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"Innovation distinguishes between a leader and a follower." Steve Jobs

While true, it is apparent that we've mythicized innovation. It's fire; it's mysterious creativity; it's tempestuous genius. It's elusive; a holy grail. It's Steve Jobs. And, because we've made it so, we've rendered innovation seemingly unattainable to the average entrepreneur. Average isn't the keyword here; seemingly is. Innovation isn't a myth; it can, and needs to, be a reality for every entrepreneur and leader.

Purposeful Search for Innovation

In Innovation and Entrepreneurship, leadership guru Peter Drucker succinctly dismantles the idea that innovation is "inspiration" or a "flash of genius." Instead, they are a practice and a discipline. "They are purposeful tasks that can, and should, be organized." Innovation isn't enigmatic; it's systematic.

Drucker acknowledges that some innovations do spring from that flash of insight or genius. But most, "especially the successful ones, result from a conscious, purposeful search for innovation opportunities." He argued that entrepreneurs need to seek out change already underway or about to occur - and then exploit them.

And in his typical, clear, instructional way, Drucker points out seven areas in which entrepreneurs can begin their search. The first four relate to conditions inside an organization, industry, or sector, while the last three relate to conditions outside the organization or industry.

1. Unexpected Success or Failure

Quick: name the biggest failure in the 20th century auto industry. The Ford Edsel come to mind? It's consistently remembered as one of the worst cars of all time; ugly, fuel-guzzling, expensive. But it presented an opportunity for innovation that Ford seized.

They realized that instead of segmenting their market by income, they needed to cater to different "lifestyles." This was a concept that put them ahead of GM and other automakers, and Ford had their payback with the release of the phenomenally successful Mustang.

Unexpected successes are fertile ground for innovation. IBM, for instance, invented the first accounting computer for banks in the 1930s. Turns out they didn't want them, and couldn't afford them. Libraries, on the other hand, were flush with New Deal cash and wanted to invest in the machines.

Both unexpected successes and failures present chances for innovation, largely because other companies ignore them. In fact, Drucker says that leaders and managers "actively reject" these opportunities. Simply being open to them can be the beginnings of a competitive advantage.

2. Incongruity

Within your organization or industry, are there discrepancies between what is and what could or should be? Drucker says this incongruity is a "symptom of an opportunity to innovate." For example, between 1950 and 1970, the steel industry was growing steadily, but profit margins were getting tighter. There was an incongruity that allowed for the innovation of mini-mills, which allowed for more efficient production.

3. Process Need

One day, Joe Jacobson was sitting on a beach. Finishing a book he'd brought with him, he realized he had no more reading material. Wouldn't it be nice, he thought, if there was a lightweight electronic book that allowed you to access more books? And with no backlighting, you could read it anywhere - including a sunny shore. It would draw so little power that you wouldn't need heavy batteries, and you could indulge in your choice of fact, fiction, prose, or poetry for hours.

In this case, and many others, need drove innovation. (And yes, for avid readers and learners, access to books is a necessity!)

4. Changes in Industry Structure or Market Structure

While it seems industry and market structures are "sacred", they can, in fact, change overnight. During the 1960s, for example, the healthcare industry experienced rapid change. Three managers at a Midwestern hospital spotted an opportunity.

They created a company that offered contracts to hospital for cleaning, laundry, kitchen, maintenance, and other tasks. The innovation allowed hospitals to outsource these responsibilities, and, within 20 years, this small business was handling over $1 billion in services.

Rapid growth, a change in "business as usual," convergence of technology, and audience definitions and expectations can cause profound disruption, and the chance to innovate for those paying attention.

5. Demographic Changes

Demographics are a reliable source of information, and innovation. And as Drucker writes, "because policy makers often neglect demographics, those who watch them and exploit them can reap great rewards."

In Japan, for instance, savvy entrepreneurs knew there was a baby "bust" and a concurrent explosion in education. This indicated that in a few decades, there would be a lack of laborers for manufacturing jobs. This gave rise to advances in robotics that put Japanese companies ahead in the field.

6. Change in Perception

Drucker points out that there is no logical or mathematical difference between a glass that is half-full and one that is half-empty. It's all perception, and this is an area entrepreneurs can exploit. For instance, in the 1960s, while Americans' health was improving, their fear of ill-health, cancer, weight gain, etc., was increasing.

This gave rise to businesses like Celestial Seasonings. The small company gathered herbs from the Colorado mountainsides and sold them on the corner. Because of changes in perceptions regarding health, it sold for $20 million to a major food-processing company. Drucker writes:

What determines whether people see a glass as half full or half empty is mood rather than fact, and a change in mood often defies quantification. But it is not exotic. It is concrete. It can be defined. It can be tested. And it can be exploited for innovation opportunity.

7. New Knowledge

Drucker calls innovations based on new knowledge the "superstars of entrepreneurship." They're highly publicized, and often game-changing. At the same time, these innovations have a longer "lead time" than other types. The diesel engine, for example, was developed in 1897. While regarded as an important development, it wasn't until nearly four decades later that the engine was put to work in trucks, cars, buses, ships, and trains.

Further delaying the practical implementation and use of new knowledge innovations is that fact that they are typically dependent on multiple sources of knowledge. Airplanes, cars, penicillin - these all depended on integrating different types of knowledge.

Kissed By Muses

There are innovations that are born of sparks of genius or some mysterious burst of creativity - giant ah-ha moments. As Drucker writes, "[S]uch innovations cannot be replicated. They cannot be taught and they cannot be learned. There is no way to teach someone how to be a genius."

The positive, and actionable, news for organizations is that there are ways to learn systematic innovation. When leaders take the time to explore these seven avenues of innovation, they can seize opportunities to pull ahead of the competition and realize better results for their companies. And if they're never "kissed by the muses," neither are they left behind by innovation.


Larry Hart

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