Innovation is a challenging term to define. One man’s innovation is another’s line extension.
About the only thing that is clear is that innovation is not R&D, the creation of original knowledge. Innovation is the process that takes that knowledge and turns it into a saleable product.
To my mind, innovation has two dimensions upon which it can be measured that accommodates all the various definitions I have heard.
- The degree to which the ‘innovation’ creates new demand. This is not a competitive term, it is utterly dependent on the degree to which the pie is made bigger. Let’s consider Uber, often cited as the biggest innovation in personal transport history. Is it new? No, taxis have been around for as long as there have been wheeled vehicles, Wells Fargo started as a sort of taxi company. What Uber did was make taxis more accessible, which no doubt did increase the size of the pie a little, but not much.
- The degree to which the ‘innovation’ creates new value. Again, to use Uber, it did deliver considerable new value, in that you did not have to wait for ages for a taxi to turn up, they are clean, and you can provide feedback. On the other hand, the taxi regulations, bloated, ill used, and anti-competitive as they are, were there for a reason, supposedly to ensure both the safety of passengers, and that the drivers knew their way around. That they fail regularly in both measures is one of many reasons Uber was able to steal so much market share by adding new value.
So, it is a simple matter of using that beloved tool of consultants, the two dimensional graph, and plotting the position along these two simple parameters. Usually that task is not as simple as the idea,
