuel. Through sustainable innovation, companies can invent and offer novel products or services that directly contribute to achieving sustainability. For example, Bio-bean, a British startup, developed an eco-friendly biofuel made from coffee waste to help power London’s double-decker buses. Bio-bean also upcycles spent coffee grounds into eco-friendly products such as coffee logs and coffee pellets—alternatives to carbon-heavy fuels such as coal briquettes and imported wood logs. Bio-bean is using material previously considered waste, contributing to a circular economy while generating approximately $10 million (USD) in annual revenue in 2020.

Fairly-sourced Smartphones. Sustainable innovation is not only about inventing novel products or services. Firms can also innovate sustainably while offering existing products or services when they change their processes. Process changes can occur in many areas, e.g. design, production, marketing, and even HR. For example, Fairphone, a Dutch social enterprise, offers consumers fairly-sourced smartphones. Unlike bio-bean, which created novel products (i.e., logs and pellets made out of coffee waste), Fairphone products do not have any new technical features. Instead, Fairphone dramatically changed the smartphone production process to make it more responsible and sustainable. They use recycled and responsibly mined materials and provide their workers with fair wages and good labor conditions. Because approximately 80% of the emissions of a smartphone come from its production, Fairphone designs its phones to last. They have a modular design which makes repairs and upgrades easier, thereby significantly reducing e-waste.

Smog Vacuum Cleaner. Daan Roosegaarde is the mastermind behind the world’s first smog vacuum cleaner. The Smog Free Tower measures almost 23 feet high (7 meters) and sucks in polluted air, cleaning it through a process of ionization before releasing it again. At its peak performance, the tower cleans 30,000 m3 of air per hour.  Thanks to Roosegaarde’s design, you can even wear rings made from the compressed smog particles collected from the tower. By buying and wearing a Smog Free Ring, you’re contributing to over 10,700 square feet (1000 square meters) of clean air. The project has garnered a lot of attention since its inception, winning multiple awards. Recent tower campaigns have been launched in South Korea, China, the Netherlands, Mexico, and Poland.

Solar Glass. Solar glass could change the way we create homes and commercial buildings. Researchers at the University of Michigan are developing solar glass, a sustainable engineering project that has generated a lot of buzz in recent years. Just as the name implies, solar glass would be able to capture and store solar energy. According to the research team, 5 to 7 billion square meters of usable window space exists, enough to power a full 40% of US energy needs using solar glass.

Edible spoons

Edible Cutlery. A green alternative to plastic cutlery, Bakey’s edible alternative comes in three different flavors—plain, savory, and sweet. They’re 100% natural and will biodegrade if not consumed.

Green Buildings. Leadership in Energy and Environmental Design or LEED® is an international symbol of sustainability excellence and green building leadership. LEED’s proven and holistic approach helps virtually all building types lower carbon emissions, conserve resources, and reduce operating costs by prioritizing sustainable practices. Canada is one of the top territories in the world for LEED certification. Did you know that buildings generate nearly 30% of all greenhouse gases, and 35% of landfill waste, while consuming up to 70% of municipal water?

Sustainable design continues to evolve with new technology and understanding. Architects and designers are thinking into the future and creating buildings based on a broader concept of sustainability; one that embraces more than improved energy performance. With building design having a profound impact on the environment, its occupants, and the economy, architects and designers have a unique ability to impart real positive change.

The green building movement is challenging our community, architects, engineers, building owners, lenders, appraisers, and others, to think differently from their predecessors, or even from themselves. In less than a decade, the green building movement changed the entire building industry and manufacturing industry for construction products and equipment. With the increased demand for green and healthy materials, efficient equipment, and fixtures, green buildings became cost-effective and achievable.

Water Capture. Some innovations are the result of using nature as a design mentor (biomimicry), for example, recent advancements in fog catchers or netting systems in arid climates help communities capture water from the morning fog and were modeled on an understanding of how the texture on the Namibian Desert Beetle’s forewings captures moisture so efficiently. The Biomimicry Institute provides learning journals that can help designers create a strong foundation for further learning. They have also created an amazing website called “Ask Nature”.

Sanitized Toilets. Almost half the world’s population, 3.5 billion people, have no choice but to use unsafe sanitation facilities. “As a result, half a million children under age 5 perish every year from diseases like typhoid, diarrhea, and cholera. Many more people become sick, resulting in an estimated US$223 billion a year in health costs and lost productivity. Today, over 25 of the breakthrough waste-processing core technologies that make up a reinvented toilet, all developed in the past decade, are being licensed to more than two dozen companies for production, testing, and commercialization. Among them are reinvented toilet designs by the Swiss engineering firm Helbling and the Nano Membrane toilet developed at Cranfield University. The Omni Processor has been tested in the field in Senegal, China, and India, and there should be at least six similar systems operating in these countries by the end of the year. Pilots for reinvented toilets are also underway in South Africa and soon in China to test and refine their service and business models.”

Circular Economy

Modern society has become very good at creating linear systems of production, the take-make-waste process. In these systems, we extract raw materials and put them through a process of manufacturing that includes intensive material and energy input as well as a lot of transportation from one manufacturing plant to another. This is considered the upstream phase because it occurs on the way to the user. Consumers then use the products until they become obsolete which can mean everything from being no longer in style, to breaking, to requiring replacement upgrades. Much of this obsolescence is actually built into the design in order to generate profits for companies, but this is a narrow way of thinking about long-term business success. Finally, once a user is done with a product, they discard it. This end-of-life phase is considered the downstream phase. This linear system results in significant damage to the natural systems that support us.  So, design for sustainability involves transforming linear thinking into cyclical thinking. In nature, there is no such thing as waste. Cyclical thinking is not merely recycling. It’s designing products to be easily disassembled in combination with designing new take-back systems and infrastructure that make it easier and less expensive for companies to collect the materials they will use in one generation of products in order to manufacture the next generation of products. This regenerative approach to design has taken many forms over the last several decades as we move towards establishing a circular economy.

The circular economy is based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems. There is a lot of waste in our current system. According to the World Resources Institute, over 100 billion tons of resources flow every year and 60% end up as waste or greenhouse emissions. Similarly, we waste approximately a third of all food produced. The circular economy offers a system where waste and pollution are reduced through product design. Importantly, 80% of environmental impacts are determined during the design stage. With a change in mindset, waste becomes a design flaw instead of being an inherent byproduct of everyday consumption.

The overexploitation of natural resources required to achieve economic growth and development has negatively impacted the environment and adversely affected their availability and cost. So, it is easy to see why the idea of a circular economy, which offers new ways to create a more sustainable economic growth model, is taking hold across the globe.

Play the “Creating a Circular Economy for Fashion”, YouTube video below to learn about the innovations in the fashion industry that may just help save our world. Transcript for “Creating a Circular Economy for Fashion” Video [PDF–New Tab]. Closed captioning is available on YouTube.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Innovation Strategy

Align Innovation Strategy with Corporate Strategy

Innovation strategy is about mapping an organization’s mission, vision, and value proposition for defined customer markets. It sets boundaries for innovation performance expectations by simplifying and structuring the innovation work to achieve the best possible outcome. For a business to thrive in today’s world of intensified competition it is critical that innovation initiatives are aligned with corporate strategy; initiatives must align to the company mission, business targets, and measurable KPIs. For this to happen, company executives need to take a leadership role in implementing innovation initiatives. To add value to the innovation process, leaders need to stay ahead of the curve by monitoring trends in the marketplace. For example, when other companies begin to change what they do, or government regulations change opening doors for opportunities, then a leader may need to take action in order to stay competitive.

Organizational leaders determine what direction the company will take in the competitive environment. Strategy is the method they will use to get there. In order to align innovation with strategy, leaders need to review and analyze how well the company is meeting its strategic objectives. Firstly, leaders need to attend to the current needs of the company and its present performance, optimize current business, and build within its core. This might include taking current products to new markets, adding new models to refresh existing product lines, or improving margins on best-selling products/services. Secondly, leaders need to think about the future. Thinking about the future means developing entirely new avenues for growth that are often outside the current business, building beyond its core. Activities here might include, launching products or services that are unprecedented in the company or perhaps even unprecedented in the market.

Below is a short list of how a few companies strategically innovate for growth.

1. “IKEA’s strategic innovation is focused on providing affordable and well-designed furniture and home products. By adopting a flat-pack, self-assembly model, IKEA revolutionized the furniture industry and created a unique shopping experience through its vast showroom-style stores. IKEA’s sustainable innovation initiatives, such as offering energy-efficient products and promoting recycling, further contribute to its strategic innovation efforts.”
2. Amazon continually innovates its core retail business, such as launching AmazonBasics, its privately labeled line of essential products. But, at the same time, they are also exploring well beyond their core. The Amazon Echo is a good example of this. Taking them into the consumer Internet of Things (IoT) and artificial intelligence (AI) arenas, and pretty far from their original retail business.
3. “Tesla’s strategic innovation lies in its development and commercialization of electric vehicles (EVs) that offer long-range capabilities, superior performance, and cutting-edge technology. By focusing on sustainable and disruptive innovation in the traditional automotive industry, Tesla has transformed the perception of EVs and has become a leader in the electric vehicle market.”
4. “Google’s strategic innovation is evident in its search engine technology and its continuous innovation of products and services. Google’s search algorithm revolutionized online search, providing highly relevant and accurate results. Google’s expansion into various areas such as online advertising (Google Ads), email services (Gmail), mobile operating systems (Android), and cloud computing (Google Cloud) showcases its commitment to strategic innovation.”

Play the “Innovation Strategy” YouTube video by Kuczmarski below to learn more about innovation strategy. You may be surprised to learn that many companies do not have an innovation strategy because they have not taken the time to figure out what strategic role they are trying to fill by pursuing new innovations. Learn about the four key components of an innovation strategy: 1) What is the Innovation vision? 2) What is the financial revenue gap the company is trying to fill? 3) How to screen one new idea from the next? 4)  What is the investment level the company is willing to make toward innovation? Transcript for “Innovation Strategy” Video [PDF–New Tab]. Closed captioning is available on YouTube.

The Ansoff Matrix is a strategic planning tool that organizations use to plan and analyze strategies for growth. Each strategy for growth carries a different level of potential risk. Each strategy is determined by focusing on whether the products are new or existing and whether the market is new or existing. Each quadrant corresponds to a different product-market strategy. Refer to Figure 6.1 below for a graphical representation of the Ansoff Matrix.

When a company seeks to grow using its existing offerings in its existing markets, the company is pursuing a market penetration strategy. An example of this would be the introduction of the Kindle Fire. It was a new generation of products in a category where Amazon had already established the original Kindle line.

When a company seeks to grow using its existing offerings in a market that the company is not currently in, the company is pursuing a market development strategy. This is actually how Amazon began, by developing the market for online book sales. Others were already doing this, simply not with the scale or scope envisioned by Bezos.

When a company seeks to grow using new offerings in its existing markets, the company is pursuing a product development strategy. This is where AmazonBasics would fall.

Finally, when a company seeks to grow by presenting new offerings in a market the company is not currently in, the company is pursuing a diversification strategy. This is the highest-risk option, as it requires both product and market development.  This is where Amazon web services would be placed. Other companies were already providing these services in a variety of ways, but it was both a new market and a new service for Amazon to address.

Below are some examples from Indeed of how a company might achieve each of the four growth strategies.

1. A business may achieve market penetration by:

• Increasing their promotional efforts

• Decreasing their pricing

• Running sales and specials to get new customers

• Merging with or acquiring a competing business in the same market

• Making product improvements to appeal more to consumers

• Refining their distribution process

2. With market development, a business may:

• Establish different segments of its customer base

• Appeal to foreign markets

• Expand its customer base to include a different part of the market previously not used, such as expanding from B2C to B2B

• Partner with another company to offer an additional product or to increase distribution

• Buy the rights from a company to produce and sell their product

• Use budget dollars to research what the market needs and develop products that will fill a void in their customers’ lives

3. As part of their product development plan, a business may:

• Partner with another company to offer an additional product or to increase distribution

• Buy the rights from a company to produce and sell their product

• Use budget dollars to research what the market needs and develop products that will fill a void in their customers’ lives

4. There are two types of diversification:

• Related diversification: Related diversification is when a company’s new offerings complement the products they already produce or at least exist in the same sphere. For example, a company that builds computers may then make a device that hides computer cords from sight.

• Unrelated diversification: Unrelated diversification is when a company’s new offerings are outside of its known capabilities. For example, if a company has been making notepads and pens for 10 years but then decides to delve into producing reusable water bottles.

The pace and impacts of technology have grown tremendously since the Ansoff Matrix was first devised so an expanded matrix was created. The expanded Ansoff matrix delineates new growth strategies beyond market development to market innovation and beyond product development to product innovation. It also gives us advanced diversification, where we are combining both development and innovation, and outright industry disruption where we are innovating deeply on both market and offering. Amazon’s original launch of the Kindle ebook and store qualifies as an industry disruption. Whereas, subsequent incremental Kindle launches do not. The Echo represents product innovation in a market that is new to Amazon, so it would land in advanced diversification.

Figure 6.1 Ansoff Matrix for Strategic Planning

Consider Various Types of Innovation

There are many reasons companies innovate, some of which include reducing costs, increasing profits, staying ahead of the competition, attracting talent, creating a leadership image, attracting investors/funding, and more. Innovation is all about coming up with new things that create value for your customers, and the organization. There are many degrees and types of innovation, although when we hear about a company innovating we often hear about new products, services, or processes. The real problem with innovation is that people think too incrementally and often too exclusively about products and services and do not consider the many targets for innovation that are all around us. Pursuing various degrees and types of innovation will help an organization maintain a balanced innovation portfolio and remain competitive in the market.

Companies can use the Ten Types of Innovation® Framework to help their innovation efforts in many ways. It can be a diagnostic tool to assess how the business is approaching innovation internally, it can help the company analyze the competitive environment, and it can reveal gaps and potential opportunities for doing something different and upending in the market. Ten Types of Innovation® Framework captures the entire innovation ecosystem, from essential organizational structures and processes to critical aspects of the product or service being introduced.

Ten Types of Innovation® analyzes 10 key areas to consider when you are innovating:

1. Profit Model
2. Network
3. Structure
4. Process
5. Product Performance
6. Product System
7. Service
8. Channel
9. Brand
10. Customer Engagement

Play this 3-minute video by MindTools explaining the Ten Types of Innovation® Framework. Transcript for “Doblin’s 10 Types of Innovation® Video [PDF–New Tab]. Closed captioning is available on YouTube.

Avoid Breakdowns Between Corporate Strategy and Innovation

Why does the alignment between corporate strategy and innovation break down?

Below are five reasons misalignment might occur.

1. Exploring solutions for the wrong reasons – Such as innovation not being aligned with corporate strategy.
2. Changes in leadership – This may bring changes in goals.
3. Poor communication of corporate vision and strategy – “Strategic clarity accounts for 31% of the difference between high and low performing organizations in terms of revenue growth, profitability, customer satisfaction, and employee engagement.”
4. Poor communication of innovation strategy – Goals, outcomes, and expectations with regard to innovation are not clear. 70% of employees don’t even know or understand corporate vision, and feel so disconnected from it that they can’t explain how it relates to their job.
5. Context – Dissolving projects prematurely because they may not appear, at first, to fit with business goals and strategy.

How can companies avoid these breakdowns?

In order to ensure that strategic alignment is occurring across all innovation projects, organizations must continually work to do the following:

• Understand Customer Pains – Pursuing solutions based on new technologies or deciding to discontinue a product are decisions that need to be made based on customer evidence. Relentlessly seeking to understand the customer will help innovation teams better align innovation strategy with corporate strategy in the long run.
• Create a Feedback Loop – The corporate strategy should inform the innovation strategy and vice versa. Keeping these two engines running simultaneously and continuously feeding both sides with key learnings will ensure that they are working in harmony.
• Communicate Vision and Strategy Clearly – It is important for management to ensure everyone is on the same page with regard to company vision and strategy by taking as much time as needed to explain these concepts. Leaders should connect regularly with team members to make sure everyone is still aligned and focused on big-picture goals.
• Consider the Context –  Not all innovation projects that are misaligned today will be misaligned in the future. There are times when innovation projects should be left alone and given time to develop. Ending projects too early can lead an organization away from true innovation and keep it from producing high-impact projects that help the company reach its goals.

