The Big Picture…

Ask a hundred innovation consultants, and you’ll get a hundred different definitions of innovation. With universal themes such as creating value, executing ideas, and that just having ideas is not innovation.

However they have a common thread. They major on the action of the innovator and the value to them. This is typical of innovation thinking coming from a product-dominant world.

I want to introduce my own. And, there is a difference. Mine uses a service-dominant logic lens to build an actionable and modern definition.

Innovation is creating and offering a new (to the organisation, market/industry, or world) value proposition:

  • that helps the beneficiary make progress better than they can currently
  • that improves during, or as a result of, the naturally occurring value co-creation while using
  • which is delivered through the scalable and sustainable co-ordination of skills and resources (often across an ecosystem)
  • and where resistance (postponement, rejection, or opposition) is minimised

It is time to update our normal definitions of innovation. Current ones focus too much on the organisation that creates the innovation. And too little on recognising the service nature of the world we live in. Where we help actors make progress, where value is co-created and that value is determined by the beneficiary based on their lived experience. That is to say, I want to embrace the service-dominant logic lens I am proposing as a step in solving the innovation problem.

If you want to skip the short background below and jump straight to my new definition, click here.

It wasn’t always so. If we jump back to 1934 we find Schumpter (1934) seeing innovation as:

“new combinations” of new or existing knowledge, resources, equipment etc…subject to attempts at commercialization (Schumpeter, 1934)

A Guide to Schumpter Fagerberg, 2008

And, this is rather service-based. With its focus on combinations of skills and resources (knowledge, resource, equipment, etc.). Innovation to him came in five types (Schumpeter, 1934):

  1. launching a new product or a new species of already known product;
  2. applying new methods of production or sales of a product (not yet proven in the industry)
  3. opening a new market (the market for which a branch of the industry was not yet represented)
  4. acquiring new sources of supply of raw material or semi-finished goods;
  5. driving a new industry structure such as the creation or destruction of a monopoly position

And that is a path we’ve followed since.

Where are we today?

Gallouj and Weinstein found that we have based most of today’s innovation theory on technological innovation within manufacturing companies (see “Innovation in Services“, 1997). And that tends to frame definitions through the lens of goods-dominant logic. That is to say, we focus on the organisation and value-in-exchange.

For example, over at Idea2Value.com, they summarise 15 innovation experts’ definitions. From that, they find 60% include “having or executing the idea” yet only 40% noted value to customer or business.

The typical definition lands with three things. Innovation:

  • is a process and an output
  • that creates something new/novel (where something could be product/good/service/process)
  • generates value

Edison, bin Ali and Torkar (2013) studied innovation in the software industry and found 41 separate definitions of innovation. They identified two that stood out as being best, shown in Figure 1.

Figure 1: Two example definitions of innovation

But neither of these definitions explain who gets the value. And in both definitions, we find goods-dominant logic traits. Such as the firm building/embedding value to be later exchanged to a customer.

As we move through 2020, the Oslo Manual has been updated to the 4th edition; and the definition of innovation has evolved into that shown in Figure X.

Figure X: Definition of Innovation according to The Oslo Manual, 4th Edition (2018)

But still it is organisation-centric rather than beneficiary-centric. And ISO have produced a definition of Innovation in their ISO65000 series (definitions are aligned with the Oslo manual).

Alice de Casanove, Chair of the ISO technical committee responsible for the standard, has said: “Innovation is about creating something new that adds value; this can be a product, a service, a business model or an organization. And the value that is added is not necessarily financial, it can also be social or environmental, for example”.

And this is interesting as it expands the view of value to social and environmental perspectives. Yet still, these definitions are still built from the past and not talking in terms of how we are beginning to see the world as truly working, i.e. service-dominant logic.

Let’s then try and look at defining innovation through a service-dominant logic lens.

Evolving the definition

Here, then, is my proposed definition.

Innovation is creating and offering a new (to the organisation, market/industry, or world) value proposition:

  • that helps the beneficiary make progress better than they can currently
  • that improves during, or as a result of, the naturally occurring value co-creation while using
  • which is delivered through the scalable and sustainable co-ordination of skills and resources (often across an ecosystem)
  • and where resistance (postponement, rejection, or opposition) is minimised
Figure 2: Defining innovation in a modern, service-dominant logic way

OK, let’s unpack this.

