This Master Class was recorded for the ShaperZ Conference May 24-25, as part of the StartMeUpHK Festival, which is an annual initiative by InvestHK.
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Bina: So David, the word innovation is used so much these days all over the place – what is innovation?
David: Thank you Bina. It’s a great question. Innovation is more than:
- Creativity and coming up with new ideas; and
- More than invention or creating new technologies
Innovation is about, as Natalie Turner, who wrote the book “Yes, You Can Innovate”, puts it, “Creating something Valuable out of an idea that is new to you” (and potentially new to the market)
Often it is not about inventing something new, but about combining existing technologies together in new way to create value
An example of this was the introduction of the Iphone, which cobbled together components of current technology, around a software package including iTunes and the App Store, with a phone
There was nothing new in any one part, but the way it was combined together was a uniquely powerful package.
Bina: There are also different types of innovation- can you elaborate for us?
David: When we talk about innovation, most people think of product innovation, such as drones or virtual reality headsets, but there is also:
- Service Innovation: such as telemedicine delivery or mobile payment systems
- Operational or Process Innovation: Such as what Dell did with their online ordering system for computers, and IKEA and their flat pack approach
- Business Model Innovation: such as The Uber and Grab model of mobility, or Freemium sale of software which evolved as a business model back in the 1980’s and is a popular approach now.
- Experience Innovation: Such as the Pet Café’s that are popular in Tokyo
One thing we must always remember when we are innovating is that the value is created by people for people. Regardless of how much automation is involved, people choose to invest in, and purchase, innovative products, services and experiences which make our lives better, easier or more fulfilling. Such innovations are created in organisations comprised of people with a common purpose.
Bina: We often talk about the different layers of the innovation journey for businesses which are broadly from start-up to maturity – can you explain these horizons?
David: To your point Bina, we need to understand that there are really 3 horizons to innovation.
Let’s start with Horizon 1, where Incremental Improvements are made on existing products, services, business models or experiences – Making things faster, stronger, more reliable, or better in some way.
Horizon 1 usually shorter-term, perhaps months
- Requiring minimal resources investment, often with small incremental, planned developments in technology
- With a faster, generally, and often smaller return-on-investment
- This what we often see in mature businesses revamping their products with minimal risk of failure.
- An example of this might be a new gaming software release (maybe version 8.4) with better graphics
Looking a bit further out, Horizon 2 is more Evolutionary, and mid-term, taking perhaps 1-3 years of development to bring it to the marketplace:
- Such innovations often build on existing science and emerging needs, on the cusp of current technology.
- Whilst requiring significant development effort and potential investment risk, Horizon 2 innovations often have the potential for significant revenue and profit in new categories of markets.
- Examples like the Internet of Things or additive manufacturing
Finally we have Horizon 3 – Radical or Revolutionary Innovation
- Examples such as the development of the Hyperloop mode of transport or Biomimicry applications in many fields.
- We often call such innovation disruptive, because they have the potential to displace existing successful businesses
- Horizon 3 Innovation can require a lot of resources and often takes years or even decades to perfect new science or business approaches to make a return on investment.
- Also, whilst the potential revenue on such ventures can be enormous, creating whole new industries, the risks of failure are also often considerable. Without deep pockets, or perhaps government sponsorship, many such developments stall before they can be brought to market.
For SME’s the surest bets are really in Horizon 1 or 2, but if you have a really well researched idea, can manage the risks of failure, and can get long-term backing, Horizon 3 innovations can have a huge pay off
Bina: So let’s summarise some key points here on what innovation is.
David: Innovation is more than just inventing stuff – it is bringing new value to identified markets through new ideas or by combining existing knowledge in new ways.
Innovation is a people-centred process.
And most importantly for any business, being clear on where you focus your innovation efforts, your PURPOSE, is critical.
Bina: Apart from these layers we can help SMEs map out innovation in stages as you have displayed in the chart here – can you take us through the six ‘I’s of Innovation?
David: Absolutely Bina! It helps to see any kind of innovation as a number of stages, with specific mindsets, skills, tools and methods useful at each stage. I will summarise these briefly.
Stages of Innovation
David: To start with, everything begins and ends with your purpose. If you are not clear what you are setting out to achieve, then your journey is bound to be full of setbacks and dead-ends and more likely to end in failure.
Bina: So what you’re saying David, if you are not clear on your purpose, then you shouldn’t start your innovation journey. It’s very important for SME’s to understand this central point.
David: So getting into The Six ‘I’s® of Innovation: Identify Trends and opportunities; Ignite as many ideas as possible; Investigate which of those ideas are the best to move forward with: make clear decisions on where and how to Invest: Implement your Plan, learning and adjusting along the way; and reflect on your learnings to improve your innovation and process
Each of the stages is as important as the other, but the process is not always linear. More often we are iterating back and forward through stages as we progress.
Bina: Now tell us a bit more – give us some examples of the Six ‘I’’s
David: The first stage to address is Identify:–
- This is Blue Sky thinking – Developing your vision of the future!
- Identify the need in society that you are trying to address –who are your likely customers (and how many of them there are) and what are the dilemmas that you are trying help them solve.
- At this stage we are
- creating potential customer personas and getting a sense for how big the possible market may be through market research and other data gathering,
- looking at trends and patterns, and visualising future opportunities to create actionable insights,
- Applying skills in analysis and visioning,
- This is when we get our team excited about new direction and possibilities.
- A mindset of curiosity is how we approach this stage.
- And through this, we validate or revise our innovation purpose
Once we have identified actionable insights from which to develop, the next stage is Ignite:-
- This is often what most people associate with innovation – creating new ideas
- Here we generate as many ideas as we can towards the earlier identified customer dilemmas.
