Innovation Glossary & Jargon-Buster for Entrepreneurial Leaders
Welcome to my A-Z of Business Growth!
Have you ever wondered what common phrases associated with business growth and entrepreneurship, such as MVP, design thinking, customer avatar, innovation sprint, agile methodology and others, actually mean?
And what exactly do we mean ourselves when we use really common terms like idea, innovation, IP, USP, competitive advantage?
My no BS guide will help you decode the business jargon! It’s a bit like an innovation glossary.
Have you heard of all of these terms? Have a read through and enjoy quizzing yourself as you go!
I’ve tried to be pretty comprehensive without going over-the-top (it was looking like an encyclopaedia of innovation in an earlier draft!), but if you come across any other terms or phrases that you think should be in here, let me know and I will look at adding them to the next edition of this guide.
This is when businesses build on their core capabilities and develop their products and markets to expand their activities beyond their core focus. Sometimes these businesses work with other companies with complementary skills and / or markets to achieve this expansion.
A classic example of an adjacent innovation is Proctor & Gamble’s Swiffer.
Agile methodology is used in a lot of technology companies. For instance, I am non-executive director of leading app development business, The Distance, specialists in creating intuitive, custom mobile solutions for their customers on iOS and Android devices.
Agile methodology is a really structured yet flexible approach to project management. Teams work in short sprints to achieve tasks, with frequent check-ins with the client or end-user to make sure that the project is being delivered in line with requirements.
Traditional project management methods can sometimes be too fixed, paperwork-heavy and laborious for fast-moving, innovative projects. Agile aims to overcome these issues, accelerate the pace of project delivery, get a better end result and achieve it more efficiently.
Agile has its very own set of terms, worthy of its very own glossary! Some of the terms you might be most likely to come across are:
Burndown Chart – a graphic or spreadsheet that shows how much work is left to do and how much time is available to do it in.
Kanban – processes and workflow that focus on just-in-time delivery. Often a Kanban board is used (and sometimes in an app such as Trello or Slack) to track project progress and help with team communication.
Scrum – a regular and frequent team session, often done with people standing up, to assess progress and agree next steps.
An algorithm is the set of rules that a machine is programmed with. The machine operates to those rules to fulfil functions such as information processing, calculations, decision-making. Computer programs usually contain a lot of algorithms!
Those of us who use social media experience algorithms in action. On platforms such as Instagram, Facebook and LinkedIn the algorithms determine the content that we are presented with, and also who sees the content that we post.
A.I. stands for Artificial Intelligence. It is sometimes also known as machine intelligence and an area in computer science in which machines are programmed to operate like humans. The algorithms (see above) in A.I. machines enable the machines to “learn” from experience.
Some supporters of A.I. say that it will amplify the abilities of humans to achieve, whereas others believe it will have a negative impact. Many jobs that exist today are unlikely to do so in the future as a result of A.I.
Everyday examples of A.I. include smartphones, drones, social media feeds, video games, mapping and location services and many more.
An Angel Investor is a person who funds start-up businesses in the very early stages, when the investment is riskier. In exchange for their investment they usually receive a stake in the business. There are also angel investor networks, some of which invest collectively online in a form of crowdfunding (see below).
Back-end development is what happens behind the scenes to create the nuts and bolts of any computer program. The workings aren’t visible to the end-user, but they create the underpinning functionality of the programme.
It’s a bit like building the engine and parts under the car bonnet, that the driver doesn’t see, but in computing and software development.
Beta testing is also sometimes called User Acceptance Testing (UAT). It is testing that is carried out on a new product, service or release either before it goes live in a ‘real world’ setting, or as part of a soft launch (see below) to test the market.
A beta version is a new version of a product, service or release that is created for testing before the final version (known as the alpha version) is made available.
An example are the UK Government’s digital information services and website pages. These are tested live to find out what works and what doesn’t before a final version is completed. You can find out more about those here.
