The Discipline Of Innovation

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The Discipline Of Innovation

• Peter Drucker
• Best of HBR 1985
• Reprinted August 2002

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BUSINESS INNOVATION

• Innovation
• Inspiration or hard work
• Role of management differs depending on which one
  it is
• Entrepreneurship systematic practice of
  innovation in existing business, public service
  or new venture

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SOURCES OF INNOVATION

• Company or industry
• Unexpected occurrences
• Incongruities
• Process needs
• Changes in industry and market

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SOURCES OF INNOVATION

• Social and intellectual environment
• Demographic changes
• Changes in perception
• New knowledge

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1 UNEXPECTED OCCURRENCES

• IBM accounting machines designed for banks. In
  1933, banks did not buy.
• Sold it to libraries
• IBM also used computers for business and not only
  scientific work.
• Ford
• Ford Edsel is biggest loser in automotive
  history Ford realized that segmentation now was
  based on lifestyle and not income groups like
  before
• Mustang winner establishing Ford as an industry
  leader
• Novocaine non-addictive anesthetic for surgical
  use but better use found for dentists

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2 - INCONGRUITIES

• Alcon laboratories
• cataract surgery is 3rd most common surgery
• Innovation in surgery so that only old-fashioned
  part was cutting the ligament.
• Cutting was so different from other procedures in
  surgery that it was incongruous
• An enzyme that can dissolve the ligament without
  cutting.
• Additional innovation Conner (Alcons
  co-founder) added a preservative to give the
  enzyme longer shelf-life

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2 - INCONGRUITIES

• Incongruity between more demand for steel but
  falling profit margins
• Solution mini-mills
• Shipbuilders making faster ships with less fuel
  consumption but still the economics (cost was
  skyrocketing for shipping) did not work until
  they used containers less time for ships in
  ports

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3 PROCESS NEEDS

• Media innovations
• Linotype by Ottmar Mergenthaler to produce
  newspapers quickly and in large volumes
• Modern advertising made news almost free
• New York Times and New York World
• Reduction of accidents in Japanese roads by using
  reflectors

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4 INDUSTRY AND MARKET CHANGES

• Changes in industry creates innovation
  opportunities
• American health care industry
• Telecommunications
• Brokerages
• New opportunities rarely fit the way the industry
  has always approached the market, defined it, or
  organized it.

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5 DEMOGRAPHIC CHANGES

• Most reliable (of the outside sources)
• Japanese example
• Robotics used to substitute for labor when people
  stay longer in school affecting number of workers
• Club Meds success in travel and resort business
  as young adults with money increased

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6 CHANGES IN PERCEPTION

• Americans health improvements yet we are worried
  more (glass half full vs glass half empty)
• Following innovations
• Magazines
• Health foods
• Etc.
• Changes in mood are concrete

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7 NEW KNOWLEDGE

• Knowledge-based innovations differ from all
  others
• Gap between the emergence of innovation and its
  appearance in the marketplace
• Need of interaction with other knowledge
• innovation requires knowledge, ingenuity, and
  above all else, focus

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PRINCIPLES OF INNOVATION

• Analysis of the sources of new opportunities
• Context makes certain sources more or less
  important
• Innovation is work more than genius, it requires
  knowledge.
• Successful innovators work in one area
  specialize
• Systematic innovation look for opportunities
  when the sources of innovation are at play