Maintaining An Innovation Premium

We take a look at how companies can create and maintain an 'Innovation Premium'


An 'Innovation Premium' is the increased value that the stock market gives a company due to its ability to release innovative products on a regular basis. The premium is derived from the notion that these innovations will generate larger future income streams and is also the method by which Forbes ranks its list of the world's most innovative companies.

A recent study by the Harvard Business Review demonstrated that companies which both create and maintain an innovation premium employ a progressive workforce and a management team that proactively seeks change. It was also discovered that these tools are normally honed in startups, as managers are forced to design their strategies around uncertain situations.

The tools listed below allow managers in startups to become experts, in what the HBR calls, 'the innovation process'. This process is a four pronged affair that involves a number of activities, including ;

- Savor surprises

- Discover job-to-be-done

- Prototype minimum 'awesome' product

- Validate go-to-market strategy

The ability to carry out these tasks successfully is partly down to the skills that management acquire through lean startups, design thinking, discovery-driven planning and agile software. Startup companies encourage management to identify 'the job to be done' instead of just leaping straight into a solutions philosophy without really grasping what type of innovation is required. The HBR also state that new business models go hand in hand with innovations and that this involves an experimental stage which validates how your customers find out about, evaluate and connect to your product.

Although the process is almost always non-linear, the HBR state that every innovation they studied went through a similar process. Maintaining an innovation premium through this allows a company to delve deep into its customers minds, far deeper than if they were just using market research. Through this method a company's innovation premium can be maintained and even incrementally developed upon. HBR's research demonstrates that managers from startup companies will find it easier to develop and maintain innovation as they're used to managing uncertain situations.


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