Five Conditions for Innovation

Incremental Innovations occur everywhere, but revolutionary innovations-the type that leverage new technologies and business models to drive down costs, increase accessibility, and improve services-are not typical. I believe that the main reason for this is an improper understanding of the conditions which foster both motivation and ability for innovation. These five conditions include:

Phase-out old products and services
Feedback loops
Incentives for merchandise or service development
Budget constraints

To illustrate how these conditions influence the innovation process, let’s examine each one.

Experimentation. Any organization that wants to adapt to a changing environment demands a mechanism for experimentation with new technologies and delivery units. Without the ability to develop an experimental infrastructure, fundamentally new and different approaches rarely emerge.

Phase-out old products and services. When an experiment is successful, a new challenge arises. Many organizations lack the ability to freely remove obsolete technology and business models. This requires invested leadership with the capacity to meet challenges that arise with change.

It’s no surprise that strong feedback between customers and the organization are needed to inspire investment in to and adoption of the most valuable innovations. Explicit feedback is needed for managers to judge when to focus on the improvement of services versus the reduction of costs.

Incentives for product or service improvement. Equipped with the knowledge of what clients want, suppliers can improve their offerings if sufficiently motivated with access to greater earnings and/or reduced costs. The key to incentives is to appropriately aligned them with the goals of the organization.

Budget constraints. Not only do limits force individuals to market, they also create incentives to cut costs. For innovation to take hold, leaders must ensure that budget constraints exist so as to motivate the suitable prioritization. In some situations, like individually distributed services, the limitations should be placed on the consumers. In other situations, such as in buying, the constraint should be placed on the person responsible for the acquisition. Irrespective of where the restriction falls, it is vital that budget incentives are utilized to force prioritization.

These five Conditions for innovation make constant change potential, and also the difference between success and failure is the ability to make or preserve most if not all of these five states.


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