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I for Innovation: How Much Does a Pound of Innovation Cost?
  •   9 min read

I for Innovation: How Much Does a Pound of Innovation Cost?

“All rad­i­cal inno­va­tions come from peo­ple who are not experts.” – Orange Telecom
Inno­va­tion. The word became a sta­ple in the Ukrain­ian busi­ness lex­i­con rel­a­tive­ly recent­ly, fol­low­ing waves of inte­gra­tion into the glob­al envi­ron­ment in the mid-2000s. After that, inno­va­tions became a top­ic of dis­cus­sion at all lev­els of gov­ern­ment and busi­ness sec­tors. The rea­son was sim­ple – an ide­o­log­i­cal cri­sis in busi­ness. The post-Sovi­et space need­ed a breath of fresh air, ideas, new mod­els, and some­times even a com­plete restart.

With­out any mar­ket­ing, PR, or a well-struc­tured pol­i­cy even in large cor­po­ra­tions, com­mon sense forced a reeval­u­a­tion of val­ues and a turn to West­ern expe­ri­ence in inte­grat­ing inno­va­tions into busi­ness processes.

Accord­ing to Forbes mag­a­zine, 9 out of 10 star­tups fail. Some sources claim that Bloomberg did not pro­vide such infor­ma­tion, but this is a mis­in­ter­pre­ta­tion that led to a myth: a Har­vard study indi­cates that ¾ of inno­va­tions fail due to mis­al­lo­ca­tion of finances and poor man­age­ment.

It’s not enough to just say, “I for Inno­va­tion,” it’s cru­cial to know how to imple­ment them.
Is it worth invest­ing in risky inno­va­tions dur­ing glob­al eco­nom­ic insta­bil­i­ty? Should funds for inno­va­tions and devel­op­ment be includ­ed in the annu­al budget?

Even the expe­ri­ences of polit­i­cal lead­ers show that inno­va­tions are always rel­e­vant: the suc­cess­ful imple­men­ta­tion of new tech­nolo­gies in North Korea’s mis­sile pro­gram made an Asian dic­ta­tor a fig­ure of inter­na­tion­al sig­nif­i­cance (hope­ful­ly, just on TV).

The The­o­ry of Every­thing New

In the book “Cre­at­ing Inno­va­tors: The Cre­ative Meth­ods of Net­flix, Ama­zon, and Google” by Clay­ton Chris­tensen, Nathan Furr, and Jeff Dyer, inno­va­tions and tra­di­tion­al busi­ness can be illus­trat­ed by the sky­scrap­ers of the 1960s. Under the exist­ing tech­nolo­gies, using any­thing oth­er than straight angles and beams was expen­sive, risky, and led to a chain of unfore­seen events.
In the clas­si­cal approach, it is dif­fi­cult to go beyond stan­dards, but sim­i­lar build­ings stood and per­formed their func­tions well. Inno­va­tions, how­ev­er, involve uncon­ven­tion­al angles, new mate­ri­als, and a delib­er­ate depar­ture from standards.

Висотки Китаю Designed by victor217 / Freepik

Sky­scrap­ers in the UAE and Chi­na have become sym­bols of archi­tec­tur­al inno­va­tion, while the Empire State Build­ing has lost its for­mer glory.

The authors of the book believe that the innovator’s method con­sists of:

  • Per­son­al Expe­ri­ence and Insight: You can’t come up with an orig­i­nal approach with­out fac­ing sim­i­lar sit­u­a­tions and know­ing the basic spe­cif­ic fac­tors of the seg­ment. How­ev­er, non-spe­cial­ists often cre­ate new visions because their per­spec­tive isn’t “cloud­ed.”
  • Iden­ti­fy­ing the Prob­lem: Demand always gen­er­ates sup­ply. Busi­ness must con­stant­ly see what prob­lems peo­ple face in every­day life, con­sid­er­ing the flour­ish­ing tech­nolo­gies and services.
  • Solv­ing the Prob­lem: If no one has seen the prob­lem, there are no solu­tions yet. Such a solu­tion will be a unique sell­ing propo­si­tion (i.e., innovation).
  • Busi­ness Mod­els: The orig­i­nal idea must under­go test­ing and sta­tis­ti­cal analy­sis to func­tion ful­ly. Dur­ing this peri­od, the direc­tion of the inno­va­tion, a full busi­ness descrip­tion, and its unique fea­tures are formed. A bud­get for inno­va­tions and imple­men­ta­tion algo­rithms is laid down.
  • Busi­ness Expan­sion: Prop­er pri­or­i­ti­za­tion allows the busi­ness to grow rapid­ly, thus imple­ment­ing new tech­nolo­gies with­in the mar­ket seg­ment and expand­ing into neigh­bor­ing seg­ments (or enter­ing new ones).

