24 May 2011

Innovation Defined

Your understanding of term determines how you think about it and how you can get out of it. In these days of a flat global world, ‘commodization’ of business and extreme competition, innovation is the buzz word. You must have it in your strategy and in all your public and private communications. But different people have different definitions for innovation. I shall unashamedly add my definition for innovation and claiming it that it is the better one to help you innovate and get the competitive advantage that you need.

Innovation is the Creation of Business value.

I will define Innovation as the creation of business value.  Notice that I did not put in NEW. New is a relative term. New to some is old to another.  The issue is not to argue with originality or newness but about the business value that you create with your innovation. If you insist on adding new, then innovation is the creation of new business value that you don’t have previously.
The key on innovation is then shifted from newness to business value. Just what is Business Value? Business value is the value, usually measured by the price paid, that some one, usually called the customer, that is willing to pay for the use of the innovation. Innovation then have 2 key parts
  1. the group of customers who use it.
  2. the value they pay for it’s use.
Where is the Value? It begins with the Purpose or Meaning.

The value begins with the heart and mind and is enjoyed or experienced with its use or consumption. Giving a purpose and a meaning to the potential customers is the thinking of ‘Design Innovation’ which in the past has concentrated on the look and feel, form vs content of design. Giving a new meaning creates new value and hence is a key part of innovation.

Consider Steve Jobs returned to Apple and came out with the translucent and colorful and rounded Apple computer. He is giving new meaning to Computer, from a boring computational device to an exciting, great to look at, fashionable piece of arts and a a piece of beautiful furniture to decorate your room.

Consider thinking about Light Bulb not as just giving of light, measured in number of candle-lights, but as creating the different ambient and atmospheres for dining, playing, reading, chatting, romancing and sleeping.
With meaning, comes the language. What are the terms you should use in your new worldview ? How do you describe the good vs the bad? Terms should be defined and described with the customers’ mindset and their view point.
Values comes in the many forms of
  1. Rational : cheaper, faster, better, safer, easier, more lasting …
  2. Emotional and Social: look good feel great – sensory, social status of wealth and fine-arts of living, acceptance, trendy.
  3. Significance of meaningfulness, contribute to better life, health, society (justice, elimination of poverty) and environment.

Consider a product or service you are offering or intent to offer, what is the Meaning of Your Innovation? What is it saying?

The Mechanics of Innovation – The Business Model
  1. Value Creation
  2. Value Delivery
  3. Value Consumption
  4. Value Collection or Capturing.
Value Creation : From meaning, the why, to the what and the how.

We have covered the meaning, the why of value creation at the start of this post. We also described the what, the language, or the feature list of What. The key is not a long list of features but a set minimum most important features and doing it to the maximum depth (MiniMax framework). That is the secret of success of Apple vs its competitors. Every feature means added cost, added complexity to build and to us, added bugs, added battery consumption and so forth. Don’t just go for features.

We then must know how to build those features that deliver the meaning we want. Current literature tell us to go for open-innovation – involving customers, suppliers, and other partners (buy or share IPRs if needed etc). It also calls for outsourcing of various forms. But remember that you need to do your own risk management and total balancing on value creation. Outsourcing may be cheaper but consider the logistics, communications, the reliability, the planning horizon needed etc. It may be more effective to do it nearer to you with similar culture to minimize misunderstanding.

Value Delivery : the channels.

Value deliver may go through the standard factory, distributor, wholesaler, retailer and then customers. But this standard rule can and is broken many times with great profits by companies like Dell, Amazon, Apples etc.
Value Consumption : the experience.

Value Consumption is the experience of using your innovation that customer go through. There are 2 keys to add:
  1. The consumption or experience begins with the discovering of your offering and continue with the buying, installing, using, fixing, and retiring and upgrade. It is with a lot of contact points. For you own business, you need to map out the contact points and extend beyond your offering. e.g. airline travel needs to join up with hotel and car rental and so forth.
  2. The emotional experience will create a lasting impact. A wise woman says that I will forget what you say but I will never forget how you make me feel!
Value Capturing or Collection – the Financial Model

We are in business for the profits. Without the profits, business can’t go on for long. In fact, for start-up, it is most important to watch cash-flows. Profit statements are subjected to manipulation. But cash flow is for real. Always go for and watch the cash flows.  Google’s success tells us that there is a new business rule – the user needs not be the payer, if you can tie up the sponsors and the users! It tells us that ATTENTION is a salable and valuable thing.