BHAG is pronounced ‘bee-hag’. The letters stand for Big, Hairy, Audacious Goal, a term coined and made famous by Collins & Porras in their book Built to Last. Their research shows that by having a clearly stated, motivational BHAG that people understand straightaway, companies are more able to inspire action and achieve success. Because people are working towards the same stretching and exciting objective it generates more collaboration, problem-solving and teamwork.
Blue ocean strategy
Blue ocean strategy is a term that comes from the title of the book by Kim and Mauborgne.
In the book, the blue ocean is a metaphor for uncontested, clear market space – i.e. space where there is no or hardly any competition.
This is in contrast to the red ocean, which is predatory, price driven and “bloody”.
Companies create blue ocean space by shaping their products and services to minimise or eliminate features that the competition offers, but which don’t enhance the customer experience. They also add in or amplify features that the competition may offer, and which do have a positive impact on the customer. This is called creating a new value curve.
Blue sky thinking
Blue sky thinking is a metaphor for having ideas or creating a vision that has no bounds or constraints – as if anything is possible.
Sometimes people think that having no constraints enhances creativity. Quite often, though, the opposite is true. Constraints can help us to frame our challenges and opportunities within clear boundaries and force us to be inventive.
A breakthrough innovation is one that overcomes previous barriers to a product, service or technology achieving greater, significant benefits for the business and end user.
The iPhone is one of the most commonly referenced examples of breakthrough innovation.
A business case is the rationale for an investment, new initiative or business decision. It is usually a written document, and includes alternative options, costs, financial and non-financial benefits, risks and forecasts. The purpose of the business case document is to help leaders make the right decisions for the company.
For a step-by-step guide to what a business case is and how to create one, go across to my earlier article and resources here.
Business incubation is the funding, extra nurturing and support that very new businesses can often benefit from in the riskiest early stages to help them succeed.
There is an interesting UK Government report on business incubators in the UK here if you’d like to know more.
The business model is how the company organises its operations in order to provide products or services to customers and generate a financial return.
Examples of business model types include:
- Bricks & mortar – having a physical location presence
- Bricks & clicks – having both a physical and online presence
- Franchise – a proven, templated business proposition that can be replicated by others in different locations
- Subscription – “SaaS”, which stands for “Software as a Service” are examples of subscription business models, in which customers sign up for an ongoing monthly fee. Examples that we use here in my business include Dropbox, Canva, Xero amongst several others.
Competitive advantage is what gives a business an edge in the market, enabling it to perform better than other companies in the same sector.
Competitive advantage can be created in many ways. Examples are location (for example, a prime footfall position on the high street for a retailer), brand, intellectual property, access to resources and finance, know-how, particular people.
For true competitive advantage, the source of it needs to be:
- Valuable to the customer – it must ultimately achieve some form of significant customer benefit
- Sustainable – the company must be able to maintain the advantage over time
- Difficult to imitate
Creative industries are those which have their origin in individual creativity, skill and talent. They also include industries that have the potential to create wealth and jobs through the development, production or exploitation of intellectual property. Industries such as advertising, architecture, art, crafts, design, designer fashion, film, interactive leisure software, music, performing arts, publishing, software and computer services and TV and radio are all examples of creative industries.
In business, creativity means coming up with fresh new ideas, problem-solving and opportunity finding.
Creativity is essential for innovation. Innovation is the purposeful conversion of ideas into a useable and useful solution.
Customer 4.0 is being described as the next generation of customer experience that businesses need to deliver in order to be successful. The digital age that we are in means that customers have more choice and are better connected than they have ever been, making them more empowered than ever too. Customers are able to choose only to engage with the companies whose values align to their own, whom they trust and who inspire them.
Another term for a customer avatar is customer persona. It is a representation of the business’ ideal target customer.
The word avatar originally comes from Hindu and means a manifestation of a god or soul in physical form on earth. In literature it was then used to describe a person who embodies an idea, and in recent years an icon or image representing a player in a video game.
In today’s digital marketing world, the term customer avatar is becoming more common due to video game influences.
