When the customer recognizes the benefit of using your product or service offerings everyone benefits. Organizations who are able to develop and leverage Innovation Competencies DNA are able to adapt to changing customer needs are often more sustainable, efficient, and effective at meeting their mission over extended periods of time. Their customers are also more likely to continue buying the products/services and be satisfied with their relationship with the organization. Their word of mouth praise for the organization produces derivative benefits as well.
A key difference between an agile organization and a laggard is the former is more influential in leading the identification of product/service standards where the latter is more likely to be focusing on retaining their existing customer base. While both approaches can be profitable the organization that is able to take the lead is more likely to be responding to changes in customer needs, preferences, and other feedback mechanisms that help the organization improve existing product/service offerings.
Innovation is a concept that describes the creation of either radical new products/services or the incremental improvement of an existing offering that helps customers realize new value. Although innovation is most often emphasized in the tech industry, popularized with startups and other lucrative entrepreneurial ventures, innovation can also be realized in services as well. Technology is often still emphasized as the ‘platform’ supporting service innovations but this is not always the case. Service innovation is achieved when an existing model (usually defined as the ‘status-quo’ for the market niche) is revised in such a way that radical new values are realized by either (or both) the customer and the organization.
When service organizations use feedback mechanisms to design & iterate upon (or create new) service offerings the standards created become the ideal to which other service providers aspire. The authoring organization becomes a leader in their market with the later benefits that come with this role.
In order to lead in the products or services industry the organization needs to have the competencies and the capacity to leverage these competencies. Without these the innovation is unsustainable, and at worst the innovation will have been developed without a customer base that needed it. These competencies are outlined in more detail in other articles but a few primary competencies are identified below.
The following are borrowed from Drew Boyd & Jacob Goldenberg’s (2011) article the “Innovation Competency Model”:
- Creativity: Ability to think in novel terms and ‘out of the box’
- Enterprising: Ability to execute ideas as well as problem solve along the way to find unique solutions
- Integrating Perspectives: Ability to connect the dots between seemingly unrelated ideas/ models
- Forecasting: Ability to find patterns and trends and show vision for the team
- Managing Change: Ability to use feedback mechanisms and productively respond to change
Many organizations essentially have what can be referred to as a ‘captured market.’ This is because they are the ‘contractor of preference’ in a specific area with few (if any) other options for the customer. This is even more likely the case when the organization is publicly funded and authorization for services is based on referral from the same funding agency (or one of its contractors). Trying to find opportunities, and the incentives, to innovate is more difficult in this environment. This is even more the case when the service is based on a need that is universal and likely to stay in society. In this scenario when the service offering no longer meets the ‘needs’ of the customer they are referred elsewhere, or simply cancel services. This ‘iconic’ service model thus remains largely unchanged over time, with few opportunities or incentives to respond to feedback mechanisms.
In the ‘captured market’ model opportunities to lead are often missed as the status quo is maintained. Instead of seeing opportunities to compete by taking the lead and setting new standards it is not uncommon to instead seek to protect the current market. The outward sharing of expertise, knowledge, and competencies is exchanged for an inward focus. Part of the reason for this is that the service based (and publicly funded) organization is often service at (or exceeding) capacity.
There are scarce resources available (or committed) to leveraging new opportunities. The result is a tendency to react to the environment as issues necessitate modifying existing practices as/after the status quo shifts. Another reason that service organizations serving a ‘captured market’ are slow to innovate is that their public funding model does not support this competency. Existing capacity is thus dedicated to working concerns as outlined in existing funding and service contracts.
Serving a ‘captured market’, as described above, is not necessarily a bad thing. Certain customer ‘needs’ will always exist; at least until there is a cure or the introduction of radically new technologies to change how the need is served. So organizations will continue to be needed (at least for the foreseeable future) to service this customer segment.
But what happens when the environment is providing opportunities to innovate and better serve the ‘captured market’?
A Case Example:
The creation, implementation, and leveraging of innovation competencies would represent a dramatic change in the business model for many of these service sectors. I recently met with a service provider who had been ridiculed in the media for improper judgement and spending. What struck me the most during this conversation was the fact that some members identified in the scandal were promoted to higher levels in the organization, and were actually present at the round-table discussion.
This service provider was also resisting a regional health care strategy developed by one of their primary funders, particularly an area that emphasized regional collaboration, communication, competency development, and benchmark setting. Their responses indicated they wanted to maintain a ‘competitive advantage’ (read – maintain the status quo) by leveraging models and concepts (inherent to their operations) that others had created. Possibly defiant to the end, this organization wants to ‘remain’ the moral authority on services provided to their captured market.
Introducing Innovation Competencies
What if these organizations were operated as innovative and enterprising service providers? Could they do so under their own inertia or would other components in the system need to follow suit?
The creation and implementation of innovation competencies benefits the customer and the organization. This is particularly true for organizations that can provide innovative leadership and through this set the new standards for the captured market. After all, if the organization’s current practices are effectively serving the existing ‘captured market’ needs then opportunities to branch out and focus on collateral need areas will eventually surface (unless the business model includes rotating customers, with time-limited services).
With proper incentives and motivation these organizations could reallocate capacity to the development of innovative competencies, and leveraging opportunities, as they are able to increase efficiency and effectiveness in existing areas. Although this is more difficult than implied, due to the existing funding environment, the opportunities do exist if they are properly valued.
What barriers do you find interfere with organizations building & leveraging innovation competencies? Opportunities?