Creating a Culture of Innovation

Q&A with James P. Andrew, who leads The Boston Consulting Group's global innovation practice. Andrew works with leading companies around the world on their innovation strategies and regularly counsels senior executives on issues of innovation culture, performance and leadership.

How do you define innovation? Ask 100 people, you'll get 105 different answers. I define innovation as a process that uses new knowledge to generate payback. Innovation is a process, not an event. And without payback, it's just an invention, just an idea.

Are there different types of innovation? There are three types of innovation. Incremental innovation allows you to maintain your market position. Expansionary innovation involves making a meaningful move in your business or industry by creating a new product or business model that significantly boosts your market share. Breakthrough innovation allows you to enter a new business or market, or to dramatically expand the number of customers that buy your products and services. They're all important and most companies do all three at some point in time.

How do you fit innovation within an existing business strategy, given that innovation is about pursuing something new? The real question is how to use innovation to enhance and improve your business and competitive position. It should not be something that is disconnected from your business strategy.

People often confuse innovation with wild creativity or "big ideas," but context is essential. Because a company's innovation strategy must support its business strategy, the definition of innovation has to be tied to 'What am I trying to do in my business?' The most successful companies anchor innovation in where they want to take their organization, how to create competitive advantage, and how to best serve customers. And the last point is essential because true innovation needs to generate a payback, and someone needs to think it is valuable and be willing to shell out some cold hard cash—or whatever it is may be a great invention but it really is not innovative.


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