How Innovation Really Works (and 10 ways to recognize an innovative enterprise)

Think for a minute of the following: the jet plane, the television, the Internet, and the cell phone. What do each of these have in common?

Now, think about this.  The jet plane effectively shrunk the world, making travel between Singapore and New York only 22 hours. The Internet allows a passenger wishing to travel between Singapore and New York to book his ticket from the comfort of his home. The cell phone allows him to check-in for his flight while driving to the airport, or to simply use his cell phone to access the airline-generated bar code that acts as a boarding pass. And the television (or an adapted version of it) entertains him while he travels the 16,000 km to his destination.

In short, each of these are or have been path-breaking. They, among countless other technology, have changed the course of the everyday life in several ways. Would we consider them innovative? Almost certainly so, I would think.

The term ‘innovation’ however is often used loosely. Often, it refers to simply anything new. The Monitor Group in India recently released a study it jointly conducted with leading business publication, Business Today titled, “How Innovation Really Works.” The report takes on the notion of innovation as simply “launching new products.” Through examples based on an Indian context, the report frames innovation against a proprietary framework — the Montior Group’s Ten Types of Innovation.

The frameworks defines (business) innovation as being “path-breaking, disruptive, and sustainable.” It divides the ten types of innovation into four broad categories: Finance, Process, Offering and Delivery.

Further, it lists out particular types of innovation under each of the category. Let’s take a look at what these types of innovation are, and the enterprises used to illustrate them.

Finance innovation involves Re-inventing Business Models and Creating Extended Networks. An example of the former can be found in Gyan Shala, a no-frills schooling project in Gujarat and Bihar. An example of the later can be found in FabIndia, which created an extended network of 17 community-owned companies that supply its products.

Process innovation involves two kinds of innovation — an Enabling Process and Core Process. An enabling process is one which supports an enterprise’s primary work, while a core process are capabilities that others can’t duplicate. An example of an enabling process is the Gujarati newspaper Dainik Bhaskar, which uses an external network to get news input through potential consumers. Thus indirectly building its own subscriber base. Core processing innovation can be seen in the working of Moser Baer, a CD/DVD manufacturing firm which diversified its operationg to the home-movie market.

Offering innovation can be found in three ways — Product Performance, Product System and Service. The report refers to TCS’s software product BaNCS as an example of a product performance innovation. Recognizing the benefits of using technology to make banking services more accessible to rural markets, TCS developed the “cloud computing” based software to provide branchless banking services to the State Bank of India. A product system innovation creates ways in which individual products can connect with each other to create a larger system. Case in point, ITC’s e-choupal. The system developed by ITC enables farmers to connect via village kiosks, creating a agri-commodity procurement platform. And lastly, a product service innovation is where companies create value in engaging with the customer once the core product has been purchased. An example of product service innovation mentioned in the report is TCS.

The last category of innovation accroding to the framework is Delivery Innovation. Delivery innovation can be in three ways — through an innovative channel, a distinct brand, and creating value through a unique customer experience. Moser Baer rapidly expanded through the Indian market by creating a distribution channel that banked on widespread, targeted outreach. Being able to release a home movie within a window period of 10 days to six months created a unique customer experience, which has contributed significantly to its growth. ITC’s e-choupal, beyond creating an innovative system has also been able to innovate further via leveraging the e-choupal brand to build its network.

The examples used in the study are not necessarily a reflection of the kinds of companies that might fit the bill. However breakthrough innovation almost always include multiple types of innovation, atleast 3-4 of the 10 within the Monitor Framework (the study selected eight organizations that fulfilled this criteria).

Clearly the framework might not lend itself to all models that exist. Still it is a useful way to recognize where greatest value lies, and to help build a business with lasting impact. Investors, incubators and other enablers interested in creating lasting social value too can use this framework as guideline towards assessing which enterprises to back.

Read more about the BT-Monitor study here, and tell us what you think about it. Also, have you come across a social enterprise that fits into this framework?