Anyone who keeps up with current events knows the world faces an almost limitless list of challenges. Challenges are a part of life which no individual, organization, business, or government can avoid. Psychologist Nikki Martinez (@DrNikkiMartinez) notes, “While some people struggle to overcome challenges, others seem to meet them with confidence. Facing challenges head-on can bring a sense of satisfaction and can be very fulfilling.”[1] She quotes the late American essayist Ralph Waldo Emerson who wrote, “Bad times have a scientific value. These are occasions a good learner would not miss.” That sentiment aligns with the old adage, “Necessity is the mother of invention.” The point is, challenges must be met and overcome if individuals, businesses, governments, and humanity are to survive and thrive. The Reverend Martin Luther King Jr. may have said it best, “Our very survival depends on our ability to stay awake, to adjust to new ideas, to remain vigilant and to face the challenge of change.” Challenges, old and new, are often overcome through innovative thinking and action.

Ten types of innovation

For an idea to be called an innovation, it must be actualized. My preferred definition of innovation is contained in the innovation formula, which is: innovation = new x valuable x realized. If any of those variables is zero, there is no innovation. Opportunities to innovate are everywhere. When you face a challenge, you face an opportunity to innovate. As a businessman, my focus naturally falls on business challenges and business innovations. Jeff Desjardins (@jeff_desjardins), Founder and editor of Visual Capitalist, asserts, “Innovation drives business forward, but it is often misunderstood.”[2] Nevertheless, he writes, “Companies must strive to build an economic moat that gives them a sustainable competitive advantage over time.” That’s a much tougher goal to achieve than it sounds. To do that, he insists, companies need to innovate. To help companies focus their innovative efforts, Desjardins points to results from research conducted by analysts from Doblin, an innovation-focused firm now owned by Deloitte. He notes the results are a “culmination of years of in-depth research. … After examining over 2,000 business innovations throughout history, Doblin uncovered that most breakthroughs don’t necessarily stem from engineering inventions or rare discoveries. Instead, they observed that innovations can be categorized within a range of 10 distinct dimensions — and anyone can use the resulting strategic framework to analyze the competition, to stress test for product weaknesses, or to find new opportunities for their products.”

According to Doblin researchers, innovations can be categorized under three broad categories (configuration, offering, and experience), each of which has types of innovation sub-categories under it. Under the configuration category, Doblin researchers place following types of innovation:

• Profit Model: How you make money.
• Network: Connections with others to create value.
• Structure: Alignment of your talent and assets.
• Process: Signature of superior methods for doing your work.

Doblin researchers place the following types of innovation under the offering category:

• Product Performance: Distinguishing features and functionality.
• Product System: Complementary products and services.

Under the experience category, they place four additional types of innovation:

• Service: Support and enhancements that surround your offerings.
• Channel: How your offerings are delivered to customers and users.
• Brand: Representation of your offerings and business.
• Customer Engagement: Distinctive interactions you foster

The thing I like most about the Doblin innovation taxonomy is that it can help companies focus on “what if” questions in specific areas.

The power of “what if” exercises

Many analysts insist innovation is essential for corporate survival. Some other analysts agree innovation is essential; however, they believe it is insufficient to guarantee survival. What is missing in many cases, they suggest, is what Peter Schwartz (@peterschwartz2) calls The Art of the Long View and others simply refer to as “what if” thinking or scenario analysis. Count me among those who believe that if corporate innovation processes don’t include “what if” exercises they could find themselves left in history’s dustbin. Alan Gershenhorn (@AlanGershenhorn), Chief Commercial Officer at UPS, notes, “Competition is coming from all corners of the globe — and it’s not just traditional competitors who want to sneak up on you and eat your lunch. The next major threat to your business might not even exist yet.”[3] No one is exactly sure what the “new normal” will look like following the pandemic. An uncertain future makes this the perfect time to do some “what if” thinking.

Boston Consulting Group (BCG) analysts Luc de Brabandere and Alan Iny assert that the benefits of scenario analysis (i.e., “what if” exercises) include “enhanced strategic creativity, greater preparedness, and superior risk awareness.”[4] Analysts from River Logic agree that scenario planning is a powerful tool that needs to be used more. “In order to keep their company ahead of the competition and weather any economic storms,” they write, “executives must constantly ask themselves hypothetical questions. They might ask, ‘What should we do if the price of energy begins to skyrocket?’; ‘What should we do if legislation decides to pass a regulation that will make production more difficult?’; or ‘What if we run a promotional program?’”[5] “What if” exercises don’t need to be solely the realm of creative thinkers.

River Logic analysts note, “For the first time in history, prescribing the best paths forward based on data-backed analytics — what we call prescriptive analytics — is within reach. A process known as scenario analysis allows organizations to determine outcomes from various inputs. For example, an organization can consider a range of economic, geopolitical, and technological issues, and create plans on how they might evolve into the future.” In fact, companies are learning that cognitive technologies can be useful in any number of ways as they make critical corporate decisions. The most critical decisions are the ones aimed at keeping a business from going belly up.

McKinsey & Company analysts Marc de Jong and Menno van Dijk observe, “Let’s face it: business models are less durable than they used to be. The basic rules of the game for creating and capturing economic value were once fixed in place for years, even decades, as companies tried to execute the same business models better than their competitors did. But now, business models are subject to rapid displacement, disruption, and, in extreme cases, outright destruction.”[6] Gershenhorn warns that company executives who focus on the “here and now” rather than the “now and later” are the ones most likely to put their company’s future in jeopardy. He adds, “To foster innovation, you need a laser focus on what could be. You can never be satisfied with the status quo. You always look for a new way to do something — better yet, find something that’s never been done before.”

Concluding thoughts

Cognitive computing systems are ideal platforms for conducting all types of analysis. Cognitive computing systems can handle myriad variables, discover new relationships, and provide actionable insights that can aid in decision-making. De Brabandere and Iny conclude, “The increase in uncertainty and the accelerating clock-speed of many markets, rather than rendering scenarios impractical, is perhaps the strongest argument for embracing them. This new approach to scenarios is not about precision but is instead about expanding the perception of the possible — and breaking an executive team out of a tunneled managerial perspective and into a creative, entrepreneurial, and strategic one. With turbulence on the rise, the value of low-cost ways to envision and seize emerging opportunities while planning for potential threats has never been higher. What a difference a day makes.”

Footnotes
[1] Nikki Martinez, “80 Inspiring Challenge Quotes About Life and Tough Times,” Everyday Power, 18 May 2020.
[2] Jeff Desjardins, “10 types of Innovation: The art of discovering a breakthrough product,” World Economic Forum, 8 July 2020.
[3] Alan Gershenhorn, “When the Next Threat to Your Business Might Not Exist Yet,” Longitudes, 22 May 2016.
[4] Luc de Brabandere and Alan Iny, “Rethinking Scenarios,” bcg.perspectives, 12 October 2010.
[5] Staff, “Scenario Analysis: A Powerful Analytics Force,” River Logic, 8 April 2016 (out of print).
[6] Marc de Jong and Menno van Dijk, “Disrupting beliefs: A new approach to business-model innovation,” McKinsey Quarterly, July 2015.