Table of Contents
Table of Contents

Innovation

Most organizations today realize the key to growth (and even survival) is innovation. Innovation is about knowing when and how to apply methods that allow new ideas to grow. It’s about finding inspiration to expand your thinking, help you get beyond what you’ve always done, and transition from idea to implementation.

A graph for mapping innovation efforts. The horizontal axis represents the range of existing to new ideas and the vertical axis represents the range of existing to new users.

A graph for mapping innovation efforts. The horizontal axis represents the range of existing to new ideas and the vertical axis represents the range of existing to new users.

By mapping innovation efforts along a horizontal axis representing existing to new ideas/offerings and a vertical axis representing existing to new users, companies can get a good picture of the balance of their innovation efforts.

Innovation is best as a portfolio approach with a balance between short-term, predictable growth—incremental—and longer-term riskier bets—revolutionary. As IDEO Chair Tim Brown describes in his book Change by Design, projects on the bottom-left quadrant (close to existing ideas) tend to be incremental in nature. They are important, and the majority of a company’s effort is likely to be put into this type of innovation. Examples of incremental innovation might include the extension of a successful brand or the next iteration of a current product. The aisles of any supermarket also provide countless examples of incremental innovation: each of the dozens of flavors of toothpaste came from a process of incremental innovation.

In addition to incremental projects that secure a company’s base, it’s vital to pursue evolutionary projects that stretch that base in new directions. This more venturesome goal can be reached either by extending existing offerings to solve the unmet needs of current customers or adapting them to meet the needs of new customers or markets. The Prius is an example of this type of evolutionary innovation. With fortuitous timing, the Prius offered customers significantly lower fuel consumption just as fuel prices in the United Stated leaped upward.

The most challenging type of innovation—and the riskiest—is that in which both the product and the users are new. A revolutionary innovation creates entirely new markets, but this happens only rarely. Sony achieved this with the Walkman, and Apple did so twenty years later with its brilliant successor, the iPod.[1]
Innovation Definition: Innovation is the ability to generate and execute new ideas—incremental, evolutionary, or revolutionary—and it starts with creativity.
Creativity Definition: Creativity is the ability to look past the obvious—to transcend traditional ways of seeing the world to create something new.

Innovation Starts With Creativity

There's a myth surrounding creativity, that you have it or you don't, and that it’s the job of “creative types” to generate new ideas. This could not be further from the truth. Creativity is like a muscle, something you can strengthen over time through focused practice. As today’s organizations strive to become more innovative and resilient, they must adapt their spaces and modes of working to encourage creativity and creative problem solving across teams.

When you take into account the current churn rate—about half of S&P 500 companies will be replaced over the next ten years by digitally native companies and other upstarts capitalizing on disruptive new technologies like automation and artificial intelligence [2]—innovation and the need for reinvention are an existential necessity.

Building on the importance of creativity in driving innovation is early evidence that design-driven companies—companies that exhibit creative problem solving at scale and put customers at the center—outperform the market. [3] In an index created by the Design Management Institute, companies with a strategic-level commitment to design outperformed the market by an impressive 211% over roughly a decade from 2005 to 2015.
The design value index: a graph showcases how design-driven companies such as Apple, Nike, and Ford outperform the market. The design value index: a graph showcases how design-driven companies such as Apple, Nike, and Ford outperform the market.

Companies in the index: Apple, Coca-Cola, Ford, Herman-Miller, IBM, Intuit, Newell-Rubbermaid, Procter & Gamble, Starbucks, Starwood, Steelcase, Target, Walt Disney, Whirlpool, and Nike. Source HBR.org.

IBM
One recent IBM survey of more than 1,500 CEOs reports that creativity is the single most important leadership competency for enterprises facing the complexity of global commerce today.[4]

Adobe Systems
An Adobe Systems poll of 5,000 people on three continents reports that 80% of people see unlocking creative potential as key to economic growth. Yet only 25% feel that they're living up to their creative potential in their own lives and careers.[5]

Translate Creativity Into Innovation and Company Growth

Ask The Most Important Question in Strategy: What Would Have to be True?
Roger Martin, a trusted strategy advisor who’s worked with CEOs of companies worldwide (and instructor of our Designing Strategy online course), uses this question to spark a more creative way of thinking and build alignment in the midst of challenging decisions.

This question helps us get unstuck. It’s an inviting and grounding way to create an argument for each strategic possibility you’re considering, design tests to learn more about each possibility, and make an educated decision instead of conjecture. If everything that would have to be true can likely be true, then that possibility is a good strategic bet.

Use the question What Would Have to be True to:
  • Build alignment—turn clashing views into collaboration.
  • Ask people to explain their logic in a cooperative way.
  • Invite others to bring their unique knowledge and skills to evaluate each strategic possibility.
  • Create an argument for each strategic possibility you’re considering.
  • Move away from everyone talking about what they think to imagining together what could be.


Prototype Your Business
Instead of planning for how every part of a business could work, use rapid prototyping to learn how the business will work. Prototypes can take many forms. At IDEO, we use prototypes of all kinds to transform abstract concepts into something tangible. We follow a three-step process for prototyping:

Step 1: Frame a Question based on assumptions — Prototyping always starts with focusing on what we want to learn. We identify areas where we know the least or have open questions or assumptions.

Step 2: Build prototypes to test with people — We aspire to build prototypes that spark behaviors. Often what people say varies wildly from what they actually do. We strive for live prototypes, which capture people’s actual behavior over their spoken intent or preference.

Step 3: Collect evidence to inform business decisions — Building a prototype includes how you’ll gather quantitative or qualitative evidence. What’s your ideal feedback and what behavior do you hope to observe?

Live Prototype Example



PillPack—a full-service online pharmacy that delivers your daily prescriptions in easy-to-use packages—wanted to test pricing and value propositions. They branded a kiosk in a mall where the CEO talked with potential customers. While online prototypes can be great, this instance of live prototyping allowed the team to learn directly from prospective customers, have conversations, ask follow-up questions, and get real-time feedback about the business. We call this a “lemonade stand” prototype. This type of prototype is a great way to get direct customer feedback about your business and answer questions around your value proposition assumptions.

Learn how to put these concepts into practice in our Designing a Business online course.

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