Three Groups of Innovators

  1. Com­pa­nies that have been inno­vat­ing since their incep­tion: Google, Ama­zon, Valve.
  2. Com­pa­nies that tran­si­tioned to a clas­si­cal busi­ness mod­el after suc­cess­ful inno­va­tions: Proc­ter & Gam­ble, Mon­delez, AT&T.
  3. Star­tups that began with a group of like-mind­ed peo­ple who received invest­ments through crowd­fund­ing and pri­vate investor groups: Steam, Uber, Dropbox.
At the same time, many authors on ser­vice and the intro­duc­tion of new mech­a­nisms unan­i­mous­ly state that reg­u­lar inno­va­tions spoil con­sumers, turn­ing them into demand­ing egotists.

For exam­ple, McDon­ald’s expe­ri­ence in ser­vice (the raised hand of the cashier and the ver­bal mod­ule “Free cash reg­is­ter!”) was inno­v­a­tive, but over time the qual­i­ty of staff behav­ior decreased, lead­ing to neg­a­tiv­i­ty from offend­ed cus­tomers who did not see the famous fast and con­ve­nient service.

Ele­ments of Innovation

Nicholas Stafford, author of “The Social Entre­pre­neur’s A to Z,” demon­strat­ed his view of inno­va­tion. In his dic­tio­nary-text­book, “inno­va­tion” con­sists of the fol­low­ing elements:
  • I – I for Inno­va­tion: Inno­va­tion and its active imple­men­ta­tion are entire­ly dif­fer­ent things. Imple­ment­ing inno­v­a­tive tech­nolo­gies is pos­si­ble only with the resilience of the idea, while the new approach itself may be stillborn.
  • N – New Ideas: Com­bin­ing two or three ele­ments (famil­iar ones) is effec­tive for intro­duc­ing new and pro­duc­tive resources.
  • N – Nar­ra­tive: A log­i­cal chain of sequen­tial rea­son­ing and their via­bil­i­ty in the sur­round­ing world. Inno­va­tions are effec­tive when they meet peo­ple’s needs. Only then do they make sense.
  • O – Obser­va­tion and Analy­sis: Exam­in­ing reality.
  • V – Vision: See­ing the poten­tial of a project and cal­cu­lat­ing pos­si­ble devel­op­ment paths in advance.
  • A – Author­i­ty: With­out a cer­tain lev­el of knowl­edge and val­ued opin­ion in the eyes of oth­ers, it is impos­si­ble to shape an idea into a full-fledged inno­va­tion that brings profit.
  • T – Tim­ing: Man­ag­ing process­es in time and space.
  • G – Game with Mean­ings, Images, Forms: Using imagination.
  • O – Objec­tive Oppor­tu­ni­ties: Resources avail­able to the busi­ness and the sur­round­ing world.
  • N – Net­work: A well-estab­lished net­work in all busi­ness chains. Only effec­tive imple­men­ta­tion paths can allow inno­va­tion to succeed.

Suc­cess Sto­ries of Innovators

Jenn Hyman

In 2008, Jenn Hyman had an idea: why not rent wed­ding dresses?

Her idea’s foun­da­tion includ­ed essen­tial ele­ments of innovation:

  1. Expe­ri­ence work­ing in bridal salons.
  2. Observ­ing acquain­tances and iden­ti­fy­ing a problem.
  3. Exper­i­ment­ing with the proposal.
Instead of writ­ing a busi­ness plan, Jenn and her friend Jean­nie bor­rowed mon­ey and bought 130 dress­es from well-known design­ers in the mid-range and upper-mid-range price cat­e­gories. Then, they post­ed fly­ers about the new ser­vice around the local uni­ver­si­ty cam­pus, rent­ed a space, and the result: near­ly 40% (out of 200) of the girls who came became cus­tomers, and all the rent­ed dress­es were returned in per­fect condition.

