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INNOVATE

How to Build an Extraordinarily Innovative Organization

Don't just innovate. If you want to be extraordinary, create a culture of continuous, disruptive innovation. Here's how you'll know when you've succeeded.

I've written a bit recently about how David almost always beats Goliath. That's true in business as well--provided that you understand the story correctly as a lesson about using innovative strategy to overcome a seemingly superior adversary.

The problem is that though it's possible to build a new venture around an amazing innovation, it's going to be a flash in the pan in you don't accomplish an even more difficult feat: building a culture of continual innovation within an organization.

Author and entrepreneur Steve Blank tackled this question recently in an address to the graduates of ESADE Business School in Barcelona. In his speech, he broke down four types of innovation. He thinks that two of them are the hallmarks of good companies, a third is the hallmark of a great company, and then there's a final, ultimate culture of innovation that only the most extraordinary companies have the confidence and passion to embrace.

Whether you're an innovator on the outside trying to bring a new idea to market, or working within an organization trying to encourage more innovation so that you'll keep moving toward the top, here's how Blank says you'll know the difference.

1. Individual innovation

The first kind of innovative culture is one built around the continual innovation of its individual stakeholders. This is perhaps what you or I think of when we envision dreaming up a new invention or process that will turn an industry on its ear and make us a billion dollars. It's also the easiest type of innovation culture to build in a larger organization.

"It's exactly as it sounds--you build a corporate culture where anyone can suggest an idea and start a project," Blank said. "Some companies use a suggestion box. Others like Google give employees 20 percent of their time to work on their own projects."

It's a good environment for innovation, Blank said, but not a great one.

2. Process improvement

This kind of innovative culture feels a little more corporate, and a little more familiar. Companies introduce new versions of products and services, tweaking each time to make them better or more lucrative.

"Car companies introduce new models each year, running shoes grow ever lighter and more flexible, Coca-Cola offers a new version of Coke. Smart companies are always looking to make their current products better--and there are many ways to do this," Blank said. "These innovations do not require change in a company's existing business model. This is what companies typically do to secure and defend their core business."

Like individual innovation, however, this is what good companies do--not great ones.

3. Continuous innovation

Now we're getting to the harder cultures to create. A culture of continuous innovation requires a company to create new elements in its business model.

"For example, Coke added snack foods, which could be distributed through its existing distribution channels," Blank suggested, and, "The Amazon Kindle played on Amazon's strengths as a distributor of content but required developing expertise in electronics and manufacturing."

If you can build a culture of continuous innovation, Blank suggested, you've reached the ranks of the great companies. But there's one level higher.

4. Disruptive innovation

Disruptive innovation is the hardest kind of culture to build within an organization, precisely because disruptive innovation can upset the organization's advantages. That's why it's usually the purview of startups, who have nothing to lose as a result of progress, and everything to gain.

"It's the automobile in the 1910s, radio in the 1920s, television in the 1950s, the integrated circuit in the 1960s, the fax machine in the 1970s, personal computers in the 1980s, the Internet in the 1990s, and the Smartphone, human genome sequencing, and even fracking in this decade," according to Blank.

The most extraordinarily innovative organizations, according to Blank, are those that shepherd disruptive innovations, and do it over and over and over again.

"Apple with the iPod, iPhone and iPad; Amazon with Amazon Web Services and Kindle; Toyota with the Prius," he said, "These companies are extraordinary because, like startups, they create entirely new products and services."

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Last updated: May 7, 2014

BILL MURPHY JR. | Columnist

Bill Murphy Jr. is a journalist, ghostwriter, and entrepreneur. He is the author of Breakthrough Entrepreneurship (with Jon Burgstone) and is a former reporter for The Washington Post.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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