Skip to 0 minutes and 1 secondOne of the big questions, in terms of innovation, is about what you innovate. Now, what you will normally find about this is that you can innovate a product, or a process, which is about how the product is made, or how the service is delivered. And sometimes we talk about business model innovations, which would be about how we make money. Now all these, I will now use as a product innovation, whichever is exactly what we are innovating, because what I want to distinguish is coming from Prahalad. C.K. Prahalad.
Skip to 0 minutes and 35 secondsAnd what he started to talk about is that beyond the product innovation, there is not only something bigger, which he calls solution innovation, but there is something even further down the line, which he calls experience innovation. Now to distinguish between these, we obviously need to understand each of them. If we are talking about product innovation, it involves the knowledge, the competence, from the company that is making that innovation and of the supply chain. So downwards and upwards supply chain of that organisation. However, it is nothing really outside of the supply chain. What happens here is that we create a new product, and then we create something around that new product that makes it even bigger.
Skip to 1 minute and 26 secondsBut that does not go much beyond that. OK? Now if you think, for example, about car, about computer, that's all product innovation. Or if you think about the phone, because that's something that we can really nicely think through each of these types. Something much bigger would be a solution innovation. How it is different from the product? When it is about a product, then it is something that we do, and we are focused on that thing that we do. When you think about a solution, that means that there are some problems that it solves. There is a solution for someone. So the focus is shifting towards the customer. It is not quite there yet, but it is going the right direction.
Skip to 2 minutes and 10 secondsIn this case, the knowledge that is involved would go beyond the supply network of that organisation. So it would-- they call it the extended enterprise, but that means all sorts of other things that interact with this thing that you are innovating. So for example, if you think about the phones, the phone is just a product. So one thing with mobile phones-- and I don't want to think of all these old-style, wired things. Now, it is a fantastic product. It is really cool that you can actually talk from long distance. However, that does not solve anything until there is enough of these products that actually it is some sort of interaction.
Skip to 2 minutes and 55 secondsSo it helps you doing your job, it helps you having fun, it helps you booking your flight, and that kind of thing. This means that it is not only that knowledge, but also all sorts of other resources, are involved from many other parties. If you think about the same thing in terms of mobile phones, the mobile phone itself is a product, of which is fantastic and completely useless, unless you also have a network, unless you also have all those other people having mobile phones and so on. Now that would be a solution innovation, and it means that all sorts of supply networks are also involved-- all those things that make the product into some sort of ecosystem.
Skip to 3 minutes and 36 secondsThe same way, database would be sort of a product innovation. It is not a product that you can really touch, but it is still some sort of product. However, an ERP system would be a solution innovation. However, an ERP system means that you have lots and lots of other things working together with this database and many other databases potentially, and that together makes a solution for the organisation of storing, retrieving, analysing, and so on the data. Now where the experience innovation comes from? It means not only that the locus is changing, so you are not only focusing on some sort of problem of the customer that you want to solve. You are focusing on the experience of using your product.
Skip to 4 minutes and 23 secondsNow that will involve not only the-- they call it the enhanced network, so it goes beyond the previous supply network-- but it even involves the customers and the communities of the customers potentially. It means that what we innovate is the customer experience. So think about your smartphones. Now that's a really cool experience innovation. And it involves all sorts of other things apart from the company that is making your smartphone. It means that there are lots of other companies producing apps. You work on that. You are actually-- similarly to what we can talk about in these co-creation approaches-- this experience is usually co-created with the customer. It means that you are installing all sorts of apps.
Skip to 5 minutes and 18 secondsYou are making the phone your own. So there are millions and millions of people having iPhones, yet it would be very difficult to find two identical iPhones. Why? Because everyone will have a different set of apps on it. Everyone will be using it differently. Everyone will have a different background, or look and feel, and-- well, not so much the look and feel in the case of the iPhone-- but there are many things that you can customise. So this means that the experience innovation involves personalisation, which is partly delivered by the customer, partly by those other companies that are involved in it. However, the really big thing is when you start talking about it with other customers.
Skip to 6 minutes and 5 secondsAnd this is where the customer communities came in. So the smartphone would be a prototype of an experience innovation. If you think about cars, having that engine that can actually run that big thing, that's a really cool product innovation. However, that product is useless unless you also have roads, you have petrol stations, and you have people who can actually drive their own cars, because-- I talked about this in a previous MOOC, which was called understanding modern business and organisations-- that it was a big deal when they wanted to produce more and more cars. They can sell maybe 1,000 and then one said, why don't we try 10,000? And the other guy said, why don't we try 10 million?
Skip to 6 minutes and 47 secondsAnd they said it is not possible to sell 10 million cars. Why? Who will drive those cars? Where we get so many chauffeurs to drive 10 million cars? And then the big change in the thinking was why don't we teach people to drive their own cars? And nobody thinks about it anymore, but this was a big change in terms of the thinking. That is one thing that comes to my mind, which was immediately an experience innovation. That's Facebook. So it was immediately designed for those communities of users, and it became immediately theirs. Interestingly, lots of those features that normally appear earlier, such as the personalisation and so on, was not there at the time.
Skip to 7 minutes and 33 secondsBut it gradually all evolved, and now it is a full-fledged experience innovation. Today, we have a lot of these, OK? And as you think about how many industries and organisations are based on services, so all service innovation is by definition an experience innovation. If you go to a restaurant, it is all about your experience in that restaurant. If it was only about nourishment, then we would invent tablets that we can take in, and that's it, OK? So this is much more towards what the world is going that everything is about the experience.
In this video Viktor Dörfler talks about how you innovate and the differences between product, solution and experience innovations.
CK Prahalad suggests that servitisation (adding services to products as additional value), while claiming customer perspective, still reflects the thinking of the manufacturer: it is the manufacturer who adds services to its products. Prahalad therefore suggests calling this a “solution innovation” as it is a solution the customer is actually interested in. He then suggests that we can go a step further to create an experience innovation.
The focus of solution innovation is delivering features of products and services so that they become a solution to the customer’s problem. While solution innovation is a significant step forward to product innovation, experience constitutes a quantum leap. Of course, products, services, and solutions still feed into the experience. However, the focus is different – it is the experience of the customer and of the customer’s network. As the value is created at the point of experience, products and services should merely be regarded as carriers of experiences. The goal is the co-creation of experiences which are personalised and have the potential to evolve. The term co-creation emphasises the value-in-use (the value is realised through the use of products and services) in contrast to the value-in-exchange (which suggests that the value is inherent in products and services).
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