innovation strategy

Innovation: but which way?

The topic of innovation is generating considerable interest and an increasing quantity of communication traffic. So do we need yet more communication on this? Do we need more ideas? Do we need to learn more about managing innovation?

“Oh yes!” is the answer to both questions and, also, those two issues go hand-in-hand.

What is innovation?

Answering this question is important to understanding what we are trying to achieve and can also help us to organise the flow of information.

Businesses are gradually accepting that innovation is manageable. As with “sales” in the 1970s and “quality” in the 1980s, “innovation” is now in transition from an area of activity which was based on natural ability and an element of luck to a process which can be designed, operated, measured and managed.

When many people think about innovation, they think about “ideation” and funnels, they also think about pipelines and about adoption, diffusion and so on … it is a big subject.

Although relatively new to the current perspectives on innovation, I find this all fairly consistent with my experience. In more than 15 years of helping software professionals to make the paradigm shifts required to adopt new software technologies and, before that, in more than 10 years of industrial and academic research and development, I have found that a process involving us in gathering, evaluating, selecting, developing and applying novel approaches is usually taking place in one form or another.

Keep it simple

However, it troubles me slightly that an understanding of more fundamental aspects of innovation might be missing. There are different perspectives of what innovation actually is, so some consolidation of the scope of the discussion is likely to be helpful in this area.

The easiest starting point is to focus on a simple aspect which, hopefully, everyone can agree on: innovation involves something new. We can argue about the differences between ideas, concepts, innovations and so on, and about the importance of generating value, but if something new is not happening, then there is no innovation.

Who is innovating … ?

So the main question that I’d like to address here is: new to whom? The answer can help us to separate our innovative activities into two main categories.

Let’s consider Apple as an example. Most people would agree that Apple is a company which is considered to be highly innovative. But, what does that mean?

When Apple introduced products like the iPod or the iPhone (in each of their variants), we can describe these as innovative products. The main sense in which most people consider them innovative is that they are new to customers. Some of those customers have purchased Apple’s existing products and some are new customers of Apple; these products are new to all of them.

When Apple introduced new versions of its MacBook computers in recent times, we can also describe these as innovative products. Yet there is very little that is new to customers; there are some changes and improvements in the product, but its purpose and use have hardly changed.

So where is the innovation? The answer is that the manufacturing process has changed radically; instead of the body of the computer being assembled from parts, it is machined from a solid block of aluminium. This produces a much more rigid body which is also lighter. The process also involves the recycling of machined material.

Apple is so proud of this that they have shown us videos of milling machines in factories producing MacBook bodies; and well they might, it is a novel process, at least to them and presumably to the computer industry.

… and in which direction?

So from the point of view of an organisation, there are two significantly different kinds of innovation taking place and the difference is in who is experiencing the novelty. From the point view of the organisation, is the novelty experienced by the organisation itself, or by its customers?

The difference can also be characterised by the direction of innovation: they can be referred to is “inbound” and “outbound” innovation.

There is also some coupling between these issues. It is very likely that outbound innovation also involves some inbound innovation; products that are new to your existing customers are also very likely to involve some techniques or processes which are new to you, although this is not necessarily true for new customers. However, it is relatively common for inbound innovation to occur without any outbound innovation; you can introduce new processes which improve the product without requiring customers to experience any significant novelty.


We know that innovation is about novelty, but it is important to be clear about whether we are dealing with inbound or outbound innovation.

This is not least because the dispositions of our organisation and of our customers towards innovation might be very different. But that is a topic for another day!

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