Innovation Process

The Innovation Process is the translation of an idea into goods or services that create value. The method chosen to do this should be systematic, predictable, and measurable. The number of steps in the process varies depending on who you ask. It may involve three steps: discovery, development, and commercialization, or it may be divided into five steps: idea generation and mobilization, advocacy and screening, experimentation, commercialization, and diffusion and implementation. The Design Thinking Methodology is a mindset and approach to problem-solving and innovation anchored around human-centered design, and has five stages: Empathize, Define, Ideate, Prototype, and Test. The chapter entitled, “Design Thinking” explains the Design Thinking Methodology in more detail.

Regardless of which innovation process a company adopts, most innovation processes follow a similar pattern which begins with market, consumer, competitor, and company research and analysis. Then the company determines which opportunities are best aligned with corporate strategy and selects one or more to pursue. Finally, the innovations are designed, tested, and launched. 

Every organization is nothing more than a series of processes. How a product is designed, is a process. How it’s manufactured is another process. How it’s shipped around the world, is yet another process. If a company can make its processes work faster, cost less, and/or result in a higher quality product/service most likely that company will see higher profits and increasingly happy customers.

According to Kuczmarski Innovation, a premier innovation consulting firm that works with clients across the world to help them develop and exceed their innovation goals, the following five steps comprise the innovation process.

1. Conduct Market Research
2. Generate Ideas for Solutions
3. Business Case Development (figure out how to monetize the innovation and prototype)
4. Scale-up (take the idea and get it ready for launch)
5. Launch (into the marketplace)

Play the “Innovation Process” YouTube video by Kuczmarski below to learn more about how the innovation process should be systematic and predictable. Transcript for “Innovation Process” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Spot Opportunities for Innovation

To identify opportunities for innovation, managers and employees first need to understand the company and how it works.  Whether you are the CEO or an employee working the front line (directly with customers/clients), you can spot opportunities for improvement by learning about the company’s problems and goals. This may mean reviewing company policies and values/mission/vision, talking with other department managers and employees, gathering customer feedback as well as spotting trends in customer complaints.  Ask yourself if there are processes that take a long time, and if so, could they be automated for improvement? Are employees or customers complaining about specific systems, communication, or processes, and do these need to be given more thought in how they could be made more efficient and/or effective? Also, consider what works well and can be replicated in other areas. It is important to understand who the company’s target customers are and always be thinking about how the company can better help them. Focus groups, mystery shoppers, buyer personas, and observing the customer journey from the pre-sale stage to the sale stage and into the after-sale stage can help companies better understand customer needs and wants.  Identify what is working well and what is not working well, and consider how things might be improved.

A great way to look for opportunities is by conducting an environment scan of the business and industry environment. Using research and analysis tools such as a SWOT analysis, Competitor Analysis, PESTLE analysis, Porter’s Five Forces competitive landscape analysis, Ansoff’s Matrix for strategic planning, Innovation Matrix for innovation planning, and more, leaders can look for opportunities, identify external threats, identify company strengths and weaknesses, then make informed decisions about where to, and how to, innovate. The chapter entitled, “Innovation Risks” explains a few of these analysis tools in more detail.

Many companies come up with great ideas simply by taking ideas from one aspect of the business and applying it to another.  Often creativity is simply a mix of disciplines. Companies create cross-departmental teams, teams that mix employees with customers or partners, and teams that include experts in the field or various fields in order to get a wide variety of ideas from various stakeholder perspectives.

These seven sources of innovative opportunity were listed by Peter Drucker in his book “Innovation and Entrepreneurship. If you are unaware, Peter Drucker is considered one of the truly great management consultants. He wrote 39 books and is considered a seminal thinker in the field of management.

A person looking for opportunities

Unexpected Success and Failures

The marketplace is the number one area to look for opportunities. A good manager should be studying the market, observing consumer and competitor trends, and looking for innovation successes or failures that maybe were not expected to occur. They should consider if a particular product or service is in greater or lesser demand than anticipated, and if so what is the reason. For example: If a competitor is having unexpected success in a particular market segment, management must find out why this is happening. They must ask themselves what it would mean to their company if they exploited the same opportunity. They must consider what has to happen to convert this opportunity into a success.

Incongruity Between What Is and What Should Be

One of the best places to look for incongruity is through the customers’ voices. Their complaints and unmet wants are all the hints a company needs to determine if there is a discrepancy between what is and what should be. Identifying incongruity is key to developing wildly successful businesses, but it’s tricky. Facebook is a company that got it right. Prior to the social network’s prolific rise, Myspace was the dominant player, but it had its downfalls. Facebook wisely noted what Myspace was versus what it should be and then built a better platform. The end result is that many people don’t even remember Myspace, but most of the world knows and uses Facebook.

Process Need

Process need involves identifying the company’s process weak spots and correcting or redesigning them. This source of innovation comes from the company’s existing capabilities and ways of doing business. An example might be a restaurant that identifies that people wait too long for their entrees and so decides to hire another chef to speed up creation times. Essentially, a company will want to look for all weak links and eliminate them.

Industry and Market Structure Change

The industry and the market are in continual flux. Regulations change and some product lines expand while others shrink, firms should be regularly monitoring these changes. For example, when the government changes regulations to open a previously regulated industry, there is historical precedence for companies that enter early to be very successful. Other things to monitor are the convergence of multiple technologies and organizational structural problems that occur from time to time (often immediately following an industry boom).

Demographics

We continually see changes occur in populations, income levels, human capital (education), and age ranges. Smart firms are constantly paying attention to this. When it comes to the baby boomers, businesses have been following them as they got older. At present, they are one of the largest as well as the most affluent demographic groups, with high levels of disposable income. Combining demographic data with segmentation and targeting is a powerful method of accurately meeting a target market’s desires.

Changes in Perception, Meaning, and Mood

Over time populations and people change. The way they view life changes, where they take their meaning from, and how they feel about things change over time and smart companies must pay attention to this in order to capitalize (and avoid becoming forgotten, a relic of ages past). For example, a principle called “down aging” refers to people who look at 50 as being the new 40. Industries have responded to this, most notably in the cosmetic and personal care industry which provides plenty of solutions to help these people look younger. Full industries are creeping up that make people feel younger. Have you spotted any lately?

New Knowledge

As the speed of the technological revolution increases, there will be an ever-increasing number of opportunities that open up. The internet has been the most notable one in the last couple of decades but there have been a plethora of other industries and opportunities that have popped up as a result of this technological revolution. New knowledge is about more than just technology though, it’s about finding better ways of doing things and improving processes. Companies should look to this new knowledge for ways to make incremental improvements. Intel does this continuously, and it’s a major part of why the company is the leading processor manufacturer today. By paying attention to the latest in academic research and investing heavily in its own R&D, the company has managed to find continual sources of innovation.

Evaluate, Design, and Test the Innovation

After researching the market, analyzing company strengths and weaknesses, and identifying a few opportunities for innovation, the company must focus on a few ideas that best align with company goals, strategies, and resources, and support a balanced innovation portfolio. Once ideas have been evaluated, each feasible idea should be reviewed for ways to reduce risks. Develop a rough strategy. What needs to happen before the next thing can happen? Which paths are not obvious? Are there skills or resources the team already possesses that can help execute the innovation vision? Consider who can help the team put ideas into action. Do experts need to be included? Trouble-shoot with the team.

If the idea is for a new product, for example, the company will create a prototype and run a pilot (test-run) implementation to show others that implementing this innovation is possible. Try it on a small scale first to see how it works. Gather input from others and make adjustments as needed. Refine and get the details right.  Bring in others to help finalize the innovative concept and put it into action. Partners should contribute in ways the team cannot.

Launch the Innovation

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

What is Design Thinking?

Design thinking encourages organizations to keep the user at the center of everything. The core of design thinking is about asking questions differently—a new way to look at problems. Play this brief introduction to design thinking from IDEO U. Transcript for “What is Design Thinking?” Video [PDF–New Tab]. Closed captioning is available on YouTube.

The Five Stages of Design Thinking

As the world is changing at an accelerated rate, organizations look for solutions to grow with their customers or users, to do new things in better ways to improve their practices, retain and grow their customers, and expand their business. Innovation is a must for these organizations. Design thinking is one of several approaches to innovation and is a process for creative problem-solving. Design thinking has a human-centered core. It encourages organizations to focus on the people they are creating for, which in turn leads to better products, services, and processes. The design thinking framework helps inspire creative thinking and strategies that lead designers to create user-friendly products that solve real problems.

There are five stages to the design thinking process, shown below in Figure 7.1, which include empathizing, defining, ideating, prototyping, and testing. They are not always completed in a linear fashion. They can be done in any order, and then redone as needed.  Different stages might spark new ideas or showcase new findings in the user journey that will inspire new iterations of phases that have already been completed.

Figure 7.1 Five Stages of Design Thinking

Empathize

In order to deliver innovative, customer-centric solutions that customers want and will buy, begin with empathy. Put yourself in your customer’s shoes and try to imagine what the customer might be thinking or feeling, what needs they may have, and what their desires are.  To do this you might observe the customer, interview the customer, and put yourself in the customer’s shoes. How do they want this product to work? As designers (or design thinkers), we should always do our best to leave our own assumptions and experiences behind when making observations. Our life experiences create assumptions within us, which we use to explain and make sense of the world around us. However, this very process affects our ability to empathize in a real way with the people we observe. Since completely letting go of our assumptions is impossible, we should continuously and consciously remind ourselves to assume a beginner’s mindset. It’s helpful if you often remind yourself never to judge what you observe, but to question everything—even if you think you know the answer—and to really listen to what others are saying.

Define

Designers will analyze their observations completed throughout the empathy stage, and work on synthesizing that information.  Forming a problem statement that is succinct is an important part of this phase that ensures a human-centered approach by focusing on the end-user. A problem statement is important to a Design Thinking project because it will guide you and your team and provide a focus on the specific needs that you have uncovered. A good problem statement should thus have the following traits. It should be human-centered, broad enough for creative freedom, and narrow enough to make it manageable.

Ideate

The solution-finding stage is where the team comes together to brainstorm creative solutions to solve the defined problem(s). When facilitated in a successful way, Ideation is an exciting process. The goal is to generate a large number of ideas — ideas that potentially inspire newer, better ideas — that the team can then evaluate and reduce into the best, most practical, and innovative ones.

Ideation Will Help You:

• Ask the right questions and innovate.
• Step beyond the obvious solutions and therefore increase the innovation potential of your solution.
• Bring together perspectives and strengths of team members.
• Uncover unexpected areas of innovation.
• Create volume and variety in your innovation options.
• Get obvious solutions out of your heads, and drive your team beyond them.

In Ideation sessions, it’s important to create the right type of environment to help create a creative work culture with a curious, courageous, and concentrated atmosphere. Instead of using a boardroom with the CEO sitting at the head of the table, Design Thinking and Ideation sessions require a space in which everyone is equal. There are hundreds of ideation methods used to spark innovative ideas. Some methods are merely renamed or slightly adapted versions of more foundational techniques. Here you’ll get a brief overview of some of the best methods:

• Brainstorm
• Braindump
• Brainwrite
• Brainwalk
• Challenge Assumptions
• SCAMPER
• Mindmap
• Sketch or Sketchstorm
• Storyboard
• Analogies
• Provocation
• Movement
• Bodystorm
• Gamestorming
• Cheatstorm
• Crowdstorm
• Co-Creation Workshops
• Prototype
• Creative Pause

Prototype

Without testing a new idea, designers would have a tough time actually solving the problem comprehensively. At this stage, small-scale, inexpensive versions of the product are required. This sets the stage for decision-making conversations around what works and what doesn’t. Prototypes can be sketches, models, or digital renders of an idea. These scaled-down prototypes can then be used in order to observe, record, judge, and measure user performance levels based on specific elements, or the users’ general behaviour, interactions, and reactions to the overall design. For instance, when developing software, a design team may produce a number of paper prototypes that the user can gradually work through in order to demonstrate to the design team or evaluators how they may tackle certain tasks or problems. When developing tangible devices, such as the computer mouse, designers may use a number of different materials to enable them to test the basic technology underlying the product. With advances in 3D printing technology, producing prototypes is now often a more instant and low-cost process, and as a result, this has allowed designers to provide stakeholders with accurate and testable/useable replica models before settling upon a particular design.

Test

Gather feedback from real users.  Because design thinking is iterative, many designers roll out multiple prototypes to test different change factors within their idea. Designers should expect to go through a series of changes, edits, and refinements during the testing stage. It is not uncommon for the testing phase to “restart” some other design thinking processes such as ideation or additional testing or an entirely fresh approach. In order to achieve the best learning results from each test, here are some areas of a test that you should take into consideration:

• The prototype
  Remember that you are testing the prototype, not the user. Your prototype should be designed with a central question in mind — a question that you will put to the test in the testing stage.
• Context and scenario
  As much as possible, try to recreate the scenario in which your users are most likely to be using the product. This way, you can learn more about the interaction (or disruptions) between the user, the prototype, and the environment, as well as how problems might arise as a result of that interaction.
• How you interact with the user
  Make sure your users know what the prototype and test are about, but do not over-explain how the prototype works.
• How you observe and capture feedback
  While collecting feedback, make sure you are not disrupting the user’s interaction with the prototype. Find a way to collect feedback in a way that freely allows you to observe what is happening (for example, by having a partner in the test, or by recording an audio or video of the test).

Play the YouTube video below for an explanation of the five stages of the Design Thinking process. Transcript for “5 Stages of Design Thinking Process” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Products Created Using Design Thinking

Can you think of a few products you enjoy using that most probably were created using the design thinking methodology?  Here are a few examples: shoelaces that don’t need to be tied (great for kids), velcro closures instead of buttons or laces (great for anyone, but specifically for older adults who may have difficulty with buttons or laces), and what about gel pads that are placed inside shoes (great for anyone with sore feet or people that stand for long hours in the workplace).

IDEO, lists 11 of their favorite products and services created with design thinking:

• Pillpack, a prescription home delivery system
• Airbnb, the online platform that lets you stay anywhere
• Willow, the first wearable breast pump
• Uber Eats, an app that is redefining food delivery
• Pay It Plan It from American Express, a feature to manage your money
• Project Bloks, a Google project that helps kids learn to code
• Besider, a birth control support network for women
• Braun, Oral-B electric toothbrush, a better brushing experience
• Moonrise, a platform that connects people with on-demand work
• LA County Voting System, an intuitive and accessible voting device
• Bendable, a community learning program for South Bend

Design for Delight

How do the best product managers build ideal solutions for their customers’ pain points? Intuit Inc. has crafted the Design for Delight (D4D) and Customer-Driven Innovation (CDI) principles to center customer empathy to build the best solutions for their customers.  “Customer-Driven Innovation is the lens through which we make decisions on what to pursue, and Design for Delight is our framework for determining how to pursue it.” Intuit Inc. is an American business software company that specializes in financial software. The company is headquartered in Mountain View, California, and the CEO is Sasan Goodarzi. Intuit’s products include the tax preparation application TurboTax, the personal finance app Mint, and the small business accounting program QuickBooks.

Play the YouTube video below to see how a university taught their students the Design for Delight methodology in a two-day bootcamp. Transcript for “Marshal University Design for Delight Bootcamp with Intuit” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Design for Delight Course

Intuit offers a free course for students who may wish to learn the Design for Delight design thinking methodology.

The methodology focuses on the following three key concepts:

1. Deep Customer Empathy
2. Go Broad to Go Narrow
3. Perform Rapid Customer Experiments

Design for Delight Innovator Certification

Design for Delight Certification Badge

Through Certiport.com students may complete a certification exam for Design for Delight (there is an exam fee for this exam). The Intuit Design for Delight Innovator certification helps individuals validate their knowledge of design thinking principles and the tools needed to identify problems, gain customer empathy, brainstorm solutions, run experiments, test assumptions, pivot, and much more. This type of thinking promotes creativity, critical thinking, complex problem solving, and other skills that are much needed and valued in today’s workforce.

