Somehow, executives have confused “sexy” solutions with true innovation. Instead of buying blindly into hyped “innovation tools,” executives should ask themselves how a given product or process will help the company grow and improve, ideally without breaking the bank.
What Is Practical Innovation?
Practical innovation means working within the confines of the resources a business already has in order to solve a problem. For too many organizations, the answer is always “I need to buy something,” but often those businesses already have the tools necessary for success.
So how does practical innovation work? There are three tenets:
1. Engineer With the End in Mind
To truly innovate, you must keep the end goal top of mind. My company recently worked with a CEO who had a 6,000-line product plan. To ensure progress, he requested weekly status updates and assembled an executive steering committee. This request had led the company to hire a full-time data analyst who had begun building a proprietary task management system.
But what the CEO needed wasn’t task management software: It was real-time reporting software. We reengineered his product plan and found a $24-per-month software solution that fit the bill. Now, that employee who spent 40 hours per week building a task management dashboard spends about 2 hours per week monitoring the reporting software and verifying inputs. And the CEO, for his part, doesn’t have to wait until Friday for an update; he can get real-time feedback whenever, saving time and money.
It sounds simple, but it bears repeating: If you start out with a road map for where you need to get, then innovation will be easier, more cost-effective, and more likely to succeed.
2. Look for Gaps in Existing Offers
The financial technology industry is a perfect example of practical innovation. Fintech began as a lending solution for small businesses, but the industry has since branched out, with companies offering finance solutions for nearly any need.
Say a customer wants a loan to cover wedding costs, but the bank considers the loan high-risk, making it difficult for the customer to get credit. Because of banks’ hesitancy to issue short-term and high-risk loans, fintech companies such as MyWeddingLoans saw a niche market and pursued it. The wedding loans provider offers up to $35,000 to customers for everything from honeymoon travel to bachelor parties with a simple online application. According to Goldman Sachs, this upstart industry is poised to siphon $4.7 trillion from established financial services companies.
3. Leverage Existing Resources to Add Value
There are always new ways to use existing resources, and the pop-up restaurant trade provides a great example. Despite claims since 2013 that the pop-up restaurant was “over,” the number of options continues to grow. During 2014, EventBrite recorded 82 percent growth in the pop-up dining experience, representing the fastest-growing trend in the industry.
The pop-up restaurant will continue to grow because it allows property owners and chefs to maximize profits with existing resources. The business owner can lease out a property for the weekend, turning a profit on a rented space; the chef already has the ingredients he needs, and he can attract additional customers with the limited-time experience; and the customer receives high-end fare for a discounted price. This pop-up tactic isn’t just for restaurateurs, either. The Boston Red Sox rent out Fenway Park for soccer matches and weddings, while the Bruins book out the team’s practice rink with corporate events. These events provide cash flow to business owners with little to no additional investment, and loyal fans get to enjoy the event of a lifetime.
Practical innovation is the art of thinking critically about how to add value without adding costs. When I work with bankers, I often ask them about profitable compliance. Compliance officers tell me that it isn’t their job to generate profit, and I always respond the same way: “You’re right. It’s your job to identify and add value, and that gives you a seat at the table.” With practical innovation, you can go in with very little investment and come out with a ton of new value.