Innovation is far more than building a better mousetrap in the form of new technology, but also involves new services, processes, business models and organisational structures.
The famous 19th Century dictum to “build a better mousetrap, and the world will beat a path to your door” still dominates our thinking too much whenever we talk about innovation. I see this in startup ventures, many established companies, and in policy discussions about what we need to incentivise companies to do.
But being innovative is far more than building a better mousetrap. Though there are various definitions of “innovation”, I tell students and other audiences that a useful benchmark of business innovation is “any strategically relevant change in an organisation.”
That’s right, you can innovate literally any activity that your organisation performs – which is a shock to listeners who have come to equate change only with newer technology, as in the invention of snazzier mousetraps for the 21st Century. Technology can be sector-changing and wonderful, but it’s hardly the only way to innovate.
Four types of change
So let’s look at four other types of change that can help businesses gain a competitive edge (I am not advocating mouse-killing or literally comparing dead mice with healthy humans, but just using the mousetrap metaphor to figuratively illustrate innovation through the same context).
— First: Talk to the mouse in order to introduce an emotional experience for an existing product.
The innovation is not in the product or service itself, but rather in new interaction with the customer that adds additional value. History shows this can matter for products that are not inherently superior to existing wares produced by rivals. Take the Lexus automobile, launched by Toyota Motor Corp. as a separate brand with its own dedicated dealership network and a carefully developed luxury image.
I was living in California in 1989 at the time of the brand’s launch in the US (Lexus wasn’t introduced into Toyota’s home market of Japan until 2005), and the Lexus was not vastly different in its technology from other high-end models on the market (though its design was a bit posher). Instead, Lexus focused on individualised customer service, as a pioneer in offering replacement vehicles while a car was being fixed and in being straightforward and honest to customers, and Lexus refused to dilute the brand’s upscale image by introducing lower-priced models to lure customers into showrooms. Dealers gave the customer a new experience through superior service, and they “talked to the mice” in a straightforward manner about the new brand’s value proposition.
— Catch more mice with the same mousetrap by introducing a new production or delivery process.
The age-old wooden mousetrap – fitted with a hammer, spring, hold-down bar, catch and cheese-baited platform – still works! So you can boost productivity without changing the product by making the process more efficient – for example, quickly and efficiently discarding dead mice, rapidly luring more mice in front of the mousetrap, or quickly reloading the trap for future prey.
Of course, processes can also benefit from technology (especially information and communication technologies) – but not only, and not always. I worked once with a diagnostics company that sold lots of equipment to hospitals, which spend a lot of money on technology. In this case, they wanted to sell patient monitoring equipment. But the largest single contributor to post-operative complications lies in varying blood sugar levels, and a simple process of a nurse checking blood sugar every 30 minutes would be as effective as expensive high-tech automatic monitoring. In the end, this equipment sale did not come off.
— Introduce a new business model (again, by talking to the mouse) by changing expectations.
As sinister as this may sound, make entry to the trap seem thrilling to the mouse – changing the anticipation or attitude toward what will follow. In a famous scene of Mark Twain’s classic novel Tom Sawyer, Tom succeeds at convincing some friends into painting a fence for him – on the premise that the experience would be really cool – and even to pay Tom for the privilege of performing the drudging task: expectation becomes reality.
Business models include how you define expectations for what the company will deliver and what customers will pay for. Reengineered processes and web-based platforms literally make their customers work for them, offloading a lot of data gathering and routine administrative work to their customers. These include data entry when you buy an airplane ticket, paying for transport logistics, and finding the right contact in the automated customer service system.
— Introduce a new organisational structure that emphasises different priorities.
Organisations are always compromises between different capabilities – such as utilisation (functional structure) versus customer orientation (business line) versus new technologies (projects) – or a combination of multiple considerations in matrix form. No organisational form can support everything, and demands of the market change: some companies centralise certain functions (such as data management) to get more efficiency; others decentralise into regional units to enhance customer care (again, technology may help but is insufficient in itself); while still others create global business lines that ensure the consistency of new offerings. Every change in how the organisation works is an innovation, with its own promises, risks and resistance. There is no “scientifically right” organisational structure – what matters is whether it supports the company in what it seeks to achieve, and that may change and need testing over time.
Small and continuous improvement is also innovation
Another common prejudice is that innovation includes only the big steps, forgetting the powerful contribution of small and continuous improvement – often in unglamorous areas. In a study of manufacturing companies, my colleague Fabian Sting and I showed that well-managed improvement processes can achieve more than 10 per cent productivity improvement per annum, which means halving the unit cost in six or seven years! This is also innovation because it implies fundamental changes to internal work flows, gradually and systematically rather than through a big bang.
Even the impact of big and sexy technology changes is truly unlocked only through continuous change and improvement over time, both for internal processes and interaction with customers. This is a fundamental rule of business innovation which, like the simple mousetrap, has stood the test of time.