In your business, find out who are the users, payers and influences.   Their values are different. Can you address them and influence them that they may see that your innovation provides the most values for them and will be willing to pay for it. Of course, you may need to balance your game of who get free and who get to pay!

If you read this far, you will probably guess rightly that
Innovation is about business value creation through business model changes. 

Looking at innovation not just merely as product, or process, or a service or even a solution, but the total model of Business Model with utility, emotional, social and significance and experiential values will help you with coming with all kinds on innovation. Just remember one more wisdom from Apple’s success: you don’t have to let it all out in one go. It is better to phase them out slowly as competitors try to catch you. iPhone 3, 3GS, 4, 4GS?, 5? ….

If you want to know more, perhaps you can sign up in one of my courses through NUS Extension.
Related Post:
  1. The Twelve Truths of Innovation
  2. Understanding The Smartphone Battle – Rise of Apple & Android
  3. Choices could be Bad – Dummies are right!
  4. Differentiated and High Payoff Innovations
  5. Apply the BVITS thinking to help you think and discover the myriads of possibilities. See BVITS ideas generation.
Lim Liat  copyrighted 23 May 2011

14 May 2011

SunZi and 36 Strategies Combined

Learning is about integrating from pieces of knowledge that we read. (See Learning about Learning from Ancient Chinese).

So here is an attempt to integrate the 36 Strategies (See 12 Success Principles from Chinese 36-Strategies) to SunZi Arts of War ( See Sun Zi Art of War (Sun Tzu) in One Minute).

I will just combine the 36-Strategies with SunZi's Strategies as given in Sun Zi Art of War-5: The Principles for Good Strategies.

The benefits we gained is that while Sun Zi Arts of War cover a much broader area of warfare then 36-Strategies, 36-Strategies give us a more refined and pictorial view of the strategies.

The mind-map below gives the details.

Let's take an example, the first grouping of 3 36-Strategies under "Able but Shows Unable".

Sun Zi did not tell us how to do that - "able but shows unable".
36-Strategies #07 Tells us to bring something out of nothing. This means we don't show any sign of what we are doing and then surprise them suddenly with what we have developed.

#29 "Flowers on Tree that never grow flower" tells us to do some breakthrough thing that was thought to be impossible before.

#32 Empty Castle tells us we could do the opposite - unable but shows able. Hence open the castle door wide to invite the enemy attack as if we have many soldiers to kill off the enemy where we actually has very few.

Lim Liat copyrighted 14 May 2011

06 May 2011

Learning about Learning from Ancient Chinese

Learning begins with reading one article at a time. But after a few related articles, we need to integrate them together to get a better picture of the subject about which we are learning.

The following four postings in Ancient Chinese Classics contain materials about learning:
  1. Understanding The Great Learning DaXue in One Minute
  2. Understanding The Doctrine of the Mean in One Minute
  3. Learning Innovation from Confucius - The Series
  4. I-Ching Hexagram #20观 Observation  (need registration)
1. Learning is about the Development of the Total Man

The Doctrine of Great Learning (DaXue) started with 3 objectives of learning:
  1. Promote the Way of Righteousness and Virtue
  2. Transform People into New Man
  3. Stop at Utmost Goodness
The 8 steps of Great Learning begin with the Study of Things, to Self-Development, Family, Country, and Peace for the whole World.

2. Virtues without Learning is Harmful
Here is the integrated mind map about learning from the Chinese Classics with the virtues topic expanded:
3. Attitudes of Learning:
The most important word is FUN. Learning itself is fun and joy. It is not difficult. It will enable the other attitudes of tired-less learning, humility in learning, mastering the subject, self-renewal, and so forth as depicted in the mind map below. Learning is the way out of poverty and breaking free from entrapment.

4. Objectives of Learning:

5. Methods of Learning:
6. Learning in Groups:
Don't just read one article at a time. Create a mind map, a giant one perhaps, and integrated the concepts learn. Each new article adds to the existing knowledge that you have. There is much effort needed to integrate the new learning into your existing knowledge map. But that is how true learning takes place - by refining or integrating to form new knowledge.

The Overall mind map:

Lim Liat copyrighted May 2011