The Best Books on Innovation Strategy

Innovation – so important, and so often neglected. Innovation is a crucial component for driving business growth, but it always requires time and resource. It therefore needs to be properly thought-out – planned, resourced and tracked. You need an Innovation Strategy with a defined process and clear goals.

With that in mind, we’ve pulled together our ultimate list of the top books on Innovation Strategy, with a quick overview of each. These are some of our favourites, from seminal works you’ll likely have heard of, to interesting reads you may not have. But all offer key insights and approaches to Innovation. Take a look and find your favourite.

Our top 8 books on innovation strategy are:

• Exploring Innovation by David Smith
• The Lean Startup by Eric Ries
• The Innovator’s Dilemma by Clayton Christensen
• Ten Types of Innovation by Larry Keeley
• Business Model Generation by Osterwalder and Pigneur
• Open Innovation by Henry Chesbrough
• Reverse Innovation by Govindarajan and Trimble
• Jugaad Innovation by Radjou, Prabhu and Ahuja

Let us tell you a bit about each one…

Exploring Innovation by David Smith

This book, aimed at university business students, makes the list because it provides a wide introduction to the nature of innovation and how it can be managed. Readers will be shown innovation as a continuous, on-going process. Exploring Innovation is nicely readable and illustrated by more than 70 engaging case studies which bring their lessons to life.

The Lean Startup by Eric Ries

Entrepreneur Eric Ries makes the point that the raison d’etre of a startup is to produce a product or service and an accompanying business model which ensure the product or service can be commercialised, delight customers and generate good profits for the startup. The grim reality is that most startups fail. To address this problem, Eric Ries and his mentor, Steve Blank, learned lessons from Lean Manufacturing movement. Eric captured the method and lessons in his book, The Lean Startup.

The core of the Lean Startup’s method is the Build-Measure-Learn feedback loop – building what is known as a Minimum Viable Product (MVP) that can be put together quickly; showing the MVP to potential customers and measuring their honest feedback on the product’s viability and features.

Based on learning from the customer feedback, you either further refine the product or decide that you’re heading in the wrong direction and pivot to a new approach or new idea. This allows you to get quick feedback as to whether or not you are on the right track and avoids waste of time and money.

If The Lean Startup sounds appealing, you could start by reading Steve Blanks’ article in The Harvard Business Review all about this approach.

A complementary book, also well worth a read, is The Startup Owner’s Manual by Steve Blank and Bob Dorf.

The Innovator’s Dilemma by Clayton Christensen

This is the book, subtitled “When New Technologies Cause Great Firms to Fail”, that introduced the world to the concept of disruptive innovation. In his research, the late Harvard Professor Clayton Christensen found that market leading companies were being undermined by newcomers with initially inferior products who took advantage of advances in technology to eat into, and hence disrupt, the market share of the market leaders. These incomers aimed their products at low end or under-served niches in the market that the leaders weren’t really interested in. The market leaders didn’t see the incomers as a threat and didn’t act to counter this emerging competition.

However, advances in the newer technologies used by the incomers enabled them to improve their products at a greater rate than the incumbents were improving theirs. The result was that the “disruptive” products, with a lower cost base and price, soon became attractive to high end customers, at which time they abandoned their previous suppliers for the disruptors.

The Innovator’s Dilemma uses examples from the computer disk drive industry where there was a rapid improvement in the technology of disk drives, and the example of the earth excavating (mechanical shovel) market, where J C Bamford was developing hydraulic technology to power small shovels attached to tractors. In each case, startups such as Seagate and JCB found low-end market niches with customers eager for their products. Over time, these companies and their products improved and conquered the mainstream.

Ten Types of Innovation by Keeley, Pikell, Quinn, Walters

Subtitled “The discipline of building breakthroughs”, this book is the distillation of research which analysed 2000 best innovations. The authors discovered that all great innovations, throughout history, consist of some combination of ten basic types, which they organise into three categories – Configuration, Offering and Experience. Each innovation type is illustrated with five examples of leading-edge innovation from across the world.

The book goes on to show how combining more than one type produces more sophisticated and compelling results. It uses further real-life examples to show how to use the Ten Types to create building blocks for innovation. Most importantly, it shows how to build an innovation capability that delivers results, bringing your innovation capability to market on time and on budget.

Business Model Generation by Osterwalder and Pigneur

This is a book that has had a major influence on entrepreneurship over the past decade. It is centred round the Business Model Canvas, which is a tool for describing, analysing and designing business models. The authors state that the book was co-created by 470 practitioners from 45 countries.

The Business Model Canvas consists of nine building blocks with which to describe and analyse a business model. The book describes five business model patterns built on important concepts in business literature. These patterns are Unbundling Business Models, The Long Tail, Multi-Sided Platforms, FREE as a Business Model and Open Business Models.

Each pattern is illustrated by analysis of the business model canvases of companies which exemplify those patterns. The book goes on to discuss techniques to help you design business models and how to re-interpret strategy through the business model approach. The final section of the book describes a generic process to help you design innovative business models.

A complementary book from the same authors is Value Proposition Design. This helps readers to create and improve value propositions, key business model building blocks, that are at the heart of business models.

Open Innovation by Henry Chesbrough

Open Innovation is an approach to innovation that has come into its own in the 21st century. It arises when companies use external resources, as well as the companies’ own resources, to develop innovative new products.

