My name is Ray Keefe and I've been developing new products intended to be made in Australia for more than 30 years. I now run Successful Endeavours, a business that designs new electronics based products that are intended to be manufactured in Australia. Innovation has always been a topic of interest for me. So let's dive right in.
Want is innovation?
It comes from nova which means new. There are quite a few definitions around and I personally find most of them not really helpful. The one I use is “a change that is intended to be an improvement". I like this definition because it covers cases where the new idea doesn't work out, and it focuses on why you want to innovate - because you are looking for an improvement of some kind.
The number one area of innovation in the world today is business models, not technology. So this stuff applies to everything.
People are basically creative. So you are already innovating, even if you don't recognise it. And you are also better at it than you realise. In fact, there are ideas you have that are brilliant but never see the light of day because you don't know how to get at them. So let's look at why that is the case.
Most people think innovation happens like this:
Which is quite unhelpful! It makes the process mystical and non-deterministic. To truly improve your ability to innovate, you need a better model than that. So let's look at the two primary types of innovation.
This was popularised after Clayton Christensen wrote “The Innovators Dilemma", which is an excellent book on the topic. If you haven't read it, I recommend it. As an example, he looked at the hard disk industry and why companies that were strongly placed got easily beaten as the technology evolved. When we think of disruptive innovation, we think of game-changing breakthroughs that replace old business models. Current examples are Uber versus traditional taxi services, and Airbnb versus traditional accommodation providers. In each case, the new offering is trying to severely erode the business case for the previous offering.
The graph above shows how the disruption works. The established technology improves over time and can eventually meet even the most demanding applications. The emerging technology is initially inadequate for even the lowest end of the market. But over time it improves and begins to take market share away from the original leader. Over time it becomes capable of completely replacing the old technology for all applications. It disrupts the existing market offerings.
As good as this seems, I see far too much emphasis being placed on this type of innovation. And the start-up culture seems completely focused on it, which is why it has the highest failure rate of any business model so far. Traditional businesses fail at a rate of 50% within two years. Start-ups fail at 98%. While disruptive innovation is important, and do it if you can, keep in mind that there is another and more important type of innovation.
Incremental Innovation is the day-by-day small improvements that transform your position over time. Even if you have managed a disruptive innovation, you still need to be incrementally innovating to keep ahead. Once your disruption becomes obvious, others will go after you. And even if you haven't been seriously disruptive, this gives you an edge over those who aren't continually improving.
A good example is the 1% principle. If you improve by 1% a year, you are going backward because you probably aren't even keeping up with GDP (gross domestic product) in a growing economy. If you improve by 1% a month, then you are at least ahead of the national growth curve and any sensible interest rate you can imagine. But if you improve at 1% a day, then at the end of the year you are 37 times better!
Do the maths. 1.01 ^365 = 37.78. If you have a garden and the weeds are winning, this is why. They increase daily.
Most of us can't sustain that level of incremental improvement, but this is where the sustainable gains come from. So how do we get there?
My next post will look at how our brains work and how understanding that can help us to use our creativity more effectively.
Successful Endeavours specialise in Electronics Design and Embedded Software Development, focusing on products that are intended to be Made In Australia. Ray Keefe has developed market leading electronics products in Australia for more than 30 years.
Successful Endeavours website: https://www.successful.com.au/
Ray Keefe's LinkedIn profile: https://www.linkedin.com/in/raykeefe/