A derivative innovation is a small improvement or modification to an existing innovation.
Design thinking is an innovation process based on some of the ways in which product designers think and create. It puts deep empathy with the customer at the very heart of the process and uses rapid prototyping to learn about what customers want and need, rather than simply to validate or test a concept.
Key stages in the design thinking process are:
- Empathise with the customer, and learn about what they need
- Define the innovation challenge, based on insights from the previous empathy stage
- Generate ideas that may solve the innovation challenge
- Create quick prototypes, and try different versions, learning each time
- Test the selected solution(s)
IBM Design Thinking is an example of a business that is deliberately using design thinking. It uses a framework to bring multi-disciplinary teams together, focus on the user and develop solutions that can be scaled up.
Disruptive innovation is a new development that forces an industry to re-think how it operates and change how it does business. For example, the internet has created a massive opportunity for industry disruption, bringing us online banking, DIY estate agency, downloadable books, music, shows and films and more.
Devs is short for developers. Devs are programmers, experts in creating computer software. They are also known as software engineers, and build assets such as websites, apps, systems and more.
The team will usually include front-end (user-facing) and back-end (‘under the bonnet’) development specialists.
Diversification is when a business chooses the strategy of developing new products and new markets that are outside its existing portfolio. Usually, the further a company moves away from its core competencies, the riskier the strategy.
Caterpillar, known for its massive yellow construction machinery, famously diversified into manufacturing work boots for leisure wear. Because work boots have an association with construction sites and toughness, the diversification strategy was de-risked to a large extent.
Dropshipping is when businesses sell their products without storing or shipping those products themselves. It is not an innovative concept per se, rather one that has become much more common as the internet – sites such as www.amazon.com, www.ebay.com, and social media have widened opportunities for businesses of all sizes to trade internationally.
Ecommerce simply means buying and selling products online.
Shopify, an ecommerce enabler, says that the first online sale ever happened in 1994. It was a CD by a band called Sting. Shopify also reports that global retail ecommerce sales will reach $27 trillion in 2020.
Facilitation / facilitator
A facilitator is someone who engages in the activity of facilitation. They help a group of people understand their common objectives and assist them in planning how to achieve these objectives, usually in a workshop or team meeting setting. In doing so, the facilitator usually remains “neutral,” meaning he/she does not take a particular position in the discussion.
In many types of group situations, and particularly in complex discussions or those where people have different views and interests, good facilitation can make the difference between success and failure.
The facilitator may need to call on a wide range of skills and tools, from problem solving and decision making, to team management and communications.
The definition of facilitate is “to make easy” or “ease a process.” The word ‘facilitate’ comes from the Latin facilitas, meaning ‘easiness’. So, facilitators ease the process of people thinking and working together in groups.
What a facilitator does is plan, guide and manage a group event to ensure that the group’s objectives are met effectively, with clear thinking, good participation and full buy-in from everyone who is involved.
Front-end development is the process of coding the aspects of software that the end-user will see, use and experience.
A gazelle is a high-growth business that has been increasing its sales by at least 20% per annum for four or more years, starting with a base of at least $100k – i.e. at least doubling its income over a four-year period.
Carol Dweck, a professor of psychology in the US, is famous for her work on mindset. Based on her research with children and adults, she has identified two mindsets:
Fixed mindset – which focuses on being right, on knowledge and avoiding failure.
Growth mindset – which focuses on learning, development, trying new things and being open to new experiences.
Highly innovative people and teams usually demonstrate more of a tendency towards a growth mindset.
A hackathon is when developers get together to collaborate on achieving a specific outcome, project or product until it’s done. The work usually goes on for at least a day, and usually longer, sometimes overnight or over weekends too.
The best hackathons are exciting, engaging, well-organised and catered for, and memorable for all the right reasons.
They can also help to build an awesome team ethic and strengthen working relationships between team members.
An idea is a thought, perception or impression. A new idea is when thoughts come together for the first time.
