Innovation Test: Five Questions

The word “innovation” is very much in fashion these days, and every firm wants to describe itself as being innovative, even if they haven’t changed anything substantial in decades.   As such, the claim to be an innovative firm should be viewed with some suspicion because further inquiry often provides little valid evidence to support that claim.  To that end, here are five questions that can be asked to determine the validity of claims to innovation:

What would your customers say is unique about your products?

If a firm is innovative, then it has delivered to the market something that is not a part of the standard offering that can be had from any other firm that provides the same products.   Where a company simply adopts things that are already available in the market, this is not innovation, but imitation.

Pretenders are fond of talking about the products that are under development but have not hit the market to deliver value to the customers – and probably will never make it off the drawing board.   Just as the young dilettante who claims to be an artist has not sold (or even completed) a single painting, such firms enjoy toying with fanciful ideas but haven’t made a serious commitment to becoming what they already claim to be.

A genuine innovator should be able to rattle off a list of unique products or product features that are already available in the market as evidence that the firm is not merely daydreaming about being innovative, but is actually innovating.   And asking the question from the perspective of the customer is significant: insiders consider their ideas to be unique, but customers take a broader perspective and are less supportive of vendors’ delusions.

What new products are you planning to offer next year?

While the previous question sought to discover how a firm has been innovative in the past, this question to consider whether the firm will be innovative in the near future.   If the firm is kicking around wild ideas but those ideas are not going to make it to market in the foreseeable future, it’s not really innovating, merely daydreaming.

Unfortunately, this is a question that pretenders are adept at answering because “the future” is very easy to fake:  they can speak at length about what they are going to do, and there is no way to determine whether they will actually act on these alleged intentions.  But ask them for a date when their new product will hit the shelves, and they will often answer vaguely, if at all.

Even so, it’s a good question to ask because the most basic requirement of innovation is delivering goods to market, and so many of the pretenders have not put serious consideration into the commercial viability of their imaginings.

Where do you get the idea for [that new product]?

Asked as a follow-up to the question about new products, this question seeks the source of innovation and validates that it is actually innovative.   Particularly where the claim of innovation is qualified (“We are the first Fortune 500 company to do this") it is often purloined (they adopted the idea of a smaller firm).

Firms that take their ideas from their competitors are not innovative, but merely imitative: they are simply mimicking the behavior of others, often without understanding its value.   An idea that is “innovative for us” is not really innovative.  Neither are firms whose ideas come from inside, as insiders are generally devoted to the status quo and their ideas are usually for efficiency improvements rahter than innovations.

Truly innovative ideas are the result of researching and observing the customer, who is the ultimate judge of whether a product is commercially viable and as such is the best source for new ideas, or from looking at gaps in the market to determine where there might be a need to do something that isn’t already being done.

In the past five years, what products have you discontinued?

This is a great question to ask because it is often unexpected: those who wish to be innovative are focused on the new ideas and seldom pause to consider that its existing products should be made obsolete by its new product offering.

The pretenders will be caught flat-footed by this question because they have not considered that innovation is a transformative process that not only creates something new but also replaces something old.  There is the possibility that innovation is done to branch out in new directions while maintaining the old like of business, but this is rare and seldom comes to fruition.

A genuine innovator should be able to tell which products were replaced by newer and more innovative ones – though in many cases the previous product is maintained to continue to serve the legacy customers who are change-averse, sales should be dropping and the product should be on its way out, with a sunset on the horizon.

With Whom are You Competing?

Where a product is significantly innovative, if often (though not always) encroaches into other industries and the innovative firm finds its greatest competition is firms that are not considered part of its traditional category.

Where a firm is competing with other firms that are very similar, this means that its products are very similar in the eyes of the market: it is merely a slightly improved substitute for something that already exists, which means that it is not innovative.

A genuine innovator has often crossed the line, as the products that result from an innovative process are significantly differentiated from its competitors that it has broken from the herd.   The innovation offers a different thing, not the same product with superficial differences.

And in the End …

A firm that is truly innovative is branching out in new directions, creating new products that cause them to break away in a different direction from others, that replace their existing product offerings, and offer some genuinely unique value to the market.   Not all firms that innovate cover all these bases, but firms that are not innovative fail to touch on any of them.