Professor Chesbrough observed two models of innovation at play, which he called Closed Innovation and Open Innovation. Closed Innovation is where companies rely solely on the resources within their organisations to carry out research and development. Open Innovation is when companies add external resources to complement their own.

External resources are used in one of two ways

1. Taking internally generated ideas/discoveries to market through a third party organisation, which develops the ideas/discoveries into marketable products/services which it then sells
2. Sourcing ideas/discoveries from external organisations and developing them using the firm’s own resources/facilities

Closed Innovation was the model used by the early industrial research-based American companies, such as DuPont, Merck, IBM, GE and AT&T, who did most of the research in their respective industries, within their own organisations. In contrast, newer companies, such as Intel, Microsoft, Oracle, Cisco, Genentech and Genzyme grew while doing little or no basic research. They realised that they didn’t need to hire the brightest and best researchers to be successful; instead they relied on external resources, either through taking in others research or partnering with other companies.

In other cases, companies, especially Xerox’s Palo Alto Research Centre (PARC), used external companies to commercialise their research. Companies that grew out of PARC included 3Com, Adobe, Synoptics, Documentum and twenty others. Arguably Xerox were too generous in allowing ideas and employees to leave to create new ventures.

Reverse Innovation by Govindarajan and Trimble

The traditional practice of innovation was that innovations were created in developed nations and flowed, in one direction, to developing ones. That is no longer the case. Reverse Innovation shows how to make innovations happen in emerging markets and how those innovations can travel in reverse from developing to developed countries.

Reverse Innovation refers broadly to the process whereby goods developed as inexpensive models to meet the needs of developing nations, such as battery-operated medical instruments in countries with limited infrastructure, are then repackaged as low-cost innovative goods for Western buyers.

The key point is that innovation in emerging markets (i.e. developing countries) is different. Emerging markets are on a different growth path to that pursued years ago by developed countries. Furthermore, developing countries have different cultures, languages and governments which lead to different mindsets and opportunities around innovation.

But the most important difference is that emerging markets can tackle opportunities with the latest technologies – they don’t have to go through the same technology evolution as developed markets did. For example, much of Africa has gone straight to mobile phones, leapfrogging fixed line communication. This led to the innovative M-PESA application from Safaricom, enabling payments and money transfers by phone.

The developing world’s inhabitants cannot afford to pay for top performance; at the same time, they want quality goods and services. This means that western firms cannot just export cut down versions of rich-world products and services. Emerging markets need an entirely different price-performance curve. Nokia recognized this in India and achieved 60% market share by re-imagining the mobile phone, cutting costs by having only a few basic models, using software to add Hindi text messaging and adding valued functionalities.

Reverse Innovation describes many compelling case studies and gives examples of where these have moved from low-cost innovations in emerging markets into compelling mainstream products in developed countries.

Examples include Grameen Bank’s microfinance from Bangladesh, which has been replicated in over a hundred countries, GE Healthcare’s battery powered ultrasound scanner, originally developed in China, Embraer’s regional jets from Brazil, Mahindra and Mahindra’s small red tractors from India gaining substantial market share in the US through product and process innovation.

Jugaad Innovation by Radjou, Prabhu and Ahuja

Jugaad Innovation is related to the subject of the previous book. Jugaad is a Hindi word meaning an innovative fix; an improvised solution born from ingenuity and cleverness; resourceful. It is often called Frugal Innovation, as the guiding principles involve frugality and improvisation.

Jugaad has six guiding principles –

• Seek opportunity in adversity
• Do more with less
• Think and act flexibly
• Keep it simple
• Include people at the margin – the underserved
• Follow your heart.

Jugaad Innovation gives examples of the application of each of these principles. An unexpected example of the first is Salesforce.com; the founder’s vision was to make CRM available to smaller companies by selling CRM as a service over the Internet. When the dot.com bubble burst and he faced tough markets, he promoted the concept of software as a service with its model of lower cost, greater flexibility in dark economic times.

Another example is the French company Danone, which empowered employees at every level to think and act like jugaad innovators. Another example is that in the late 1990s the CEO of Renault went to Russia and found that low-cost Lada cars were outselling Renaults. He challenged his engineers to undercut Lada with a modern, reliable, affordable car. They applied “frugal engineering” to come up with a range of cars sold through Renault’s Dacia subsidiary, now selling well across Europe.

Neusoft is an example of including the margin. They are China’s largest IT solution and service provider. Their Chairman and CEO worried that, as the Chinese population grew wealthier, chronic diseases were on the rise. Neusoft worked to bring low-cost high tech health monitoring and telemedicine to rural hospitals and low-income citizens. A wristwatch collects bio indicators from sensors in the watch. These are uploaded to HealthCloud, where artificial intelligence analyzes data using a healthcare knowledge database and sends customized exercise and diet advice to patients.

As well as companies in developing countries, such as Selco India, Big Bazaar, Haier, many Western companies have picked up on Jugaad’s principles of improvisation – Procter and Gamble, GE Healthcare, Pepsico and IBM among them.

So, that concludes are list of the Top 8 Books on Innovation Strategy. Of course, there are more worthy books out there with great ideas and solid guidance on how to approach Innovation. Possibly we’ll write a new list of the next 8 soon, but, for us, these are a great starting place if you want to read up about Innovation Strategy.

Happy reading!