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A leading innovation and marketing blog from Braden Kelley of Business Strategy Innovation

Monday, November 02, 2009

Can Innovation Create Competitive Advantage?

by Jeffrey Phillips

Innovation as Competitive AdvantageOver the last six or seven years, definitely since about 2003 or 2004, there has been an increased focus on innovation in many businesses. I think much of this was driven by several factors, including an increased rate of change in competition, especially the growing capabilities of India and China. I also think that information costs have fallen as the web has become more fully adopted, and consumers are demanding more. Finally, I think the focus on cost-cutting and outsourcing is reaching it's logical conclusion. Most of the things that could be cut, trimmed or outsourced have been. Many businesses in the US are relatively lean, and need to return to growth and differentiation.

All of these factors contribute to the need for innovation. However, there are a lot of trends that suggest innovation is important in the near future as well. The focus on global warming means new technologies are required to reduce emissions. In the US, health care reform will mean new demands on an antiquated health care system. The US Government is straining to provide services that the population expects and demands. The banking sector is ripe for change and disruption. All of these factors suggest a significant amount of change is in store for our government and for major businesses.

None of this is going unnoticed in the hallowed halls of major corporations. Booz and Company has just released its yearly Innovation survey, and more than ever, innovation is moving from an interesting sideshow in most organizations. Now, innovation is being recognized as offering a competitive advantage, perhaps one of the few sustainable advantages, and CEOs and executives are taking note. The survey points out that over 90% of the executives surveyed said innovation was critical to the success of their firms as they prepared for the market and economy to improve. One executive went so far as to say "the recession was a catalyst for increased innovation".

Booz and Company listed three reasons why they felt companies have continued to invest in innovation during the economic downturn:
  1. Innovation is becoming a core component of overall corporate strategy

  2. Recognition that product development cycles are longer than recessionary periods

  3. Many see the recession as an opportunity to build advantages over their

One of the biggest impediments to innovation continues to be the "constraints of the product development lifecycle". The product development life cycle in many industries is simply too long and too cumbersome, and any opportunity to shorten the development life cycle could mean real rewards. Conversely, any slacking off could mean falling behind the competition.

My take: Innovation is gradually moving from an occasionally interesting sideshow that is not focused and not strategic, to becoming a key focus of senior executives as they realize that only innovation can help the firm continually grow and differentiate. Innovation is rapidly becoming a capability or enabler that strengthens and focuses the corporate strategies, and should over time become a key enabler to many corporate goals and strategies. Once more firms create a continuous capability for innovation and modify their cultures to embrace innovation, then we'll see the real transition occur. It is heartening to see that more and more firms are placing more emphasis on innovation at a strategic level.

Jeffrey PhillipsJeffrey Phillips is a senior leader at OVO Innovation. OVO works with large distributed organizations to build innovation teams, processes and capabilities. Jeffrey is the author of "Make us more Innovative", and innovateonpurpose.blogspot.com.

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Blogger Jeffrey Phillips said...

Hi Braden

Strange to comment on my own post but a recent publication by Monitor reinforces the point my post. Monitor has just released a study on open innovation. The conclusion: Open innovation is a source of competitive advantage.

Here's the link to the research.


8:23 AM  
Blogger Braden Kelley said...

Thank you for posting the link to the Monitor paper Jeffrey.

Done well, Open Innovation does provide a brand halo to the Open Innovation leader in an industry and does definitely give them nearly a right of first refusal on the best ideas.

If that doesn't provide an element of competitive advantage...

9:46 AM  
Blogger ANDREA said...

Excellent post, very timely and timeless!

I would like to extend the level of reasoning to smaller enterprises as well as to state that as a rule, it is critical for all entities of both products and services to use innovation to out-compete.

This increases the call for increased sophistication and general business awareness required. Consequently, no longer is it sufficient for leaders to claim that they are too busy leading to strategize.

Where there is known constraints (and most firms have these constraints in this economic space), we must increase the duties to include "to foster and support the evaluation of his/her portfolio, to foster and support the development of new products and services.....".

Of course, this WOULD in fact require true COLLABORATION wouldn't it? True Talent Management is calling us.

This explains my commitment to Appreciative Inquiry as a model to attain excellence (incremental growth and strengthening) and to keep the competition talkin'!

10:59 PM  
Blogger map said...

Oh dear!
how to marry Innovation and Collaboration ti oroduce a "competitive" advantage?

80% of our Top Managers are in their position because of "non-cooperative" achievements.
Now, go out and tell them, that they need to become cooperative to boost innovation and competitive advantage.

Good luck!

3:40 AM  

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