How companies can become innovative

Innovation is the buzzword these days. We hear it everywhere: in commercials, business literature, strategy retreats, and inspirational speeches by senior executives. Companies need to constantly reinvent themselves to maintain their competitive advantage and innovation plays a key role in that process.

So, what is innovation? How do we know we are on the path to true innovation? What often comes to mind when we think of innovation is Apple and its products – iTunes, iPod, iPad, iPhone – that people are so used to that sometimes one wonders how life would be without them. In this case, innovation means breakthrough products or services that transform our lives. Meeting the needs of the end users, this is the parameter against which innovation should be measured.

Innovation is not exclusive to technology companies. Innovative mobile financial services such as M-Pesa, M-Shwari, and M-Kopa have increased financial access to the previously unbanked population. But we need to understand that technology can be a subset or outcome of innovation, not necessarily the ingredient. Take Airbnb and Uber, for instance, which are transformational simply because they reinvented the existing business models in their respective industries. Uber bypasses the restrictive licensing system that protects taxi franchises and taxi cartels in many cities across the world. Airbnb presumes a model of shared economy and allows peer-to-peer transactions that enable individuals to rent out their apartments.

These businesses play by a different set of rules simply because they reinvented their business models. They found a sweet spot between their business models, user needs, and restrictive regulatory laws (that protect existing businesses). Even Apple innovates more around the user experience and content and not necessarily around technology.

MAGIC BULLETS

There is a tendency to look for magic bullets to encourage innovation in companies, but the fact is that there is no defined path to innovation. What might be innovative for one organisation may be conventional for another. It is all about the context of the innovation and the adaptability of an organisation to meeting the needs of its end users. Apple’s Steve Jobs famously pointed out that a lot of times people do not know what they want until you show it to them, implying that one cannot create something new by asking people’s opinions about what exists. While this strategy may have worked for Apple, other companies, such as IBM and Google, have been successful by employing a contrary approach: listening to their customers. While customers may be unable to perceive their future needs, they are able to discuss their unresolved problems, which businesses can then adopt as the basis for their future products and services. Diverse approaches can, therefore, be used to achieve the end goal of customer satisfaction.

Innovation is not necessarily about an end product; it is more of a process and a way of thinking. It is not just about hiring a chief innovation officer and having innovation labs. No. Innovative products are the outcomes of innovative thinking. Ergo, we should be stimulating and inspiring people to think more about user needs and creating value. And not just think, but act, and as a result, innovative outcomes will follow.

This is what distinguishes innovation from creativity. While creativity is coming up with a new (or big) idea, innovation is about executing the idea. Both are crucial for successful innovation such that without them, the capacity of an organisation to innovate is almost zero.

So, how can companies get there? Institutions play by different play books in order to innovate. What is common for all of them is that they leverage their internal capacities and seek to serve the needs of their end users. To do this, they need to focus and define their end user and the problem they seek to address. Coming up with an innovative product, service, or business model is less a matter of epiphany and more of changing your lens to adopt the point of view of your customers.

Gloria Muhoro works at African Development Bank.

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