Prototyping and 3D Printing

Prototyping

As mentioned above, a prototype is a mini design of the actual product. It can be a sketch, a low-quality, or a high-quality copy depicting what the real product will look like. It is important for companies to prototype fast and often in order to produce innovations at the right times–when customers demand them and before competitors beat them to market. The main benefit of prototyping is that it results in a faster and more effective design cycle (accelerated development). Because prototypes allow companies to test their design in the “real-world” environment, it is easier to identify potential problems and prevent costly mistakes down the road (better products).

Play the YouTube video below for an explanation of how Intuit Inc. builds prototypes. Building Prototypes Ready to Test with Customers Transcript. [PDF–New Tab]. Closed captioning is available on YouTube.

3D Printing

3D printing is an inexpensive way to make a prototype. Today 3D printing, or additive processing for manufacturing, has become a standard.  In previous years many manufacturers, automakers, jewelry makers, sculptures, etc., were using a subtractive processing method.  With subtractive manufacturing, there is much waste. Think about sculpting a statue out of a tree, you would whittle away the parts of the tree you don’t need to make the statue appear.  With additive manufacturing, there is little waste because the statue would be built layer upon layer from the ground up in the exact shape and design you specify.

Acumen Research and Consulting forecasts the global 3D printing market to reach $41 billion by 2026. The adoption of 3D printing is ever expanding and companies who have yet to integrate additive manufacturing somewhere in their supply chain are now part of an ever-shrinking minority. Where 3D printing was only suitable for prototyping and one-off manufacturing in the early stages, it is now rapidly transforming into a production technology. Most of the current demand for 3D printing is industrial in nature.  As it evolves, 3D printing technology is destined to transform almost every major industry and change the way we live, work, and play in the future.

A few examples of 3D printing used in various industries:

• consumer products (eyewear, footwear, design, furniture)
• industrial products (manufacturing tools, prototypes, functional end-use parts)
• dental products
• medical and health products

Play this YouTube video from Mashable, “What is 3D Printing and How It Works?”, to learn more about the 3D Printing process. Transcript for “What is 3D Printing and How Does it Work? Video [PDF–New Tab]. Closed captioning is available on YouTube.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Where should the responsibility for innovation lie? Companies need to create an organizational structure to drive innovation; there are many variations and approaches. A product innovator must recognize the company’s innovative business structure and its inherent roadblocks and then determine how to overcome them. The most common approaches companies use for innovation include components of design thinking, rapid prototyping, lean innovation, and open innovation. Design thinking is a process that brings together what is desirable from a human point of view with what is technologically feasible, and economically viable. The design thinking process starts with a deep understanding and empathy for the customers’ needs. Then, it goes through the steps of defining the problem, ideating the solutions, prototyping the ideas, and testing the ideas. IBM developed an internal framework for innovation, naming it IBM Design Thinking.

What are the Seven Stages of Product Development?

Person generating ideas

The product life cycle attempts to describe the stages a product goes through from launch to discontinuation, which typically includes introduction, growth, maturity, and decline. “The product development life cycle explains how new ideas are brought to the market. From concept to commercialization, it guides aspiring builders through the process of product development in a way that’s intended to reduce risk and maximize the odds of finding traction. In relation to the product life cycle, it’s like a prequel to the introduction phase. There are a few different ways to categorize the steps in the product development life cycle. What’s most important, however, is for companies to lead a lean, user-driven operation. That way, they can deliver a minimum viable product (MVP), gather customer feedback, and generate revenue as quickly as possible.”

New product development teams often consist of top management, and specialists from sales and marketing, research and development, manufacturing, and finance. This team will conduct market research and gather customer and employee feedback to consider when formulating ideas for new products. The team will also evaluate the feasibility of ideas, consider the resources available, and identify risks. This group considers and plans new and improved products following seven stages, as listed below.

1. Idea Generation (Idea formulation)
2. Idea Evaluation (Screening)
3. Concept Testing
4. Product Development
5. Testing and Execution
6. Post Development (Commercialization, Market Introduction)
7. Support and Maintenance

The most innovative organizations rely on systems of individuals and teams working across functions in their organizations. Innovation isn’t the work of only scientists, engineers, or marketers; it’s the work of an entire business and its leadership.

Play the YouTube video below, “Product Development Process: 7 Essential Stages”, to learn more about each stage in the new product development process.[/footnote] Transcript for “Product Development Process: 7 Essential Stages” Video [PDF–New Tab]. Closed captioning is available on YouTube.

What are the Success Factors for Product Development?

There are different factors that influence the success of new product development.  For instance, the entire team needs to be competent and committed to the success of the product. The product designer will be responsible for utility and usability, but there are a number of factors that are beyond the control of the designer. An effective new product development (NPD) function is supported by the right tools and the right business culture; it depends on teamwork underpinned by organizational knowledge and strong strategic direction from above. But it is also characterized by systems and processes that are agile, adaptable, and repeatable. Businesses should carefully consider how they can develop the precise mix of culture, people, and digital infrastructure to meet these demands in the most efficient and competitive way possible.

The following eight factors will influence the success of new product development.

1. Top Management Support

Manager supporting employee

The support of top management is essential, without it the project will not get the resources and financial budget to implement the development phases. The design team must learn to convince top management to support the project, or the entire project collapses. Creating a culture that values innovation and encourages it at every level has been found in countless studies to be one of the key indicators of success in this area. The focus, resources, and respect that your organization channels towards NPD will reflect the priority it is given in the minds of those who can influence its direction the most. Steve Jobs, for example, based the leadership culture of the Apple Company on brand fanaticism and radical customer devotion and propelled the organization into a new and unprecedented era of innovation.

2. Market Orientation

Market orientation analysis should guide the team on how to meet the needs and wants of customers. Investopedia defines market orientation as follows: “Market orientation is a company philosophy focused on discovering and meeting the needs and desires of its customers through its product mix.” It seems reasonable to suggest that while a design team does not have control over company philosophy it should be in a good position to influence this. Conducting user research and where appropriate market research – two fundamentals of developing high-quality user experiences; will enable the discovery of customer/user needs and how to meet them.

3. Technology

Ensure the technology being used to introduce the product to the market is compatible with the market. It is imperative to use a technology the market can resonate with.  For instance, a multi-million dollar software or hardware requirement may make the product inaccessible to small consumers.

4. Knowledge Management

The company should ensure data and information are accessible to all. A digital document management system can act as a repository of information vital for the success of new product development (NPD) initiatives. It can give teams a firm grasp of project progress, deliverables, and dependencies. It can facilitate easy access to the documentation they need to complete tasks. It can allow different teams to work on and suggest changes to those documents. It can give overall governance of a project to a nominated individual, who can use its publishing and curation tools to keep projects well managed and on track. Good knowledge sharing capabilities reduce mistakes, increase the speed of delivery of goals, and build closer more aligned teams.

5. New Product Development Strategies

The responsibility for drafting and implementing strategies is a shared goal between the development, design, and management teams. These parties should coordinate their activities to ensure there is uniformity in their decisions.  Having clear processes for design and development is essential. While these may be tailored to fit specific circumstances – a methodology for working that is clearly understood and agreed to by all members of the product development team is highly likely to produce better results than those created with no formal process.

Responsibility for new product development strategies is likely to be shared between design, product management, and development. This means that the design team will have some input into the strategies chosen and will be able to influence these strategies with their user research to guide the strategy to fit the needs of their users. It is probably fair to say that product management will normally have the final say on a strategic direction but designers have plenty of room to negotiate with product managers to ensure better outcomes.

6. New Product Development Speed

Speed to market is a critical factor in success. If the new product development process takes five years but a competitor’s process takes only two years – it is likely that no matter how good the team’s designs are; they will have been eclipsed by the time they get to market. Refining the design process to maximize speed whilst protecting the user experience is a delicate balancing act. Designing for a great user experience is within the design team’s control, however, the development process speed is much less likely to be within the design team’s control and their ability to influence that speed may be minimal.

7. New Product Development Process

Having clear processes for design and development is essential. While these may be tailored to fit specific circumstances – a methodology for working that is clearly understood and agreed to by all members of the product development team is highly likely to produce better results than those created with no formal process. The design team will, normally, have some input into these processes and be able to negotiate modifications to processes when they fail to produce optimal results. There is little control for the design team over the way other teams execute these processes. Failure in execution, from other teams, is one of the few areas where it is reasonable to say that failure was completely outside of the design team’s control.

8. New Product Development Team

New product development normally brings together teams of diverse people from all across an enterprise. It is strongly suggested that these diverse teams tend to be highly creative and more successful than teams of a more standardized nature. The way teams work together is a critical factor in their success and designers operating as part of such a team have their part to play in this. Professionalism and leadership can be displayed by any member of a team (including those without official leadership and management roles) and while one team member cannot be responsible for the actions of others within a team – they are fully responsible for their own actions. As Michael Jordan, the world-famous athlete and basketball superstar says; “Talent wins games, but teamwork and intelligence wins championships.”

How Can Product Innovation Be Combined with Other Innovation Types?

When a company works to combine multiple types of innovations, they often produce powerful results. Top innovators (those repeatedly launching successful offerings) integrate twice as many types of innovation as the average innovators.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Importance of Entrepreneurship

Entrepreneurship is important for economic growth.  New companies create employment, contribute to a nation’s GDP, and bring new and innovative products and services to consumers.

“A society becomes greater if the employment base is large and diversified. It brings about changes in society and promotes facilities like higher expenditure on education, better sanitation, fewer slums, a higher level of homeownership.”

“Entrepreneurship increases income levels, therefore improving standards of living. Entrepreneurs identify challenges in the lives of customers and provide appropriate business solutions. Additionally, they hire new employees who receive remuneration and this income gets circulated in the economy. All of the spending and salaries generate incremental wealth, therefore improving standards of living.”

“Entrepreneurs again play a key role in increasing the standard of living in a community. They do this not just by creating jobs, but also by developing and adopting innovations that lead to improvements in the quality of life of their employees, customers, and other stakeholders in the community. New and improved products, services or technology from entrepreneurs enable new markets to be developed and new wealth to be created. Additionally, increased employment and higher earnings contribute to better national income in the form of higher tax revenue and higher government spending.”

Entrepreneurial Traits

An entrepreneur is someone who starts, owns and operates a business. It is difficult to generalize about the kind of people attracted to the idea of starting their own business because entrepreneurs are increasingly diverse. An interesting portrait of Canadian entrepreneurs emerged from a 2019 BDC survey of 1,025 Canadian business owners. Among the findings:

• Twenty-eight percent were women, up from 11% 40 years ago.
• Newcomers to Canada were twice as likely to start a business as their Canadian-born counterparts.
• The number of Canadians under 35 who started a business increased by 80% between 2014 and 2018.

Key Traits

While entrepreneurs do require many skills and abilities, they may not have all the skills they need to run a business successfully.  In these cases, an entrepreneur might hire a consultant, a contract employee, or a full-time employee to support the business tasks for which the entrepreneur is lacking skills or may not have the time to focus on. For example, as an entrepreneur, if accounting is your weakness you might hire an accountant, payroll service, or bookkeeper. If sales or marketing are not skills you have developed you might hire a salesperson or contract a marketing company to help you build marketing campaigns. While hiring consultants, services, or employees does cost money, you can rest assured it is being done accurately, and the investment should pay off.

Some of the key traits found in entrepreneurs include the following.

1. Passion. “Work ethic and passion go hand in hand. It takes work ethic to keep the business strong, and it takes passion to feel motivated enough to maintain a good worth ethic. That feeling of success is priceless, and it’s how entrepreneurs feel when they see great outcomes from the effort they put into their work.”
2. Risk Tolerance. “Taking risks helps businesses find new ways to differentiate themselves from the competition, which is especially helpful in saturated markets. In the event the risk doesn’t have the intended result, the entrepreneur can still apply the valuable lessons learned to future business decisions. Microsoft’s Bill Gates is credited with the quote, ‘To win big, you sometimes have to take big risks.’ Gates certainly took risks throughout the history of Microsoft, but perhaps his most notable risk was leaving Harvard during his sophomore year in 1975 to found the company. His vision was ‘a computer on every desk and in every home,’ which was something no one could have conceived of at the time. The risk he took to make that vision a reality paid off.”
3. Persistence. “While many successful entrepreneurs are comfortable with the possibility of failing, it doesn’t mean they give up easily. Rather, they see failure as an opportunity to learn and grow. Throughout the entrepreneurial process, many hypotheses turn out to be wrong, and some ventures fail altogether. Part of what makes an entrepreneur successful is their willingness to learn from mistakes, continue to ask questions, and persist until they reach their goal.”
4. Innovative. “Innovation is a characteristic some, but not all, entrepreneurs possess. Fortunately, it’s a type of strategic mindset that can be cultivated. Some of the most successful startups have taken existing products or services and drastically improved them to meet the changing needs of the market.” “Companies that thrive are often built from the wild creativity of their creators. With aggressive competition these days, entrepreneurs are forced to come up with original ideas that differentiate their companies from others. Creative entrepreneurs consider the possibility that the traditional solution isn’t good enough.”

Motivational Factors

There are some common motivational factors identified in many entrepreneurs. For instance, entrepreneurs are often motivated by much more than money and most start their business to become their own boss. In BDC’s survey, when asked why they became an entrepreneur, the most popular answer—cited by 70%—was independence, autonomy, and flexibility. About one in two mentioned passion or self-fulfillment and one third cited financial reasons. Refer to Figure 9.1 below to view survey results for motivational factors that influence entrepreneurial success.

Figure 9.1 Motivational Factors Influencing Entrepreneurs’ Success (2019) BDC Survey Results Chart

“The 2019 BDC survey of business owners sheds additional light on what makes Canadian entrepreneurs tick. Three in four said they had to deal with financial insecurity, significant stress, and a lack of benefits. Yet, 90% were professionally satisfied.”

Types of Entrepreneurs

Ben & Jerry’s Ice Cream

There are many types of entrepreneurs and depending on which website you read, you may see a list of five to fifteen types of entrepreneurs. The type of entrepreneur you are depends on your goals and personal characteristics (e.g., skills, knowledge, creativity, interests, preferences, situation in life, drive, determination, etc.).

The Indeed Editorial Team (2023) provides the following list of nine different types of entrepreneurship.

1. Small business entrepreneurship. People interested in this category are probably interested in making a profit that supports their family and a modest lifestyle.  They often run the business and work in it.  They hire local employees and family members. Local grocery stores, hairdressers, small restaurants, small boutiques, consultants, plumbers, and accountants are a part of this category.
2. Large company entrepreneurship. People in this category are often in a team of executives who know how to sustain innovation. Small business entrepreneurship can turn into large company entrepreneurship when the company grows quickly or when a large company acquires a small business. Microsoft, Google, and Disney are examples of this category.
3. Scalable startup entrepreneurship. People in this category look for things that are missing in the market and create solutions for them. Many of these types of businesses start in Silicon Valley and are technology-focused. They seek rapid expansion and big profit returns. Examples include Facebook, Instagram, and Uber.
4. Social entrepreneurship. People in this category want to solve social problems with their products and services. Their main goal is to make the world a better place and so they are not concerned with making big profits.
5. Innovative entrepreneurship. People in this category aim to change the way people live for the better. Innovators tend to be very motivated and passionate people. They look for ways to make their products and services stand out from other things on the market. People like Steve Jobs and Bill Gates are examples of innovative entrepreneurs.
6. Hustler entrepreneurship. People who are willing to work hard and put in constant effort are considered hustler entrepreneurs.  Their aspirations are what motivates them and they are willing to do what it takes to achieve their goals. They have drive and determination and do not give up easily.
7. Imitator entrepreneurship. People in this category use other people’s business ideas but work to improve them. They seek to make certain products and services better and more profitable.  They have a lot of self-confidence and determination. They learn from other’s mistakes.
8. Researcher entrepreneurship. People in this category like to do as much research as possible before starting a business. They believe that with the right preparation and information, they have a higher chance of being successful. They tend to rely on facts, data, and logic rather than their intuition.
9. Buyer entrepreneurship. People in this category use their wealth to fuel their business ventures usually through purchasing well-established businesses that they think will be successful. Their goal is to grow the business they acquire and expand their profits.

