Three external forces that drive innovation
The first force driving innovation is intensifying competition.
An advantages position in the market inevitably attracts new entrance to the market, which overtime find
myriad of ways in which they can imitate the market leader and erode its market's leadership.
The second force is the changing customer needs and wants.
As the population ages, their needs change and the products and services will have to adapt to that. Who's
going to read social media feeds on a smartphone screen with such small phones? Who is quick to even hear
the phone ringing? Over time, we have become more sensitive to our environmental impact, and rightly so,
scientists have been doing their best to warn us about climate change and pollution. Such big trends like
aging population and environmental sensitivity change customer needs and force companies to adapt and
innovate. Car companies, for instance, now find it very hard to sell their polluting diesel cars and are rushing
to meet the demand for electric cars.
Technological advances is the third force driving innovation. Today, industries are being disrupted by
machine learning, artificial intelligence, virtual reality, 5D telecommunication, and blockchain technologies,
just to name a few. Their emergence creates a completely new sphere of possibilities, which could not have
been imagined before. Every new technology reshuffles the cards.
Innovation is essential for economic growth as well. While innovation can destroy existing businesses and
sometimes eliminate jobs in short term, its positive effects in creating new businesses have long-term
positive effects on economic growth. Value added products and services are the backbones of economies,
and therefore, boosting innovation is an important part of public policy. Countries compete for
innovativeness by offering subsidies for research and development and tax benefits for attracting global
talent. Ever wonder which countries are a hotbed for innovation?
Paradoxes of innovation
The first paradox relates with uncertainty.
Any innovation project is essentially an attempt to disturb the status score. The very act of creating ideas is
the deviation from the usual and a journey to uncharted territories. In these uncharted territories, it's often
uncertain whether the company will be able to create a new product, it's uncertain whether there will be a
market for it, it's uncertain whether suppliers will be able to deliver, and it's uncertain whether the
competition will be ahead or not. Yet with innovation, companies venture into these uncertain conditions.
On the other hand, uncertainty means risk and potential losses. Innovation failures can be catastrophic for
firms and society.
This is the core paradox of innovation. Innovators have to embrace uncertainty while also doing their best to
reduce it over idea generation, selection, and implementation processes of innovation.
This paradox requires different ways of working and different skills than in any other business activities.
How so? To manage such uncertainty, various tools help entrepreneurs and business developers to chart the
right course in these uncertain territories. These tools range from technical tests, market tests, feasibility
assessments, and standard setting activities. These tools help entrepreneurs and business developers manage
uncertainty as they decide which resources to commit and how much.
Beware that the primary target is not to eliminate all uncertainty par se but to manage the innovation risks in
the most rewarding but the least damaging way possible.
The second paradox is the paradox of developing seemingly incompatible capabilities within the
organization, we call this the capability paradox.
Among the innovation activities, one can distinguish between the creation stage of innovation where the
new business concept is created and the implementation stage of innovation in which the concept is
brought to the market.
The two phases require very different activities and capabilities.
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