Hey, Jenny: The Importance of Innovation

Jenny Darroch, Ph.D., is a professor at the Peter F. Drucker and Masatoshi Ito Graduate School of Management. Biweekly, she’ll answer questions relating to marketing and innovation, always explaining how these two disciplines (created and developed by Peter F. Drucker) can equip you with the knowledge and skills to become a change leader.

Please note: MMN’s editorial staff synthesizes Jenny’s answers into takeaway messages.

Q: Why is innovation important?

Darrouch: Innovation is not a choice. Organizations face constant—sometimes disruptive—change and need to innovate (i.e., doing new and different things that satisfies unfulfilled needs of customers) to stay in business.

One example is the taxi industry, which has been disrupted by ride sharing services such as Uber and Lyft. The Yellow Cab Company in San Francisco, for example, has already filed for bankruptcy protection.

Some say the taxi industry only has itself to blame because it was too regulated and lacked innovation and therefore wasn’t adapting to changing customer needs.

MMN Take-home Message: If an organization does not continuously innovate and change, it will inevitably stagnate and die. Continuity of an enterprise depends on producing and managing innovation.

To survive and thrive, organizations must be capable of initiating and implementing continuous, purposeful change.

No institution is destined to live forever. But organized and structured innovation can greatly extend an organization’s lifespan.

Q: Can you define what innovation is?

Darrouch: I'll try… I'm going to oversimplify for the purposes of this discussion. But in future articles and interviews, I will add other dimensions as to what innovation means.

For starters, according to Peter F. Drucker, the truly new does not, as a rule, satisfy demands that already exist. He said: "It creates new expectations, sets new standards, makes possible new satisfactions."

In keeping with this particular Drucker view of innovation (he has other views as well), we can say that Apple was a pioneer in creating new business spaces and new market niches. It was and still is truly innovative.

Apple's game-changing innovations—iPods, iPhones, iPads, iTunes and the Apple Watch—made possible new satisfactions unknown before the development of these products.

An organization's innovative strategy (using Drucker's definition) aims to create a new business rather than a new product within an already established product line.

Q: Can you get a little more specific?

Darrouch: In a nutshell, innovation is not so much about science or technology, but about creating value. The ultimate measure of an innovation is the impact it has on the market and/or society.

To succeed, an innovation must create new value for the customer. Netflix is a perfect example. They met an unfulfilled need in the marketplace by solving the problem of late fees and continued to iterate with on-demand viewing.

If a manufacturer of, say, elevators invents and embeds a software diagnostic module inside their elevators that automatically locates a source of possible failure before it happens, the manufacturer has created new value for the customer.

Buyers who want to prevent elevator downtime will be very responsive to the manufacturer's innovation and, quite likely, receptive to the manufacturer's total selling proposition because of this value-added benefit.

Put differently, people won’t adopt our ideas for change (whether it be the marketplace or internal customer/employees) unless they can see the value in what we are offering them.

What I mean by this: We need to identify how customers currently solve the problem they have and then ask ourselves whether our innovation solves the problem better.

This is why some people extend the definition of innovation to mean “positive change.”

I should also point out there's a big difference between "defining an innovation that solves the problem better," and actually "creating the innovation."

Once customer needs are determined, much work is required in producing and managing the innovation.

Still another distinction involving certain kinds of innovations involves how the organization introduces the change or innovation to the market (and sometimes also to employees within the organization) in ways that it will make it easier to accept. (These are topics for future articles and interviews).