Social Entrepreneur

Some people start businesses in order to help society, people, and communities. A social entrepreneur does not start a company with their main goal being to make a profit, instead, their goal is to make positive change in the world. Their goals often align with the United Nations Sustainable Development Goals (as shown in Figure 9.2 below) and their efforts may have a local, national, or global impact. “Whether it’s reducing poverty, ending homelessness, or fighting climate change—social entrepreneurs are, first and foremost, committed to a cause. While starting a business to support a worthy cause is admirable, the venture still requires focus and serious processes to be sustainable and reach the desired social or environmental impact.”

Figure 9.2 United Nations Sustainable Goals

“These entrepreneurs might be for-profit or non-profit, and they operate under the umbrella of social enterprise or entrepreneurship. It recognizes societal issues, donates profits or uses grants or raises, and mobilizes resources for the greater good. Poverty reduction, child rights restoration, access to health care and financial services, women empowerment, and community development are the most common issues these entrepreneurs address. They often persuade societies, large organizations, and governments to encourage social transformation by addressing unmet needs and social issues.”

Play the YouTube video below, “What is Social Innovation?  How do you actually DO it (and change the world)?”, to learn more about the steps involved in creating a social innovation. Amber Melanie Smith provides a specific example of a social innovation related to food insecurity and applies the design thinking methodology to step through the stages of identifying the problem, empathizing, defining the problem, ideating, prototyping, and testing the solution. Transcript for “What is Social Innovation? How do you actually DO it (and change the world)?” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Necessity Entrepreneur

A necessity entrepreneur is someone who starts a business based on a need for income, out of necessity, because they cannot find employment, have lost their job, need to supplement their income, or require flexibility to attend to other demands in their lives. Some necessity entrepreneurs find business ideas to pursue after retirement or after being downsized. “A typical necessity entrepreneur is over 50 years of age, has been unemployed for over a year, and sees the possibility of finding full-time employment dwindling.”

“A business started out of necessity is usually initiated through some sort of bad luck, i.e. a job loss, redundancy, or even ill health. These entrepreneurs are hesitant because, in all honesty, they would rather be working for a large corporation with the guarantee of a monthly income, however for whatever reason, that is not an option. As with all entrepreneurs, be they averse to starting a business of not, they have a particular knowledge or know a specific product that they think is of value to others. To be able to share this knowledge/product with the world is all they know so, if the only way to be able to use these specialities is to create their own business that’s what they do.” An example of this might include, a parent with an autistic child who finds it difficult to work a full-time job and still provide the care and attention required to support their child.  This parent decides to stay home to take care of their child because they feel they are the best person to do so. The parent then starts to receive many questions from friends and family about autism, and they realize that there may be a need for this type of service. They decide to obtain formal credentials and they complete an online program in the field of autism and behavioural science. Once formally qualified, they start a business providing advice to families about autism as a fee-based service. This works well for the necessity entrepreneur because they can now earn an income by providing a needed service and still take care of their child.

Opportunity Entrepreneur

An opportunity entrepreneur is someone who sees an opportunity to make money, gets involved at the right time, and aims for business growth and economic development. For example, “Matt Horan started Rollasole after his girlfriend always complained of walking home in High Heels. With his first entrepreneurial venture he created the first vended shoe, launching Rollasole in his local nightclub. From his hometown, word spread and he built up his business selling his shoes online, in stores and in vending machines. Soon the bright lights of Vegas came calling and after a chance meeting with Ashley Ross an unlikely partnership was formed to bring Rollasole into the States.” Sometimes one great idea acts as a catalyst for other great ideas and today we can find vending machines dispensing sneakers, dress shoes, “emergency” shoes, and “flip flops” for beach wear or when you need a pair of shoes to enter a restaurant.  So many great ideas!

Tim Hortons

Another example of an opportunity entrepreneur is Tim Horton, who was a Canadian hockey player, and In 1964 he founded the first Tim Horton doughnut shop in Hamilton, Ontario, which later grew into a chain of franchises across Canada and eventually the United States. Burger King purchased Tim Hortons in 2014 and the two brands became subsidiaries of Restaurant Brands International Inc. (RBI).  As of August 2022, RBI is one of the world’s largest quick-service restaurant companies with over $35 billion in annual system-wide sales and over 29,000 restaurants in more than 100 countries.

Sometimes a potential entrepreneur identifies an opportunity to make a new product or start a new business which may be a combination of a profit-making business idea that also supports a socially sustainable goal or a business created out of necessity that not only makes a profit but also supports a socially sustainable goal.

A good example of a social and profit-making business is 31 Bits.  During a trip to Uganda, marketing and international development college student, Kallie Dovel, realized that many of the uneducated single mothers she had met during her trip had exceptional skills and resourcefulness in making jewelry out of old posters. Kallie identified an opportunity to sell this jewelry so she partnered with a few of her college peers and formed the company 31 Bits. The company employs artisans, women from Uganda, with these exceptional skills and ensures they are paid a fair wage.  The company also promotes ethical sourcing by allowing for family time, providing dignified careers, and preserving culture. The mission statement for the company is “We use fashion and design to drive positive change in the world by providing artisans with dignified opportunities and inspiring customers to live meaningful lives.” Nearly a decade later, 31 Bits can be found in hundreds of stores and has been endorsed by celebrities like Sophia Bush, Candace Cameron Bure, and Jessica Alba, and has been written about by Forbes, Harper’s Bazaar, and Elle. Most importantly, hundreds of artisans’ lives have been changed forever.

Steps to Creating a New Business

The Business Development Bank of Canada (BDC) provides an ultimate guide to starting a business in Canada.  This step-by-step guide provides resources and answers to many questions an entrepreneur may need when considering starting a new business.

1. Identify a Business Opportunity. You may find an opportunity for a new product or business by identifying a need for something that is currently missing, or identifying a problem that is occurring and contemplating a way to fix it. Before you start spending money on an idea, it’s essential to ensure your business idea has the potential to be successful. Conduct research into what other companies are doing that may be similar to your business concept. Ask yourself these questions. How will your company stand out from the crowd? Who are your target customers? Will they want your service or product? How much money will you need and where will you get it?
2. Choose a Business Structure. In Canada, there are three common types of business structures, sole proprietorship, partnership, or corporation and each has its own pros and cons.
3. Choose a Business Name. “Selecting a name for your business is not a task to be taken lightly. In fact, it may prove more difficult than you expect. Your name must be accurate, catchy and, most importantly, available. Your name will often create your company’s first impression on customers, so choose it with care. Ask yourself the following questions. Does the name reflect my business and what I sell? Can it be easily remembered? Is it unique and distinctive?”
4. Create a Business Plan.  Often a business plan is used to help secure funding, validate a business idea, grow an existing business, buy a business, sell a business, or advise clients. It legitimizes a business idea, shows the results of research, provides product and customer information, and includes operational and strategic goals. “A business plan is a document that explains how your business operates. It summarizes your business structure, objectives, milestones, and financial performance. It’s a guide that helps you, and anyone else, better understand how your business will succeed.” Additional information on business plans is below.
5. Obtain Business Financing.  There are many ways to finance a new venture, and depending on the size of your startup you might use personal funds or apply for a bank loan (debt financing). Other options include government grants and subsidies, asking family and friends, crowdfunding, developing partnerships, business incubators or accelerators, and inviting venture capitalists or angel investors who may be willing to invest in your business for partial ownership or participation in business decision-making (equity financing).
6. Choose a Commercial Space. Your choices here will vary. You may not need a physical location if you are selling online and working from your home, although if selling products you will need to consider suppliers and shipping.  If you operate a mobile hotdog cart you will want to setup in locations where your customers are. Some mobile food trucks/carts/stands obtain permission to set up outside specific retail stores.  Some food truck owners obtain contracts with various organizations and they move from company to company during lunch hours selling lunch products to employees. If you are going to sell products or services in a brick-and-mortar store, then you want to consider buying or leasing a space, the costs of each, and finding a location either near your target market (make more sales near potential customers) or near your supplier (reduce costs).  There may also be licenses required, for example, if you sell liquor or food products. You may also require insurance.
7. Hire Employees.  Whether or not you hire employees will depend on the size of your business.  For example, if you are opening a hot dog stand, then you may be the only employee you have.  If you are opening a small bakery you might start out hiring friends and family, although, that can be a sticky situation if you have disagreements. Although, some entrepreneurs open restaurants or retail businesses specifically to start a family-owned business and create jobs and income for their family members. As your business grows you may need to hire employees. Take time to do a thorough job search so you can find the right-fit employees, otherwise, you may end up with a lot of headaches and wasted time by hiring the wrong people. To save time, and depending on the number and type of employees you need, you might use a recruiting firm to vet potential candidates for you. While there is usually a cost for this service, it saves you time (and money) in not having to recruit and select employees yourself.
8. Grow Your Business. “Getting your business up and running is only the start of your business journey. Your first year will be one of your most challenging. It’s when many businesses fail. You will have to keep your eye not only on your day-to-day operations but also planning for your company’s future growth. The difference between the two is often described as working in the business versus working on the business. Visit the Business Development Canada (BDC) manage your growth hub for more tips on how best to move your business forward in the early months.”

Business Plan

A person holding a light bulb sign

A business plan may change as your business grows or pivots in a new direction, so you will find the business plan is not fixed but flexible and needs to be revised from time to time. Any new or existing business can and should make use of a business plan. “In its simplest form, a business plan is a guide that outlines goals for your business and how you plan to reach them. It contains an overview of your business strategy, milestones to track tasks and responsibilities, and the basic financial projections you need to forecast your sales, expenses, and cash flow.” “The primary purpose of a business plan is to help you understand the direction of your business and the steps it will take to get there. Having a solid business plan can help you grow up to 30% faster and according to our own 2021 Small Business research working on a business plan increases confidence regarding business health—even in the midst of a crisis.” There is no one right way to write a business plan, your approach depends on your industry, and who is reading your plan. Ensure you include all the important information any lender or investor will want to see before they go into business with you.

Below is a brief description of the sections of a traditional business plan.

1. Executive Summary. “This is an essential part of a successful business plan that often takes the most time to complete. It’s also one that you may consider completing last, even though it’s usually the first thing that the reader sees. An executive summary is the definitive recap of all of the information that you include in the business plan. Most commonly, this section doesn’t exceed two full pages. This is because the executive summary aims to present the essence of the business and its goals. It serves as an elevator pitch that may help you convince someone to invest in the business.”
2. Company Description. “A List of the goods and services the company will provide, the market it will serve, short- and long-term goals for growth and a brief history of the company’s formation and past performance.”
3. Market Analysis. “The market analysis section details the target market for the company’s product offerings. This section confirms that the company understands the market and that it has already analyzed the existing market to determine that there is adequate demand to support its proposed business model. Market analysis includes information about the target market’s demographics, geographical location, consumer behavior, and market needs. The company can present numbers and sources to give an overview of the target market size.”
4. Competitive Analysis. “A competitive analysis is a strategy that involves researching major competitors to gain insight into their products, sales, and marketing tactics. Implementing stronger business strategies, warding off competitors, and capturing market share are just a few benefits of conducting a competitive market analysis.
5. Management Plan. “The management plan provides an outline of the company’s legal structure, its management team, and internal and external human resource requirements. It should list the number of employees that will be needed and the remuneration to be paid to each of the employees. Any external professionals, such as lawyers, valuers, architects, and consultants, that the company will need should also be included. If the company intends to use the business plan to source funding from investors, it should list the members of the executive team, as well as the members of the advisory board.”
6. Operating Plan. “The operating plan provides an overview of the company’s physical requirements, such as office space, machinery, labor, supplies, and inventory. For a business that requires custom warehouses and specialized equipment, the operating plan will be more detailed, as compared to, say, a home-based consulting business. If the business plan is for a manufacturing company, it will include information on raw material requirements and the supply chain.”
7. Sales and Marketing Plan. “This section of the plan defines what you plan to do to promote and sell the company’s products or services. Consider including your pricing plans here and mention the organization’s unique selling proposal. You may also list important communication channels for the business. For example, if you’re about to launch a retail company, you may explain which social media channels you’d use to promote the products through paid and organic advertisements. Other elements to include here are your email, influencer and content marketing strategies.”
8. Financial Plan and Projections. “This section should include a company’s financial planning and projections. Every company needs to have a budget in place. This section should include costs related to staffing, development, manufacturing, marketing, and any other expenses related to the business. Financial statements, balance sheets, and other financial information may be included for established businesses. New businesses will include targets and estimates for the first few years plus a description of potential investors.”
9. Appendix. “The final section of a business plan usually includes any additional information or appendices that support the claims and ideas you present in previous sections. You may consider adding attachments that exhibit the viability of your business plan, for example, financial statements or external market reports that you used to analyze competition or target audience.”

Play the YouTube video below, “What is a Business Plan? – BPlans Explains Everything”, to learn about what a business plan is and why and how you should use one. Transcript for “What is a Business Plan?” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Business Model Canvas

The business model canvas is a strategic planning tool used by managers to illustrate and develop their business model. The business model canvas template clearly identifies the key elements that make up a business. Additionally, it simplifies a business plan into a condensed form. In this way, the business model canvas template acts as an executive summary for the business plan. The typical use for this tool is to outline the fundamental building blocks of a business, but it can be used effectively for individual products as well. It can be used to identify potential opportunities for growth and expansion, or areas that need improvement. The components may vary but typically the business model canvas includes the following nine building blocks and each is represented by a rectangle in the model diagram.

1. Customer segments
2. Value proposition
3. Channels
4. Customer relationships
5. Key activities
6. Revenue streams
7. Key resources
8. Key partnerships
9. Cost structure

Play the YouTube video below, “Introduction to the Business Model Canvas”, to learn about what a business model canvas is and why and how you should use one.  Transcript for “Introduction to the Business Model Canvas” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Support and Education for Entrepreneurs

The University of Toronto Open Learning Series

The University of Toronto, The Bridge, Scarborough Campus, offers a free entrepreneurship course within its open learning series. “We welcome students, staff, faculty, alumni, and local and international community of emerging entrepreneurs to enhance your learning of entrepreneurship through the award-winning Entrepreneurship Open Learning Series. Start your entrepreneurship journey by completing training modules that teach you core management principles to help perfect your business plans and pitches.”

After you complete the entrepreneurship course within the open learning series you will be able to do the following:

• Explain value proposition and utility to help focus on specific motivations for a specific product.
• Define the target market and describe value specific for a target market to help demonstrate the value built into a product.
• Evaluate the utility and value of a product within an industry using market research.
• Design a usage scenario for a product.
• Discuss software design principles to help the development of a product.

Open Courses

There are many free online courses in entrepreneurship and many other subjects.  These courses are offered by various education providers, often in addition to their fee-based courses, and include Massachusetts Institute of Technology (MIT), INSEAD, University of Toronto, McMaster University, University of Michigan, Stanford Online, Open Yale Courses, Harvard University, LinkedIn Learning, FutureLearn, Coursera, Edx, Udacity, edX, Khan Academy, YouTube, and more. Some courses are referred to as MOOCs, Open Courses, and Free Trials or Demos.

OER (Free) Books, Video Tutorials, Case Studies, and More

“The Recommendation on Open Educational Resources (OER), adopted by UNESCO’s General Conference at its 40th session on 25 November 2019, is the first international normative instrument to embrace the field of openly licensed educational materials and technologies in education. OER are defined in this Recommendation as learning, teaching and research materials in any format and medium that reside in the public domain or are under copyright that have been released under an open license, that permit no-cost access, re-use, re-purpose, adaptation and redistribution by others.”

There are many free ebooks, case studies, video tutorials, and lessons on many subjects, including entrepreneurship, available from eCampus Ontario, BCCampus, OpenStax, OER Commons, Saylor Academy, Khan Academy, MERLOT, Directory of Open Access Journals (DOAJ), Open Textbook Library, OASIS, and more.

Incubators and Accelerators

“A business incubator is a specialized program designed as a space for new businesses to learn and grow. The programs provide services for entrepreneurs and startups while offering reduced rates for supplies and workspace. Typically, young businesses must apply for a position and commit to a certain amount of time in the program. While in a business incubator, companies can more thoroughly plan their business, learn from other individuals and save money.”

“A business accelerator is a program designed to help established startups scale quickly, and often provide funding in exchange for equity in the business. Accelerators often require startups to already have a minimum viable product or a fixed team before they can apply. Once admitted, startups go through an intense period of growth and development, often over the course of three to six months.”

Below are a few examples of business incubators and accelerators, and remember to check with your own college or university to determine if there is an incubator or accelerator on campus.

