Signals, Not Predictions, About Innovation in 2019

I recently wrote an article about innovation during 2018, and in it I made some disparaging remarks about Apple, which may or may not have caused it to lose a tremendous amount of market capitalization. Or perhaps the stock was overvalued, and Apple has become more interested in margin than in innovation. I’ll let you, gentle reader, be the judge.

What I want to do here is to speculate on the coming year. What do we know about the state of innovation? What do we think will happen in 2019? What innovation methods or approaches will gain ground? Which activities or approaches will lose steam? Will innovation finally cross the chasm, leave the hype cycle “trough of disillusionment” to take its rightful place in the “slope of enlightenment?” We’ll explore.

Looking ahead in 2019

As with any evolving or unfolding management philosophy, there are factors that can accelerate innovation or change it dramatically this year, and factors that will rise to create barriers to innovation. More important, though, I think we’ll see a reframing and repurposing of innovation, as many corporations decide they can’t do innovation effectively enough internally and become distracted by digital transformation.

Old avatars lose their luster

We’ve referred to Apple as an example of innovativeness for a while, but that adulation and praise may be increasingly undeserved. Apple did some amazing things with the iPod, iTunes, and the rest of the i series, but lately it has rested on its laurels. Other innovators have also fallen on difficult times. Facebook is increasingly exposed as a data supermarket and illustrates another challenge for innovation in 2019: worries from consumers about who, exactly, is benefiting from innovation. We need some new avatars, and we need the old avatars to return to their previous luster.

Mastering the basics

It’s really time for some of the larger firms that have been experimenting with innovation to decide to simply master the basics. Innovation doesn’t need to be an unplanned, ad hoc experiment with few tools or milestones. Large corporations have made significant commitments to efficiency, quality, Six Sigma, and other goals. Is it too much to expect at least some equivalent level of investment and proficiency with innovation? If not, then why bother?

What is innovation, and who is it for?

Many corporations, especially those managing or collecting data or acting as a platform, are using innovation to enrich themselves rather than their customers. There will be a backlash to all of this unannounced or under-publicized data harvesting. Customers want companies to innovate, but they expect to benefit from the innovation, rather than be taken advantage of.

Can big business really innovate?

Many larger corporations are asking themselves this question and increasingly arriving at a bifurcated strategy for innovation. They will do more incremental innovation internally and will trust that entrepreneurs or third parties will do the horizon two (nurture emerging business) and horizon three (create genuinely new business) work for them. In this regard we see evidence of this shift in the increase in accelerators and corporate venture capabilities of larger corporations, who are finding it difficult to do interesting and disruptive innovation internally. An entire market opportunity will arise to conduct interesting horizon two and three innovation for, or as a proxy to, large corporations, which can then be acquired by the large corporations once the innovation are proven in the marketplace.

Product is passé

Product innovation is so yesterday. Product innovation is relatively easy to do, and relatively easy to copy, so companies are realizing that product innovation is the entry point in the game, and the real stakes are increasingly around business models, channels, experiences, and services. Yet many companies don’t have experience or capabilities to constantly rework their channels and business models. Something will have to give. Many winners will follow the Uber and Airbnb model—changing business models, services, and experiences using models that rely on physical assets as little as possible.

The risk in platforms

A few years ago, every company wanted to create a platform. Platform innovation is still a hot topic but as industry executives watch Facebook and Apple testify on Capitol Hill, there is a growing awareness of the platform as a double-edged sword. If consumers feel threatened or get angry about the use of their data or the access to the platform, Congress may step in and do something that these innovators don’t want—regulate. Unless, of course, the regulation codifies their lead. Congress could play an interesting role in innovation during the next year or two, trying to “protect” consumers but having the opposite effect—locking in larger firms that have abused privacy rights and forestalling new innovators.

Ecosystem

It used to be we’d delineate “closed” and “open” innovation activities. Increasingly, we just talk about innovation, recognizing that it involves other parties. Because it involves other parties, we begin to recognize that all innovation happens in the context of an ecosystem. Understanding your ecosystem and how to work within it to maximize innovation effectiveness will become a key differentiator. You simply will not do everything by yourself, and there are plenty of good partners in your ecosystem if you will allow yourself to work with the ecosystem. The best innovators in the near future will 1) understand the players in their ecosystem and their value propositions; 2) have existing relationships with those players; and 3) understand how and when to leverage those relationships to drive the most value.

Digital transformation

Innovation has been on the periphery of management thinking for a while. Some companies have been successful; some have not. Some have fully deployed innovation tools and methods; some have not. However, a new management imperative is emerging, and it remains to be seen if the new imperative—digital transformation—plays nicely with innovation, works in parallel, or works in opposition. All three could unfold.

My sense is that most executives will want to focus on digital transformation. It seems obvious and natural and builds on existing products and platforms. However, executive time is constrained, and time for digital transformation may mean less time, budget, and attention for innovation. On the other hand, a digitally transformed business should be able to conduct innovation much more effectively. Digital transformation will either be a significant enabler or increase barriers to innovation.

Signals, not predictions

I’ve learned over time that making predictions about innovation, especially corporate innovation, is a fool’s game. However, I think some of the items I’ve included here are either already underway (e.g., shifting risk to third parties with accelerators or corporate venture) or are obvious concerns (what does digital transformation mean to corporate innovation?).

Although platforms and ecosystems have been discussed for years, I think innovators who understand the space are recognizing the value of a platform but also some of the risks involved, and how difficult it is to build a truly viable platform. Others are really only beginning to understand the value of the ecosystem that they live in.

Without a doubt we can say that digital transformation will have an impact on innovation; we just don’t yet know what that impact will be. We can also see that platforms and ecosystems, while both valuable, carry different risks. Increasingly, a platform may be viewed as something to regulate, like a utility, while tight ecosystem connections may offer more value.

Innovation needs aren’t getting any less strategic for large corporations, and the demand from consumers is getting more intense. What companies need is a specific, defined, communicated, and implemented innovation strategy that helps clarify expectations, roles, and goals. Without that strategy and good communication, many organizations will continue to struggle to do innovation well, even 20 years into the innovation epoch.

First published Jan. 7, 2019, on the Innovate on Purpose blog.

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