Product line extensions, geographical      expansion and new technologies and      adjacencies aren't enough.      Performance shortfalls create a "results      gap." But limitations of growth are caused      by organizational and process gaps.      Building the team and its methods.      The characteristics and processes of an      "Entrepreneur in Residence."      Going beyond the creative into a      practical and executable model for      sustained growth.      Oyster-centric definitions of terms used      on this site.      Back to Books & Articles. The leadership issue is how to survey the ecosystem in an unbiased way to select domain not product opportunities. Transformational Innovation An Oyster International Perspective - March 16, 2006 Companies need a framework for thinking about different types of innovation. Process innovation leads to efficiency - for example, reduce the number of process creating efficiency and improving leverage Product innovation leads to market expansion - for example, customers would like a CD player that will tolerate movement for use on a treadmill leading to the creation of buffered memory CD players Transformational innovation leads to new growth platforms - for example, redefining the the toothbrush business as oral care leading not only to electric toothbrushes, but to a thorough reexamination of the oral care ecosystem. As a consequence, the platform logic applied to oral care results in an entirely new family of products ranging from tooth whitening comparable to professional services, to low cost disposable electric toothbrushes High performing companies are successful with process and product innovation all of the time. A subset of high performance companies, those which are true innovators, practice transformational innovation leading to new growth platforms. Oyster's focus is on the work of leadership, best practices and new learning required to deliver transformational innovation. The idea of an innovation culture implies that "innovation" is homogenous. It is not. Process and product innovation are simpler and can be accomplished by a straight line of thinking - experience and best practice is plentiful. In new growth platform development, the "nature of thinking" is different - it is not a straight line. The questions are different - not better, faster, or smaller but survey the eco-system for knowledge and insight. Identify all participants, all the products, all the services, all the technologies, distribution systems, etc., and apply your "platform logic" to determine how to leverage your core capabilities. Define the domain and new growth platform opportunity where your capabilities could be applied. There is a need to think in terms of new usage and business models that are neither visible or in existence today. Business Units are constrained by pressure to grow earnings faster than revenue, not- invented-here and a product mentality. Product managers want to respond to customer needs and improve the quality of their offering incrementally. This is why companies like Sony, Intel and others had access to all the component parts to develop an iPod but never did. They didn't have the "thinking logic" or insight to conceptualize the platform opportunity. Companies that are product development driven rarely do. Except for the idea, the "transformational thinking" and the design, Apple didn't do much. The idea started as a music downloading peripheral for the Max. Then came the idea - "let's do it like a USB", and, two years later, came a music platform in sleek case connected to Bose speakers. The disc drive came from Toshiba, music downloading thanks to the compression and decompression technology of Real Networks, content from Time Warner, distribution via HP and Starbucks and so forth. To achieve this, the eco system needs to go on a journey together. They needed to learn as they went and discover the platform development process. The economic system of a multi partner, transformational innovation requires careful development: Revenue: What is the market size? What is the customer willing to pay? Value creation: Assess the value - what is the contribution of the various players? Value capture: Who will capture the value created? What is the value capture logic? Does it create incentives for future collaboration? The leadership issue is how to survey the ecosystem in an unbiased way to select domain not product opportunities. There is a set of interdependent principles we have observed being applied in companies successful at transformational innovation: The CEO is responsible for transformational innovation and will need insightful, experienced and dedicated "thinking partners" and independent execution capability Your core capabilities and platform logic set the boundaries for new domains and NGPs - they require stretch and are reachable. You need to ask "where are we not going that our platform logic could take us?" You find latent demand through exploration and "learn as you go" with the eco system partners (e.g. let's migrate into word processors rather than smaller calculators) Creating or inventing new business models requires disciplined and systematic processes without being too programmatic. Don't be encumbered by intimacy with your existing business or your product development thought process (Sony's market enabled the iPod but they didn't have the insight to invent it) Define the management and key influence network that will carry the message, role model the behavior and play their part in innovation activities. Draw a network map and determine who needs to learn what and how to deliver this work. The power of leadership is to Leverage their external network Think in terms of platforms not products An engaged (vs presiding) leader who understands the hard thinking, work and brings experience, insight and the skill in framing and reframing insightful and curious questions that progress the work Chief Executives use transformational innovation to close the enterprise growth gap. They need platform opportunities that are material to the corporation and scalable to warrant their spending significant time and energy on this activity. 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