When we think about how companies practice innovation, the question comes up, how many different ways can a company innovate? And so we're going to look at how that happens. We're going to look at it from the perspective of a classic article on innovation practices called The 12 Different Ways for Companies to Innovate. It's an MIT Sloan Management Review article that was done back in 2006, but it captures a dozen ways. And so we're going to look at each one of those ways and see how that fits. What you're seeing here is a radar plot. It's a technique that the authors of this article used to map out the strength of each of these different practices in any given firm. And so we're going to go through each one of these points and then look at how they compared four different firms and what the strengths and the weaknesses were of each of their practices. So let's start with the first practice, innovation offerings. Basic offering, you can develop entirely new innovative products or services. This is what the obvious example of an innovation practice is. And some examples of that are the Gillette Mach 3 Turbo razor and new things that are coming out even today. And Apple iTunes music service and iTunes University educational offerings. Those were entirely new innovation offerings that those firms developed. An innovation platform is another way that firms can innovate. And what you do in that case is you use common components or building blocks to create an innovative derivative offering. And so, some examples of that would be things like General Motors offering OnStar and GIS platforms on its automobiles. It's the basic automobile, but then it's an added, could be an aftermarket item or could be a built-in item that they offer with sale of the car. And Disney's movies and then a Disney made animated movies, so they did something entirely different with the same platform. Innovative solutions is the third way. And here, you create integrated and customized offerings to solve customer problems end-to-end. So they're very complete. So some examples of that are the UPS logistics services Supply Chain Solutions. They're offering a complete supply chain solution. They in effect could have a firm actually outsource all of its supply chain functions to UPS. Similarly, the Dupont Corporation had building innovations for the construction industries and this was a very packaged solution based on its strength and its platform, and knowledge of chemistry. Another example of innovation practice is to innovate with users and customers. And so if you work with your customers and you discover unmet customer needs, or you identify underserved customer segments, you can build new innovations into that, and find new opportunities. And some examples of that are Enterprise Rent-A-Car that does temporary replacement for automobiles. You can rent a car, not just for travel, but you can substitute your car while it's being in the repair shop or if you've had an accident. And, as they say, they come and pick you up, that's another little feature. Where they've built a relationship with customers that is different than most other rent-a-car companies. Green Mountain Energy's focus on sustainable forms of green power. Here again, this is something that is a unique form of energy company that is focusing on a unique form of energy offering. Having an innovative customer experience is another way that firms can practice innovation. You can redesign customer interactions across all the different touch points and the interactive points and the moments of contact that you have with customers. And so, some examples of that are where a bank, Washington Mutual Bank, innovated their retail banking concept to allow much more customer interaction. And if you've ever been to the sports store Cabela's, their store is really an entertainment experience. And you go there and yes, you purchase and you select items that you want to buy, sporting equipment that you want to buy. But it's an entertainment experience as well. Another example of an innovation practice is to do value capture and, here, you redefine how the company actually gets paid for the value it provides. Now, keep in mind that every innovation produces value the customers want. And so if you capture that value in a variety of different ways, you can innovate in a very novel way. And so you create new innovative revenue streams from this. And some examples to that are you could conceivably, Google could charge for complex Internet searches or Netflix or Amazon could actually share revenue with movie distributors for what they offer. And innovation as a process is another example of how to innovate in a practice. So if you redesign your core operating processes to improve efficiency and effectiveness, this is an internal innovation, but it is a valuable one, as well. And so some examples of that are where Toyota's production system for its operations really became a very streamlined and practiced operation. General Electric's design for Six Sigma is again, another efficiency, internal refinement and improvement practice that they have within the firm. Another example is innovating in the organizational structure. We talked about process just briefly. Now we're talking about structure. If you change the form and the function or the activity scope of the business, you can innovate. And so some examples of that are where Cisco's partner-centric network virtual organization operates in a very independent and yet strongly networked way. Proctor & Gamble is organized with what they call front-to-back hybrid organizational structure. It has a customer focus, and in that, Procter & Gamble is focused on a whole series of customers that buy groups of Procter & Gamble products. Supply chain innovation is another example of a practice that could be innovative. Here, you consider different ways of handling sourcing and customer fulfillment. So how do you bring in the materials that you're using and how do you deliver the end product to other people? And so some examples of that are Moen Plumbing, their fixture ProjectNet approach to collaborative design with suppliers. So, they have a relationship in the supply chain where they produced it, and they have a relationship with the people who actually sell to customers. And General Motors has a system for integrated supply and online sales. So, there's a connection between the manufacturer of an innovative idea and the consumption and the use of that idea in the marketplace. The distribution presence innovation. This is where you can create new distribution channels or innovative points of presence that are out there in the marketplace, or out there in the customer environment. And these include places where offerings can be bought or can be used by customers. So some examples of that are, a very familiar example, Starbucks had in the past and some places still does offer music CD's and coffee equipment sales right in their coffee shops. So they're not just selling cups of coffee, they're selling other products and services. And Diebold's remote teller system for convenient banking is another example of serving a customer outside the walls of a bank. Networking innovation, where you create network-centric intelligent and integrated offerings, things that come together in unique ways. So some examples of that are Otis elevator. They have a remote elevator monitoring service so that the Otis Corporation monitors its products and how well they're working. And that is something that doesn't have to be done by the building owner him or herself. And Nest home monitoring services is another example of network-centric intelligent offering. Brand innovation is another way that an innovation practice could be done in a firm. You can leverage and transition a given brand into new market domains with some brand innovation. And so, some examples of that are the Virgin Group that has branded venture capital. So, it isn't just ordinary venture capital, it's the Virgin Group that has a unique brand name and has moved into an area that if you respect the brand, then you're likely going to respect what is happening in the new offering that Virgin has. Yahoo, as a lifestyle brand,with a wide range of service offerings, is another example. So, you're building on a brand, and you're providing a wide range of offerings, and you're relying on that brand for customer acceptance. So now, in this diagram, you recall the radar plot that we had in the beginning and you see on the outside of this radar plot is each of the 12 different ways to innovate in a firm. And so, the authors in their research looked at four different banks and compared them. And you can see in this radar plot, where it goes from the center it's very low, to the circumference or the outside of the circle it's very high level of innovative activity. You can see that some firms are stronger in some areas and weaker in others. And so this is a way to compare the innovation activity of your firm as benchmarked against some other firm. And so the takeaways here are that yes, there are a wide range of ways in which you can practice innovation. But you want to find a way to measure that. You want to find a way to portray that. And a radar web approach to mapping innovation practices actually reveals opportunities for improvements and reveals strategic positions of your competitors. And that's what you want to know, you want to know where it is that you need to improve in order to match what your competition is. And when companies identify neglected innovation dimensions, they do have a path to re-define their strategy.