Then came the ques­tion of increas­ing effi­cien­cy: should they allow try-ons or increase the selec­tion? By expand­ing the assort­ment, 50% of those who came used the rental ser­vice. An online sur­vey of 4,000 girls fol­lowed, and 5% agreed to use the service.

Rent the Runaway

Rent the Run­way Fight­ing design­ers’ fears led to the inno­v­a­tive idea of Rent the Run­way. Even at the investor search stage, Jenn had no busi­ness plan. The mon­ey was obtained, and Jenn Hyman launched Rent the Run­way in ear­ly Novem­ber 2009 as a beta ver­sion with an offer­ing of 800 dresses.

With­in a few months, Hyman attract­ed an addi­tion­al $30 mil­lion in invest­ments, and the num­ber of dress­es increased to 30,000. Accord­ing to Jenn Fleiss, the com­pa­ny’s mar­ket­ing direc­tor, 85% of women at Pres­i­dent Oba­ma’s inau­gu­ra­tion wore dress­es from their ser­vice. It was a victory.

Net­flix

Net­flix is one of the bright­est exam­ples of an inno­v­a­tive approach. This ser­vice is now a major play­er in the film indus­try. The com­pa­ny start­ed as a small DVD rental deliv­ery ser­vice. In 1999, the busi­ness seg­ment and all its par­tic­i­pants were in the shad­ow of the Amer­i­can giant Blockbuster.

Netflix

In 15 years, Net­flix became the monop­oly of the film rental and stream­ing tele­vi­sion mar­ket in the USA and beyond (of its 80 mil­lion clients, 35 mil­lion are out­side the States). The main fea­ture of the com­pa­ny was the abil­i­ty to stream movies and shows via the Inter­net. A bright logo, learn­ing from com­peti­tors’ mis­takes, and a trans­par­ent and qual­i­ty ser­vice were the keys to Net­flix’s success.

The com­pa­ny now has part­ner­ships with Mar­vel and Dream­Works, rights to pop­u­lar shows like “Dare­dev­il,” “The Defend­ers,” and “Crit­i­cal House.” A unique fea­ture of the por­tal’s series is the release of the entire sea­son at once, anoth­er inno­va­tion that made Net­flix syn­ony­mous with binge-watching.

Sam­sung

The main com­peti­tor of the world’s lead­ing high-tech inno­va­tor, Apple. Sam­sung is cred­it­ed with many pranks, includ­ing trucks full of coins to pay off a court debt. The com­pa­nies dili­gent­ly steal ideas from each oth­er like cyn­i­cal long-mar­ried cou­ples. How­ev­er, Sam­sung is known for its love of fresh per­spec­tives on famil­iar things.

Mark She­droff, Vice Pres­i­dent of the Sam­sung Open Inno­va­tion Cen­ter, says the cen­ter stands on four pillars:

  1. Part­ner­ship Pro­gram: Allows for the exchange of expe­ri­ence and tech­nolo­gies with oth­er companies.
  2. Invest­ment in Research: Helps devel­op the industry.
  3. Attract­ing Exter­nal Teams: For fresh per­spec­tives on set tasks.
  4. In-House Cen­ters: For reg­u­lar work.
Sam­sung reg­u­lar­ly attracts teams of 5 – 6 peo­ple to work on spe­cif­ic tasks, giv­ing them auton­o­my in cre­at­ing prod­ucts with­out approval of pre­lim­i­nary and inter­me­di­ate results. Then they are giv­en all the oppor­tu­ni­ties of a large com­pa­ny: financ­ing, dis­tri­b­u­tion, and oth­er resources.

Samsung

Mark notes that inno­va­tion costs pay off: the com­pa­ny sells 450 mil­lion phones and 50 mil­lion TVs annu­al­ly. The man­u­fac­tur­er’s goal is to cre­ate a cross-plat­form struc­ture that can unite all prod­ucts into a sin­gle net­work. Microsoft also strives for this but with much less success.

Lego

Lego stopped being just a man­u­fac­tur­er of one of the best con­struc­tion toys in the world and embraced inno­va­tion in the mid-2000s by sign­ing agree­ments with the largest enter­tain­ment fran­chis­es. Now it has prod­uct lines from FOX, Dis­ney, WB, and almost any product.

