January 10, 2011
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In the business world, innovation comes in two flavors: vanilla and revolutionary. Most innovations are plain vanilla, the kind that take a company’s current way of doing business and make it a bit better.
As vice president of FedEx Innovation, Mark Hamm specializes in what he calls “game-changing innovation” -- inventions that defy accepted rules and rebel against restrictions on what’s possible. The trick is to know which flavor is right for your business.
“Every business can be innovative,” says Hamm. “First, you must determine whether you’re trying to gain incremental growth for your business or trying to create a new market with game-changing innovation.”
The right decision, he says, depends on a number of factors, including the company’s current stage in its life cycle.
Small Steps
New and growing businesses are best off pursuing incremental innovations in efficiency and service, says Hamm. Improvements in day-to-day operations help the company establish itself and grow its core business within a region, niche or segment.
Every company can benefit from fresh ideas that target five general areas of innovation:
- Overall business model
- Product or service
- Processes
- Customer experience
- Partnerships
“Everybody in the company has the capacity to come up with ideas in their area,” says Hamm. “Those ideas are valuable and necessary, and keep you competitive.”
Unfortunately, a competitive advantage in any one area can be fleeting.
“Don’t expect a lot from day-to-day innovations, because the value slowly leaks,” says Hamm. “They are easily copied, so incremental improvements don’t distance you from the competition.”
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Giant Leaps
The goal of revolutionary innovation, Hamm says, is to create a long-term competitive advantage. A company that is well-established, in decline or in a highly competitive arena might consider game-changing innovation to expand into a new segment or to reinvigorate the business.
“A game changer is when you can create a whole new market,” Hamm explains. “It’s when you disrupt the status quo with an altogether new and compelling value proposition that customers understand and will pay to receive.”
Hamm’s Innovation team did just that with SenseAware technology, which combines an in-package sensing device with a comprehensive web-based information platform. Multiple sensors record the shipment’s vital signs -- temperature, location, when it is opened, and whether the contents have been exposed to light.
The development of SenseAware illustrates valuable lessons on breakthrough innovation:
- Prepare to invest. A breakthrough capable of grabbing the market’s attention warrants your time and probably requires new technologies, new processes and other value boosters that carry a price tag. To accelerate the creation of new business models and customer experiences, FedEx formed Hamm’s Innovation team and asked the group to bring solutions to the marketplace within three to five years. SenseAware is the team’s first product
- Go cross-functional. To score a major hit, launch a coordinated effort that spans the five areas of innovation. “If you bundle together ideas from multiple areas to offer a new set of capabilities, you have a better chance of coming up with a game changer,” says Hamm. “You also make it difficult to duplicate. That way you can sustain your competitive advantage and get higher returns.”
- Test with customers. “Ask select customers to help complete the vision,” Hamm recommends. Give them a chance to try your big idea and provide feedback. SenseAware was created through intensive research and beta-testing with biotechnology, pharmaceuticals and health care companies. FedEx then made a limited release of the product to 50 U.S. health care and life science companies for tracking delivery of surgery kits, medical equipment and live organs.
No matter what flavor you choose, Hamm says innovation should always be followed by a period of increasing operational excellence. “You can’t afford innovation all the time. You need to get a return on that innovation before you introduce the next great idea.”
Jon Holten is a writer and content consultant based in Bloomington, Minn.
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