Innovation Guide

Do you ever wish you could build something so great that people and the media would get just as excited as they do when Apple launches a new product?
Or, do you ever wish that (because of your innovation), your company would rise in value so fast that the world’s biggest social media network would buy it for $1 billion?

An innovation like that would change your life forever. It’s the dream of every entrepreneur.
While there is no formula for creating revolutionary products, there are some critical elements of innovation that will promote their development.

This simple guide will help.

1. You can plan innovation

You may not be able to plan a specific and predictable sort of innovation…but you can create a culture in which people put a high premium on innovation. That kind of culture starts at the top.

In their early days, Google allowed employees to spend 20 percent of their time on pet projects. That led to some DOA products like Buzz, but it also set the stage for some killer ideas like Gmail.

The founder of GE, Thomas Edison, created an atmosphere that valued innovation by:

  • Encouraging collaboration
  • Encouraging mistakes
  • Demanding one major invention every six months and one small one every ten days

If you think about it, Steve Jobs did the same thing in his company, pushing his people to invent and then innovate products like the iPod, the iPhone and the iPad.

2. You don’t have to spend a lot of money

The beauty of information software is that everything is basically free. In the old days, a company would have needed tens of thousands of dollars just to get the software for their product. Now, with open source movement, cloud storage and a whole range of free sources, expenses are reduced drastically.

The makers of Angry Birds—Rovio—innovated cheaply, which paid off big for them when they went public in 2012, at an estimated worth of $1 billion.

3. You don’t have to listen to the customer

Revolutionary products are created when you break from the past and introduce a whole new way of living and working. However, your customers will not be able to tell you how to do that.

Do you think Drew Houston’s customers would have told him they needed something like Dropbox if he had asked them? What about Kevin Systrom and Mike Krieger—the founders behind Instagram—do you think their potential customers would have given them the specs for their app?

The answer is no.

Ask customers what they want, and they will tell you they want improvements to existing products. They’ll ask for better, faster and cheaper. What they really want is the same old thing—just 10 percent improved.

That’s not innovation. That’s not even a derivative of an old idea.

4. You must work like a slave

True innovation doesn’t exist on a predictable time line. It could happen overnight, or it could happen in ten years. You just never know, and you have to keep on working.

Facebook is an innovator that blew up within a few short years. Apple, on the other hand, took decades to build, finally exploding with the iPod in 2000. Could anyone have predicted these life cycles? No. This is why you should always work like you are in it for the long haul.

Of course, some of us try to short circuit the process by engaging in hackathons. According to Anita Campbell, hackathons are “a slightly different take on Google’s famous ‘20 percent’ culture, where employees are urged to spend 20 percent of their time working on projects that aren’t related to their current duties and may possibly never have real-world applications.”

5. You will have to think ahead to the next innovation

Innovations don’t last. There is always a competitor knocking on your door. Companies that jump out in the lead due to an innovation do not remain in the lead for more than a decade. There are two reasons for this:

  1. Out-of-your control reason – Copycats and minor derivatives will come in and flood the space, which will lead to lower profit margins.
  2. In-your-control reason – Other times, the companies themselves are their own worst enemies. They get so caught up in trying to do what they did to get to first place that they fall behind. Clay Christensen calls this “Innovator’s Dilemma.”

Be careful of innovation that can be copied quickly. Although Foursquare owns the honor of innovating the “badge,” companies are flooding the market with their own brands of the badge. Instead of protecting that innovation, Foursquare would be better off chasing the next innovation.

6. You can create derivatives

You don’t always have to be totally original to create a profitable innovative product. The question-and-answer site Quora is nothing but a glorified forum. And micro-blog platform Twitter is just a new take on blogging. And Google’s PageRank is just a new twist on search.

The innovators behind these products just looked at existing products and said, “How can I make this better?”

Keep in mind, derivatives can be copied endlessly, so they give you a market advantage for only a short period of time. But it can be worthwhile to experiment with your current inventory.