Seneca College

Seneca College has HELIX. “HELIX’s Innovation and Entrepreneurship Incubator has a process that provides future entrepreneurs with resources and support to help develop their innovation mindset and grow their new ventures from ideation to launch and scaling. The process involves two stages or ‘strands’ – the INNOVATION Strand and the ACCELERATION Strand. Those who want to enter the ACCELERATION Strand of HELIX must complete all six workshops of the INNOVATION Strand and deliver a pitch of their proposed venture idea.”

MIT

The MIT delta v accelerator is the capstone entrepreneurial experience for students at MIT. MIT REAP is a dynamic global initiative with two programs – Global and Focus – that engages with communities around the world to strengthen innovation-driven entrepreneurial ecosystems and transform economies.

MaRS

MaRS Discovery District innovation hub works with business startups to scale-ups. MaRS offers a range of services and a Start-up toolkit that help tech founders grow their companies and create meaningful innovation: solving real problems for real people. MaRS works with hundreds of companies across the country, turning breakthrough ideas into products and services with global impact.

District 3

“At District 3 we work with founders and their startup teams to help them validate their business and get to scaling it, faster and better. As a founder, you’ll be receiving tons of information and opinions about what you need to do run your startup successfully and you’ll have to learn to select what to follow. This takes time and experience, and while there is no real way to teach it, there are tools and organizations out there that can make it easier for you—like this library!

Futurepreneur

“Futurpreneur has been fueling the entrepreneurial passions of Canada’s young enterprise for over two decades. We are the only national, non-profit organization that provides financing, mentoring and support tools to aspiring business owners aged 18-39. Our internationally recognized mentoring program hand matches young entrepreneurs with a business expert from a network of more than 2,600 volunteer mentors.”

BDC

The Business Development Bank of Canada (BDC) offers many tools and resources, as well as advice, to entrepreneurs and business owners. “We support small and medium-sized businesses in all industries and at every stage of growth with money and advice. We are the Business Development Bank of Canada.”

Government Support

The Government of Canada and many chambers of commerce have mentoring programs designed to facilitate contact between business leaders and budding entrepreneurs. Local economic development centers and some business leaders’ associations offer similar programs. The Government of Canada, Starting a Business website, also provides information for registering a business, getting business support and financing, choosing a business name,  applying for business permits and licenses, and tax help. The Canadian Government’s Business Grants and Financing website provides information on Government financing programs, loans and capital investments, wage subsidies, grants, tax credits, and managing your business finances. Some grant and loan programs in Canada include Business Start Program (BSP) in Manitoba, Youth Entrepreneurship Partnership Program in Ontario,  Jeunes Promoteurs in Quebec, and Canada Small Business Financing Program.

Governments in countries other than Canada may also offer incentives for new business start-ups.  Some government programs specifically offer support to young entrepreneurs, entrepreneurs starting businesses within specific industries in which the government may be trying to grow the economy, and entrepreneurs who are part of specific minority groups. For example, The U.S. Small Business Administration (SBA) is a federal agency that provides assistance to current and prospective small business owners.. There are also several federal entrepreneur programs for immigrants, such as the Microenterprise Development Program and the Minority Business Development Agency Business Centers.

Crowd Funding

“Crowdfunding is a kind of crowdsourcing and alternative financing by which people, via the Internet, can contribute money to a person, cause, event, or business venture. This method has been used to fund startup businesses, help communities suffering from a natural disaster, and aid families and individuals in financial need due to a medical emergency or a death. Crowdfunding is now a common method for connecting entrepreneurs and investors—offering an alternative to bank loans or venture capitalists—and it is now a popular way of supporting cultural institutions, such as art organizations and charities. Billions of dollars are raised annually via this fundraising method. A high-profile example of crowdfunding is Oculus VR, now part of Meta (the parent company of Facebook). It produces virtual reality headsets and other hardware and software. The firm’s founder, Palmer Luckey, used Kickstarter to raise $2.4 million (U.S.) in 2012, vastly exceeding its crowdfunding goal of $250,000. Facebook purchased the company for $2 billion in cash and stock in 2014.”

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Definition of Technological Innovation

Technological innovation focuses specifically on technology and how to embody it successfully in many types of innovations such as products, services, processes, profit models, channels, and customer service engagement innovations. Technological innovation can be a source of competitive advantage for organizations that seek to create value in the market. Examples of technological innovation include the Internet, quantum computing, computers, and smartphones. “Not all innovation is technological innovation, though it might seem like it at times. Many companies innovate using their existing resources and you don’t need to invent a revolutionary technology to be considered an innovator. Much innovation comes from organizational innovation and creating new business models to challenge established companies and make headway in competitive markets. Many innovative companies also pursue process innovation using existing technologies, or establish themselves as early adopters of new technologies that streamline their business.”

Example of Technological Innovation in Services

An example of technological innovation in the service is SATMAP which is a software solution that uses advanced analytics to improve service in call centers. It helps companies match callers to service agents with appropriate personalities, resulting in higher rates of customer satisfaction and service-to-sales conversion.

Example of Technological Innovation in Products

The creation of the digital camera, capable of taking photographs with superior image quality and without the need for film or the need to develop film, is an example of technological innovation in products. “Apple’s innovation strategy involves introducing exciting new products and improvements (iPod, iPhone, iPad, and iTunes) and using innovative business models for maximum product success. It utilizes both radical and incremental innovation to its advantage and focuses on product design and functionality.”

Example of Technological Innovation in Processes

The development of robots for stock logistics, which are able to identify the items of an order and remove them on the corresponding shelves, as is currently done in Amazon warehouses, is an example of technological innovation in processes.

Importance of Technological Innovation

Technological innovation is important because it touches each of our lives bringing us a higher standard of living and a better quality of life. It allows us access to global communications, e-commerce, finance and trade, and so much more. Some form of technology is used by most people in the world today.

Students sitting on a bench each using a cell phone

“While less than 7% of the world was online in 2000, today over half the global population has access to the internet. Similar trends can be seen in cellphone use. At the start of the 2000s, there were 740 million cell phone subscriptions worldwide. Two decades later, that number has surpassed 8 billion, meaning there are now more cellphones in the world than people. Apple sold its first iPod in 2001, and six years later it introduced the iPhone, which ushered in a new era of personal technology. These changes led to a world in which technology touches nearly everything we do.”

“We are living in a time of exciting technological innovations. Digital technologies are driving transformative change. Economic paradigms are shifting. The new technologies are reshaping product and factor markets and profoundly altering business and work. The latest advances in artificial intelligence and related innovations are expanding the frontiers of the digital revolution. Digital transformation is accelerating in the wake of the COVID-19 pandemic. The future is arriving faster than expected.”

Current Technological Innovations

“Digital technologies have advanced more rapidly than any innovation in our history – reaching around 50 percent of the developing world’s population in only two decades and transforming societies. In the health sector, for instance, AI-enabled frontier technologies are helping to save lives, diagnose diseases and extend life expectancy. In education, virtual learning environments and distance learning have opened up programmes to students who would otherwise be excluded. Public services are also becoming more accessible and accountable through blockchain-powered systems, and less bureaucratically burdensome as a result of AI assistance. Big data can also support more responsive and accurate policies and programmes.”

Below is a list of a few of the technological innovations emerging today.

1. 

   A child making friends with a robot

   AI. “In 1958, Lisp programming language appeared, which became the standard for AI systems. In 1959, Arthur Samuel, an MIT engineer, used the term “machine learning” for the first time. Today, we find artificial intelligence applied in several ways: virtual assistants like Alexa and Siri, autonomous vehicles, and intelligent houses, among others.” “The wide range of AI innovations is expected to impact people and processes within and outside an enterprise context, making them important to understand for many stakeholders, from business leaders to the enterprise engineering teams tasked with deploying and operationalizing AI systems. There are four main categories: Data-centric AI, Model-centric AI, Applications-centric AI, and Human-centric AI.”

2. Extended Reality (XR). “Extended Reality (XR) is the combination of human & computer-generated graphics interaction, which is in reality as well as the virtual environment. In basic terms, Extended Reality is a superset of Augmented Reality (AR), Virtual Reality (VR) & Mixed Reality (MR). Applications for XR can be found in the entertainment industry, sales and marketing, housing and real estate, education and training, and work from home for remote areas. There are three major challenges with XR: cost, hardware, and privacy.”
3. Breath Testing for Disease Control. Beyond delivering results far faster than a blood draw, breath testing for infectious diseases and cancer detection could streamline medical diagnostics by providing a non-invasive way to collect critical health data.
4. 

   ChatGPT Generative AI

   Generative AI. “Generative AI, or generative artificial intelligence, is a form of machine learning that is able to produce text, video, images, and other types of content. ChatGPT, DALL-E, and Bard are examples of generative AI applications that produce text or images based on user-given prompts or dialogue. Generative AI is used in everything from creative to academic writing and translation; composing, dubbing, and sound editing; infographics, image editing, and architectural rendering; and in industries from automotive to media/entertainment to healthcare and scientific research. There are wide-ranging concerns about generative AI that touch upon legal, ethical, political, ecological, social, and economic issues.” Some limitations of today’s generative AI include the following. Limited creativity and originality, as it can only create new data based on existing patterns. Bias, if the data it was trained on is biased or incomplete.  Ethical concerns, such as the potential for misuse, plagiarism, or deception. “Workers across industries, from marketers and developers to product designers, have been discovering the ways in which generative AI can help them do their jobs better. This could mean creating extraordinary content in a fraction of the time, accelerating IT coding and testing processes, optimizing product simulations and design for much higher quality. In short, generative AI can give them ‘superpowers.’ In McKinsey & Company’s report, ‘The economic potential of generative AI: The next productivity frontier,; the firm’s researchers also project that generative AI can add the equivalent of $2.6 trillion to $4.4 trillion to the economy annually.”

5. Lithium-metal Batteries. “Electric vehicles come with a tough sales pitch; they’re relatively expensive, and you can drive them only a few hundred miles before they need to recharge—which takes far longer than stopping for gas. All these drawbacks have to do with the limitations of lithium-ion batteries. A well-funded Silicon Valley startup now says it has a battery that will make electric vehicles far more palatable for the mass consumer. It’s called a lithium-metal battery and is being developed by QuantumScape. According to early test results, the battery could boost the range of an EV by 80% and can be rapidly recharged. The startup has a deal with VW, which says it will be selling EVs with the new type of battery by 2025.”
6. 3D Printed Homes. Using massively scaled 3D printers, homes can be made. We already see this deployed in the U.S. and other developed nations. “In the developing world, where limited infrastructure makes shipping in materials a challenge, recent demonstrations using 3D printers take a leap ahead by employing locally sourced materials, clay, sand, and local fibers to print structures—eliminating roughly 95% of material requiring transport to a building site. This emerging technology could provide rugged shelters in remote regions, where housing needs are dire and no viable transport networks exist. The result could be a game changer for nations that are often otherwise left behind.”
7. Green Hydrogen. “Hydrogen has always been an intriguing possible replacement for fossil fuels. It burns cleanly, emitting no carbon dioxide; it’s energy dense, so it’s a good way to store power from on-and-off renewable sources; and you can make liquid synthetic fuels that are drop-in replacements for gasoline or diesel. But most hydrogen up to now has been made from natural gas; the process is dirty and energy intensive. The rapidly dropping cost of solar and wind power means green hydrogen is now cheap enough to be practical. Simply zap water with electricity, and presto, you’ve got hydrogen. Europe is leading the way, beginning to build the needed infrastructure.”
8. 

   A Drone flying over crops

   Agricultural Drones. “Farmers have begun to use agricultural drones adorned with cameras to improve the treatment of their crops. The drones allow farmers a unique perspective that previously-used satellite imagery could not provide. They help to expose issues with irrigation treatment, soil variation, and distressed plants at a much lower cost than methods like crop imaging with a manned aircraft. The success of the drones is made possible by technological advances in GPS modules, digital radios, and small MEMS sensors. Together, these advances allow farmers to bring greater precision to their craft in order to reap greater rewards.”

9. Genome Editing. Scientists have the technology to edit the human genome. But when should they, and who contributes to these decisions? “CRISPR/Cas9 genome editing is an inexpensive and efficient tool to introduce changes in DNA. Its ease of use sets virtually no limits on potential scientific and clinical applications. Prospects include correcting congenital monogenic disorders, targeting disease-causing molecular lesions, and even altering multiple genetic loci at the same time. Beyond therapeutic applications, there is at least in principle the possibility that CRISPR/Cas9 can be used to enhance human traits, such as resistance to infectious diseases, strength, or cognitive capacity. Such interventions can target somatic cells in adults or be employed in embryos during early development. Genome editing at the beginning of embryonic life means that any genomic alteration introduced will pass on to the germline and propagate through future generations. These possibilities have sparked considerable debate about germline genome editing ethics, governance, and the scope of responsible use of germline interventions.” “Researchers in China created a pair of monkeys with specific genetic mutations. This innovation has great implications for the field of biomedicine. The ability to alter DNA at specific locations on chromosomes makes it easier to study diseases. Researchers at MIT have expressed interest in studying brain disorders like autism and Alzheimer’s disease. CRISPR has the potential to aid researchers studying such ailments, allowing them to identify what genetic mutations actually cause the disorders.”
   
   

   DNA Analysis

   There are many concerns around the ethical use of CRISPR and the differences in regulation among the countries of the world. Four main concerns have surfaced and include the following. Safety. Due to the possibility of off-target effects (edits in the wrong place) and mosaicism (when some cells carry the edit but others do not), safety is of primary concern. Some researchers argue that there may never be a time when genome editing in embryos will offer a benefit greater than that of existing technologies today. Informed Consent. Some people worry that it is impossible to obtain informed consent for germline therapy because the patients affected by the edits are the embryo and future generations. The counterargument is that parents already make many decisions that affect their future children, including similarly complicated decisions such as PGD with IVF. Researchers and bioethicists also worry about the possibility of obtaining truly informed consent from prospective parents as long as the risks of germline therapy are unknown. Justice and Equity. As with many new technologies, there is concern that genome editing will only be accessible to the wealthy and will increase existing disparities in access to health care and other interventions. Some worry that taken to its extreme, germline editing could create classes of individuals defined by the quality of their engineered genome. Morality. Some people have moral and religious objections to the use of human embryos for research. Federal funds cannot be used for any research that creates or destroys embryos.

10. Smart Wind and Solar Power. “SMART is an acronym for ‘System Management of Atmospheric Resource through Technology’. SMART wind is a combination of wind turbine siting and management technologies which could create nearly $150 billion in electric sector cost savings within thirty years of their implementation.” “One barrier to mainstream use of renewables is integrating sustainable energy sources into the current power grid. Big data and artificial intelligence have made it easier to predict how much power wind turbines will produce. Anticipating power fluctuations is key to developing technologies for integrating wind and solar into the power grid.”

Future Technological Innovations

Below is a list of a few of the technological innovations that we may see emerging in the near future.

