Three Key Ingredients for Business Innovation

What does innovation mean within an organizational setting? According to FastCompany, “Innovation is the process through which value is created and delivered to a community of users in the form of a new solution.” Here, innovation is described as a process, and in this article, we will look at ways to facilitate the process of generating solutions with new ideas to drive value for businesses.

1. Organized Chaos

Good ideas can come from anywhere, and too often, the most innovative ideas are hammered down by hierarchical vetting. The existence of the phrase “death by committee” illustrates how projects and ideas can be ‘killed’ from within, lost in a black hole of other projects and ideas that nobody’s reviewing. While hierarchy and order helps facilitate efficient decision-making, it is very inefficient in encouraging creative ideas unless they’re being issued from the top. Ideas coming from lower levels often have to pass through multiple layers of management before reaching decision-makers.

Businesses today need to be adaptive and flexible to the ever-changing environment, and to do this, they not only need to foster creativity but also have a system in place to bring new ideas to life—hence ‘organized chaos.’ After all, there’s no use having many ideas without a good way to identify the best ones.

Photo by: Robert Scoble

There are hefty consequences for leaving good ideas hanging, as the creative talent that came up with these ideas could grow frustrated and dissatisfied and eventually leave the company. An example of this is at Google where employees famously get to spend a percentage of time on their own projects. The problem that emerged with this system was that too many ideas were being generated but few ever implemented. It is discouraging to employees if they spend a whole year working on a new feature and it never gets used.

So it’s all good that people are coming up with great ideas, but there needs to be a way to make the good ones come to life, or else employees can grow disappointed and frustrated. A reasonable goal for a company would be to implement a decided number of ideas, such as one out of every 100, or perhaps make it a competition to implement the winning idea.

Case: PricewaterhouseCoopers

One example of a company encouraging new ideas as well as implementing a system to actually put the best ones into action is PricewaterhouseCoopers (PWC), an accounting and consulting firm. PWC launched an idea-management website called “PWC PowerPitch” to gather employee ideas, which could help cut costs, improve customer service and increase revenues.

Employees posted their own ideas and voted for their colleagues’ suggestions. PWC promised that a team of senior management would review the idea within 30 days of submission and notify the employee of its status. More than 60% of the firm’s employees submitted ideas and around 4% of 3300 ideas were implemented, which was more than the 1% benchmark suggested earlier.

Once employees began to see their ideas being put into action, participation increased—employees now knew their ideas were not just going into a black hole. On top of that, “Recognition from their peers is a powerful motivator for many people,” said Murat Philippe, a consultant at HR Solutions, a workplace consulting firm in Chicago. A combination of knowing your ideas are being valued and being recognized by your peers may be the most effective motivator for innovation.

2. Experimentation

Photo by: Mateus

The hardest thing in business is allowing space for mistakes and failure when taking risks. But how do we find the balance between risk vs. reward? Sometimes, taking your chances pays off. In October 2012, Red Bull and Felix Baumgartner took a huge risk—they dropped Baumgartner from the edge of space to set a world record for the highest free fall.

This could have resulted in a human tragedy and irreversible damage to the Red Bull brand should anything have gone wrong. Why take this risk? Regardless, someone within the planning process went ahead with this idea and in doing so, secured Red Bull’s place in history. They showed that Red Bull truly gives you wings.

Of course, marketing stunts in this extreme form aren’t the only way to experiment. Experimentation can take place in the form of creating new product categories or business models (or both at the same time), too. An example of this is Redbox, a DVD rental company that utilizes automated retail kiosks as their primary retail touchpoint. The automated machines eliminate the real estate and staffing costs of brick-and-mortar stores, which revolutionizes the way people rent physical DVDs.

Photo by: Cliffano Subagio

Creating a new product category doesn’t necessarily mean you need to completely reinvent the wheel. Sometimes, you only need to make your audience believe you did. For example, think of the iPad. Was that a new category when Apple came out with it in 2010? It was, but not because the technology was new. It’s because Apple defined it as a new category. Experts characterized the iPad as a tablet, but the customers did not. That is the most important part.

We often don’t know in advance how much a current change could actually be an innovation that could invent the future. That’s why it’s important to take calculated risks and allow space for failure, because one experiment could just be the tipping point.

3. Set Limitations

In a study by Sheena Iyengar, two stands were set up at in Draeger’s, a store known for its variety of choice. One stand had six jams and the second had 24 for the customers to try. The results found that customers were likely to buy more jam when given less choice. The reason for this is because customers don’t want to make the wrong choice, and given many options, there’s a lot of comparing and contrasting necessary to make a good decision,  so it becomes harder to choose and people just give up.

Photo by: Drew Stephens

That is just one example of why—sometimes—less is more. Apple as a company in particular carries this motto, but not just in the design of its products. The ethos of simplicity pervades all aspects of the company. Reducing their product messaging to just once sentence and restricting media access to the company all helps create a paradoxical mystery surrounding the brand, which helps build the hype around new products, generating long lines outside Apple stores on the day of the product launch.

Although we should always listen to what the customer wants, sometimes we need to set limitations and actually help the customer get from point A to point B. Replacing confusion with complexity is not a solution—design has a role to play not only visually but also in the customer decision-making process, making it simpler for a customer to make the decision you want them to make. Tell your audience what you want them to do and give them a clear path to fulfill their primary motivations, and they will accept the limitations you set.

Photo by: Boegh