It was Peter Drucker who famously said:
“A business only has two functions: marketing and innovation. The rest are just costs”.
And truth be told, since great marketing is simply a form of introducing something new to the market we could probably say that there is only one central function:
Innovation.
That is what your business exists to do. Nothing more.
Now what’s crazy about this is that most businesses don’t innovate at all. They think it’s an “optional extra” rather than their very purpose for being. And that’s why they struggle:
- A business with no innovation is a business with nothing new
- A business with nothing new is a business the same as its competitors
- A business the same as its competitors is a commodity
- A business that’s a commodity will have to cut margins to compete
- A business that cuts margins to compete makes no money
- A business that makes no money fails!
Pretty simple no?
So you’ve gotta innovate. You’ve gotta bring something new to the game, otherwise you’re going to slip down this slope.
Now of course, this is easier said than done. Most businesses don’t innovate because they can’t wrap their head around what an innovation might look like in their industry.
“Sure”, they say, “it’s easy for a tech company to innovate – but we’re not like that! Our industry isn’t innovative!”.
I get why you might think that, because the word innovation is very tech-slanted. But it’s an illusion. The truth is that this sort of “technical product feature” innovation is just one type of innovation; and there are eight others.
Here’s the full list. Check it out, and I’m sure you’ll see that there are many you could try.
(Remember: the purpose of an innovation is not simply to be “new”, but to deliver the unique value your strategy is focused on, so think of all of these in that context)
Type 1: Product features
Unique widgets or functionality to deliver your value.
Example: the removable doors on the Ford Bronco.
Type 2: Means of production
Unique processes in creating your product that deliver your value.
Example: McDonald’s fast-food assembly line.
Type 3: Routes to market and distribution
Unique channels that help you deliver your value.
Example: Red Bull’s extreme sport event creation and partnerships.
Type 4: Service bundling
Unique blends of products and services that generate new value.
Example: Peloton’s combination of exercise classes and hardware.
Type 5: Branding and presentation
Unique visual and communication angles to land your value.
Example: Liquid Death’s heavy metal aesthetic.
Type 6: Customer targeting
Unique choice of target customer who need a particular value offer.
Example: Justin Welsh’s solopreneur segment creation.
Type 7: Customer experience
Unique ways of interacting with customers that deliver new value.
Example: Octopus Energy instantly picking up the phone.
Type 8: Pricing
Unique ways of charging customers gives them new value.
Example: Spotify letting you have music “for free” with ads.
Type 9: Culture
Unique ways to handle your team that helps generate value.
Example: Patagonia’s “surf time” and Google’s “20% time”