1. Necrobotics. “Sometimes new future technologies can offer amazing development, with the possibility of changing the future… while also being incredibly creepy. This is one way to describe the idea of necrobotics which, as the name suggests, involves turning dead things into robots. While this sounds like a plot to a creepy horror film, this is a technology being explored at Rice University. A team of researchers turned a dead spider into a robot-like gripper, given the ability to pick up other objects. To achieve this, they take a spider and inject it with air. This works because spiders use hydraulics to force their version of blood (haemolymph) into their limbs, making them extend. Right now this concept is in its infant stages, but it could mean a future where dead animals are used to further science… it all feels very Frankeinstein-like!”
2. E-skin. “While modern technology allows us to communicate verbally and visually almost anywhere in the world, there is currently no reliable method of sharing the sense of touch across long distances. Now, a wireless soft e-skin developed by engineers at the City University of Hong Kong could one day make giving and receiving hugs over the internet a reality. The e-skin is studded with flexible actuators that sense the wearer’s movements and convert them into electrical signals. These signals can then be sent to another e-skin system via Bluetooth, where the actuators convert them into mechanical vibrations that mimic the initial movements. The system could be used to allow friends and family to ‘feel’ each other over long distances, the researchers say.”
3. Xenotransplantation. “The procedure of transplanting, implementing or infusing a human with cells, tissues or organs from an animal source – has the potential to revolutionize surgery. One of the most common procedures performed so far is the insertion of a pig’s heart into a human. This has now successfully happened twice. However, one of the patients was only alive for a few months, and the second is still being observed. In these surgeries, the heart cannot be instantly put into a human, gene-editing needs to take place first. Certain genes need to be knocked out of the heart and human genes need to be added, mainly around immune acceptance and genes to prevent excessive growth of heart tissue. Right now, these surgeries are risky and there is no certainty around success. However, in the near future, we could see xenotransplants happening on a regular basis, providing hearts or tissues from animals to humans in need of it.”
4. 3D Printed Bones. “3D printing is an industry promising everything from cheap house building through to affordable rugged armour, but one of the most interesting uses of the technology is the building of 3D printed bones. The company, Ossiform, specializes in medical 3D printing, creating patient-specific replacements of different bones from tricalcium phosphate – a material with similar properties to human bones. Using these 3D printed bones is surprisingly easy. A hospital can perform an MRI which is then sent to Ossiform who create a 3D model of the patient-specific implant that is needed. The surgeon accepts the design and then once it is printed, it can be used in surgery. What is special about these 3D printed bones is that because of the use of tricalcium phosphate, the body will remodel the implants into vascularized bone. That means they will enable the full restoration of function that the bone it is replacing had. To achieve the best integration possible, the implants are of a porous structure and feature large pores and canals for cells to attach to and reform bone.”
5. 

   Body organs

   3D Printed Organs. “Your skin is your body’s largest organ. It protects your innards, holds you together, and regulates your body’s temperature. However, since skin doesn’t perform any complex chemical-sorting or blood-pumping activities, the skin is one of the simplest organs to replicate. In theory, this should make it the easiest organ to 3D bioprint. This new research could provide the base for future effective 3D printed skin treatments to minimize the long-term and permanent damage done in burn victims.”

6. Energy Storing Bricks. “Scientists have found a way to store energy in the red bricks that are used to build houses. Researchers led by Washington University in St Louis, in Missouri, US, have developed a method that can turn the cheap and widely available building material into “smart bricks” that can store energy like a battery. Although the research is still in the proof-of-concept stage, the scientists claim that walls made of these bricks ‘could store a substantial amount of energy’ and can ‘be recharged hundreds of thousands of times within an hour’. The researchers developed a method to convert red bricks into a type of energy storage device called a supercapacitor. This involved putting a conducting coating, known as Pedot, onto brick samples, which then seeped through the fired bricks’ porous structure, converting them into ‘energy storing electrodes’.”
7. Arc Hotel. A futuristic massive dome hotel created by the Russian architectural firm, Remy Studio, will be half immersed in water and built to withstand floods, tidal waves, rising water, earthquakes, tsunamis, and just about any natural disaster there is. It is also built to be completely sustainable. It will gather energy through solar cells and it will have a rainwater collection system. The Arc Hotel is only on paper for now, but in the future, it will be a 151 thousand square foot establishment. Sounds exciting, but we may have to wait a few years before we can book a room at this hotel.
8. Hyperloop Trains. You know of the fast magnetic trains of Japan, well, a company named Virgin Hyperloop is trying to push things even further. The hyperloop train may be able to send people shooting across tubes at a rate of about 600 miles per hour through a low-pressure tube using electric propulsion. The vehicle floats above the track using magnetic levitation and glides at airline speeds for long distances due to ultra-low aerodynamic drag. Science fiction? Hardly, in fact, the first vehicle of the Hyperloop has already been tested and proven, and some larger tests are being scheduled for the next few years. Not only that, but the tubes are built underground so as to not disturb wildlife, and they will be made so there are no carbon emissions. Sounds promising!

Explore the Concept – Regulating Technological Innovation

“Sweeping technological advancements are creating a sea change in today’s regulatory environment, posing significant challenges for regulators who strive to maintain a balance between fostering innovation, protecting consumers, and addressing the potential unintended consequences of disruption. Emerging technologies such as artificial intelligence (AI), machine learning, big data analytics, distributed ledger technology, and the Internet of Things (IoT) are creating new ways for consumers to interact—and disrupting traditional business models. It’s an era in which machines teach themselves to learn; autonomous vehicles communicate with one other and the transportation infrastructure; and smart devices respond to and anticipate consumer needs.”

Regulatory leaders are faced with some key challenges in figuring out how to best protect citizens, ensure fair markets, and enforce regulations while allowing these new technologies and businesses to flourish, and resisting the urge to over-regulate. “Existing regulatory structures are often slow to adapt to changing societal and economic circumstances, and regulatory agencies generally are risk-averse. Rapid adaptation to emerging technology, therefore, poses significant hurdles—and, in turn, to the technology industries, where change occurs at a rapid rate.”

A person using future technology

Technologies can help make our world fairer, more peaceful, and more just. Digital advances can support and accelerate the achievement of each of the 17 Sustainable Development Goals – from ending extreme poverty to reducing maternal and infant mortality, promoting sustainable farming and decent work, and achieving universal literacy. But technologies can also threaten privacy, erode security, and fuel inequality. Technologies have implications for human rights and human agency. Like generations before, we – governments, businesses, and individuals – have a choice to make in how we harness and manage new technologies.

Technology can be used for positive outcomes such as overcoming some of the greatest challenges our society faces, including climate change, famine, and disease. Technological advances can help to advance economic development and lead to a better quality of life. “But it can also be a tool of tremendous fear and oppression, embedding biases in automated decision-making processes and information-processing algorithms, exacerbating economic and social inequalities within and between countries to a staggering degree, or creating new weapons and avenues for attack unlike any we have had to face in the past.”

“Understanding technology and how we can make better decisions about designing, deploying, and refining it requires capturing that nuance and complexity through in-depth analysis of the impacts of different technological advancements and the ways they have played out in all their complicated and controversial messiness across the world. These impacts are often unpredictable as technologies are adopted in new contexts and come to be used in ways that sometimes diverge significantly from the use cases envisioned by their designers. The internet, designed to help transmit information between computer networks, became a crucial vehicle for commerce, introducing unexpected avenues for crime and financial fraud. Social media platforms like Facebook and Twitter, designed to connect friends and families through sharing photographs and life updates, became focal points of election controversies and political influence. Cryptocurrencies, originally intended as a means of decentralized digital cash, have become a significant environmental hazard as more and more computing resources are devoted to mining these forms of virtual money. One of the crucial challenges in this area is therefore recognizing, documenting, and even anticipating some of these unexpected consequences and providing mechanisms to technologists for how to think through the impacts of their work, as well as possible other paths to different outcomes.”

“Many reforms are stimulated by technology developments which have changed the underlying cost and competitive structure in industries ranging from telecommunications to banking to biotechnology. At the same time, regulatory reform is a powerful stimulus to further innovation. Competition-enhancing reforms in both the manufacturing and service sectors have been essential to the development and diffusion of new technologies, such as the Internet, automatic teller machines, and optical scanners in supermarkets.”

Flags of countries in front of the United Nations

 

“Organizations like the International Organization for Standardization, the World Intellectual Property Organization, the United Nations Industrial Development Organization, and many others have tried to harmonize these policies and protocols across different countries for years, but have met with limited success when it comes to resolving the issues of greatest tension and disagreement among nations. For technology to operate in a global environment, there is a need for a much greater degree of coordination among countries and the development of common standards and norms, but governments continue to struggle to agree not just on those norms themselves but even on the appropriate venue and processes for developing them.”

Without greater global cooperation, is it possible to maintain a global network like the Internet or to promote the spread of new technologies around the world to address the challenges of sustainability? What might help incentivize that cooperation moving forward, and what could new structures and processes for the governance of global technologies look like? Why has the tech industry’s self-regulation culture persisted?

The growing use of smartphones, connected devices, and sensors has created a vast digital footprint in consumers’ lives—a trend that will only accelerate. From a regulatory perspective, one important question is who owns all this data—the user or the service provider who stores it? If the service provider owns the information, what obligation does it have to store and protect it? And to what extent can data be shared with third parties? Can a car manufacturer charge a higher price to car owners who refuse the right to share their private data and less to those willing to share their data? With no single global agreement on data protection, regulators around the world are taking different positions on these issues.

Answering these questions in order to understand these processes requires synthesizing knowledge from a range of different fields, including sociology, political science, economics, and history, as well as technical fields such as engineering, climate science, and computer science. “A crucial part of understanding how technology has created global change and, in turn, how global changes have influenced the development of new technologies is understanding the technologies themselves in all their richness and complexity—how they work, the limits of what they can do, what they were designed to do, how they are actually used. Just as technologies themselves are becoming more complicated, so are their embeddings and relationships to the larger social, political, and legal contexts in which they exist.”

For technological innovation, regulation can be a catalyst or a hindrance. As emerging technologies evolve, regulators from around the world are rethinking their approaches, adopting models that are agile, iterative, and collaborative to face the challenges posed by emerging technologies and the fourth Industrial Revolution.

 

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

Reduce Risk by Creating a Balanced Innovation Portfolio

In today’s rapidly transforming business world, it seems the only thing that is constant is change. Companies that cannot keep up with the pace of change and adapt to disruptive innovation often find themselves struggling. There are quite a few companies that failed to innovate and were either forced to declare bankruptcy, merge with another organization, or fell from the top of the Fortune 500 companies rankings– 88% of the Fortune 500 firms that existed in 1955 are gone. Every new ground-breaking product and service, in the end, will become obsolete, commoditized, and outcompeted by new and better solutions, products, and companies. This may be best epitomized by Kodak, Blockbuster, Polaroid, Pan Am, Sears, Compaq, Nokia, Yahoo, and Blackberry. To secure healthy revenue streams and long-term survival, organizations need to have a balanced innovation portfolio. An innovation portfolio is a collection of innovation projects, ideas, and programs that the company manages to reduce potential risks associated with innovation. These projects usually span time, ranging from short-term (core), to mid-term (adjacent), to long-term (transformational) initiatives.

A well-balanced innovation portfolio has a mix of high-risk game-changers and low-risk incremental innovations. Portfolio balancing is a technique used by the world’s best innovators to analyze the long- and short-term risks of innovation projects in the company’s pipeline. No organization can afford to risk its business on one big idea. Likewise, developing a bunch of small, incremental projects won’t deliver a big win either.

The Innovation Ambition Matrix, as featured in the Harvard Business Review (May 2012) and diagrammed in Figure 10.1 below, is a classic model that helps companies decide how to fund different growth initiatives. Few organizations think about the best level of innovation to target, and even fewer manage to achieve it. According to  Nagji and Tuff,  the best approach to innovation is to think in terms of managing an integrated, balanced ’portfolio’ of innovation initiatives which are divided into three types: Core, Adjacent, and Transformational.

Figure 10.1 Innovation Ambition Matrix, Nagji, B. & Tuff, G., Harvard Business Review

Reduce Risk by Performing Environmental Scans

Finding a creative idea is only the first step in every innovation process, understanding the business environment and forecasting both internal and external factors that may affect it is critical before releasing innovations to the market. At this point, tools like the PESTLE analysis and SWOT analysis come into action. The frequency of environmental scanning depends on the purpose of the scan. It can range from once a year to once a month. Leaders should conduct environmental scans once a year to review shifts that can and will impact business performance.

PEST Analysis

A major source of business uncertainty is change in the environment in which an organization operates. The environment is constantly changing; environmental scanning will, to the extent possible, help leaders identify changes in terms of events, issues, trends, and deviations from the norm. Environmental scanning is about understanding the world and context in which the business operates. It is a process for monitoring both the internal and external environments for clues to existing circumstances and changes that could bring about risk or opportunities. The purpose of environmental scanning is to find and retain information in order to inform decision-making at a certain point in time.

The first step in the risk management process is gaining a well-rounded understanding of the organization’s external and internal environment. Risk refers to the effect of uncertainty on objectives and outcomes at different levels of the organization. Knowing the environment and the direction of current and future shifts will help leaders identify and understand possible drivers and sources of risk that could affect the achievement of company objectives. Therefore, scanning activities should include a wide range of facts, trends, and time horizons.

A PEST analysis is one way to scan the external environment for opportunities and risks. Traditionally, the framework was referred to as a PEST analysis, which was an acronym for Political, Economic, Social, and Technological; in more recent history, the framework was extended to include Legal, Environmental, and Ethical factors. Common acronyms include PEST, PESTLE, PESTEL, SLEPT, STEPE, and STEEPLE (the extra ‘E’ stands for Ethics) and it does not matter which acronym you choose because each of them describes the macro-environmental factors that can affect the performance of an organization. Using a PEST analysis acronym, managers would include ethics under the social or political factors, legal under the economic or political factors, and environmental sustainability under the social or political factors. Therefore, PEST is all you really need. After completing a PEST analysis, organizations are in a better position to plan an effective strategy to meet their objectives and minimize risks. PEST factors are considered when assessing the impact of external factors on a company’s profitability.

Competitive Analysis

Competitive analysis (sometimes called a competitor analysis or competition analysis) is exactly what it sounds like, a structured approach to identifying and analyzing a company’s competitors. More concretely, it’s an assessment of the competition’s offerings, strategy, strengths, and weaknesses.

Competitive analysis helps leaders answer questions such as:

Which other companies are providing a solution similar to ours?
What are the ideal customer’s minimum expectations?
What are they currently not getting from our product with regard to those expectations?
What barriers do competitors in the market face?
What should we avoid introducing in our product?
What price are customers willing to pay for our product?
What value do we need to provide to make our product stand out in the market?
What trends are happening and how might they change the playing field?

How to do a Competitive Analysis:

1. Determine who your competitors are.
2. Determine what products your competitors offer.
3. Research your competitors’ sales tactics and results.
4. Take a look at your competitors’ pricing, as well as any perks they offer.
5. Ensure you’re meeting competitive shipping costs.
6. Analyze how your competitors market their products.
7. Take note of your competition’s content strategy.
8. Learn what technologies your competitors use.
9. Analyze the level of engagement on your competitors’ content.
10. Observe how they promote marketing content.
11. Look at their social media presence, strategies, and go-to platforms.
12. Perform a SWOT Analysis to learn their strengths, weaknesses, opportunities, and threats.

SWOT Analysis

A SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a company’s competitive position and to develop strategic planning. SWOT analysis assesses internal and external factors, as well as current and future potential.

Every SWOT analysis will include the following four categories. Though the elements and discoveries within these categories will vary from company to company, a SWOT analysis is not complete without each of these elements:

• Strengths describe what an organization excels at and what separates it from the competition: a strong brand, a loyal customer base, a strong balance sheet, unique technology, and so on.
• Weaknesses stop an organization from performing at its optimum level. They are areas where the business needs to improve to remain competitive: a weak brand, higher-than-average turnover, high levels of debt, an inadequate supply chain, or lack of capital.
• Opportunities refer to favorable external factors that could give an organization a competitive advantage. For example, if a country cuts tariffs, a car manufacturer can export its cars into a new market, increasing sales and market share.
• Threats refer to factors that have the potential to harm an organization. For example, a drought is a threat to a wheat-producing company, as it may destroy or reduce crop yield. Other common threats include things like rising costs for materials, increasing competition, tight labor supply, and so on.

Reduce Risk by Using Metrics

Metrics are measures of quantitative assessments commonly used for assessing, comparing, and tracking performance or production. Metrics used on innovation projects are a good way to monitor return on investment. Not all metrics work for every company or every project. There are, however, certain types of metrics that every innovation team should pay attention to, including:

• Number of new ideas in the pipeline
• Number of innovation projects started
• R&D spent as a percentage of sales
• Revenue/profit/growth from new innovations
• Number of new innovations launched in a specific amount of time

Measure progress and success

The list below provides a few reasons that companies should use innovation metrics.

• Provide strategic direction by signaling shifts in priorities
• Guide resource (re)allocations
• Assess the effectiveness of innovation spending
• Hold managers accountable and link incentives to reach targets
• Diagnose and improve innovation performance
• Mitigate risk

There are many risks associated with innovation such as the loss of money, the loss of time, the loss of company reputation, and the loss of potential. Due to the fact that there is only a limited number of company resources, businesses cannot pursue all the innovative projects they may wish to at one time and must budget for the most promising projects. Opportunity costs are the potential benefits a business misses out on when choosing one alternative over another. Because opportunity costs are unseen by definition, they can be easily overlooked. Managers can make better decisions when choosing which innovation projects to pursue by understanding the potential missed opportunities when choosing one investment over another.

