By Shrinath V and Vaishnavi Bala Kumaran
Jun 11, 2024 | Article
In our work, we often see that business leaders are privately uncomfortable with the overuse of innovation. They know that without innovation, their firms would struggle. But they also feel it’s overused today. To understand what innovation can do, we must first categorize it. Broadly, innovation can be either Disruptive or Sustaining in nature. Disruptive innovation is the big bang innovation that involves a major change in the existing way of doing things. This involves looking at elements like supply chain (in case of hardware companies), channel partnerships, customer readiness, marketing, sales targets and a lot more to get off the ground. The promise of disruptive innovation is that if it works, it puts the company far ahead of its competition.
While media loves talking about Disruptive innovation, it may not always serve the company’s needs. Disruptive innovation requires shifts in not just the company’s way of working, but also in market and customer acceptance. When these aren’t in sync, disruptive innovation may struggle to take off.
A case in point is the recent launch of the Recall feature in Microsoft Windows. Microsoft pitched this as a game-changer for productivity for a new range of AI driven PCs. Recall would record everything that customers did on their PCs, so they could quickly go back and review work from the past. Recall took screenshots of users’ devices every 5 seconds, and created a comprehensive log of activities. They would then use AI to make this entire log searchable by the user. It aimed to make customers more productive by removing the need to remember what they did on their PCs earlier.
Microsoft launched this with much fanfare, but the response was critical. Analysts and customers saw this as a privacy threat, and Microsoft has now delayed the launch. With such public concern, there are doubts that public trust on this feature might be permanently damaged.
Sustained innovation, on the other hand, focuses on incremental improvements and enhancements to existing products, services, or processes. It involves refining and optimizing what is already in place, ensuring that the company remains competitive and continues to meet the evolving needs of its customers. Sustaining innovation often includes continuous feedback loops, regular updates, and iterative development.
The iPhone versions are typical examples of sustained innovation. With every new launch, Apple builds on the earlier version, so that customers don’t have to change their usage patterns too much. Yes, the new devices have better and sometimes novel features. But they all seem like organic growth from the previous version.
By steadily improving, companies can maintain customer satisfaction, improve efficiency, and strengthen their market position without the high risks associated with disruptive changes. This type of innovation is essential for long-term growth and stability, allowing organizations to build on their successes and adapt to changing market conditions.
To succeed, organizations need to plan both types of innovation carefully.
If the organization believes only in big bang innovation, it often shuts out smaller incremental sustaining innovation to existing products that are likely to increase their revenue. These are often seen as less important, and consequently, they do not see management support, attract the right talent to work on them or have marketing budgets to support them.
The method to madness in choosing the right kind of innovation is where “Innovation Value Analysis” comes in. A methodology that combines quantitative and qualitative assessments to determine the potential value of new ideas and initiatives and the type of innovation more suitable.
Understanding Innovation Value Analysis
Innovation Value Analysis is a systematic method that looks at products and services through the lens of benefits, costs, and ability to meet key customer needs. It brings a structured methodology to the process of innovation, helping organizations focus their resources on the most promising and impactful innovations. The process involves several key steps:
Idea Generation and Screening
Collecting and evaluating a broad range of ideas from various sources within and outside the organization.
Feasibility Study
Assessing the technical, financial, and operational feasibility of the shortlisted ideas. Review customer perceptions about these as well.
Value Assessment
Quantifying the potential benefits of each idea in terms of revenue growth, cost savings, market expansion, and competitive advantage.
Risk Analysis
Identifying potential risks and challenges associated with implementing the ideas. Risks could be related to business, portfolio, competition, reputation or more.
Prioritization and Selection
Prioritizing ideas based on their assessed value and feasibility to determine which ones to pursue.
Benefits of Innovation Value Analysis
Innovation Value Analysis offers several benefits to organizations, including:
Strategic Focus
Innovation Value Analysis helps organizations focus their resources on the most promising and impactful innovations, ensuring that they allocate their resources effectively.
Risk Mitigation
By identifying potential risks early, companies can develop strategies to mitigate them, increasing the likelihood of successful implementation and launch.
Enhanced Decision-Making
Quantitative and qualitative assessments provide a robust foundation for making informed decisions about which innovations to pursue.
Increased ROI
Prioritizing high-value innovations leads to better allocation of resources and higher returns on investment.
Innovation Value Analysis is a powerful tool that can help organizations unlock the full potential of their innovations. By adopting a structured approach to evaluating and prioritizing new ideas and initiatives, companies can ensure that they are focusing on the most promising and impactful innovations.
The benefits of Innovation Value Analysis are numerous, including strategic focus, risk mitigation, enhanced decision-making, and increased ROI. As the examples of P&G and Tesla demonstrate, Innovation Value Analysis can be a key driver of success for companies looking to stay ahead of the competition and achieve their goals.
At FutureCraft Innovation Consulting, we help businesses make sense of What’s Next for them. We put innovation to work for you through our comprehensive Innovation Value Analysis as service, we assess tangible and intangible benefits of your innovation initiatives.
