Where does business innovation come from? Is it a push or a pull? I contend that innovation isn't imposed, it's fulfilled.

Many years ago I did volunteer work for an organization in New York that provided help to people getting out of jail. I tutored several parolees looking to boost their employability. One of them was studying fashion, and an assignment paper we worked on contained this question (as I remember it):

Where do new fashions come from?
A) They filter down from the upper class to the mainstream
B) They're dictated by designers and fashion companies
C) They rise up from the working class

There was no answer given in the assignment paper -- it was an essay question intended to spark research and analysis. But my personal opinion, at least in terms of what I've observed of the fashions of my generation, is this: a little bit A, but overwhelmingly C.

In the context of this blog, I would edit the question this way:

Where do business innovations come from?
A) They're generated by business organizations and corporations
B) They're dictated by consultants and software companies
C) They're demanded by consumers

And my answer would be almost the same as above: Some A but mostly C. In other words, I believe most business innovations come from the bottom up, not the top down. Innovation starts with consumer demand. If Sam Walton hadn't invented Wal-Mart, somebody else would have, because that's what consumers wanted.

That's also the lesson of a recent survey by Cisco (one of the B contingent) about corporate adoption of Web 2.0 technologies and strategies, and in particular Internet video.

Nearly 30 percent of companies surveyed reported that the primary business reason for investing in video and Web 2.0 tools is to address the demand for innovative products and services from their customers.

Is innovation a push or a pull? And how important is it to determine the direction business innovation flows? Check out this passage from The New Age Of Innovation:

The new architecture should embed the enterprise in the Internet, connecting to external devices, sensors, and products (as in the RFID or tire example in Chapter 1), customers (as in the ICICI insurance example), and supplier systems (as in the Wal-Mart example). This enables an N = 1 customer experience executed in an R = G environment.

Note the subtle shift in language represented by the phrase, "embed the enterprise in the Internet." Most business people still think of that process the other way around: embed the Internet in the enterprise. The authors' metaphorical shift makes clear where they think the pressure for the "new architecture," i.e. business-model change, is coming from.

Take the example of Apple's iPod, which the authors examine extensively in their book. That product was clearly an innovation, both in terms of design and business model. But where did that innovation come from? I contend that Steve Jobs and the Apple engineers were simply fulfilling the innovation consumers were demanding for a mobile digital music device and a new business model for listening to music. In fact, that business model was already on the drawing board in the form of online music services like Napster. Jobs & Co. figured out how to monetize it.

This ties into what the authors of The New Age Of Innovation refer to as "co-creating" value with your customers: being attuned to what the consumer is asking for and working toward that end. Business innovation is out there, waiting to be fulfilled. If you want to know where to innovate in your business, simply stop, look, and listen.