“Regardless of how funding is established—or the size of the budget itself—it is critical to measure how much money was spent at each stage of the process: preparation (i.e. percentage of capital budget allocated to innovation projects), development (i.e. R&D spending at each phase of development the innovation process), and results (i.e. percentage of sales from innovation projects). As with the portfolio approach to general innovation metrics, the use of financial metrics across the innovation lifecycle reduces the focus on ROI, and too much focus on ROI can cripple innovative projects in the early stages.” The chapter entitled, “Leading Innovation” discusses funding and budgeting for innovation in more detail.

Businesses can measure innovation by using the following metrics.

• Timesheet metrics
• New product or service metrics
• Financial metrics
• Training and staff competency metrics
• Management and leadership metrics

Input Metrics

Input metrics measure how well the company is gauging input and effort into the innovation project. These metrics measure things like the number of ideas generated by each employee, time spent by top management on innovation activities, and the percent of capital allocated to innovation projects.

Development Metrics

Development metrics gauge the company’s progress, process, and pipeline of innovations. These metrics measure things like the amount of R&D spend on each phase of development, the number of projects in the pipeline, and time spent on each phase of idea management.

Output Metrics

Output metrics measure the end or results of the company’s efforts. These metrics measure things like the number of products launched on an annual basis, the number of patents awarded, and the percentage of revenue from new offerings.

Metrics offer guideposts for improvements and progress, they calibrate the company’s efforts and show a clear path for remedy. Companies can determine from metrics what is working and what is not working and how to modify the project from start to finish.

Common Flaws With Measurements

The list below provides a few common flaws with using measurements.

• Encouraging incremental innovation over disruptive innovation
• Having too few metrics, or too many
• Measuring what is available versus what is needed
• Placing too much emphasis on output measures over process effectiveness

Play this YouTube video “Innovation QuickWin: Innovation Metrics” to learn about the major metrics that companies need to set to monitor and track innovation success. Transcript for “Innovation Quickwin: Innovation Metrics” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Reduce Risk by Reducing Resistance to Change

Innovation creates change, whether that is a new process or technology being implemented in the workplace or a new radical product being developed that creates change within the organization.  There will always be employees and other stakeholders that are resistant to change and this may hinder or put up roadblocks for the innovation project to succeed.

Below is a list of ten reasons people resist change along with some strategies management can use to overcome resistance to change.

1. Loss of Job Security or Control. They fear they may lose their jobs, or not have input into how their job is done. Management communication and employee training may help reduce their resistance.
2. Shock and Fear of the Unknown.  People will usually move forward if they feel the risk of standing still outweighs the risk of moving forward. The change should be communicated early and the need for change should be convincing–the less employees know about the change and how it will affect them, the more fearful they will become.
3. Lack of Confidence. They fear they will not be able to learn new systems/processes or perform to their best ability. Management should help employees build their competencies to increase their confidence.
4. Poor Timing.  Too much change all at once can cause employee resistance. People should feel the benefits of previous change efforts to help them buy-in to the next change.
5. Lack of Rewards. Employees will resist change when they do not see anything in it for them in terms of rewards. Management needs to explain the tangible short-term and long-term benefits to employees.
6. Office Politics. Some employees resist change to prove to management that the decision is wrong or that the person leading the change is not capable of this initiative. Others may resist change because they may lose power in the organizational structure. When teams are united and working toward a new initiative, employees will accept the decisions of the leaders.
7. Loss of Support System. Employees get comfortable with who they work with, their team, their managers and have built a predictable support system. It is human nature to avoid the unfamiliar, but on the other hand, most people enjoy adventures.  Management should communicate how the new support system will work.
8. Former Change Experience. If employees have experienced poor change management in the past, they tend to resist new change even more. Management should talk about previous change initiatives and highlight their benefits.
9. Lack of Trust and Support. Change does not happen well in an atmosphere of mistrust.  Communication must be and actions must be trustworthy in order for employees to build faith in the intentions of management/leaders.
10. Peer Pressure. Organizational stakeholders will resist change to protect the interest of a group. People are willing to change if the promise of the future is better than the realities of the present.

Play this YouTube video “Ten Reasons Why People Resist Change in the Workplace” to learn more about why employees resist change and how companies can reduce this resistance. Transcript for “Ten Reasons Why People Resist Change in the Workplace” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Reduce Risk by Building the Right Team

An important component of innovation project success is building the right team.  Companies may have employees with the right skill sets or they may need to hire externally.  When the right talent for an innovation project is not available within the company, training to advance internal candidates may be an option.  If training is not available, too costly, or will take too long, then companies might consider either outsourcing parts of the project development to experts in the field, for example, small companies that focus on a niche area, or hiring new employees, either on a full-time, if feasible, or part-time, or contract basis. If this is a one-time need or a need that occurs seldom, hiring a full-time employee may be too costly, therefore, not feasible.  It may be feasible though to hire a contract worker who can work on-site for the time frame needed with no long-term expectations of becoming a full-time company employee. Below are a few key points to remember about building the right team.

• Innovating for short-term versus long-term initiatives (ten years in the future) demands very different skills.
• Innovation teams should be staffed with people that represent different stakeholders and interests in the organization.
• Innovation teams should have one or a few influential “champions” with the ability to convince other members of the organizations to get on board.
• It is vital to bring in highly talented outsiders that will look at innovation projects without the lens of the organization to get a fresh perspective.

Part of building the right team may mean collaborating with other companies (even competitors), the government, consultants, or customers on innovative projects. Forming partnerships with other organizations to create a new innovation is often a great idea since it will reduce the risks of innovating for each company because each partner shares in the risks. With that said, each collaborating organization will also share in the rewards.  An organization that may be weak in some areas may be able to offset those weaknesses by partnering with another company that is strong in those areas. For example, if the company has determined it is too expensive to purchase new technology, or too difficult to obtain patents, they might gain strengths in partnering with a company that has the technology or patent that is needed. Companies may take advantage of collaborating with the Government of Canada which provides funding and advisory support for research and development (R&D), innovation, and commercialization projects. Collaborating and listening to employees is a good way to help ensure the company is creating products and services that customers want because employees often interact with customers, solve customer problems, and gather feedback from customers and are able to bring these insights to the innovation project. The chapter entitled, “Leading Innovation” discusses in some detail several types of collaborations that leaders can pursue in order to nurture innovation.

Reduce Risk by Safeguarding Intellectual Property

In general terms, intellectual property is any product of the human intellect that the law protects from unauthorized use by others. The concept of intellectual property relates to the fact that some intangible assets, products of the human intellect, should have the same protective rights as physical property (tangible assets). For some innovations, a company may require a patent or copyright to protect its intellectual property from competitors and help the company keep its competitive advantage. Although, a competitive advantage does have a time limit that runs out when legal rights expire or when competitors catch up (or surpass) with their own innovations.

The main types of intellectual property include the following.

• Patents. Legal rights that allow the inventor exclusive rights to the invention, which could be a design, process, improvement, or physical invention. Patents protect inventions from being copied or used by others without permission.
• Trademarks. Distinctive signs, symbols, or phrases that are recognizable and represent a product that legally separates it from other products. Trademarks identify the source or quality of goods or services and are often associated with a company’s brand.
• Copyrights. Legal rights that protect original works of authorship, such as books, music, films, etc. Copyrights also state that the original creator may grant anyone authorization through a licensing agreement to use the work.
• Trade secrets. Confidential information that gives a business an advantage over its competitors. A trade secret is a company’s process, recipe, formula, or practice that is not public information and provides a monetary benefit to the holder of the trade secret. KFC’s original recipe was a trade secret and only a few employees knew the recipe and were bound by confidentiality agreements to not disclose or share the recipe.

This video explains the primary methods of protecting intellectual property (patents, copyrights, trademarks, trade secrets), including the qualifications for using them, and when an organization might opt to not protect its IP. Transcript for “Innovation Strategy: Intellectual Property” Video [PDF–New Tab]. Closed captioning is available on YouTube.

Reduce Risk by Studying Innovation Failures

No one likes to fail and most of us try very hard not to fail, but failure is about learning, and it is absolutely necessary to learn in order to succeed at innovation. For every innovation leader out there like Google, Microsoft, or Amazon, there are hundreds of competitors that never quite make it out of the gate. For growing startups looking to establish themselves, it’s always helpful to try and understand why this happens, although, innovation failure is not something that only happens to small companies; even market leaders like Coca-Cola, Samsung, and Nintendo can still have plenty of bad days. Just check out the sad history of the Nintendo Virtual Boy. Despite the negative energy it comes with, failure has its positive side. Experiencing failure can teach you lessons that you wouldn’t have learned otherwise. Actually, some of the most successful people in the world were only able to attain success because of the lessons they learned from their previous failures.

To reduce the chance of failure companies should study their own past failures as well as those of their competitors.  Learn from failure. What worked? What did not? Failure is not something to be afraid of or viewed negatively within the company–it is a learning curve from trial and error. Businesses that reflect on past failures often discover that the failures of the past brought them to the successes they now enjoy. “The most important goal of innovation is to gain a competitive advantage by increasing the speed and effectiveness with which your company learns—and acts on that learning. Innovation is about experimentation—failing early and often.”

Here are a few tips for teams to learn from innovation project failures:

1. Know it is OK to fail because a new route is created from failure.
2. Realize experience is the best teacher because the team learns what works and what doesn’t.
3. Allow the team the freedom to fail because if they are too cautious they will not take risks.
4. Failure helps the team gain new knowledge in their work and resets their focus.
5. Let the fear of failure help motivate the team to succeed, failure leads to mastery.
6. Welcome failure because the faster the team fails, the faster they will succeed.
7. Failure makes people stronger, making them better prepared to tackle the next challenge.
8. Keep records of your company’s and competitors’ failures and successes to refer back upon “lessons learned” when working on future innovation projects.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)

How Can Leaders Structure the Organization to Support Innovation?

Department managers competing for resources

Smaller businesses do not have much problem with the organizational structure getting in the way of innovation because most employees who have an innovative idea can speak directly with the owner of the business to get the idea reviewed and approved. Larger corporations have several types of organizational structures and some of those, such as hierarchical have many layers, so an employee may speak with their direct manager who then speaks to an area manager who then speaks to another manager, and so on.  Often in these large organizations, different departments are responsible for their own profit and loss, so they essentially compete with each other for company resources which is not the best structure to support collaborative innovation or make it easy to get big ideas into the innovation pipeline.

From small businesses to large organizations like global megacorporations, companies across the globe generally rely on four different types of organizational structures in the mechanistic model: Functional, Divisional, Matrix, and Hybrid. Matrix structures combine functional structures with divisional structures in a grid arrangement that combines vertical functions (e.g., organizational roles and titles) with horizontal divisions (e.g., directors of various product lines, projects, etc.). A matrix organization decentralizes decision-making and provides teams with increased autonomy while simultaneously improving cross-functional collaboration to boost overall productivity and encourage innovative approaches to problem-solving. Hybrid is similar to matrix structures, yet allows for collaborative sharing of data and resources while preserving division-specific specializations.

While the four organizational structures above are the most common, companies around the world also use four other types of organizational structures which are more organic in nature: Process, Circular, Flat, and Network. Process structures concentrate on end-to-end workflows for specific processes. This improves adaptability and flexibility to meet changing demand and market conditions. A circular structure is intended to encourage the dissemination of information and inspiration from the center and allow different divisions to participate as components of a single whole. In flat structures, management and executive staff take a more collaborative rather than supervisory role, working and communicating closely with team members and project managers.

To ensure operations are running smoothly, many businesses follow an organizational structure that best supports their size and business goals. Having and communicating a clear organizational structure helps employees understand their roles and corresponding expectations and informs goal-setting.

Play this YouTube video “How Apple is Organized for Innovation: The Functional Organization” to learn more about how to organize a company for innovation success. Transcript for “How Apple Is Organized for Innovation: The Functional Organization” Video [PDF–New Tab]. Closed captioning is available on YouTube.

How Can Leaders Create an Innovative Work Culture?

Creating an innovative culture at work can improve employee satisfaction, team productivity, and the quality of the company’s products and services. It can also help grow brands, attract prospective employees, keep talent in the workforce, and help generate revenue.

An innovative culture is a work environment that fosters and rewards employee creativity instead of focusing on deadlines and revenue. Tech companies often have an innovative culture since the tech industry constantly changes and generates new ideas.

Key characteristics of an innovative culture include:

• Unique strategy: An innovative strategy often involves specific goals and a strategy specifically designed for and by the company.
• Autonomy: When the workplace has an innovative culture, it often gives employees freedom in how they work to accomplish goals.
• Trust: An environment of trust encourages employees to share ideas and attempt new methods to accomplish goals.
• Accepting failures: Innovation may lead to some failures along the way. Allowing these failures helps employees be more creative without the fear of defeat or making a mistake.
• Leadership: Good leaders with effective management abilities help maintain an innovative culture. However, it’s best implemented when employees act as leaders, too.

An innovative work culture encourages continuous improvements which can help the company produce improved products and services which in turn helps the company retain existing customers and attract new customers.  An innovative company also attracts investors and new talent (new employees). Innovation can improve the company’s image and make it a leader in the industry, again bringing more customers, investors, and profit. Innovative companies often have higher revenues and profits than their competitors.

When companies trust, encourage, and reward their employees, their employees feel more creative and create new ideas at work. These new ideas are often beneficial to the company.  Innovative cultures create happier and more productive employees.  Innovation can prepare a company to adapt to its industry and market and this ability to adapt can lead to a company’s longevity as it must keep up with its competition to stay relevant. When a team searches for new methodologies or processes and creates new products, it may discover a groundbreaking idea or predict a future problem it may face. Both can help the company adapt to a changing landscape.

Listed below are a few of the benefits of having an innovative work culture.

• Sets a course for improvement
• Helps develop new ideas
• Leads to company growth
• Gives a competitive advantage
• Increases team efficiency
• Develops an adaptive nature
• Appeals to more talented professionals
• Improves the company brand

Leaders should do the following to help create an innovative work culture.

Play this YouTube video “Amazon’s culture of innovation” to learn more about how Amazon creates a culture of innovation. Transcript for “Amazon’s culture of innovation” Video [PDF–New Tab]. Closed captioning is available on YouTube.

How Can Leaders Nurture Innovation?

Leaders must create corporate structures that continuously nurture innovation. They should build connections to innovation within the company vision, mission, and values and ensure that company values and goals are communicated throughout the organization. It is also important for the leaders of the organization to model the behaviours they want to see in their employees and create a culture of innovation through providing training, motivation, encouragement, and support to employees. Leaders must examine new ideas with an open mind.  Many ideas are in their infancy when they first appear and it may take time to refine and perfect the concept.

Below is a list of some of the ways company leaders can support innovation and encourage its growth.

Create an Innovation Strategy

To nurture innovation a company should have an innovation strategy that is communicated to all stakeholders. An innovation strategy is a clearly-defined plan of structured steps a person or team must perform to achieve the growth and future sustainability goals of an organization. An innovation strategy provides people with a framework for critical decision-making. Leaders may consider the following questions when devising a strategy:

• In what areas will we invest?
• How much will we invest?
• Who will make investment decisions?
• What capabilities will we need to develop to support our investments?
• What capabilities can we not build, which we must then acquire or form a partnership to provide?

Holding on to traditional practices just because “that’s what we’ve always done” is not a strategy for success. That rigid approach is guaranteed to fail in the face of disruption, as proven by Kodak and Blockbuster.

The chapter entitled, “Growth Strategy” discusses innovation strategy as a growth strategy in more detail.

Use the Innovation Ambition Matrix

To nurture innovation, leaders who want an innovative company must ensure a balanced innovation portfolio; a combination of core, adjacent, and transformative innovation initiatives. Generally, 70% of innovation investments are in core innovations, 20% in adjacent innovations, and only 10% in disruptive innovations. In terms of value creation potential, however, the ratios are inverted:  core innovation efforts typically contribute 10% of the long-term cumulative return on innovation investment, adjacent initiatives contribute 20%, and transformational projects yield a huge 70%.  The right balance of innovation investment will vary from company to company according to particular factors like the age of the company, its competitive position in the market, and characteristics of the industry served (e.g. number of suppliers, market growth, and regulatory patterns). Most companies tend to be heavily oriented toward just core innovation and whilst this is understandable in terms of avoiding the greater risks and uncertainties associated with adjacent and transformational initiatives, the result will be a steady, long-term decline in business and attractiveness to customers if a company never tries some adjacent or transformational projects.

