September 24, 2009

Product Innovation 2.0 - The new facets of innovation in a virtually boundaryless enterprise

Product Innovation 2.0 - new facets of innovation in a virtually boundaryless enterprise
It is no unwritten fact that organizations are actively seeking ways to harness the collective intelligence of its employees and customers for product innovation.

The Knowledge Worker
Much of the value added today to products and services comes from knowledge work. This could be streamlining operations for better supply chain management or synthesizing organizational cultures in mergers and acquisitions. Enterprises are looking for opportunities to increase the productivity of workers involved in such complex interactions that constitute 41% of the workforce in the US (according to McKinsey).

The Informed Customer
With information more easily accessible and readily available, customers are getting smarter about products and demanding a say in the design of products. It has become challenging not only to gain the trust of new customers but also retain the loyalty of existing ones. Predicting buying patterns and satisfying the demands of today’s customers are complex business issues that are difficult to define in advance.

Three New Facets of Innovation from the Long Tail
Traditionally, innovation has been internally-driven with a top-down approach where leadership bears the structural authority and controls interactions within the enterprise. Also, traditional innovation is driven by a “go to the customer” corporate strategy and based on market research, surveys, and focus groups. Legacy business models that use such a reactive, structured approach to innovation have failed to effectively address today’s business issues.

Enabled by Web 2.0-based collaboration platforms, today enterprises are seeing the birth of a vibrant, unstructured collaborative ecosystem as entities, within and outside the enterprise, interact with each other (refer to diagram above for a graphical representation of these enterprise interactions). Collaborating, sharing, and learning are rapidly becoming the norms for the next generation enterprise. These interactions are shaping three new facets of innovation:

  • Intranovation – employees in the organization collectively provide ideas on products and services in an unstructured yet guided (and not controlled) format
  • Internovation – innovation with customers and the enterprise collaboratively design products and services
  • Extranovation – innovation with customers designing products and services
The table below further describes these new facets of innovation and explains how sustainable value can be created.

This innovation technique will cause innovation, content creation, and control to exist at the bottom of the enterprise. It will turn control upside down. Bottom up innovators usually will not have the structural authority to order people to join a team; instead the innovator will succeed by influencing them and leveraging a personal network – collaborating, sharing, inspiring, and leading.
Customers and the enterprise will collaborate to create new products and services. The size, needs, and engagement of customers in product design and promotion will build a vibrant ecosystem that would continuously help the enterprise to create and improve products and services.
In such an outwardly driven innovation technique, customers come together to define the products and services they need, without interference from the enterprise. The enterprise may provide the platform and facilitate such an innovation.
Employee and Customer
How is sustainable value created?
Value creation through improved employee productivity and greater employee satisfaction, significant internal shift of control when employees have greater control to easily create or change business processes
Value creation when customers and employees collaborate to build a vibrant ecosystem leading to greater customer loyalty and retention
Value creation with greater customer satisfaction and loyalty when customers create products/services causing a significant external shift of control to customer

These new facets of innovation represent new opportunities for open, continuous innovation driven by the enterprise’s intellectual capital of its employees and demands of its consumers. The fact that the outcome does not tend to have an end state and there is always potential to improve existing products and services, causes the business value generated to be truly sustainable.

The next generation, virtually boundaryless enterprise will leverage these innovation techniques to support unstructured, complex interactions and gain competitive advantage from the knowledge of its employees and customers. The enterprise will become more competitive in the market, build and maintain customer stickiness, be able to respond to market changes and improve employee productivity. Tactically, enterprise applications will need to increase access to data and information, support decisions, improve communications, and support multi-party workflows and collaboration.

So does your enterprise currently employ any these techniques? In what organization functions do you see the potential of these new facets in revealing untapped innovation for your enterprise?

Convergence of Forces are driving Consumer Innovation! (Updated: May 2012) 

Three years after I wrote the above article on the new facets of Innovation, we are seeing forces come together to redefine how business will be conducted, keeping the consumer in the center of all decisions

Multimedia, social media, and the Internet of Things is fueling exponential growth in data for the foreseeable future. To enable the next frontier for innovation, competition and productivity, companies will need to leverage big data. Companies will need to change their systems to conform to the nexus of converging forces - social (behavior), mobile (access), cloud (delivery), information (context) - and shift control to the consumer / end user. 

Developing a discipline of innovation through information will enable organizations to respond to customer, employee, product or environmental changes as they occur. It will enable companies to leap ahead of their competition in operational or business performance. 
In the foreseeable future, companies who do not leverage big data to innovate will be forced to seize operations!
I recently provided thoughts to the CIO community on how Big Data will drive innovation and beat competition:

Indian CIOs: Big data analytics help beat competition

So is leveraging big data a part your company's innovation strategy? How is your company leveraging data coming from social networks and pervasive technologies? 


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