7. You need non-conventional views

Innovations always come from left field. In fact, these innovative products often cause people to scratch their heads.

Think about your first reaction to Twitter: “This is stupid.” Almost everyone said that for the first year or two it was in operation. But millions are using Twitter now.

The same thing with Qoura: Everybody thought it looked like a glorified Yahoo Answers. Yet, unlike Yahoo Answers, the people who were answering the questions were professionals or experts, making their answers qualitatively different from Yahoo Answers.

8. You can employ creative destruction

Don’t be afraid to create competition within your own company. Innovation grows in environments where people are always looking to create the killer product—the one that will put the current in the dustbin. If you don’t do it, someone else will.

For example, Netflix originally sold DVDs via the mail. So you have to wonder why they didn’t call their company Mailflix.

The reason is they realized people would eventually watch movies online. In fact, Netflix was cannibalizing its DVD business by encouraging people to watch movies online so they could cut their costs for sending DVDs through the mail.

How about that for creative destruction?

9. You need king-like confidence

It helps if you are an egomaniac. Why? Because innovators are often ignored, called crazy or flat outfought—both inside and outside their company.

When faced with that kind of opposition, you need to resist the rejection and make tough decisions. Resist being told “no.” Resist doubters. You need to believe in your product when no one else does.

Furthermore, you need to convince everyone—customers, partners and potential investors –that they need your product. That takes a thick skin and an unrelenting persistence.

10. You need to hire smart

You can’t expect a B team to produce top notch innovation. You need an A team for that. That’s why Eric Paley suggests you hire a core team of A players—and then put a bunch of B players around them.

You can give C players the boot.

How would you define A, B and C players? Here’s how:

  • A Player – These are the people who can both read and “write” the book. They are rare, but worth the effort to find. They will deliver innovative ideas. Yet just any “A player” won’t do. You need to look for the ones that have worked for startups before.
  • B Player – These are people who can read the book well. They do their jobs well without much motivation. However, they need a ton of motivation to innovate.
  • C players – These are the people who can’t read or write the book. They are high-maintenance or demand constant handholding. They will slow down innovation.

11. You need the right business model

Last but not least, you need to figure out how you are going to make money. For SaaS companies, monetizing the innovation through subscriptions or licensing is a normal business model.

However, you have to get the price right if you want to create sustainable adoption. Take apps, for example. There is zero revenue inside a free app. You will need a good upgrade model to make your product profitable.

Let’s say you sell the app. Even then, you are making money on only the initial purchase—unless you have an upgrade model inside the app. But price it too high, and adoption of the app will be low.

Of course you could install advertisements. One startup, FreeTheApps, generates around $800,000 in revenue each year by placing ads into their apps.

Which model will work best? Here are three more to think about:

  • Cost-plus pricing – Set the price at what it costs to produce the product—plus any profit you want to make on top of that.
  • Target return pricing – Figure out how much money you have to make in order to recoup all of your expenses. For example, let’s say you dropped $300,000 to build your product, how many products will you have to move at what price point to make that money back in a stated time frame? That number is the cost for the product.
  • Value-based pricing – Base the price on the amount of value it delivers to the customer. For example, imagine your product helps people generate four leads a day. Those leads are worth $5 each to that person. Then you price the product at $20 a day.

An innovation is worthless if you can’t make money with it. This is why getting the business model nailed is critical.


Innovation isn’t an accidental process. It is something you can plan…and in the right culture and with the right people, you could be just six months away from the next great product in the world.

Besides, with the cost of innovation being so low, you really don’t have any excuse for not experimenting and innovating on a constant basis. Who knows? You could be just around the corner from a fantastic innovation.

What other things should companies know about innovation? Please share your ideas in the comment section below!

About the Author: Neil Patel is the VP of Marketing of KISSmetrics and blogs at Quick Sprout.


Autor: Gabriel Catalano - human being | (#IN).perfección®

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