Initial considerations on how the Innovation Process relates to Customer Value and Organization Structure
The innovation process includes stages as ideation, experimentation, development, and commercialization and the innovation effort could be devoted to any of the following dimension (Tidd, J. and Bessant, J.R., 2020):
- product innovation – changes are brought into what the organization offers,
- process innovation – changes are brought into how things get developed or delivered,
- position innovation – changes the market and context the company wants to occupy as distinctive place, and
- paradigm innovation – changes the underlying framework on where the organization operates and does things.
The innovation process is essentially the creative activity converting an idea into a valuable outcome for the organization’s stakeholders. In this context, putting customer value at the center of the creative activity is essential for customer-centric successful innovation processes.
Customer value proposition can be defined and measured around the following type of values:
- Functional value – solving customer problems and/or making their life better,
- Emotional value – provide a positive feeling to the customer,
- Economic value – support the customer on saving money or time,
- Symbolic value – provides to the customer social status, and
- End value – value is perceived also after consuming the product or service (LSBF, 2023).
Table n.1 included in the Appendix, defines the mapping between innovation dimension and value proposition. For each of this match, the table brings to live the concept by briefly exploring real-life innovation examples.
Intuitively, some of the examples proposed in Table n.1 could have been used in more than one match, demonstrating that innovation could address more than one value proposition at a time.
In addition to customer value proposition another valuable context where valuating innovation process is the structure of the organization/s engaged. Organization structures can affect and being affected by the innovation model and strategy the organization itself pursuits.
In-house R&D capabilities and closed organization archetypes were the prominent organization structure design to drive innovation in the past. Closed systems of innovation becomes unsustainable in scenario where highly competitive markets have been shortening the duration of competitive advantage. A recent report from Accenture highlights how the global disruption – measured by a composite index evaluating aspects as social, geopolitical, climate, consumer and technology – increased by 200% from 2017 to 2022 in comparison to an increase of only 4% from 2011 to 2016 (Accenture 2023). To address this Accelerating trend, enterprise organizations have been exploring and adopting co-innovative models that facilitate and embrace open systems able to create shared value (Lee, S.M. & Olson, D.L. & Trimi, S., 2012). Accenture highlights how a new category of companies is emerging (Accenture names them “Reinventors”). Characterized by aiming deliberate strategy setting new performance frontier, Reinventors have the ambition to continuously innovate their value proposition and the industries in which they operate. Focus on talent strategy and breaking down organizational silos are two of the six imperatives Reinventors obey (Accenture 2023).
When looking at strategic management, organizations adopting Resource Based Value (Barnes D.,2018) tend to increase their innovative and resilient attitude (Hoa Do & Pawan Budhwar & Helen Shipton & Hai-Dang Nguyen & Bach Nguyen, 2022).
Organizations very often face the dilemma wherever betting on exploratory innovation rather than the exploitative one. Some of the organizations engage in innovation ambidexterity aiming to combine both exploratory and exploitative innovation. In this context, organization structure plays a role too, with balancing more centralized innovation effort suited for exploitative innovation and distributed-open effort suited for exploratory innovation. To achieve balanced innovation ambidexterity, organizations evaluate trade-off between incentive synergy and organizational structure (Zhang, Q. and Sun, X. 2023).
Innovation is not affected only by how the distribution of hard factors as finance, assets, capabilities and decision-making power across the organization structure’ entities . Innovation is supported by cultural and emotional attitude of the organization too. The level of engagement of the company workforce, reflected in motivation and recognition of the value people provide, could increase the organization ability to innovate its value proposition (Accept Mission, 2021). Organization structure should facilitate the dynamic distribution of knowledge. Easing the flow of knowledge and collaboration affect positively the innovation performances of project teams and entrepreneurship in general (Gonzalez R.V.D., 2022; Nasution,H.N. & Mavondo,F. & Matanda, M.J. & Ndubisi, N.O., 2010).
Concluding, to embrace innovation at the pace required nowadays, organization structures need to be more open and remove barriers within and outside the organizations itself. Knowledge, talent and technology should dynamically flow across organization’s departments and in the ecosystem where the organization operates and aim to contribute with innovation.
