beneficiary-focussed helps make progress improves minimised-resistance offering resource coordination scalable sustainable co-creation of value value proposition

The Big Picture…

The innovation problem stems from how we define innovation.

We need a better definition of innovation. One that moves away from seeing manufacturers creating value and exchange focus. And towards one that puts helping beneficiaries make progress as key. Where Jobs-to-be-done theory comes naturally and co-creation of value are upfront. Let’s free ourselves from repeating the same tired approaches, that lead to disappointment.

"Insanity is doing the same thing over and over again and expecting a different result." – why keep trying to innovate using a definition of innovation that leads to the innovation problem? Let's fix that! Click To Tweet

Here’s my definition. And it comes from using 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
  • 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

And I would use the same definition for digitalisation (which is, simply, innovation where the value proposition is digital).

We know that we have an innovation problem with, for example, 94% of executives being disappointed with innovation performance. One reason, I suggest, stems from how we define innovation. We repeatedly take a very product-dominant logic approach – a pure focus on output and one off transactional sale to maximise return for the manufacturer.

Let’s look at how we got to where most innovation consultants and books are today. And then see where we should be instead (if you want to get there straight away, click here!)

Where are we today?

Today’s typical definition of innovation includes three aspects. Innovation:

  • is a process and an output
  • that creates something new/novel (where something could be products/goods/services/processes)
  • has value (embedded by the maker)

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. And 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, from the OECD and the European Commission, which I have copied in Figure 1.

Figure 1: Two example definitions of innovation

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 2.

Figure 2: Definition of Innovation according to The Oslo Manual, 4th Edition (2018)

And ISO, the standards body, has produced a definition of Innovation in their ISO65000 series (too expensive for me to buy, though the 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”.

Alice de Casanove

Finally, let’s go back to the “father” of innovation. According to Schumpeter, 1934, innovation comes in five types:

  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

So, What is the problem?

The problem with all these definitions is that they look at innovation with a divide between producer and consumer (or manufacturer/customer). One creates value, the other is seeking it and using it up/destroying it.

The impact of doing that is we frame definitions through the lens of goods-dominant logic. That is to say, we:

  • naturally focus on producers/manufacturers creating (embedding) value
  • begin believing all innovations are good and valuable
  • rely on the concept of value-in-exchange – a transactional approach that sees value as maximising cash for the manufacturer at point of sale

This should not be surprising. Gallouj and Weinstein found, in “Innovation in Services“, that we have based most of today’s innovation theory on technological innovation within manufacturing companies. And so a goods-dominant logic perspective is rather natural.

However, that brings along several issues. Amongst others, it:

  • makes us myopic to solutions – we want to add yet another razor blade.
  • raises the risk of our innovation efforts being based on the benefit to the manufacturer/producer rather than the customer.
  • minimises us building relationships with customers (our lead times are long, ability to pivot is low, and anyway we are too busy chasing the next exchange/sale).
  • prevents us from seeing what the customer does with the innovation after the point of sale. The circular economy, for example, is not interesting to us (why would it be? We’ve exchanged, and making a new exchange when you’ve used up the value is good for us…). Or in job-to-be-done theory lens, we see the big hire, but none of the subsequent little hires.

And, by believing all innovation is a good, we see only the challenges of diffusion and adoption. We pay scant regard to the very real resistance to innovations (why would there be resistance, it’s a great thing I’ve created…!)

Are there solutions?

Let’s not dismiss that there are proposed band-aids in such a myopic world to plaster over the issues.. Levitt’s Marketing Myopia from 1969 is the warning, yet few seem to take heed. Christensen’s Job-to-be-done theory can help break the goods-dominant obsession. Blue Ocean strategy can help us identify service aspects to higher or introduce (or lower/remove) to create new markets. And lean approaches might address the transactional nature of value-in-exchange.

But, these are bolt-on solutions looking to fix issues in the underlying approach.

Instead, Let’s look at defining innovation through a service-dominant logic lens – where the above comes for free, from the start.

Evolving the definition

It wasn’t always the case that we are so goods-dominant in our thinking. Jump back to 1934 and we find Schumpter (1934) – just before he wrote what we saw above – 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

This is rather service-based. With its focus on combinations of skills and resources (knowledge, resource, equipment, etc.).

And it is a service-based view that I propose we need to take to give us a workable definition of innovation. That will help us overcome the innovation problem. Instead of grounding the definition in goods-dominant logic, I choose to use the evolution of service-dominant logic.

At its heart, service-dominant logic means a shift to beneficiary-first and relational thinking as well as how resources and competences are applied (rather than focus on the end output). It also means we see goods as distribution mechanisms for service, rather than engaging in a goods vs service debate.

Innovation: A definition for growth

Here, then, is my proposed definition.

Figure 3: Defining innovation in a modern, service-dominant logic way

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
  • 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

Let’s unpack all of this on the next page.

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