Innovation of Business

and the
Business of Innovation™
The Seven Core Principles of Value-Driven Innovation
Paths to Performance Excellence

Innovation is both process and result. More than that, innovation is a mindset… a culture… a way of seeing and doing business. Innovation in itself has little value until customers and other stakeholders are satisfied to the point of being loyal. That is, innovation sets its sights very high, looking beyond satisfaction to durable relationships.

Achieving the high potential of innovation takes both hard work and a clear understanding of its core principles. Two essential axioms set context.

No one ever buys a product. They always buy what they think the product will do for them.1

You know by instinct that this is true, yet in the rush to market, you might forget. No one ever buys a compass. They buy a sense of direction. Not a drill bit, but round holes. Not loudspeakers, but sound. Not mousetraps but fewer mice.

We don’t buy products, we buy the value of products. We buy the sum of benefits that products deliver. The same is true everywhere in business. No one ever invests in a new venture. They invest in returns on investment. Not funding for a project, but potential competitive advantage. Not work done, but progress made.

Value exchanges enable relationships with customers. Product-for-payment enables trust and opportunities, over and over.

We have no inherent value as suppliers of products and services. We are all strategies.

From customer perspectives, we are sources of valuable products, not the value itself. Though they rarely use this language, customers see us as strategies – ways to get desired products. If they can find a distinctly better way (strategy) to meet their needs, they’ll eventually use that alternative.

Only one aspect of business can overcome this “strategy constraint.” Relationships. We can choose to see ourselves as servants that meet customer and stakeholder needs. We can put relationships first, developing precious loyalty that delivers returns far in excess of mere sales. Seven formal principles then guide performance excellence.

Principle of Value
Consciously structure, lead, and manage to consistently increase the win-win value of relationships with customers and other stakeholders.

Our job is never to manage businesses or create products. It is always to develop and sustain durable win-win relationships. Everything else is support. Products for payment define the classic win-win. Salary for performance is another. Investment for profits. Everywhere we look, we see win-win relationships as the core of durable success.

The Principle of Value requires consciously structuring, leading, and managing with a particular focus and intent. The remaining six principles guide implementation of the Principle of Value.

Principle of Focus
Make conscious, informed, proactive choices about who we want to be, where we want to go, how we intend to get there, what we value, and how we intend to behave.

“Who” is about identity. “Where” about goals and objectives. “How” about strategies. Value about value systems. “Behavior” about culture. All are keys to leadership.

To make these decisions, we ask and answer lots of questions. We synthesize answers into powerful, durable, detailed, marketable visions at levels of businesses, business functions, projects, products, services, technologies, and even embryonic ideas. Used well, such visions can drive every aspect of business.

Well done visions include value promises to stakeholders. Building loyalty requires making value promises both audible and visible, then honoring them with performance over time. (That is branding.)

Visioning processes logically precede planning. Formal Pre-Planning™ improves and accelerates planning by making decisions in advance with proven, robust decision processes. Planning then drives performance. The better the vision, the better the plans and performance.

Principal of Strategy
View every action as a strategy to achieve goals, then carefully choose the best strategies.

Businesses of every type and size need strategic direction. Goals are desired long term results that set durable directions. Objectives are desired measurable, achievable, and assignable near term results that may change with each plan period.

Strategies are methods for reaching objectives. Once we see R&D, manufacturing, marketing, etc. as strategies, we realize that choosing strategies structures the business. Choice of marketing strategies then structures the marketing function, and choice of PR strategies structures the media relations function, and so on. We balance choice of strategies against resource limitations, including time, expertise, facilities, funding, and investor support.

Significant objectives require integration of a range of strategies. An Integrated Strategy™ both increases the odds of success and requires more resources. A key step in strategizing is ongoing reality checks to ensure we can actually implement our plans.

Our most important objective is ever increasing loyalty from ever larger numbers of customers and stakeholders. Effective leaders and strategists put those relationships first. They start with goals, then choose strategies carefully. Tacticians may start with actions, spending resources on efforts that don’t help reach goals. Indeed, a tactical approach generally leads to waste, inefficiency, and poor image.

Principle of Need Satisfaction
Conceive, develop, and deliver value to customers better, faster, and more profitably than any competition.

