That is easy, innovation is something new right? But new to whom, in what sense and what magnitude? While there are many definitions around, I didn’t find any of them particularly useful. Instead, I decided that if you are trying to advise managers on how to do innovation better then you need to define innovation in a way that helps them decide or focus resources. This led me to think about the challenges that an innovation might pose for a firm, either individually or in combination. I think there are three main challenges.
The first is the customer challenge. How novel will this innovation be to the target customer? Do they know they need it or are their needs latent? Is the target segment one the company understands or not? These and similar questions identify the challenge the firm will have in gaining market acceptance.
The second is the development challenge. Is the firm reassembling existing and understood technology or is it necessary to break new ground? Is this a tangible product or an intangible service or both? Can the existing organization deliver the innovation well or does the firm need to reorganize or learn new skills to do this? These and similar questions identify the challenge the firm will have in developing the innovation.
The third is the appropriation challenge. Is the firm going to use its current business model and distribution channels or is a new a model or channels necessary? Will the firm face new competitors or ones it already understands? Who has the most power in the supply or distribution channels, the firm or others? These and similar questions identify the challenge the firm will have in making money from the innovation.
The development challenge is what people usually think of when they talk about innovation. However, this is only part of the story. Knowing the challenge on each of the three dimensions helps the firm set up the project team correctly, with the right skills and resources. For example, an innovation that represents a strong customer challenge will require different skills and resources to one that represents an appropriation challenge.
I use these three challenges both to make sure the book covers the right topics and to discuss how innovation projects with different challenges need different management.
