togetherI don't know of many other words quite as abused as innovation. Maybe the word strategy, but that's about it.

It seems to mean everything and anything. [Reminds me of "engagement"! :]

I have personally struggled with internalizing what innovation truly means. I mean really truly. Until recently.

In preparing for my talk (Self Sustaining Innovation: Ideas for Creating A Data Driven Organization) at the JMP Summit, I found the perfect way of thinking about innovation. It came from a old Google talk given by Douglas Merrill (ex-CTO of Google). I loved the framework so much that I adapted it for my JMP presentation, and wanted to share it here with you all as well.

In his talk Douglas defined three types of innovation. I think it provides a great deal of clarity beyond the standard definition of innovation as "improving something".

#1: Incremental Innovation.

A great example of incremental innovation is. . . wait for it. . . yes you in Kansas. . . . Evolution.

incremental innovation

Life rolls forward and over time there are small improvements that add up to something significant when looked at over time (and of course usually in hindsight).

A more every day example is Kaizen popularized by the Japanese car manufactures, for example arranging parts so that they are closer to each employee improves the process ever so little bit. Enough of these improvements add up.

For me personally Microsoft's "ribbon" menu in the Office 2007 were a nice example of incremental innovation. It makes a complex product much easier to use, in turn causing a bump up in revenues for Microsoft.

Another example of a incremental innovation is "related searches" you see on the Google search results page. Or more recently the suggestions that come up when you search on

googlecom avinash kaushik

Or the "onebox" in Google's Chrome. Each small by itself, but keeps moving the ball forward.

#2: Incremental Innovation with a Side Effect.

Opposable thumbs. That's a great example of incremental innovation.

incremental innovation with a side effect 1

At some point during our evolution we (and not everyone else competing with us – woo hoo!) got opposable thumbs. An otherwise mundane development that allowed us to hold things better. This lead to tools. That lead to other delights that you now see around you.

Life rolls forward and along the way a side effect that causes significantly higher improvements.

A non-mundane example of this is Apple's creation of the iPod. Its normal Mac innovation machine produced something that redefined who Apple is as a company today.

Another example is Google's AdSense. Prior to AdSense there were other ways to monetize content on the web. But AdSense was a great side effect because it allowed any blogger, student, housewife, or big site to add text based ads to their site with greater ease and monetize content. While certainly not perfect it remains one of the most widely used monetization systems on the web. Good for Google and good for its customers (big or small).

#3: Transformational Innovation.

You'll understand why there aren't too many examples of transformational innovation in nature. That's not how, fortunately, nature works.

transformational innovation

Over the course of human history there are lots of examples of transformational innovations. The invention of the wheel. The printing press. The interweb. Lots of examples like that. Dramatically changed life for all of us. One thing, huge impact, new curve.

A much smaller business example from Google is AdWords.

Advertisements on search results pages existed before Google. Not just banners but text based results existed as well (in various forms). Google's transformational innovation was creating a auction based model for ads where the price paid for the click on the ad was directly tied to the economic value created for the advertiser.

There are other examples all around you of companies, people, organizations that have, by leveraging ideas big and small, created transformational innovation. Please share your examples via comments.

Net net. . . .

Next time someone sprout's innovation on you then my hope is that you'll think of these three types of innovation and promptly ask them what kind of innovation are they hoping to accomplish.

They'll be confused.

Draw the graphs for them.

Then ask them again which type.

And don't forget to ask them if the investment in "innovation" will be worth the ROI.

A company we all love and know spent $6.2 billion in R&D in fiscal year 2005 and $7.8 billion the year before. Yet for all that money you would be hard pressed to find even one example of Transformational Innovation from them between 2004 and today (they spent north of $5 billion each year since 2005). The best I can think of is minor incremental innovation.

For the CEO of that company I offer, with the deepest humility, this framework so that he can make this exhortation when he signs next year's R&D chq: "… and dudes when I say innovation, I mean transformational! Here's a graph from a nice blogger that shows what I expect. Note the red line!!" : )

What kind of innovation can Web Analytics empower?

web analytics tool This is a blog about web analytics, so what about us? What can we deliver?

While we all hope to achieve transformational innovation in our web based efforts using web analytics data, I have come to the realization that for the most part that is not possible.

Transformational innovation is possible on the web, and it is all around us. I am unsure that it is because of the use of web analytics data.

I feel sad saying that but unfortunately we have to be truthful and acknowledge reality.

A big reason for this (we sadly not powering transformational innovation) is because for 99.9% of the people who have access to data out there web analytics still means slapping a javascript tag or processing a log file.


That simply does not have enough juice.

A far bigger reason is that there aren't enough smart Analysts around. Companies are complex bureaucracy. Web Analytics, in spite of best intentions, is still an afterthought. In a silo. Online Marketing is largely still a faith based initiative.

It is hard to admit it but it is true.

Ok if not transformational then what?

All that is not to say that web analytics can't power some forms of innovation.

If you only going to rely on your clickstream tool then really it would be hard to even to incremental innovation. If that's all you are using to make decisions, then. . . . well. . . . not much is going to happen.

To get in the innovation game on the web using data you need to get inspired by the Web Analytics 2.0 mindset and approach. . . . .

web analytics 20 2

You can improve the chances of causing repeatable incremental innovation in your company if you use a couple of the components above.

Say using Google Analytics, Omniture, CoreMetrics, NedStat etc AND using the Website Optimizer. You analyze the data and do A/B testing (or even Multivariate) and you increase the chances that you'll keep your company moving forward.

Or use the clickstream tools and also 4Q. Those two together will help you understand both the What and part of the Why. Again customer ideas flow in, you execute and bam (!) incremental innovation.

Now here's the great news.

I think that for each of our organizations (big or small) we, the Awesome Analytics Actuaries (A3 baby!), can actually empower incremental innovation with a side effect.

For that we need to kick it up a notch and truly execute against the Web Analytics 2.0 mindset. Fire all the cylinders!

innovation with a side effectThat means using analytics tools but also using Surveys (to get ideas from our customers), using Competitive Intelligence tools (to learn from the ecosystem), using Experimentation and Testing (to prove the HiPPO's wrong, and try new ideas), using robust Outcomes analysis (to know why what works). All that massively improves your chances that you'll find "side effects".

But it's not just tools.

It means following the 10/90 rule, it means setting up your people to be Analysis Ninjas and not Reporting Squirrels and other such cultural changes.

But it can be done. We have the power to bring about incremental innovation with side effects.

Yes we can! (Now where have I heard that before?)

Ok now its your turn.

What do you think when you hear the word innovation? Does this framework help? Would you propose an alternative? Care to share your favorite innovation? Web or otherwise.

Please share your feedback, ideas, critique. Thanks.

I had the privilege of leading the WAA Standards committee last year. Its hard working pretty Members have produced an awesome metrics definitions document covering 29 new terms.

The committee is asking for your brilliant feedback. Please share it with them on the WAA Site.

If you prefer email, you can write to me, I'll be happy to forward. If you prefer snail mail, let me know. If you prefer morse code, we can accommodate that as well. Please share your feedback any way convenient.

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