Need drives everything in business. Without need, there is no justification for products, business developing products, companies supporting businesses, or entire industries. With business focus set, need satisfaction turns products and services into sources of durable relationships. Amazing features manufactured with ultimate quality have no value if they meet no needs. Since no one ever buys a product, they never buy features. Features are strategies (or tactics) for delivering greater and preferred value, as perceived by customers. Intangibles such as brands and buzz can increase perceived value.

Need satisfaction defines performance excellence in products. Getting there means knowing customers better than they know themselves. It means being able to conceive of products that customers will want, just as soon as they know such a thing is possible.

Principle of Perception Management
Manage everything done and said to consistently reinforce desired marketplace perceptions.

We can do perfect work in focus and need satisfaction, yet foul it all up with self-centered communications and confusing messages. Remember, job-one is to build durable relationships.

Every communication both conveys information and creates perceptions. Perceptions change with every new interaction. Our audiences (customers, investors, media, analysts, etc.) can’t stop developing opinions, approvals, biases, etc. Self-centered communications focus on us, our business, and our products. Customer-centered communications focus on target audiences and their needs before introducing businesses, products, and features in context of relationships.

Customer loyalty is a relationship built on trust based on consistent performance and congruent agreement between what we say and how we behave. Communication excellence, then, requires proactive choice of desired perceptions so that our words match our actions.

Branding is the core of this process. Indeed, brand equity (our loyal relationships) is the only durable source of corporate wealth. Everything else changes. Only relationships can survive over time.

Principle of Leveraged Strengths
Discover and leverage the full nature and power of every key entity and process in our business.

People, teams, and processes of all sizes, in all functions, are strategies for performance. All can be focused on value, strategy, need satisfaction, and perception management.

Beyond that, we can discover strengths we may not have recognized. A product, for instance, can be completely described by its features, yet customers buy value, not features. We can also describe products in terms of capabilities (what one can do with it), benefits (the value of using it), and intangibles (the reputation and image it carries). Innovation focused only on features will miss ways to deliver value and persuade purchase.

Then there are underlying systems. The most obvious is win-win, product for payment. So long as both sides are satisfied, the system will continue. The business itself is a system that can be diagrammed to explicitly show internal loops for focus, need satisfaction, perception management, and ongoing change. Each of those loops contains elements (processes) that are subsystems. Systems theory is a rich source of tools for leveraging strengths for performance excellence.

Well designed businesses discover and use the full range of potential strengths of its entities and processes, thus enabling powerful advantage.

Principle of Change
The only way to stay in control of our business is to proactively lead into change.

Change accelerates. Indeed, change will never, ever again be as slow as it is today. Concepts of value are changed by all sorts of market forces, not the least of which is new product introduction. (We didn’t know we needed that, but now that it’s here, could we have it in silver… and smaller… and … and …) Change in perceived value forces changes in everything else in business.

Change leadership needs knowledge of customers, business performance, and the impact of market forces. Basic research, market research, design engineering, and knowledge management thus become strategies for leading into change. In turn, all of those contribute to re-visioning of organizations and their multiple levels of strategies.

Leaders hold responsibilities for driving the whole organization to proactively adapt to changing realities. For corporate cultures built around the Seven Principles, adapting to accelerating change is as natural as breathing. Performance Excellence

To summarize, performance excellence is nothing less than consistent increase in the win-win value of relationships with customers and other stakeholders. To achieve performance excellence, we apply seven principles.
Value: Relationships first
Focus: Integrated vision. Leadership
Strategy: Goals-driven operations. Leadership
Need Satisfaction: Value-driven products. Leadership
Perception Management: Audience-centered communications. Leadership, management
Strengths: Powerful people, processes, and systems. Management
Change: Ongoing business evolution. Leadership, management
Value-driven innovation is rare. Few businesses set their sights as high as customer loyalty, yet over time, customer loyalty (brand equity) is our only durable source of wealth. Everything else changes. Products, people, facilities, investors. Only relationships survive change, and only if we pay close attention.

Invest in visions for your business, functions, and products. Ask and answer questions from customer perspectives. Learn to see through customer paradigms. Then put those decisions to work. The time for change is now, and it always will be.

1 Miller, Robert B. and Stephen E. Heiman, Conceptual Selling, Warner Books, 1987



13. It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to management than the creation of a new system. For the initiator has the enmity of all who would profit by the preservation of the old institution and merely lukewarm defenders in those who gain by the new ones. (Nicolo Machiavelli)

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