Five Conditions for Innovation

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

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

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

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

Phase-out old products and services. Many organizations lack the capacity to freely remove outdated technology and business models. This requires invested leadership with the ability to meet challenges that arise with change.
It’s not surprising that strong feedback between clients and the organization are needed to motivate investment into and adoption of the most valuable inventions. Explicit feedback is needed for managers to judge when to concentrate on the improvement of services versus the decrease in costs.

Incentives for service or product improvement. Equipped with the knowledge of what customers 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.

Budgets force prioritization. Not only do limits force people to market, they also create incentives to lower costs. For innovation to take hold, leaders must make sure that budget constraints exist in order to motivate the suitable prioritization. In some situations, such as individually distributed services, the constraints should be placed on the customers. In other situations, such as in buying, the constraint should be placed on the person responsible for the acquisition. Regardless of where the constraint falls, it is vital that budget incentives are used to force prioritization.

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


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