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Management article
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Reference no. SMR47314
Published by: MIT Sloan School of Management
Published in: "MIT Sloan Management Review", 2006
Length: 9 pages

Abstract

Faced with the prospects of slow growth, commoditization and global competition, companies like General Electric Co, Microsoft Corp and Ford Motor Co have now emphasized innovation as critical to their future success. But what exactly is innovation? Although the subject has risen to the top of the Chief Executive Officer agenda, many companies have a mistakenly narrow view of it. They might see innovation as synonymous with new product development or traditional research and development. But such myopia can lead to the systematic erosion of competitive advantage. As a result, companies in a given industry can come to resemble one another over time. In actuality, business innovation is far broader in scope than product or technological innovation. In fact, a company can innovate along any of 12 different dimensions with respect to its: (1) offerings; (2) platform; (3) solutions; (4) customers; (5) customer experience; (6) value capture; (7) processes; (8) organization; (9) supply chain; (10) presence; (11) networking; and (12) brand. Nissan Motor Co, for example, has innovated along the platform dimension, using essentially the same small engine block to power a variety of models, including an upscale midsize sedan, a large sedan, luxury sedans, a minivan and a sports coupe. Enterprise Rent-A-Car has innovated along the customers and presence dimensions, placing car rental locations in the neighborhoods where people live and work rather than at airports. Together the 12 dimensions of innovation can be displayed in a new framework called the ''innovation radar'', which companies can use to manage the increasingly complex business systems through which they add value.

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Abstract

Faced with the prospects of slow growth, commoditization and global competition, companies like General Electric Co, Microsoft Corp and Ford Motor Co have now emphasized innovation as critical to their future success. But what exactly is innovation? Although the subject has risen to the top of the Chief Executive Officer agenda, many companies have a mistakenly narrow view of it. They might see innovation as synonymous with new product development or traditional research and development. But such myopia can lead to the systematic erosion of competitive advantage. As a result, companies in a given industry can come to resemble one another over time. In actuality, business innovation is far broader in scope than product or technological innovation. In fact, a company can innovate along any of 12 different dimensions with respect to its: (1) offerings; (2) platform; (3) solutions; (4) customers; (5) customer experience; (6) value capture; (7) processes; (8) organization; (9) supply chain; (10) presence; (11) networking; and (12) brand. Nissan Motor Co, for example, has innovated along the platform dimension, using essentially the same small engine block to power a variety of models, including an upscale midsize sedan, a large sedan, luxury sedans, a minivan and a sports coupe. Enterprise Rent-A-Car has innovated along the customers and presence dimensions, placing car rental locations in the neighborhoods where people live and work rather than at airports. Together the 12 dimensions of innovation can be displayed in a new framework called the ''innovation radar'', which companies can use to manage the increasingly complex business systems through which they add value.

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