Innovation is one of those business buzzwords you now hear almost every day. But, what is it exactly, and how can you deliver it within your organization?
The Merriam-Webster dictionary defines innovation as:
1) the introduction of something new;
2) a new idea, method, or device
There are two types of innovation: breakthrough and incremental. Yet, incremental isn’t what most companies are pushing for. Organizations are spending a significant amount of money setting up innovation labs and incubators to drive innovation. Others are asking employees to think outside the box and funding ‘the next best idea’, which may or may not ever see the light of day.
Innovation isn’t a one-time idea, product, service or fundamental process change. Innovation is all about truly understanding your industry, your competitors and most importantly, that value you are bringing to the entire system. It is about instilling an entrepreneurial mindset in your employees. For employees like myself who works in a large organization, you may have hear it called an intrapreneurial mindset. Regardless of what it is coined, it is about looking for ways to do things differently.
This week, I took some time to reflect on what innovation really means and looked to Netflix as my example.
While Netflix originally entered the market in 1998 with an innovative concept, which was to have a mail-in/out DVD rental business, it success lies in its ability to adapt to an ever-changing industry and evolving customer needs. Just eight years into business, Netflix had an opportunity to transform again by revising its business model to leverage the power of the internet. In 2006, it expanded its offering to include streaming video, eventually phasing out its DVD rental service.
Since 2006, Netflix hasn’t made any breakthrough changes, yet it is still an industry leader and continues to grow. Why? By simply adjusting its business model to continually deliver on its value proposition.
Take a moment and try to imagine what Netflix’ Business Model Canvas initially included in 1998. If you are unfamiliar with the Business Model Canvas tool, click here for a blank sample. Do the same exercise, pretending it is now 2006. Do it one last time as if it were 2014. And, if you were to look at it again today, mid-2018, how has it evolved? What key changes has it made in the last 3 or so years?
As I did this exercise, I realized that since 2006, there is nothing revolutionary about what they are doing. Yet, they are still considered to be highly innovative. That is because they don’t stand still. They continually make adjustments to their business model. Using the Business Model Canvas as my baseline, here are the areas I believe they have focused the most on improving:
- Netflix focused on growing its international market. As a result, revenues from those markets grew from ~1/3 of total revenues to ~1/2 of total revenues since 2014 (Dunn, 2017)
There are two areas that have significantly changed since 2014:
- Content partners have grown year over year and include the many of the top producers in the world, such as Paramount Pictures, Warner Bros, DreamWorks, etc.
- Device partners include virtually all device types available, from mobile phones, HDTV, set-top boxes, etc.
- Netflix has put an increased focus on developing its own ‘Netflix Original’ content, which has seen tremendous success.
Innovation isn’t always about coming up with the next big transformational idea. It can also include new ways of doing the business you are already in. And, that takes us right back to Merriam-Webster’s definition of innovation.
Dunn, J. (2017, January 19). Here’s how huge Netflix has gotten in the past decade. Retrieved May 25, 2018, from http://www.businessinsider.com/netflix-subscribers-chart-2017-1