Innovate by Design — Not by Accident

Dimensions of Entrepreneurship

The most risk-prone forms of innovation: None and home-run strategies*

Continuing their series of talks at the Irish Computer Society (ICS), Michael O’Duffy of DCU’s Centre for Software Engineering and David Trevitt of Business Knowledge Innovation advised on how to exploit innovation. Their talk was the third in a series on the subject.

O’Duffy cited research that design is the core to market differentiation. Most products are “me too” varieties and rushed to market, he said. The design process, however, can separate a product from its competitors and can also provide a road map for its upgrade and eventual replacement. An example I wrote about recently is General Electric’s process where they now devote significant resources to innovation even to the point of disrupting themselves (PDF) with new, less-expensive products.

Trevitt spoke of the risk-reward balance that must be struck. In addition to the cultural view of risk, innovators must also keep an eye on their customers. How open are they to change?. “You may also have to sell them,” Trevitt said.

Change can be incremental or radical. The greatest rewards come from radical breakthroughs. Apple’s explosion in to the music business with the iPod is a great example. But radical efforts also present the greatest risk. Trevitt advised working on incremental innovation, too. The academic research bears this out. The graph above shows that relying on a break-through innovation is just as risky as not innovating at all.

To address risk, Trevitt advised a raft of tools including modelling, marketing testing (surveys, focus groups, expert views, etc.), pilot markets, and other means to measure a potential product’s viability. However, those tools also have their shortcomings. Trevitt used a quote from Henry Ford to point out the potential pitfalls in relying on focus groups:

If I had asked people what they wanted, they would have said faster horses.

The speakers were asked by one audience member about organisations that have no culture of change. O’Duffy said some had tried a skunkworks approach where a group worked on product development outside the main organisation. “That doesn’t tend to work very well. You want to bring them on board,” he said. Acknowledging innovation can be disruptive, he said innovators were not mavericks.

Another questioner asked who owns the risk and rewards in innovation. Trevitt said it is ultimately the CEO but it is up to the designer to clearly communicate their ideas and the risk involved. He said that architects are generally “very articulate” because they constantly  explain new and abstract ideas to customers. However, an internal innovator will want to be successful and will not intentionally harm the company. After all, their reputation depends on it.

* The graph is from Corporate Entrepreneurship & Innovation, 2nd Edition by Morris, Kuratko & Covin. You can read a sample chapter (PDF) here, or a PowerPoint summary here.