Innovation is in all the wrong places

I live a pretty cosmopolitan futuristic life atop a glass skyscraper in New York City, but I’ve yet to get a pizza delivered by drone, order a taxi from Alexa or open a hotel door with my smartwatch. I’ve also not booked a hotel from a bot (because trying that drove me crazy) nor consumed news from one, because that’s a terrible way to do it.

In a world where what’s possible is advancing at breakneck speed, it’s odd that British Airways has developed an emotionally aware smart blanket, but doesn’t “do” email. It’s strange that IKEA has VR to help you experience your kitchen, but struggles with the basics of e-commerce. My car rental company has invested millions in onsite video-calling kiosks, but their app loses 50 percent of the bookings I make.

We’ve got the questions wrong. It shouldn’t be how are you innovating or which project is doing new things, but why are you doing it and on what level. From pizza by emoji or bot or smartwatch, to emoji-inspired aubergine-flavored condoms, we’re experiencing a very superficial type of innovation. It’s something new, physically notable and at the edge of the relevant business. It’s typically the product of a small innovation unit, primarily with the goal of a funky press release, a great photo call or something to talk about on the next earnings call.

And, generally speaking, it’s the wrong types of companies that are doing it. It’s CPG companies with beloved products but perhaps little to talk about. Maybe having a brand worth billions and steady sales is a bit boring. So we have special editions, apps and direct e-commerce with dubious unit economics. We have mattress brands becoming publishers. Why? Because Conde Nast, The New York Times or Hearst make it look easy? Or wildly profitable? Every new SKU is disruptive or, better still, reimagined.

Yet many companies must innovate, desperately. The TV industry is making better shows than they ever have, but is suffering because they have little understanding of modern consumer behavior and choice architecture. We’ve got airlines that use incredible technology to keep their fleets in the sky and on time, but who routinely fail in even the most basic communication functions.

Let’s stop thinking of technology as a trendy tattoo — a surface-level commitment best kept on a conspicuous but not often used part of the body.

From car rental desks that look shocked when it’s busy to hotels that can’t tell you when your room will be ready and ask for credit card details three times, physical retailers need to adapt to a world in which online shopping has made people impatient, expecting to find things immediately — and to be served even faster.

For all companies, innovation needs to be deeper. Not token gestures on the edge, but fundamental rewiring of business from the core. Imagine a business as an onion of concentric layers. On the outermost surface would be communications — how companies express themselves. Inside this would be marketing — the services, promotions, pricing and products made by the business. At the core, upon which everything else is built, are the business values, culture, processes and systems.

Only the most superficial changes happen at the edge. It’s easiest there, requires the least organizational effort and gets the most visibility. Launching an innovation lab or an incubation fund and a venture unit requires a few bodies in a trendy offsite office, even if they do nothing after the post-launch media hype wears off.

Innovation at the marketing layer is interesting. It’s Honest and Dollar Shave Club, both pretty sizable changes to products or how they are sold, supplied and paid for. But while examples like this have huge valuations and momentum, it’s not clear how groundbreaking they are.

The real examples of innovation come from companies built for the modern age. They’ve taken new behaviors, new technology, new workflows and, above all else, new consumer expectations. Here we see the obvious examples like Uber or Airbnb, but also companies like Facebook, which has become a media owner of vast scale that does not actually make any content.

Here you can compare the revenue and costs of Buzzfeed and compare it to an old-world company like Conde Nast. Let’s consider Netflix relative to Blockbuster, but also Spotify compared to record shops, or Kodak and Instagram. The most rapidly grown companies in the modern age, like Tesla worth $30 billion, or Dropbox, Nest or WhatsApp, have smashed all known expectations of what’s possible because they innovated at the core.

For goodness sake, no more iBeacon-driven vending machines, no more 3D-printed trinkets.

Technology will create vast and profound shifts. The mobile-first world has yet to really arrive. Mobile payments, digital wallets and the Internet of Things will create the best-ever canvas for business.

Technologies like 5G, ultra-fast Wi-Fi, smart cities and other forms of ICT will form the architecture of the world in which businesses will operate. At the same time, people will change. Tolerance of waiting is already near-zero, same-day delivery is expected, as are free returns and UIs must be near-invisible and frictionless.

Maybe you do need an innovation lab. Maybe working with startups is key. Maybe your organization needs impetus and expertise — but for goodness sake, no more iBeacon-driven vending machines, no more 3D-printed trinkets.

Let’s stop thinking of technology as a trendy tattoo — a surface-level commitment best kept on a conspicuous but not often used part of the body.

Let’s think of it as oxygen — essential to the beating heart of your business.