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Kathy Burger
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Authors of "Breaking Away: How Great Leaders Create Innovation That Drives Sustainable Growth -- And Why Others Fail" Seek to Demystify Innovation

With so much emphasis on efficient operations, bank CIOs can lose sight of the importance of fostering innovation. A new book aims to give companies the tools they need to create an innovative culture.

Innovation is misunderstood, and pursuing it often results in costly disappointment. But it doesn't have to be that way, argue the authors of "Breaking Away: How Great Leaders Create Innovation That Drives Sustainable Growth -- And Why Others Fail" (McGraw-Hill), a new book that identifies the factors that lead to the creation of successful innovations. The authors -- Jane Edison Stevenson, vice chairman of board and CEO services for Korn/Ferry International, and Bilal Kaafarani, who has served as a global innovation executive at consumer products companies including P&G, Kraft and Coca-Cola -- draw from their experiences in the corporate world to create what they call an innovation framework, principles that can be applied to any organization regardless of industry.

"I see corporate America being driven more and more by fear … and defining success as not making a mistake, as opposed to moving forward and taking the risk that's essential to unleash people's capabilities," says Stevenson. By understanding what innovation is and isn't, and by understanding different kinds of innovation, she explains, businesses and their leaders can reduce the risks of innovation.

"[People] use the word 'innovation' a lot but really don't have any idea what [they're] talking about," she adds. "A lot of times people use the word innovation to mean 'something different,' but just because it's different doesn't mean it's innovation."

4 Types of Innovation

Rather, Stevenson says, "We define innovation as something that's unique, of value and worthy of exchange." To help firms achieve that ideal, she and Kaafarani have defined four types of innovation, identifying risk, profile, impact and upside within each. The first category is Transformational Innovation -- the big innovations "that change your life and impact society," the authors say. But transformational innovation can take years to achieve and also is the most risky "because you don't know what it is," says Kaafarani. "You can't define the business case."

It also is the foundation of the second type of innovation: Category Innovation, which builds on transformational innovation by identifying new markets to serve or new applications of the transformational innovation. It is half as risky as transformational innovation, says Kaafarani, but it still has plenty of uncertainty. "You're making a bet on a consumer proposition within a developing category to make money," he explains. For example, if the Internet is a transformational innovation, services such as eBay and Google would be the category transformations, Kaafarani adds.

Marketplace Innovation is the third form. It takes a category innovation and adds "a feature or benefit that makes it unique again," creating "incremental growth opportunities," Stevenson says. Apps would be the marketplace innovation for the category innovation of the iPhone and iPad.

The last category is Operational Innovation, which is internally focused. "This impacts the supply chain, financial algorithms, the cheaper-faster-better quotient inside the business," Stevenson says. It doesn't create external change, but rather "how things are done," she adds. "It's low risk, you know what the upside is likely to be, and you can define and measure it."

Understanding these distinctions helps a company's management figure out "what's realistic in terms of risk and time, and the leadership characteristics and cultural environment that are essential to driving each," Stevenson notes. "You're not setting yourself up to have expectations that aren't realistic." The CEO, adds Kaafarani, can assess what kind of innovation is really needed "and put the right resources against it."

It's not just about matching the type of innovation to the corporate culture, however -- different executives are best suited to lead particular types of innovation, the authors emphasize. There's no right or wrong approach, they say, and ideally a company will have executives typifying all four types of innovation.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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