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The Three Channels of Business Innovation

   Words by Paul McQuillan

   on 25/05/2018 10:00:00

InnovationTechnology opens new opportunities and has made innovation crucial to all businesses.

As a result, everyone wants to deliver on innovation but how can we put this into practise?

Being an innovative business, changing and adapting to new technology can be difficult, particularly for SMEs where combining future planning with business as usual can be a challenge.

Yet SMEs are often ideally positioned to deliver innovation, being run by managers and owners that are naturally invested and curious in their industry – whereas larger companies can feel ‘forced’ into innovation by their competitors.

Execution is key however, and becoming a business open to innovation is about establishing the structures that ensure we get the best from our ecosystem of employees, partners and decision makers – to allow innovation to happen naturally, rather than being limited to top-down decisions from senior management or the company owner.

To build these processes, we should first look at how innovation typically comes from three channels: Core, Adjacent and Transformational.

Core Innovation

Consists of small, yet meaningful improvements to the products, services, and other ways in doing business - these will typically come from business users and teams as refinements and additions to current processes.

Here having a clear flow of idea to implementation key, so your teams can see their ideas translated into reality and so feel empowered to contribute their vision to the success of the business.

We can implement Core Innovation by ensuring your employees have a clear flow of ideas and process improvements to a central point of contact, which can then be communicated to a technology partner or internal resource for implementation.

This allows your teams to regularly see their ideas translated into reality and so feel empowered to contribute their vision to the success of the business – on a practical front, the following tips may be useful:

  • Maintain a central catalogue of potential additions or changes that is available across the business – and these ideas should come from the bottom up rather than top down.
  • Favour agile implementation for quick turnaround times – accepting that some core ideas work well whereas others will not but the speed of discovery of works vs don’t-works will benefit the business.
  • Ideas should be small and itemisable for quick implementation, and so should come from practical experience of existing processes. (i.e. we need to report better to clients vs this report could be improved by including an additional filter option)
  • Finally look at the level of incremental change that you think is right for the business and ensure this is properly allocated between Internal Resource and Technology Providers, so that implementation is executed to an acceptable timeframe.

Outcomes of Core Innovation, following the points above should allow your teams and technology partner to work together on a rolling weekly, monthly or quarterly basis to keep the business evolving towards stronger processes – leaving decision makers free to look at the bigger picture.

Types of Innovation

Source: Harvard Business Review.

Adjacent Innovation

Is meaningful change in the way we do business that gives the business something demonstrably new, and helps produce a competitive edge through increased efficiency or a new method of customer engagement.

This type of innovation comes from being aware of changes in technology and how customers are engaging in your market, and looking at how these changes can be applied in your business.

Examples of adjacent innovation would include introducing new CRM or ERP solutions, remote workforce / mobile systems, or introducing new apps to improve existing systems.

We can implement Adjacent Innovation by regular reviews, with a technology partner that invests in Research & Development for new products or developments, and investigates the wider market for useful Apps or Service Updates.

Use your Technology Partner’s experience to distil these new options to those that could either:

Expand existing processes, this is similar to Core innovation but with a focus on new tools to reform rather than incremental change.

New processes, where technology provides new options to create new more customer centric processes.

We can also motivate well-connected network clients and suppliers to bring quality ideas into the business – this can be done through events, networking and good account management with your customers.

Unlike Core Innovation, Adjacent Innovation will typically involve an element of training and user adoption to ensure the new ideas or processes are properly digested by the business – and so engagement to keep staff with us on the journey is key.

Outcomes of Adjacent Innovation, builds a ‘can-do’ culture in the business, taking opportunity from new options not previously on the table.  These options should then become embedded in the business and subject to future incremental changes as part of regular Core Innovation.  In this fashion an SME can aim to have both Core and Adjacent Innovation running continuously through the business.

Transformational Innovation

The last of our three innovations, is the big picture transformative change in an organisation.  This is typically where a business pivots on an innovative idea or technology to become a different business to how it was previously.

Transformation Innovation will involve both organisational change and a cultural change as different skillsets or mindsets will be become valuable as a result.

Such Transformations can often come from new market entrants that are encumbered with ‘the ways things are done’ (the examples of Uber, AirBnB and others being the most obvious here) but are also often implemented by existing businesses and market leaders looking to adapt to new customer culture or technology change.

Examples of transformational innovation today would include investigating how AI and Machine Learning will change existing business practises, and how the IoT will change how customers relate to products – however predicting the future in these innovations is notoriously difficult.

Transformational Innovation can start from access to strong high-level reports that give you the right picture of the business and ideally the customers in the market, this can typically be gleaned from big-data analytics to produce useful information – which we use to:

(1) Review new and existing markets that the business could move into.

(2) Look at new ways of engaging customers, and how this meets customer expectations.

  • Don’t just rely purely on a Technology Partner for this type of innovation, as this will come from a Business Owner or Key Decision Maker’s experience and knowledge for the right next steps based on this information.
  • Draw upon other information from the wider market, competitors and technology partners to evaluate the transformational options that may be possible.
  • Don’t rush it!  Many companies are seeing digital disruption as a ‘we-must-change-everything-we-do’, but in most cases, true transformations flow naturally from the company’s previous state.  Looking at how Apple became a Media Company, or how Google grew into an Advertising Company is a good example of how these companies fundamentally transformed over time but in a way that was relatively natural as their product lines evolved.  The risk of transformational change is that we disrupt our own existing business model without a suitable working replacement – the concept of FOMO (fear of missing out) can apply to digital disruption and accidentally motivate us into changes that are not ideal for the business.
  • Correctly implemented transformations can help a business occupy a pivotal place in the market that would otherwise have been missed; and become the go-to model for other competitors or partners in the industry or vertical.


In our experience, putting structures in place for each of these three types of innovation creates a more flexible business that better manages the time of decision makers alongside keeping the business relevant in a changing world.

These structures can be simple and draw from the experience and talent both from inside the business and from technology partners.  This can build an environment of regular change and innovation , that does not rely on periodic top-down initiatives that have a higher risk of failure.

This is a longer version of an article published by CRMCS for Elite Business earlier this year – the abridged version can be found here -

Further Reading

What is the Foundation of Innovation

Human Capital Practises drive Organizational Innovation

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