The chapter entitled, “Innovation Risks” discusses the Innovation Ambition Matrix as a way to mitigate risks in more detail.

Scan the Business Environment

To nurture innovation leaders must continually look for opportunities and threats and examine the company’s strengths and weaknesses so as to build weaknesses into strengths, use strengths to combat threats, and take advantage of opportunities. Using research and analysis tools such as a SWOT analysis, Competitor Analysis, PESTLE analysis, Porter’s Five Forces competitive landscape analysis, Ansoff’s Matrix for strategic planning, Innovation Matrix for innovation planning, and more, leaders can plan ahead, mitigate risks, and make informed decisions based on research.

The chapter entitled, “Innovation Risks” discusses how scanning the business environment can help reduce risks, and provides additional details about the analysis tools.

Accept Reasonable Risks

To nurture innovation leaders must be ready to accept risk and understand it is acceptable to fail and try again, as this is part of the innovative process. Investing in a knowledge management system will help the company make it easy to share information and ideas, track innovation progress, manage the budget, track ROI, and keep track of lessons learned from past failures so as to avoid these pitfalls in the future. An electronic system allows companies to capture the benefits of, and lessons learned from innovation.

The chapter entitled, “Innovation Risks” discusses how to reduce innovation risks in more detail.

Encourage Internal Collaboration

Focused colleagues brainstorming in the boardroom

To nurture innovation, it is important to create cross-departmental teams and make communicating across departments easy. When, for example, the marketing team only speaks to the marketing team this creates a recipe for groupthink. To ensure employees understand how the different parts of the company work and how they must work together to achieve progress, leaders might, for example, create a policy whereby anyone who wishes to become a business unit general manager must have worked in at least two functional areas for two or more years. The CEO of a very successful technology company requires the R&D people to spend about 10% of their time in marketing and sales and vice versa.

A great example of internal or cross-company collaboration is Starbucks. As the rise of café culture birthed hipster pop-ups and independent shops, the dominant chains began to lose ground. Keen to avoid a Kodak moment, Howard Schultz jumped to action. The Starbucks CEO invited store managers from all over the world to come together for a conference to redesign the café experience.

Design Innovation Labs

Designing innovation labs is another way to nurture and support innovative initiatives. Innovation Labs focus on business growth. They can either be internal to a company that has the resources and the team available to run their own internal programs, or they can be external such as a consulting firm that supports the innovation process of other businesses. Innovation labs are strategic and goal-focused and are used as tools to address specific company innovation requirements. An innovation lab is a fast, flexible and creative concept that adapts to the needs of the host organization. Innovation Labs can be set up for just a few days, run over the course of a few months, or can become an ingrained part of a company that provides a constant source of innovation. Some well-known organizations create innovation lab spaces where their employees can experiment and work on innovative ideas.

Below is a list of a few companies with successful innovation labs.

• Kohl’s Innovation Center
• Google[x]
• Amazon Lab126
• Verizon 5G Labs
• Volkswagen Automative Innovation Lab
• Staples’ Velocity Lab
• Coca-Cola’s KOLab
• Lowe’s Innovation Lab
• Capital One Labs

Foster Intrapreneurship

Intrapreneurship is defined as entrepreneurship inside an existing company. Intrapreneurship programs are a great way to make innovative projects and ideas happen. It refers to the new businesses or ventures created within an established organization. Some companies nurture innovative ideas brought forth by employees by supporting them in intrapreneurship initiatives. These initiatives often take the form of company spin-offs or subsidiaries whereby the employee who came up with the idea often becomes a top-level manager of the new spin-off company. Often intrapreneurship is supported through an innovation lab.

Below is a list of a few successful intrapreneurship initiatives.

Vimeo

Vimeo is an exceptional example of how an Intrapreneur, Anjali Sud, transformed the company’s business model inside out and went from being the Marketing Director to the CEO of the company. Increasing sales by 54% in a year, Anjali Sud changed the struggling online video platform to a successful SaaS business.

BOXLAB

Through the intrapreneurship program at BASF, Chemovator, BOXLAB Services became the first corporate spin-off in the organization. Mischa Feig and Lisa Ruffin are the intrapreneurs behind the spin-off, which now operates as an independent startup on the market with BASF holding minority shares.

PlayStation

Back when gaming consoles were first being developed and marketed, Sony was not interested in entering this industry. It’s hard to believe this considering that today, gaming accounts for 29% of Sony’s revenue. Ken Kutaragi is the intrapreneur behind the launch of the first Sony PlayStation in December 1994 in Japan. It eventually became the first “computer entertainment platform” to ship over 100 million units, doing so in under a decade.

Consider Mergers or Acquisitions

To nurture innovation, large companies may work with smaller businesses that have a niche, expertise, technology, or specialty that the larger company does not have.  Many times large organizations purchase (acquire) these smaller companies so that the larger organization can expand its innovative skillset, technologies, processes, patents/trademarks, and expertise with what the smaller company brings. For example, software and application development might not be the company’s thing so the company might consider partnering with a Python developer to launch a brand new web application that the industry has never seen.

Cisco’s acquisition strategy generally targets smaller companies that have developed innovative new products,  but the key to making these acquisitions pay over the long term is the company’s ability to retain the talented engineers and managers from the acquired companies.

Collaborate with Competitors

Collaboration may be something the company needs to do to meet its innovation goals. These projects are often referred to as co-creation, joint ventures, coopetition, partnerships, or collaboration projects. Many new products are brought to consumers through this type of collaboration. “One of the most famous competitive collaborations is Microsoft and Intel. They created Wintel Alliance, in which Intel worked on hardware, and Microsoft created the software. While the alliance has since fizzled out, the two giants collaborated to build software and hardware platforms and brought their tech to virtually every home in the world.”

Below is an example of how Starbucks collaborated with Spotify to offer customers of both businesses an innovative music ecosystem. 

Collaborate with Government

The Government of Canada is encouraging greater partnerships among Canadian businesses, universities, and colleges to drive innovation and encourage the adoption of new processes and technologies that help Canadian businesses prepare to compete and win in the global marketplace. Businesses can get a list of financing programs, expertise, facilities, and more to support their innovation projects at the Government of Canada Innovation Funding and Support website.

The government often partners with businesses toward innovation, especially social, environmental, and technological innovation. Governmental organizations across the globe have launched their own innovation hubs often partnering with companies to find innovations that will bring value to entire communities.

Collaborate with Consultants

Innovation consultants can help guide and support the innovative process.  Companies can outsource these experts if they do not have an organizational structure for innovation or lack talent within the organization. Some well-known innovation consulting firms include IDEO, Innosight, frog, and the Board of Innovation. The expertise, experience, and services offered by each consulting firm may vary, but these experts can guide the innovation project, train internal managers, and help manage the project.

Collaborate with Customers

Open innovation is a business management model for innovation that promotes collaboration with people and organizations outside the company. Open innovation, also known as co-creation, means stepping away from the usual corporate culture of secrecy which is often associated with research and development. This innovation model becomes viable when the company acknowledges that there are many bright professionals and greater knowledge outside the organization. Companies might consider co-creation partnerships with customers, gathering ideas from crowdsourcing competitions, and working with universities, research organizations, suppliers, start-ups, and even competitors. Collaborating with customers by inviting them into innovation projects, through gathering feedback to participating in development, customers have helped companies make great strides.

BMW sports car engine

An “open lab” can offer real benefits for organizations, for example, reinforcing corporate commitment to innovation and creativity in a physical space. Auto manufacturer, BMW, has a co-creation lab where its customers can share their ideas and become an integral part of concept vehicle development.

In early 2018, Swedish furniture and home goods retailer IKEA launched ‘Co-Create IKEA’, a digital platform encouraging customers and fans to develop new products. In 2018, Coca-Cola entered into a co-creation experiment with customers to make sure its Southeast Asia product strategy reflects the tastes of the region and its people.

Below is an example of how IKEA co-creates with customers. 

How Can Leaders Fund and Budget for Innovation?

When a company selects an innovative idea to pursue, management must determine where the money will come from to fund the innovation project.  Management must also create a budget for the project, a team to work on the project, a timeline for development, and track long-term returns on investment. Companies evaluate innovative ideas and select the ideas that align with corporate strategy and have the best chance of success because the investment of resources (i.e., time, labour, money) for one innovative project may mean lost opportunities on other innovative projects.

There are many ways to fund innovation projects and often companies will have money budgeted for a certain number of innovation projects to be supported over specific spans of time. If additional funds are needed, the Government provides support and funding for various types of innovation, crowdfunding may be an option for some innovative projects, bank loans may be an option, and investors or partnerships may also be a way to help support the company budget for innovation. The chapter entitled, “New Venture Innovation” discusses crowdfunding for financing innovative initiatives in more detail.

The process for establishing a funding source will differ depending on the company. For example, Allstate CIO, Suren Gupta, has described how a formal Innovation Council evaluates ideas and allocates funding. In other companies, if the innovation ties closely to a particular business unit, then funding may come from that group’s budget. The actual size of the budget depends on whether a company lab is building the technology itself, partnering with other organizations, or acquiring a company, product, or talent. For example, Amazon and Google have spent millions of dollars developing parcel delivery drones. Meanwhile, companies like UPS and Daimler AG have opted to partner with—and make strategic investments in—established drone makers, thus, reducing both the risk and the cost of innovation while still allowing the company to develop new capabilities.

How Can Leaders Measure Innovation Progress and Success?

It is not always easy to figure out the right mix of metrics to use to measure innovation. Some organizations measure what is easy rather than what is important. The most important function of measuring innovation is to ensure the project is moving in the right direction. Innovation metrics allow managers to see if the team is doing enough of the right kind of activities to be able to actually achieve results. Measuring innovation helps to guide resource allocation, hold the team accountable for their actions and responsibilities, and assess the effectiveness of innovation activities.

“By committing to measuring innovation, the company can encourage employees to be more conscious of the need for creativity and fresh thinking, no matter what their day-to-day responsibilities might be. If management regularly measures the company’s innovative output and shares these measurements with employees it will help encourage staff to think about innovation accountability on a daily basis and take responsibility for finding new ways of doing things.”

The chapter entitled, “Innovation Risks” discusses measuring innovation using specific types of metrics as a risk reduction tactic.

Example: Innovation Practices that Saved LEGO

 LEGO story sourced from The Leadership Network

From the brink of bankruptcy, LEGO has grown into a highly profitable toy brand that produces a staggering 22 billion plastic bricks a year. Fueled in part by LEGO movies, the privately held company surged ahead of its main rival, Mattel, in 2014 to become the biggest toy manufacturer in the world.  Against all odds, LEGO achieved one of the biggest turnarounds in history. How did they do it?

Setting a new direction

First, LEGO restructured and hired a new CEO, Jørgen Vig Knudstorp, a process-based thinker and father of four who arrived from McKinsey & Co. in 2001 and was promoted to CEO just three years later, at just 36. Knudstorp quickly realized that the problem was not with the product, but with the company’s attempts to become more relevant in the age of video games. LEGO had “over-innovated,” spreading itself far too thin and launching so many new initiatives that the company had lost its sense of identity.  

Innovation at the core

Knudstorp’s turnaround plan involved a mix of cost-cutting, philosophical revitalization, sustainable innovation, and back-to-basics simplicity. The goal was to rediscover the very essence of LEGO, innovate close to the core, and leverage their loyal and creative fan base. He set up “The Future Lab”, a secretive and highly ambitious R&D team tasked with inventing new, technologically enhanced “play experiences” for children all over the world based on detailed ethnographic studies of how children play. With The Future Lab, LEGO developed a range of low-risk, low-cost innovation practices to test ideas and cultivate expertise.  

Smart Licensing

Star Wars LEGO characters

LEGO’s breakthrough with licensed intellectual property began in 1999 with an agreement to license Star Wars characters and vehicles. On the heels of the Star Wars success, LEGO smartly committed itself to obtaining licensing arrangements with established brands, including Harry Potter, Lord of the Rings, DC Comics, Marvel, and Disney. The move paid off, while royalty expenses were in the hundreds of millions, profits reached billions.  

Rapid prototyping

Within its factories, LEGO has embraced a philosophy of rapid prototyping. Inspired by Google and other technology companies, they create minimum viable products to prototype and get new products to market quickly on a small scale. The Future Lab also cultivates intrapreneurship as its relationship with LEGO is more akin to an incubated start-up. By using market testing and validating their new products, The Future Lab is driving culture change to ensure that this new business model and way of working will be accepted across the organization.  

Open Innovation

Lego goes a step further with consumer feedback by putting customers, suppliers, and partners in the driving seat for innovation. LEGO Ideas is a crowdsourcing platform that allows fans to design their own sets, gather support from fellow fans (you need at least 10,000 votes), and eventually get LEGO to produce your set as one of its standard lines. Examples include Back to the Future’s DeLorean and the Ghostbusters Ectomobile, which are now widely popular.

The online platform now generates hundreds of new product suggestions each year and uses subtle and powerful open innovation techniques, employing everything from social media to peer selection to entice fans into contributing new designs and ideas.

LEGO Architecture is another good example. Several years ago, a Chicago architect and Adult Fan of LEGO (AFOL) reached out to LEGO, suggesting they create official kits similar to his homemade LEGO models of iconic buildings. The idea was initially met with some resistance, but fortunately, a free-thinking Norwegian LEGO executive saw value in AFOLs and created a stealthy, shoestring plan to prove their worth to the company. They tested the LEGO architecture line in just a couple of stores in Chicago and saw that they were able to charge “grown-up prices” for kits with the same number of LEGO bricks inside. The pilot was a success and the line remains hugely popular amongst adult fans of LEGO worldwide.  

Designing Products for Girls

Another example of audience diversification is LEGO Friends. In 2011, boys made up 90% of LEGO consumers and LEGO wanted to broaden its appeal to more girls. Their research showed that – while both girls and boys love the building aspect of LEGO – there is a key difference in how boys and girls tend to play with their sets. Whereas boys tend to be more compelled by a strong narrative, girls are more likely to use their sets for role-playing. After years of refinement, the company launched LEGO Friends, a new line designed specifically for girls. The line doubled sales expectations in 2012, the year it was launched, and in that year alone LEGO tripled its sales to girls.

Low-Risk Experimentation

In the past, LEGO wouldn’t have launched any “risky” products that could smear the brand’s reputation for quality. But that’s precisely why Knudstorp created Future Lab – so mistakes can be made relatively cheaply and vast amounts can be learned. For example, LEGO Universe, an online game that resembled World of Warcraft, was discontinued just over a year after its launch as they weren’t able to build a satisfactory revenue model. The experiment barely damaged LEGO’s reputation whilst providing multiple key insights and learning lessons to establish the company in the digital world.

In February 2015, LEGO launched a new game – LEGO Portal Racers – in partnership with augmented reality company Metaio. The game uses an Intel RealSense camera and depth technology to allow users to play without using their hands, instead of using head movements to steer left or right. The original idea was to have kids build their own vehicles out of bricks and scan them into the game, but it remains a digital-only experience for the time being. Like LEGO Fusion, it is a means for Future Lab to understand and experiment with new technologies.

Few businesses have mastered the digital/physical experience but LEGO’s ability to experiment quickly, cheaply and under the radar means it can continue to evolve, discover new forms of play, and delight its fans.  

So what can we learn from the ups and downs of innovation at LEGO?

1. Innovation without direction is risky.
2. Innovate close to the core first.
3. To experiment and test ideas in a safe way, without damaging your brand reputation, start with small projects and small budgets, then test, learn and improve.
4. Disrupt yourself – build the next big thing before a competitor does.
5. Foster open innovation and listen to the wisdom of your customers.
6. Build an innovation culture that gives people the freedom to be creative, as well as the direction and focus needed to deliver profitable innovation.

References

(Note: This list of sources used is NOT in APA citation style instead the auto-footnote and media citation features of Pressbooks were utilized to cite references throughout the chapter and generate a list at the end of the chapter.)