Innovation is not just, or even primarily, about technology leaps — or user experience leaps — or new category definitions. Innovation is about corporate identity and corporate skill.

Go scan the business bookshelves. Innovation that produces major profit is the holy grail of business. Everyone wants to know the secret sauce. And now everyone wants to duplicate Apple’s secret sauce.

Dick Brass, in his Feb 4th New York Times op-ed piece, lambasted Microsoft for not being first to ship touchpad technology. But then, Xerox PARC was not the one that made money from the direct manipulation interface, though they invented it. On Oct 18th, Ashlee Vance of the Times published “Forecast for Microsoft: Partly Cloudy,” talking about whether or not Microsoft can transform itself to succeed against Google. Google and Apple are the current innovation darlings.

I won’t claim to have the last word on the secret sauce of innovation, but I can share some observations about the role of institutional mission and the ability of a company to deliver on a good idea.

And I suggest to you that Apple was successful because they just did the next right thing, given their corporate mission and skill.

The Phoenix team that crashed and burned

More than 18 years ago, a client of ours was trying to reinvent themselves. They had a new CEO who was looking to shake the company up and define a new growth direction. So he created Phoenix teams. Each team was supposed to figure out a new direction to take the company. The teams were funded and the scope was open. How much more committed to innovation could management be?

One of the product managers heard about our work and called. This company made hand-held measuring instruments; now some of their traditional customers were becoming involved in the emerging PC help desk services. At the time, the industry was in the middle of the changeover from IBM/VT100 terminals to PCs. There were early iterations of remote control apps on the market, including PCAnywhere, but they were expensive, difficult to use, and unintegrated.

At first, the Phoenix team studied people who did PC hardware support and repair and found there really wasn’t much of a market — they just did module swap out. So the Phoenix team that we worked with looked at the needs of the help desk users — a largely new market. These help desk users were people who might have been techs using measuring instruments before PCs came along, but by and large they didn’t use these instruments in their current help desk positions.

Help desk support for this company was a possible business adjacency: a new role for existing customers with a need to support a rough emerging technology. Not a bad place to hunt for business expansion.

We took the team into the field to understand what was going on with the help desk worker. We found out that their key problem, the primary time waster, was managing how to help users solve their problems without being there.  The solution was a help desk-targeted system, including trouble-ticketing, which at that time was not adequately provided.

Business identity drives new product direction

The team was excited. Here was a new market with some big problems — the technology was either non-existent or, at best, costly and clunky. But the solution was software — not software embedded in hardware. The solution was trouble-ticketing and remote access solutions — not measurement. These were not usual solutions for this company. The team highlighted these organizational risks to their leadership, but management said, “Keep going.”

After several years of encouragement, this Phoenix team came to their final “go/no go” management review. The project was cancelled, the team disbanded, and the product never shipped. Someone else eventually made the money off of that same opportunity. Our team bemoaned the lack of insight of their company — and discussed leaving to become a start-up. They didn’t, but some just quit.

What happened?

This company knew how to create and sell small hardware boxes with really good measuring technology. They created software supporting the instruments. But this hardware company had no appropriate business models or organizational structures to make this new “hot idea” real. They didn’t know how to create, package, sell, or price software as a stand-alone product. Software as a product just wasn’t within their core skills area or part of their core business mission. Going from small hardware boxes with really good measuring technology to a help desk support environment was simply too big a stretch away from the core identity of the company.

Just because a team can see a direction doesn’t mean the company can go in that direction. Just because a new — even adjacent — market opens up doesn’t mean that a project can deliver on that opportunity within the context of the corporation they belong to. Delivering on an insight is as much about existing business identity and existing business skill as it is about what is technically feasible.

The future of collaboration that was never built

It was March 2000. There was content up on the Web but few transaction-oriented sites. There was interaction between consumers and information, but little between businesses. Where was the Web going? It wasn’t yet clear.

We were commissioned to study five industries and understand the future of B2B. The study was funded by a large enterprise software solution company looking for their web advantage. We studied software companies, trading, purchasing, corporate finance, and the auto industry. The data was loud and clear: the potential was enormous.

The most interesting findings were on the role of business-to-business collaboration. We recommended to our client that the future was in collaborative places for teams to communicate across corporate boundaries and negotiation places for safe transactions. All online, all secure, with the ability to support ongoing presentation, document sharing, and private conversations — both topical and attached to central documents. We recommended online places connecting companies where collaborating people could join and work — all for the purpose of transacting business across corporate, regional, and national boundaries.

Successful core products consume all the corporate energy

At the time, there was no LiveMeeting, there was no WebEX, only email-supported, business-to-business collaboration. It was clear — by looking at the practice and the breakdowns in the practice — what the Web could become. This company was already supporting within-company sharing of data and information; this direction was a natural adjacency which could be implemented on a new platform.

It’s been more than 10 years now since we made those designs and recommendations. All of the ideas we foresaw have now been shipped-by someone else. Why?

