Wednesday, March 11, 2009

Innovation, invention and entrepreneurs

When out working with our clients, we are constantly asked to define the differences between innovation, invention and entrepreneurs. I'll give you the answer we've developed over time, and I hope you'll respond with your own in the comments.

Innovation, to our way of thinking, is about creating ideas and putting them into valuable action. Innovation isn't just creating new ideas. It is also about commercializing those ideas in a way that generates new products or services or business models that others find valuable. In this definition then, invention is a subset of innovation. Inventors create something new, and sometimes find ways to commercialize their inventions, which then makes them innovators as well.

Entrepreneurs are innovators, usually identifying an opportunity and developing a new product or service to bring to market to fill a gap they've identified or to meet an unrecognized need. The difference between entrepreneurs and innovators in larger organizations is that entrepreneurs have one big idea, and they put their entire investment behind that one idea. There are no other options, and failure means shutting down the business.

For innovators in larger organizations, innovation is eventually about making the best choices, given a range of ideas and investment opportunities. Even in very large organizations, there is little stomach for new ideas and risk, and often a wide range of ideas for new products and services. Innovators in larger organizations need to be able to select the ideas that have the greatest promise and commercialize those ideas, so the innovation process within larger organizations relies as much on a strong vetting and evaluation process as anything else. Innovation in many larger firms is a resource allocation issue - which ideas to fund, while in very small firms innovation is a "bet the ranch" issue - all eggs in that basket.

What's interesting to me, and will need to be the subject of another post, is the fact that within larger firms we have a "portfolio" of products and services - new products, old products, products for this niche or that niche. We understand product roadmaps and the tradeoffs necessary when developing new products. However, we rarely if ever understand our portfolio or pipeline of ideas and how they would "map" to a portfolio, even though as we've noted previously innovation is primarily a selection issue. But we'll leave a portfolio discussion for another post.

If innovation is primarily a resource allocation and selection process in a larger firm, then what's your evaluation and selection process? Does one exist, or do you still use the "squeaky wheel" approach? The absence of a defined selection and allocation process speaks volumes as well, does it not?
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posted by Jeffrey Phillips at 5:28 AM

13 Comments:

Anonymous Steve Todd said...

Jeffrey,
I work for a highly innovative hi-tech company (EMC, 35,000+ employees). Customers look to EMC to store and protect ever-growing amounts of information.
Our selection process always boils down to customer need, and lately our criteria has revolved around innovations that make it "easier" for customers to manage huge amounts of information storage equipment. These types of inventions usually get top funding.
Steve

8:22 AM  
Anonymous Jacob McNulty said...

I like the distinctions you make - well done. What especially resonates is your closing paragraph about the pipeline - I think it's developing efficient throughput for innovation that's really going to give organizations their next big edge.

7:56 AM  
Anonymous Drew Boyd said...

Jeff, thanks for the insights. My belief is that innovation selection should use the same basic structure and approach used for other decisions. Imagine hiring a new person. What approach do you use? We start with a job criteria, we interview candidates and rate them against those criteria, and we select the best candidate for the job based on those criteria.

The better question is not how do you select ideas, but rather how do you determine your criteria.

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