Appendix
| Innovation type | Customer Value Proposition type | Real life example |
| Product innovation | Functional value | As consumer, this is the intersection where most of the innovations are experienced. For example, the instant photography was the product innovation that Polaroid (ACS, 2023) brought to photography as functional value for users to immediately verify the outcome of their creative work. |
| Product innovation | Emotional value | The new Fiat 500, is an example of product innovation and emotional value with the intent to evocate a successful car model of the 1950s (The Guardian, 2013). |
| Product innovation | Economic value | LED technology deployed as energy-efficient lighting to replace incandescent light bulbs, is an example of product innovation concentrated on economic value. With LED consuming a fraction of the energy used with traditional incandescent bulbs and having up to 25 times longer life (Energy Gov, 2023), LED represents tangible economic value for users. |
| Product innovation | Symbolic value | With the increasing attention to environmental (Deloitte, 2021) high brands in the automobile industry have been innovating their offer introducing electrical vehicles models. With Tesla being able to commercialize at scale an innovative product and brand, the company has been able to combine a social status of luxury and eco-friendly cars. |
| Product innovation | End value | Online learning as innovative and more affordable form of education can be considered as a service innovation able to address the need (knowledge) of user also after the learning experience is completed. |
| Process innovation | Functional value | Technology as Optical Character Recognition for example deployed within claims processing for an insurance company, is a case of process innovation focused to deliver functional value (e.g. by simplifying customers data capturing). |
| Process innovation | Emotional value | Considering the business process of project management, the introduction of collaborations tools as for example Zoom, it is a case of process innovation (compared to traditional phone calls) bringing emotional value. Video calls are more engaging than traditional phone call helping people to have a better experience (The Guardian. 2020). |
| Process innovation | Economic value | Robotic Process Automation, a technology that help organizations in automating repeatable administration tasks (TechTarget, 2020) is an example of innovation companies use to reduce administrative operations costs or to relocate their talents in performing more intellectual and creative tasks. |
| Process innovation | Symbolic value | As for example at Coca-Cola, the introduction of re-cycling capabilities in the company’s processes (Coca-Cola, 2023) represents a case of how organizations aim to deliver symbolic value – attention to environmental concerns – within their process innovation. |
| Process innovation | End value | Sharing economy models as the one introduced by Uber or Airbnb could be considered as assets ownership management process innovation. The value of the asset extends after the same has been used for fulfilling the owner needs and wants. The asset is continuing providing value as it is used for renting of new income opportunities. |
| Position innovation | Functional value | Positioning cereals as a valid and healthy nutrition option for dinner instead of [or in addition to] the traditional consumption during breakfast (Kellogg’s, 2022) is an example on how position can be innovated while fulling a functional (health nutrition) value. |
| Position innovation | Emotional value | One example of position innovation that aims to bring emotional value is the branding the Italian restaurant “La mia Mamma” in London (La mia Mamma, 2018) introduced by hiring real housewives working in the restaurant kitchen so to bring the emotional value of authentic homemade Italian food. |
| Position innovation | Economic value | The new models Jaguars has been introduced in the market (Bloomberg, 2015) is an example how the prestigious British brand has been moving downmarket repositioning the company and delivering an economic value of cheaper but still prestigious automobiles. |
| Position innovation | Symbolic value | An example of how position innovation can deliver symbolic value is for example how Shell is rebranding itself as green company bringing renewable electricity to British households (Reuters, 2019). |
| Position innovation | End value | One example of position innovation where companies aim to deliver end value is for example the establishment of alumni groups in LinkedIn. Companies are removing the sense of bitterness when losing talents and by introducing alumni groups keep former employees in their relationship network so continue to provide value as brand awareness and networking. |
| Paradigm innovation | Functional value | The change brought in by the commercialization of internet allowed paradigm innovation where several businesses went online to provide new functional value. As for example to purchase good online introduced (at large scale) by Amazon, create the paradigm of full online businesses and marketplaces. |
| Paradigm innovation | Emotional value | The circular economy paradigm innovation (European Parliament, 2022) is an example where companies engage to delivery emotional value as sustainable and responsible business for their stakeholders. |
| Paradigm innovation | Economic value | Deregulation in the civil aviation industry for example allowed the introduction of low-cost airlines a paradigm innovation that brought economic value (cheaper products) to customers. |
| Paradigm innovation | Symbolic value | Dyson with redefining the home appliance market, introduced a series of products that changed the paradigm of the market. From a commodity hoover mindset – nothing more than a simple tool to keep the house tighten up – to a mindset where the product represents a specific social status of the customer. |
| Paradigm innovation | End value | Grameen Bank with its microfinance model (Grameen Bank, 2023) introduced a new paradigm for loan services supporting poor people to raise their finance security, aims to deliver an enduring, life changing value for customers. |
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