Building value

Peter Thiel has an excellent lineage for creating value through innovative company's. He co-founded Pay Pal, was the first outside investor in Facebook, and started Palantir Technologies - a big data analytics company valued at $20 billion.

In his book "Zero to One", Thiel classifies value as the sum of the money a business will make in the future. The ability a business has to reach that intended value lies in its ability to dominate the market it operates in.

Thiel suggests four different types of areas to measure your company against when seeking that potential:

1. Proprietory Technology

Proprietory technology is the heart, but not all, of the innovation that sets a company apart. Thiel suggests that the company's technology must enable the company to perform an essential aspect of the offering at least ten times better than the alternative.

2. Network Effects

Network effects are an offering's ability to appeal to a defined market strongly. The principle is that the offering gains strength as more people use/buy the offering. An example of this is a typical market like Apple's app store.

3. Economies of Scale

Profitable businesses should build a limited fixed cost that does not increase at the same rate as growth.

4. Brand

A brand is a promise from a company on its ability to deliver a product or service. For a brand to be valuable, the promise must stand out when compared against the market competition.

Businesses can build value through various paths, but a company on route to building good future value will display all four of these characteristics.

Leading Teams that Innovate

Ayse Birsel writes a provocative article with the title "To come up with a good idea, start by imagining the worst possible idea". To find good ideas to enable innovation drivers, Birsel suggests that leaders should change their role. Leaders should set the boundaries then transform into a collaborator function to allow the team to solve problems in their own way. By facilitating the innovation process leaders empower far more people with a greater focus. When lead with skill, the outcome is a sustainable generation of solutions with more meaningful potential.

Birsel recommends three steps for leading innovation in this way:

1. Divergent initiating

In this freeflow process, initiators must encourage divergent thinking to generate a large number of new ideas.

2. Look ahead

Innovation leaders must have the ability to identify future problems that will need solving accurately. Once identified, these problems must be presented to the team to take problem-solving ownership. Finally, teams must possess the organizational empower to generate and implement the solutions they generate.

3. Flat rather than deep

Leaders must remove hierarchies which present friction to the problem-solving process. Cross-functional teams with high-quality connections are optimal patterns for collaborative solutioning.

While the leader's role is pivotal to any innovation team, Birsel builds a strong case for a collaborative building leader. The result is empowered teams that can maximize their combined efforts.

Innovation Discovery

Establishing a sustained practice of innovation can be challenging. There are many areas a company has to perform well in to possess the ability to innovate. A company must explicitly specify what area it plans to innovate within; it needs to be able to formulate a set of goals for the innovation initiative then measure the efforts needed to reach the defined goals. Finally, a company must be able to scale and set a culture of innovation as a practice. According to de Jong, Marston, and Roth who wrote "The eight essentials of innovation", the core of the innovation process, however, is the main ingredient of innovation discovery.

Innovation discovery is the strategic ability to search and identify a differentiated business opportunity in a new market combined with the company's ability to deliver on the new proposition in such a way that the value created is attractively profitable.

For innovation meet his criteria companies needs to:

1. Find a worthwhile problem;

2. Have the relationships necessary to create a technology that solves the problem and;

3. Formulate a business model that empowers it.

4. Iterative testing, analysis and product tweaking in the coalface of market testing.

Innovation is a company-wide, strategically defined process. Without a measured way of discovering the area's of innovation, a company will struggle to reach new market opportunities effectively.