Steve Jobs famously said that creativity is about connecting things. When we have new ideas, we are connecting the information that we have in our brains to create a new option.
Ideation is the process of having ideas. It also can sometimes include turning those ideas into a commercial outcome.
Creative tools and techniques can be used to help with ideation, both for individuals and groups. You can find all sorts of free downloadable resources to help with ideation at www.ideatime.co.uk.
Incremental innovation is when small improvements are made to existing products, services and business processes. They are usually straightforward, low risk and inexpensive to implement.
It is estimated that at least 85% of all business innovation is incremental, and sometimes people use the innovation iceberg metaphor because it happens internally, within the business, and often is “below the surface” and unseen from the outside. This does not make it any less valuable. Continuous improvement means that incremental innovations can accumulate and create huge savings, efficiencies and other benefits. Companies such as Toyota have famously used ongoing incremental innovation through Lean manufacturing (see below) to achieve substantial competitive advantage.
Industry 4.0 is also known as the fourth Industrial Revolution, or 4IR. It is associated especially with the digitisation of manufacturing, but its effects are much more far-reaching and are touching many industries, and businesses of all sizes around the world.
Technologies such as A.I. (see above), robotics, location services, big data analytics, biotech and more have created opportunities for production lines to be super-automated and provide a new level of manufacturing performance and customer insight data. This means that mass personalisation of product manufacturing is possible, as is highly detailed working. Automation is also benefiting companies through lower production costs post investment and increased consistency and quality. Robots and people can work side-by-side, and the theory is that automation will release humans to do more interesting and skilled work. Whether this always will prove to be the case remains to be seen.
Examples of companies who are actively developing 4.0 manufacturing are Siemens, Bosch and Audi.
I define innovation as purposeful creativity. It’s about taking ideas and making them useful in practice.
Innovation doesn’t have to be completely original. It can be an adaptation or improvement to something that already exists. Many innovations are built on the shoulders of the products or services that pre-date them. For instance, today’s smart phone built on the laptop innovation, which built on the P.C., which in turn built on the typewriter, which built on printing press techniques and so on.
Idea proliferation – or coming up with lots of ideas on an ongoing basis – is a really important ingredient of creativity.
Having lots of ideas helps you to come up with even more ideas! Here’s why:
- If you have 2 ideas – a and b – you can only derive 1 new idea from those which is ab.
- If you have 3 ideas – a, b, and c – you can derive 4 new ideas which are ab, ac, bc, and abc.
- If you have 4 ideas – a, b, c, and d – you can then derive 11 new ideas which are ab, ac, ad, bc, bd, cd, abc, abd, acd, bcd, and abcd.
To give you clearer picture, here are the numbers above and some more:
- 2 ideas can generate 1 new idea.
- 3 ideas can generate 4 new ideas.
- 4 ideas can generate 11 new ideas.
- 5 ideas can generate 26 new ideas.
- 6 ideas can generate 57 new ideas.
- 7 ideas can generate 120 new ideas (and so on! I think you get the idea!).
To compete, on an individual, professional level, as a team, and as an organisation, your core currency is ideas – ideas on how to solve problems, create opportunities, differentiate, bring new, added value.
Ideally you will create a constant flow of ideas, so that you always stay fresh, in tune with the changing market, and become the architect of your own opportunities.
Not all of these ideas will be great ones, and that’s ok. The innovation funnel (also sometimes called the innovation filter) is a metaphor used to express the concept of putting lots of ideas into the top of a funnel, with only a handful of the very best ones coming out the other end, having been actioned. The less good ideas don’t get developed as far as the better ones.
Useful criteria to apply in your own innovation funnel when you have a number of ideas include:
- Value – the tangible and intangible benefits that the idea could bring.
- Fit – how well the idea fits into your overall strategy and portfolio.
- Do-ability – how achievable the idea is, given the resources that you believe you can access, including with some stretch.
As you sift your ideas through the sieve of these criteria, you can make a decision on each idea:
- Go – the idea meets all the criteria and should progress to the next stage.
