Innovation redefined: beyond investing in technology

One of the most overused words of the last decade is “innovation.” As with most buzzwords, the more it’s used, the less it tends to mean. But real innovation is what determines progress, and often as a result of progress, the definition of innovation changes with time. So, what does innovation mean now?

First, let’s look at what it meant back in the day. Innovation meant taking risks, betting on something new. Today’s innovators likely still are risk takers – that, after all, is the nature of business. But we’ve advanced since then. Now, to cultivate and sustain success, the risk takers must also be risk mitigators.

Today, taking risks and innovating go beyond investing in technology. Innovation is about investing in new ways of thinking and empowering people to challenge the status quo – whether to create a new product, find an unconventional solution or anticipate opportunities. One example that meets all those criteria is today’s mesh economy – companies that invent new ways for people to share products and services, driving traditional companies to rethink their approaches to innovation.

Three Kinds of Innovation

The Verisk Analytics innovation model consists of three subsets:

• process innovation – drives efficiencies in business operations

• product innovation – extends existing products with new functionality and capabilities

• invention – redefines markets and creates new industry ideas

We implement all three, with an emphasis on invention. Invention stems from our collaboration with customers, allowing us to gain a thorough understanding of what challenges confront the markets we serve and how we can find solutions to those issues. Equally, collaboration with our customers enables us to discover what works well and where the growth opportunities exist for them – and, consequently, what services we need to create, revive, or expand to meet their growing requirements.

With customers deeply involved in our development process, we gain the benefit of real-time insights and reactions as they move through phases of innovation with us – from ideation to prototype to adoption. That kind of collaboration has redefined what innovation truly means today both at Verisk and for many other organizations.

Innovation: What’s Next?

Investing in innovation requires a culture that supports innovation, ensuring employees understand and rally around an organizational philosophy defining what innovation means and why it matters. The Verisk concept of innovation is based on our n+1 philosophy: To be competitive today, organizations must strive for what we call the n+1 data set. If a company’s data set has a certain number of elements — n — it must constantly be working to include one more. It must continually add elements, advancing toward the next layer, adding richness to its analysis. To be sure, such an approach requires investment – in data resources, in analytics, in technology, in people. But the return on investment is to thrive, rather than simply survive or ultimately fail. That’s true for all industries but especially so in data-driven industries such as insurance, healthcare and supply chain, among others.

The n+1 philosophy can help a company answer such crucial questions as, What’s next? and What should we do to improve efficiency, reduce risk, indeed turn risk into opportunity and increase growth?

For example, a comprehensive supply chain risk management strategy – along with the incorporation of an array of predictive analytic tools to measure and manage risk – often extends beyond the supply chain itself to encompass all major operations of the organization. In fact, modern predictive analytics is fast becoming a tool to recognize key trends, patterns and potential disruptions within supply chains. It’s a means to protect the enterprise’s most valuable assets while also creating sophisticated risk resilience and mitigation models.

Exponential Benefits

A recent PricewaterhouseCoopers survey indicates that over the next five years, the most innovative companies are set to grow at twice the pace of the global average and three times the rate of the least innovative.

There’s a myriad of literature available about innovation, yet much is not particularly helpful because it tends to describe innovation as a single element. Quite the contrary, there are several different modes of innovation, and a company has to be clear about what it means when using the term. What kind of innovation is the company looking for?

Innovation through the n+1 philosophy shows up everywhere in the form of this question: Is there a layer of data we’re not yet accessing that may drive us toward a better solution? One example can be found in catastrophe modeling. Historically, our business has tried to understand the probability of a range of perils, such as hurricanes. Companies need to understand both a hurricane’s location and intensity. But we’re also aware there have been changes in the composition of the atmosphere that potentially can lead to an extreme weather event, such as a hurricane. That said, if the temperature of the surface of the ocean correlates with the amount of energy that can affect the next hurricane developing at sea, a company can use new parameters, such as sea surface temperatures, in its analysis. That’s the +1 layer. And each layer can set the stage for yet another.

So, meaningful innovation today applies n+1 as its foundation and embraces a comprehensive dialog with customers to make sure a company truly understands its customers’ emerging needs. From the strength of that relationship, a business tends to realize a viable product and associated revenue much faster. And the benefits just accrue from there: Rather than aiming to build the solution of all solutions, a business can produce more refined iterations – one at a time – and then enjoy the rewards of one success after another.