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Invention or Innovation?
by Peter Flentov, Joann Michalik and Mike Peters,
Principals, 20/20 Innovation LLC
All new business ventures are based on an idea or concept that the founders believe is innovative - you have to in order to embrace the uncertainty and risk inherent in starting a new business.
The "innovation" might be a new technology that's the basis of a product or service. Alternately, the business concept might involve a new business model or a novel new process. Whatever idea the new business is based on, it's new, it's different and you believe it's innovative.
While typically used interchangeably, there is an important distinction between invention and innovation. An invention is anything that is new and novel. But mere novelty, in and of itself, does not represent an innovation. In order to be innovative, the invention has to meet three criteria:
- It must provide a group of customers with recognized and meaningful value.
- The customers must be willing to pay for the value.
- There must be a significant, sustainable customer demand.
So innovation is defined in terms of value and demand. If there isn't a critical mass of users who are willing to adopt (and pay for) a new invention, then it simply isn't an innovation. Any new business should start with a deep understanding of the market and the value proposition of the new offering. This makes sure that you really answer the question of "what's in it for me" from the customer's perspective. After all, in the end it is the customer who will determine whether your business is successful or not.
As consultants who help companies create new value by working with them to identify and implement growth strategies, we have had the opportunity to review a wide variety of business plans. Over the years we've been struck by the number of plans that don't discuss the value offered to the customer. Nine out of ten business plans don't include any significant discussion about who the customer is and what's in it for them.
Sure, each of the business plans we've reviewed has an overview of the market being targeted, but this discussion typically deals with the structure of the market rather than how the customers function within the market. The plans will describe in detail the size and rate of growth of the market, and the positioning and strength and weaknesses of the current and expected competitors.
These are important considerations when planning your new venture - they tell you whether market fundamentals can support the venture. But they don't give any meaningful insight into whether the business will be successful in this market.
Success depends on the company being able to exploit customer behaviors, needs and wants to deliver outcomes that will be of value to the customer. Ensuring that the concept at the heart of the business plan will be of sufficient value to the target customers requires a deep understanding of the customers' practical, intellectual and emotional needs and wants.
Before you approach investors for funding, make sure your business plan is able to articulate the customer value proposition in detail - and validate that value proposition. It will make your case much more compelling.
20/20 Innovation LLC helps start-up ventures with business plan evaluation, market and user research, and develops go-to-market strategies to identify and exploit growth opportunities. For further information contact Peter Flentov at (617) 763-2020 or at pflentov@2020innovation.com.
