Ten Types of Innovation: The Discipline of Building Breakthroughs

TOP 20 INSIGHTS

1. On average, the world’s most innovative companies use 3.6 different types of innovation in a single new product or service, whereas average innovators only use 1.8 types of innovation altogether. Combining the types makes moves harder to replicate by competitors.
2. Hyatt uses “lab hotels” to find innovative solutions to recurring problems. A select number of its 488 global hotels have between 7 and 9 experiments running at the same time. Successful experiments then get implemented.
3. Chicago restaurant Next makes money on customers’ tabs paid in advance. To reserve a table, customers pay for their entire meal in advance. Next makes interest on those funds and dramatically decreases “no shows.” Pricing also changes based on the time of the reservation rather than the quantity of food eaten, therefore maximizing margins.
4. Natura, a Brazilian cosmetics company, has a modest R&D team but continually launches products on the cutting edge of “skin science” to the tune of $3.4 billion annually. This was done by relying heavily on “open innovation” partners – 25 universities around the world that come up with 50% of Natura’s products.
5. In the 1990s, Dell hand-picked its customers to maximize revenue and profitability. It researched corporate customers to see which had the most predictable purchasing patterns and low service costs, including which were second-time computer buyers and are therefore more likely to have fewer service calls.
6. Gillette completely altered its profit model after customers got hooked on its products. Gillette started with selling cheap blades to train the customer to throw them away instead of sharpening them to reuse. Later on, it switched to a higher margin on the blades.
7. At $147 billion in revenues, growing 5% annually means that General Electric must create a new Fortune 500 company each year. Former CEO Jeff Immelt created the “Imagination Breakthroughs” program to meet this need. Each business unit presents its best new idea every year, and winners get support and funding for their ideas.
8. Henry Ford’s success with the Model T was due to more than just the assembly line innovation. Investing in his employees led to a decrease in turnover costs and an increase in employee satisfaction. Ford paid twice the minimum wage so his workers could afford to buy the cars they were building and reduced the workday from nine to eight hours.
9. Ford also sold modification kits that made the vehicle a multi-use machine. Now known as the product system innovation, owners could use their Model Ts to make cider, pump water, saw wood, or blow snow, among other uses.
10. To sell diapers in China, Procter & Gamble used network and profit model innovations. Chinese parents were not convinced that diapers were healthy for babies, so P&G partnered with Beijing Children’s Hospital to prove they were safe and helped baby sleep longer. P&G also made the diapers at three different price points to increase their affordability.
11. Combine innovation “tactics” to produce innovations that can be replicated across industries. Zipcar and Chegg are both examples of companies that combined metered use and switchboard innovations. Zipcar provides easy-to-use and always available car rental by the hour. Chegg lends textbooks in a similar fashion.
12. By asking potential customers to vote on its website, fashion company Threadless figured out which designs customers would purchase before going through the trouble to produce them. Threadless has hosted over 42,000 designers pitching their designs, with over 80 million people voting for them.
13. Turn a successful innovation into even more money. Equipment manufacturer Caterpillar optimized its own supply chain and proceeded to capitalize on that knowledge and experience by forming CAT Logistics, a successful consultancy that helps others do the same. CAT Logistics garnered a revenue of $3.1 billion in 2010 and was spun into a separate company in 2012.
14. Harley-Davidson innovates in service and support systems, cultivating user communities among minority motorbike groups such as women and Latinos. Harley-Davidson was the top brand for minority riders with over $4.5 billion in sales in 2011.
15. Hyundai radically innovated its service just after the Great Recession. In 2009, customers gravitated towards the brand because of its guarantee that anyone who lost their job within a year of buying or leasing a Hyundai could walk away from the payments and the vehicle.
16. Almost 40% of the companies on 1999’s Fortune 500 list were no longer in existence ten years later. This fact underscores the importance of continuous evolution and innovation.
17. Take company values one step more than needed, like cleaning brand Method. Method steers clear from any ingredient that has the slightest chance to make a cleaning product unsafe.
18. Starbucks may be coming out with a new drink every season, but the average caffeine addict doesn’t realize that Starbucks’s core innovation was providing a “third place between work and home”. By cultivating this sense of space and belonging, they built a regular customer base who connected with the brand and formed a habit.
19. Indian “smart basics” hotel chain Ginger operates with a room to staff ratio of 1 to 0.36, as compared to the industry average of 1:3. They do this through a combination of tactics such as outsourcing tasks such as laundry and food service, promoting a self-service mentality, and eliminating under-appreciated luxuries that caused extra work and expense.
20. The Mayo Clinic achieves medical breakthroughs with a five-phase process that prevents risks in potential investments and innovations. As ideas move through these checkpoints, they are improved and gain access to more funding.