- No go – the idea falls significantly short of the criteria.
- Modify – the idea nearly meets all the criteria and could meet them all with some tweaks.
- Park – the idea is showing potential merit, but the timing or conditions aren’t right. Hold this as a potential idea to revisit in the future.
Innovation adoption lifecycle
The innovation adoption lifecycle describes how a new product or service is adopted by customers, and when different customers are likely to purchase. Some customers are likely to be early adopters, others later adopters.
Although the concept is used specifically in the context of innovation, it was first articulated and published by Rogers in his book Diffusion of Innovations, now a classic but written back in 1962.
Rogers categorised customers into 5 groups:
Innovators – these are the very first people to buy innovations. They are risk takers.
Early adopters – they try the new product or service before it becomes popular and well known.
Early majority – these are not the opinion leaders or influencers and will follow and use reviews and recommendations before buying.
Late majority – they are very risk-averse and only purchase once something has become mainstream. They may also often wait for a new version or model to come out rather than buying the original one.
Laggards – these are people who don’t like change and will only buy the innovation if they have no other choice but to do so.
A business’ innovation culture is the extent to which employees feel and demonstrate that they are able to be creative, collaborate and take action on their ideas to enhance company performance.
Individual employees will experience the business’ culture in different ways, bring different expectations and have their own perceptions of it. However, tools such as the Dolphin Index can be used to survey perceptions of the climate of innovation in businesses and teams.
My own PhD research demonstrates that the aspects of innovation culture that make a particular difference to helping employees to be entrepreneurial at work are that the business is dynamic, up for taking some calculated risks, is welcoming of employees having and sharing lots of ideas and provides support for employees’ ideas.
An innovation sprint is a form of workshop, lasting a day or sometimes several, designed to bring people with different skills together to tackle a specific challenge.
Innovation sprints tend to follow an innovation process that moves the group from problem definition, idea generation, idea development through to action planning. Sessions are interactive, collaborative and structured to elicit fresh thinking from the participants.
Innovation sprints are usually led by a facilitator (see above).
An intrapreneur practises entrepreneurial activity in an established organisation.
They successfully spot opportunities that are not immediately obvious to most
colleagues and make them happen to generate positive, material results for their employing organisation. These results can constitute reputational, product or service development, or market development benefits to the organisation.
IP (Intellectual Property)
IP refers to assets that have been developed through creativity. Examples are inventions, written and artistic work, designs, symbols, names, processes, images. IP can be legally protected to prevent other people from using the ideas as their own, for instance by copyright, design right, trade mark, registered design, patent.
IP is a specialist area. A good place to start is the UK Government’s online guide to Intellectual Property.
The process of successful product or service innovation is most often not straightforward. Challenges – often unexpected – arise along the way, meaning that it is usual for innovation to make some progress, only to have to go back a step or two to work through an issue.
This process of moving forward, going backwards to revisit, and then moving forward again is referred to as iteration. The term iterative process is also frequently used in the context of innovation.
Lateral thinking means taking a creative, non-logical approach to coming up with ideas to solve problems and opportunities. The benefits of lateral thinking are that it generates fresh thinking that is not immediately obvious. Edward de Bono’s lateral thinking techniques are designed to disrupt the brain’s regular thinking patterns and increase creative thinking.
A lead user is a significant customer whose demands are ahead of the market, meaning that the supplying company needs to innovate in order to keep up with and retain that customer. The term creative consumer is also used to describe this type of customer.
Lean is both a philosophy and process improvement approach that focuses on minimising waste and maximising customer value without compromising quality, efficiency or productivity. It started in manufacturing but is applicable and used in many other industries.
Lean is sometimes referred to as process innovation or value stream innovation.
Lean has its own terminology, much of it coming from Japanese due to Lean’s roots in Toyota.
Some examples of Lean terms are:
Bottleneck analysis – identifies which part of the process significantly slows everything else down, so that the issues can be addressed and the process can be accelerated.
