Demystifying Innovation Breakthroughs

We want to demystify innovation and share with you a simple framework to create your own innovation breakthroughs.   This framework was developed based on our research and analysis of similarities and difference of over a hundred innovation breakthroughs across industries and geographies.   Read on if you would like to know what took us a year of hard work, long nights and rich debates to discover.

Our first observation was that many of the innovation breakthroughs were similar and could be grouped together into at least ten categories like Going Green where companies like GE and BP were creating water desalination plants and solar energy solutions for Libya and Philippines, respectively. Another category was Customized Comfortwhere companies like Adidas and Starbucks were able to mass produce products and yet make each product customized for each customer.  Another example was Building Blocks where companies like eBay and YouTube provided basic infrastructure for everyone to co-create new solutions and value.   The other seven categories were Neglected Niche, Providing Protection, Simply Sufficient, Intel Inside, Always Available, Trusted Transactions, Customized Comfort, Simply Sufficient and Expensive Expendables.

Further analyses showed that innovations within a category were also leveraging similar capabilities and similar tactics.  Going Green innovations were all around targeting underserved markets with solutions that were inferior in the developed world but were actually superior when comparing to having nothing at all. Similarly, Customized Comfort innovations were all around branding, having a standardize platform and postponing the customization until the end.  In the case of Building Blocks, the innovations provided simple and non-invasive governance for individuals to interact within their environment and a high trust in the creativity of individuals to find applications.

Based on this finding, we asked ourselves whether any company could generate breakthrough innovations by ideating around a category and then executing on the best idea by following similar tactics and acquiring the needed capabilities.   The answer to that question was a No.  We found that it was possible to generate ideas using this technique but most of them were easy to replicate by others or did not appear to have sustaining market demand. So what was it that we had missed?

When we had categorized the innovation breakthroughs, we had observed that many of the innovation breakthroughs fit in multiple categories.  We also had remarked that some of the categories were similar in nature in terms of them being around a market segment or focusing on some trends or using some specific business model.  Further examination showed that the ten categories could actually be further grouped as

(1) New Sustaining Trend: Always Available, Neglected Niche, Going Green and Trusted Transactions

(2) Basic Human Need:   Customized Comfort, Providing Protection and Simply Sufficient

(3) Business Models:  Intel Inside, Building Blocks and Expensive Expendables

Interestingly, we also found that each of the innovation breakthroughs had also been bucketed into one mega sustaining trend category, one basic human need category and one business model category.  The iPod was based on being Always Available (iTunes, portable), Customized Comfort (my songs, my pictures) and Expensive Expendables ($1 downloadable songs).  The Tata car was based on Neglected Niche (poor of India), Providing Protection (unsafe transportation) and Building Blocks (dealerships manufacture the cars).  The insight was that sustainable innovations are based on a mega trend, must serve a basic human need and must have a viable business model.

We were still missing how eBay and Enterprise car rental created creating barriers to entry in a way that there was no number two.  The final piece of the puzzle was made clear that these companies were bundling their competences and those of their partners in a similar way.  Apparently, that differentiation was sufficient to confuse fast-followers.  Pepsi entered the healthy beverage market through the Smart Spot utilizing partnerships with other healthy product companies, vending machine companies and health organization to make its claim credible.  This was a system that coke cannot easily replicate.  Similarly, Enterprise built partnerships with insurance companies and dealership to serve as referrals for people looking for a car rental and internal training to really “pick you up”.

To have an innovation breakthrough,  it must (1) be based on sustaining trend, (2) serve a basic human need, (3) must have a profitable business model and (4) combine the company assets and those of a partners in a unique way.    If you are going to use this framework, then you may want to consider the following specific trends around sustainability, mobility and connectivity, bottom of the pyramid and trusted transactions; the following human needs around customization or personalization, safety or simplicity; and business models that depends on co-creation, bait and hook or  branding.