Innovation is creating and offering a …value proposition

Right up front, we set a service-dominant mindset:

Actors cannot deliver value but can participate in the creation and offering of value propositions

Foundational Principle #7 of service-dominant logic

Unlike our product-dominant thinking friends, we do not see that we have embedded value by the act of making something (a goods or a service). We can only offer a value proposition. The value itself will be co-created as the service is delivered.

Value is always co-created by multiple actors, always including the beneficiary

Foundational Principle #6 of service-dominant logic

Our new definition reflects this fact – we offer only a value proposition.

A value proposition that is new to the organisation, market/industry, or the world

For our value proposition to be an innovation it needs to be novel.

But rather than a puristic view of new meaning new to the world, I broaden this to be new to the organisation, or market/industry or the world. The idea comes from Edison, bin Ali and Torkar’s (2013) definition of novelty (see Figure 3). They use new to the firm, but I’ve changed to new to the wider organisation.

Figure 3: Novelness / Newness of an innovation

I broaden this out for a couple of reasons:

  • innovations can be carried
  • beneficiaries have expectations

First, we know that certain actors involved in creating value propositions can be facilitators, carriers or sources of innovation (den Hertog’s (2000) “Knowledge-Intensive Business Services As Co-Producers Of Innovation“). Den Hertog saw consultancy companies, for example, work across many industries and markets. As such, they have an opportunity to observe many ways of working. And they are in a position to solve problems in one industry/market using something they saw in another. In other words, they carry innovations. But you as an innovator can do similar as you move between companies.

Secondly, customers are increasingly expecting to do things in your market/industry that they regularly do elsewhere. The spread of QR codes from the travel industry to the entertainment industry, for example. Or tracking their personal packages as they do their commercial ones.

The Value Proposition helps the beneficiary…

Now we drive another aspect of service-dominant logic into the definition. That a service-dominant approach is inherently beneficiary-oriented.

A service-centric approach is inherently beneficiary oriented and relational

Foundational Principle #8 of service-dominant logic

And our definition is still unrestrictive. The beneficiary could mean anything from external customer through to internal department. As long as we are clear who that beneficiary is. Where we have more than one beneficiary, we need to understand who is the main beneficiary.

But what do we help the beneficiary with?

…Make Progress…

As we identify service-dominant logic with Christensen’s job to be done theory then we will borrow the phrase “make progress”.

The underlying thought is that people don’t buy products or services; they “hire” them to make progress in some aspect of their life. And that is what we want all of our innovations to do. To help the beneficiary make progress.

Figure 4: Our new value proposition (innovation) needs to help the beneficiary make progress better than they currently can

There are a couple of subtleties here. First, beneficiaries can make progress using goods, service, or a combination. Yet I do not make a distinction in this definition. And this is fine as seen through our service-dominant logic lens. We see goods as a distribution mechanism for service. For example, if your problem is to quench thirst, then you can drink water from the tap (a service) or from a bottle of water (a product, but that is a “frozen” service). So there is no need for us to make a distinction between goods or service(s) in our definition.

And the second subtlety is that a job to be done can have a combination of functional, emotional and social dimensions. Which nicely ties us back to the comments from the ISO working group on her definition of innovation.

There is an important caveat in my definition.

Where a beneficiary can make progress better than they can currently

The beneficiary needs to be able to make progress in a way that is better than they currently can. If not, then we are not offering a compelling reason for the beneficiary to fire their existing hire and hire our service instead. Remember that the current hire could be ‘do nothing’.

However, we know that value is determined by only the beneficiary.

Value is uniquely and phenomenologically determined by the beneficiary

Foundational Principle #10 of service-dominant logic

So it is a tricky aspect to manage. Better can mean many things, such as:

  • quicker
  • cheaper,
  • more conveniently,
  • reduction of perceived risk,
  • removal of hinders,
  • and so one.