- And apply a mindset of pure creativity, without judgement, using brainstorming and lateral thinking tools.
- Quantity is more important than quality at this point, and with training and practice, the skills of creative thinking can be enhanced
- Once you have your list of ideas, it is useful to categorise them against the Innovation Horizons.
Having generated as many ideas as possible, it is time to sort through them and determine which are the most valuable to carry forward. This is the stage of Investigate.
- Here we apply a critical mindset and cold hard logic to systematically research, test and analyse the list of ideas to decide which ones have the most merit.
- This Investigate stage is extremely important because it often lays the ground work for the next stage.
- At this point it is useful to have a set of criteria against which to score the ideas, such as scale of innovativeness (which horizon), ease of development or implementation, scalability, potential ROI, etc.
- The most useful things to come out of this stage are a small number of validated Value Propositions, together with prototypes or other proofs of concept.
Now that we have a smaller, validated list of potential innovations, it’s time to decide which ones to Invest in and how to make that happen
- This is sometimes called the graveyard of innovation, where great ideas meet the cold hard reality of investment.
- The question here is where and how do we get the money, knowledge and competencies to develop the validated Value Propositions through to market launch.
- Here we must blend sound judgement, with skills of persuasion and influence, and a mindset of courage to invest in the next phases of development towards implementation.
- It is not uncommon to need to go in and out of this, the next and the previous stage iteratively to bring the product or service to market.
- Useful tools at this stage, particularly if you are seeking venture capital or loans, include
- Elevator Pitches
- Pitch Decks
- Business Plans
- Hiring Plans
- Project Management methods
- Something I am sure our SME viewers familiar with, at least in concept.
Once we have ours plans in place and resources secured, it is time to Implement and bring the innovation to market.
- This is the hard work part – like a marathon
- Here we need to build the right team with the right skills to bring the innovation to market with “good enough” quality in the fastest time possible.
- SME’s also might want to consider partnering with others such as technology providers, marketeers, contract manufacturers, etc. to bring knowledge, skills and delivery capability, that they don’t have, rather than investing themselves
- It is also critical to have Agile Development and Project Management capabilities to shepherd the innovation to release
- You must have a mindset of Commitment to overcome the many hurdles that you are likely to face
- The critical point here is get an early release out into the market, learning from feedback to ensure you are on track, before investing in scaling up delivery.
The final stage, after you have gotten the first generation to market is Improve.
- The mindset we need here is “Clever” … clever to rapidly improve on what has been launched.
- The world doesn’t stand still and nor do your competitors. You need to optimise your innovation and scale up delivery.
- On top of iterative improvement to the product, service or customer experience, it is time to review how you did with your innovation journey
- Many businesses, particularly SME’s don’t have the patience to do this, but the pay-off is in learning:
- What can you improve in the process for your next innovation journey?
- Have you met your initial purpose?
- What would you do differently with the future innovation journeys.
Bina: That’s a really useful chart David so please then summarize the innovation journey for us.
David: Start your drive to innovate with a focus on purpose and people – be clear on the dilemma’s you are trying to solve and for whom.
Remember that Innovation is more that Ideation. There are 6 stages to deliver truly valuable Innovation.
And take note of the most useful mindsets and tools to help you navigate successfully over and over.
Bina: What does an SME need to know to be successful in delivering innovation?
David: Any single invention, whilst potentially successful, can be accidental.
To truly create value, innovation must be a targeted, deliberate and continuous process. In fact most of the large companies we admire today, such as Google, Apple and Air BnB began as SME’s with the clear intent to create new value, and to continuously innovate and improve.
Bina: What specific challenges do SME’s face with the innovation journey?
David: We have seen 3 common challenges that SME’s faces with the Innovation Journey:
- The “One-Shot” problem – Having started a business and achieved some good success with a particular set of products, services or business model, they often find themselves struggling to innovate further, perhaps falling behind in the market-place. This is often because they have become narrowly focussed on continuing Implementation and have forgotten the more strategic elements of revisiting their purpose, continuously looking at trends and patterns for new opportunities. The best companies invest resources in continuously innovating for a profitable future.
- Finding and managing resources to operate and grow their business –
- If the challenge is tech resources, how can the business upskill or hire staff with the right capabilities or partner with tech companies to bridge the gap. Conducting a technical and leadership capabilities analysis in the business and creating a plan for closing those gaps is then needed.
- If the challenge is finances, where can the business seek investment capital or development loans. Has the business explored InvestHK or other government sources?
- Have they created and honed a pitch, and begun networking with VC firms, private investors and bankers. Has a business plan been built to support the pitch.
- If the business is struggling to know what to do next, this is where working with Business Coaches and Mentors can make a significant difference to future success. Such mentors can often point ways to free up resources and help find potential partners to get what the business needs to move forward.
- Scaling up to the future – Somewhat related to the first 2 challenges. Often SME’s grow to certain size and struggle to scale up. Such businesses need to seek advice on how to put in place the right structure to transition to the next stage. Investing in the right business coach or mentor at this point can make the difference between stagnating or growing unprofitably and accelerated profitable growth.
Bina: Good point David as InvestHK offers various funding to support SMEs in HK and there are various government incubators as well who can assist in this area. Please do reach out to them at the conference or their booths to learn more.
David: Most importantly business owners must be willing to change and learn new ways of working themselves.
Bina: I couldn’t agree more David- SMEs need to flex in this innovation journey to be successful.
I think that is a good point to wrap up today’s masterclass David- thank you.