Balancing Innovation & Uncertainty

Innovation means change, change never stops. At any moment we are confronted with many decisions, some are pretty uncertain as to what the outcome will be others less so.

Incremental innovation

Most business tend to focus on incremental change, introducing a new product, or more likely an updated one, the number of uncertainties are low, the outcomes can be predicated with a high degree of accuracy. This is also the area where normal strategy tools can be applied, think Porters 5 Forces model, known competition and suppliers, known solutions with some adjustments. Market researchers can apply their full range of tools e.g. focus groups etc. to determine customer reaction to a new offer.

Stepwise Innovation

Incremental innovation is running smoothly, new ranges and updates are appearing on a regular basis, competitor moves are followed and successfully countered. The time has arrived to think of bigger steps, the risk rises, but so do potential awards. A step can be taken e.g. opening a new shop, factory or hotel. Its affect can be calculated, again with estimates of odds of success, using elements from Game Theory. The whole range of activities can be deployed to encourage or deter your components moves, in short this is competitive strategy.

Scenario Innovation

This is no longer an either or stepwise form of innovation. Scenario planning is an essential though not always easy method to explore several plausible futures at the same time. The great strength behind this technique is it allows you to think the unthinkable. ten years ago it probably seemed unthinkable that Nokia would be gone now, but they are from consumer phones. Creating scenarios allows you to address aspects of your business that you deem to plausible i.e. it could happen and it could have a devastating affect if it did. The only thing you can’t calculate is the possibility of it happening. But your strategy and business model better take it into account.

Disruptive Innovation

Before scenarios can be used it is useful to keep an eye on the next from of Innovation. I call it disruptive because it most often does not depend on just one technological innovation but rather several technologies and techniques coming together at the same time. Timing is everything. The Apple Newton arrived before internet, the cloud and powerful tiny handheld computers were really possible, a personal assistant that was not connected was to put it bluntly not much of an assistant. The iPhone came more than 10 years later. Suddenly it made sense.

I would put self driving cars into the area of disruptive. When the various elements of technological innovation come together than you can order a self driving car anytime, anywhere than owning a car seems to be a lot less of an obvious attraction. Think of a country like Germany where about 1 in 7 of the jobs are dependent of the Auto industry. where in a country of 80 million some 40 million have cars that spend more than 90% of their time parked. The second most expensive item, after your house, that you own. A lot of if’s and huge consequences.

Breakthrough Innovation

The step usually furthest away from reality. It usually comes from some fundamental discovery,often made in a university or research lab. It can happen that it might even be a breakthrough in search of an application. A particularly good example of this is the use of genes from other living creature being inserted into another to produce a product with extra ordinary property. Ever hear of  Spider Goats ? The researchers were after the silk produced by spiders, it is extremely strong and flexible, ideal for applications in the medical industry. However the simplest way to get the silk was to insert the silk gene into goats, milk the goats and then extract the silk from the goats milk. It should be easy and cost effective, certainly more so than maintaining farms of spiders.