And this idea of the value as being uniquely determined by the beneficiary also supports disruptive innovation. A phrase we have to be very careful of as many people misuse. The true definition revolves around, as the Christensen Institute defines: “a product or service initially takes root in simple applications at the bottom of a market—typically by being less expensive and more accessible—and then relentlessly moves upmarket, eventually displacing established competitors”. Three cases are identified:

  • Enabling technology – making the service more available and accessible to a wider population
  • Innovative Business Model – targeting non-consumers (new consumers who did not use the service before) or low-end consumers (previously seen as non-profitable)
  • Coherent Value Network – where the network providing the service is better off when the disruptive innovation succeeds.

But we need to be careful. “Phenomenologically” refers to the lived experience of individuals, not general group dynamics. Value see today by one beneficiary may be seen differently tomorrow. Think of supermarket checkouts – perhaps valuable if you have 2 items and its a lunchtime rush (you make progress in buying your items quicker), less valuable perhaps if you are doing the weekly shop. But you may find that they treat you like a thief by default off-putting.

In “Evolving Winning Ideas – using the lean canvas iteratively“, I talk about poor solutions pushing consumers to find new solutions. And that a compelling value proposition pulls consumers towards your offering. Leveraging both push and pull is an excellent approach.

But service provision is usually not a one-off.

The value proposition improves as a result of co-creation of value

As we can only offer a value proposition and we co-create value during delivery, then we have an inherent opportunity for continuous improvement. And we also know that:

A service-centric approach is inherently beneficiary oriented and relational

Foundational Principle #8 of service-dominant logic

This, then, is another point where we can look to job-to-be-done theory. There we find the concept of big and little hires. Where the “big hire” is when the beneficiary switches to explore your value proposition. And “little hires” are the repeated choices to re-hire your service.

There is little guarantee that a beneficiary will make the little hires if the last hire was not beneficial to them. And this applies equally to frozen service (goods). Just recall the disaster Coca Cola had when they replaced a product that had served the consumer well with New Coke. Consumers decided they were not going to hire new coke, despite 200K taste tests showing it was preferred. It just goes to show that value can be an emotional attribute.

Lets switch tracks a little. Even though my definition is beneficiary-forwards, we cannot forget that an innovation that doesn’t support the other actors is not going to survive.

Which we deliver in a scalable and sustainable way…

Our innovation has to be able to be delivered in a scalable and sustainable way. Otherwise, it is unlikely to survive.

It needs to be scalable within the context of the beneficiaries. And that might mean within your organisation or the world.

And it needs to be sustainable. I’ve avoided using the phrase commercially viable here. I want to keep the focus away from finance, reflect the service-dominant view that survivability of the network is a focus, as well as future-proof for the future economic status. Sustainable could mean profit in a commercial setting, or not loss-making in non-profit organisations.

…often in an ecosystem…

But we rarely deliver a value proposition in isolation. Nearly all offerings involve an ecosystem. We have payment partners, distribution partners, and so on. Ecosystem scalability and sustainability is increasingly important in our own offerings.

…that will not be resisted

And finally, we know that innovation resistance – where the use of an innovation is postponed, rejected, or even opposed – is a big issue. But amazingly, it is rarely thought of or addressed today. So, to remind ourselves, I add this to my definition.

Figure 5: A recap of innovation resistance hierarchy and the causes

Wrapping Up

And so, we arrive at our complete definition that wraps up service-dominant logic concepts to give an actionable definition of innovation. One that also pulls in leading theories such job-to-be-done and explains other concepts such as disruptive innovation and blue ocean strategy.

To remind ourselves, the definition is:

Innovation is creating and offering a new (to the organisation, market/industry, or world) value proposition:

  • that helps the beneficiary make progress better than they can currently
  • that improves during, or as a result of, the naturally occurring value co-creation while using
  • which is delivered through the scalable and sustainable co-ordination of skills and resources (often across an ecosystem)
  • and where resistance (opposition, rejection, or postponement) is minimised

Hits: 128

beneficiary co-creation job-to-be-done make progress lean market offering eco-system resistance make progress proposition scalable service-dominant value sustainable
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