Lego

Eric Hansen, Senior Direc­tor of Open Inno­va­tion at Lego, says in many inter­views that the ini­tial task force was cre­at­ed to:

  • Assess the poten­tial for intro­duc­ing innovations.
  • Ana­lyze glob­al inno­va­tion experience.
  • Cre­ate recommendations.
Once the plans were approved, the com­pa­ny began dis­cussing joint projects with oth­er com­pa­nies, inter­view­ing suc­cess­ful inno­va­tors, and test­ing new prod­ucts on a large scale (for­tu­nate­ly, the com­pa­ny had the resource base).

Here are a few of Eric’s statements:

Peo­ple don’t have to work for us to work with us.
Con­sumers are cre­ative and smart. They expect you to lis­ten to them.

Hansen high­light­ed the nec­es­sary rules for devel­op­ing and intro­duc­ing innovations:

  • Indi­vid­ual cre­ativ­i­ty into col­lec­tive sys­tem­at­ic creativity.
  • Pri­or­i­tize strengths.
  • Achieve suc­cess with peo­ple who are inter­est­ed in success.
The best exam­ple of Lego’s suc­cess is the LEGO Ideas project.

Where to Get Ideas?

Oth­er people’s expe­ri­ence is use­ful, but brain­storm­ing with­in the com­pa­ny’s cre­ative depart­ments can be more beneficial.

Sources of inspi­ra­tion for ini­ti­at­ing new ideas can include:

  1. Lit­er­a­ture on inno­va­tion: There is a wide selec­tion of Eng­lish-lan­guage and adapt­ed lit­er­a­ture on ideas, suc­cess­ful cas­es, and inno­v­a­tive meth­ods. A sig­nif­i­cant dis­ad­van­tage of trans­lat­ed lit­er­a­ture is out­dat­ed infor­ma­tion, but there are also cur­rent mate­ri­als, such as Clay­ton Chris­tensen’s “The Inno­va­tor’s Solution.”
  2. The­mat­ic webi­na­rs in Eng­lish: This option is bet­ter as all tru­ly rel­e­vant trends come from the West. You can famil­iar­ize your­self with the pro­gram here.
  3. Open inter­na­tion­al forums: These take place annu­al­ly in major infor­ma­tion cen­ters world­wide. For exam­ple, the pop­u­lar Japan­ese forum Inno­va­tion Week­end. In Ukraine, the open forum InnoTech Ukraine has been held for the third con­sec­u­tive year.
  4. Client ser­vice and feed­back ana­lyt­ics: Through sur­veys, ques­tion­naires, and focus groups.
InnoTech Ukraine 2017
InnoTech Ukraine 2017
Com­mu­ni­ca­tion with com­pa­ny lead­ers, top man­agers, and depart­ment heads pro­vides valu­able con­tacts, insights into suc­cess­ful cas­es, and poten­tial part­ner­ships in prof­itable projects.
Main Rule: You need to move, com­mu­ni­cate, and develop.
In most cas­es, crowd­fund­ing plat­forms and investors serve as resources for obtain­ing funds. It is nec­es­sary to prove through num­bers that the approach is inno­v­a­tive. The devel­op­ment bud­get should be cal­cu­lat­ed at the busi­ness mod­el­ing ver­i­fi­ca­tion stage.

Ver­dict

There are undoubt­ed­ly more promi­nent fig­ures in the world of inno­va­tion: Richard Bran­son (head of Vir­gin), the mad genius Elon Musk, and the late Steve Jobs.

They always pri­or­i­tize inno­va­tion and ben­e­fit not only from increased income but also from pub­lic inter­est, as in the high-tech era, infor­ma­tion is a much more valu­able resource than mate­r­i­al goods.

Any inno­va­tion car­ries the risk of becom­ing an unnec­es­sary prod­uct that does not meet con­sumer needs or fails to cre­ate them.
Although the infor­ma­tion that “9 out of 10 star­tups fail” is uncon­firmed, the per­cent­age of viable orig­i­nal busi­ness ideas remains low, so it is essen­tial to make every effort to ensure that your “Eure­ka!” becomes a real­i­ty and brings you profit.
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