There are two basic types of businesses, traditional and venture businesses. Traditional business competes in a known market with known products, while venture businesses create new markets with new products. Both, traditional and venture businesses can innovate.
Innovation has two basic approaches, product focused or customer focused. Innovation happens in three areas, the profit levers, the strategy, and the business model. However, true innovation is careful not to get drawn into the good idea drain.
A product focused approach to innovation is the more traditional approach where experts and/or researchers develop a final product based on their experience and/or research, then start selling it and adjust it in the future, based on customer feedback. An example where this is often used is the medical industry. Apple also seems to do a good job with this approach, since they set a high value on quality, simplicity, and privacy. Sometimes the customer doesn't know what they want until you show it to them (Steve Jobs).
A customer focused approach to innovation is a more recent approach that became what is known as the lean startup model. This began, in my humble opinion, by Steve Blank, author of The Startup Manual. This approach develops a minimum viable product to test assumptions with potential customers in order to further develop the product later, after you have discovered and validated real customers. There are no facts inside your building, so get out and talk with customers (Steve Blank).
I first mentioned profit levers in my book Opportunity Truth, and have gone on to refine the idea. The following are ways a business can increase their profits.
Industry structure can be shaped, and creative thinking can be systematically unlocked and developed (W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy).
There are many books written by experts about what strategy is, the following is my thought on strategy.
The most important for of discipline for sustained results is a fanatical adherence to the strategic concept of what you are deeply passionate about, what drives your economic engine, and what you can be the best at (Jim Collins, Good to Great).
The business model is how a business makes money, and is explained in detail in the book Business Model Generation. The business model can be recorded and developed with a Business Model Canvas that can be thought of as a one-page initial plan with nine parts. The Business Model Canvas can be found at https://www.strategyzer.com.
A business model describes how an organization creates, delivers, and captures value... The four external forces of a business model include industry forces, market forces, macro-economic forces, and key trends (Alexander Osterwalder and Yves Pigneur, Business Model Generation).
The Startup Owner's Manual by Steve Blank and Bob Dorf
Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne
Driving Eureka by Doug Hall
Business Model Generation by Alexander Osterwalder and Yves Pigneur
Testing Business Ideas by David Bland and Alex Osterwalder
Disciplined Entrepreneurship by Bill Aulet
Zero to One by Peter Thiel with Blake Masters
The Lean Startup by Eric Ries
The Innovator's Dilemma by Clayton M. Christensen
The Innovator's Mindset by George Couros
The Disruptive Voice
Innovation and Leadership
The Innovation Engine Podcast
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