This company was founded on knowledge about data — how to store it, how to share it, how to make databases work within an enterprise. They had a very successful sales model that targeted core back-office enterprise workers; they had a software platform that made producing many applications with shared access to common data easy to build. And new requests and needs for the core platform and products were coming in all the time. This was their cash cow.

Our design team’s new ideas required rethinking at every level: business models, data sharing, sales models, security across corporations, how to build on the Web, how to connect the Web to their existing platform, how to message to the users who would now use this environment — not the usual back-office customer.

No matter how much this team wanted to innovate — and they really wanted to innovate — they couldn’t move their organization. Our client discovered the possibilities first, understood the customer, had the design — but they did not catch the wave because this new solution required enormous energy and focus to create. And the organization was already focused on their core business. It is hard to put your focus on a new ball when all eyes are on the balls coming from existing customers.

Winning the market with planning

A large publishing company delivered very large paper reports. These reports compiled the findings of a professional search and included opinions for a very key business issue. The Web was encouraging publishers to provide paper products online. But these reports were enormous — hundreds of pages. “Would our customers want something online?” they asked. Could they be wooed away from paper and accept an electronic solution? What would it take to put it online? It is so big — could it even go online?  This company began by asking some good questions — before they acted.

Successful innovation means planning and design at every level

The company’s enlightened VP knew where she wanted to take the company and knew that she had to build a software organization and competency to get there. They started by going to focus groups, showing  some initial mockups based on what they thought customers had told them they wanted. But the customers said, “No — this is all wrong.” Then they came to us.

In 2003 no competitor had anything online — and the team’s work showed that delivering on paper had real problems that an online report could address: finding information in the report fast; bringing the most desired information to the top; designing the content layout for simplified scanning; providing highlighting and tagging tools. The company delivered on the promise — and took the market by storm. Not because they were first (which they were), but because they designed their solution to directly overcome the known problems of paper. But simultaneously, they developed new business models, a new brand presence, and a new software delivery organization. They delivered an organizational solution — because they were committed to this new direction and planned for it. Having the right design was critical — but aligning the organization made it possible.

For industries like publishing, threatened by emerging online platforms, the necessity to figure  out how to deal with “e-everything” is strong. But denial that there is a problem (which we have seen) or haste to toss everything up on the Web (which we have also seen) can undermine client loyalty, along with the bottom line. Changing the company in response to technology changes takes enlightened, focused leadership acting on the corporate culture.

An innovative stretch

But what happens if you are a software product company — a really good one in your space — and you are looking for an innovative leap on new platforms?

Successful innovation is often just the next right thing for that company

Our client makes modeling software and wants to keep its current user base and grab the imagination of future generations. The current population is aging and knows how to use “old-time” technology. But real power and value comes with more sophisticated modeling — if only everyone was using it — and if only they could start with some easy templates. Web 2.0 and serious search technology was emerging. “What if,” they thought, “we create a kind of marketplace to share and reuse models?”

They called us to help them leverage new technology the right way to encourage designers to use the environment and to “get real” about its value. They got the data, planned the project, knew the necessary technology, shipped the solution, and are watching the communities grow today. They are seeding the users of tomorrow — with this new environment.

What happened?

This company leveraged their same mission with their same users to achieve an adjacent goal on a new platform. They incorporated new social networking and search technology with which they had serious competency. They  created buzz for their existing and new products to the upcoming generation. For them, it was just the next right thing.

From the inside of an organization, innovation often looks like the next right thing — not something radical. But from the outside, it can look game changing. But something game changing in the market still has to be managed and delivered appropriately. Users are simply too unforgiving of mistakes.

Apple did the next right thing — for them

So let’s go back to Apple and the iPhone. Apple makes hardware. Apple has been doing direct manipulation devices for years. Apple serves consumers. Apple has already done impressive industrial design on their hardware. Apple already has a reputation for and commitment to and know-how to design really usable software. Apple also reinvented itself and mainstreamed music delivery with iTunes. Apple has an infrastructure, third-party partnerships, and a model for selling little things through downloads to the general public.

And what was happening in the industry: content and applications of all types — video, games, text, social networking, maps — was already available on the Web. People were already searching on existing smart phones and getting addicted to them. Nationwide connectivity was reliable. And devices and downloads were now pretty fast — so performance was not much of an issue.

So was the iPhone a radical transformation? Was it an incredible innovation? From the perspective of the industry and sales, yes. But from Apple’s point of view, wasn’t the iPhone just the next right thing?

The secret sauce of innovation may be ready to ship  in your organization. The question on the table is: what is your company and what can your company do that is the next right thing for your customer, your overall skill set, your product commitments, and your corporate identity?

Or are you willing and able to radically reinvent yourselves over and over and over? Innovation comes from an organization that can leverage all their resources to deliver a leap in value and delight to the target customers.

And to find that value and delight — well, of course — we come back to user-centered design.