Yesterday found me at a lunchtime talk by Professor Raj Echambadi of the University of Illinois College of Business. He did a short presentation on innovation within organizations, with a couple of quick case studies tossed in.
It’s of great interest to me as an investor in start ups. I also have watched certain large companies approach to innovation closely to see if they really innovate, or if they just say they innovate. Innovation is really hard to do. When you are battling corporate culture, it makes it even harder.
Raj made a great point to start. Innovation for the sake of creating something new isn’t innovation. “Innovation is commercialization of invention.” Unless you turn a profit off of it, your innovation sits on the shelf unused.
One question I had. How much money does government and corporate America throw at innovation that sits on the shelf? I bet it’s in the billions of dollars easy, maybe trillions.
In order to innovate, there are effective strategies to pursue. They can be summed up into three topics.
1. How will you create value?
2. How can you capture this value in the face of competition?
3. How will you execute the value proposition?
As a start up entrepreneur, that’s a good way not only to think about your business, but how to present to investors. Identify the problem and how you solve it. Then identify the size of the market and how you will get it.
Of course, these points are easier said than done. There is a large variance in competitive strategy. The business case the professor featured was Netflix vs Blockbuster. Netflix ($NFLX) formed and entered the at home video market. Blockbuster dominated it at the time. Did Netflix compete with them? No. They targeted non-consumption. Blockbuster already had the consumption market. Netflix created an entirely brand new market within an existing category. They understood what the customer wanted and thought about it much differently than Blockbuster. That’s how new markets are created.
Most humans and most companies have a common heuristic. It’s called, “affinity to the status quo”. Sometimes having that loyalty helps drive efficiency in your life and in companies. However, be careful, because it can leave you with blind spots that can be fatal. Raj recommends a book, “Predictably Rational”. I will have to pick it up.