Kaizen – continuous improvement, heavily involving the input and collaboration of the people on the frontline who experience the processes first hand.
Muda – waste, anything that is produced or used that does not add value for the customer.
Value stream mapping, also known as process mapping – a visual stage-by-stage map of the process, with swim lane flow charts to show the roles and actions of different people in the process.
Market pull happens when the demand or need for a new product or service comes from the marketplace.
An example of market pull is the range of accessories that are now available to enhance smartphone photography, such as add-on lenses, tripods, selfie-sticks, photo and video editing apps.
Amazon is a commonly cited example of a business that has pioneered mass personalisation, which is when a company is able to highly customise its offer for a wide range of individual niche segments, differentiating through its capability for small batch production.
There is an old expression: reach for the moon, and at least you will land amongst the stars.
JFK’s space mission to land a man on the moon and return him safely to Earth was a real moon shot.
In business growth and innovation terms, moon shot has come to mean an extremely ambitious, challenging, creative and inspiring goal.
A moon shot is very similar to BHAG (see above).
In product development, the minimum viable product (MVP) is a product with just enough features to satisfy early customers, and to provide feedback for future development.
The idea is that rather than waiting to perfect and polish every aspect of a product before it gets tested or goes to market, the MVP helps entrepreneurs and corporates alike be more agile, ship their concepts much more rapidly, and get customer feedback that helps them to continuously improve the product to make it better, stronger and more attractive more quickly.
Waiting until the business has developed the ‘perfect’ product often means wasting time and money, and in some cases allows the competition to get there before you do.
The concept of open innovation is credited to Chesmore. Open innovation is when an organisation opens itself up to receive innovation from the outside world or customers, suppliers and stakeholders. This is in contrast to traditional models of innovation which focus on innovation being an internal-only process.
An excellent example of open innovation that I have been personally involved with as a facilitator is Northumbrian Water Group’s Innovation Festival.
The Innovation Festival is a truly unique event taking social and environmental challenges and applying exciting problem-solving techniques, such as design sprints, data hacks and workshops over five action packed days with employees, customers, suppliers, stakeholders and international experts.
The focus is on innovation mixed up with a summer festival feeling, featuring a marquee village, 14 huge challenges tackled in a fun and focused way, STEAM activities to inspire the next generation, evening entertainment to chill-out at and health & wellbeing activities for participants. More than 3,000 people have attended the two festivals to date, from 650 businesses and organisations.
In the context of innovation and business growth, pain point means an aspiration or challenge that the customer is experiencing, and the emotion connected with that aspiration or challenge.
The customer’s aspiration or challenge may be real or perceived, but the customer is aware that they have the problem or opportunity and want a solution for it.
Fully understanding customer pain points is essential for innovation because they provide huge opportunity for successful, commercial product and service development, and because they inform the language and channels for customer communications.
Sometimes when a single price is presented to customers, those customers have nothing to compare the price with to assess whether or not it offers good value.
To counteract this, businesses sometimes give a second price, either higher or lower than the target price, to provide some context and help the customer with their buying decision. This is the reference price.
The reference price could be more expensive than the target price, positioned for a premium package, or less expensive for a more basic package.
Providing a reference price can be a successful strategy for preventing your customers from going elsewhere to look in detail at competitor prices and for helping them to make their decision based on the information you have given.
Reverse innovation happens when solutions created in and / or for the developing world are distributed to and used by more developed nations.
Some businesses have an active strategy of carrying out product development in emerging countries first before introducing them more widely across the world.
If you’d like to learn more about it, take a look at a book called Reverse Innovation: Create Far From Home, Win Everywhere, by Govindarajan & Trinder.
Seed funding is also known as seed money, or seed capital.
It is an investment in a very early stage company, usually in return for a share of equity, to help get the company started until it can generate revenue for itself.
The word ‘serendipity’ originates from an eastern fairy story, The Three Princes of Serendip. The main characters in the story were always discovering by accident things that they weren’t looking for.
Serendipitous innovation means coming up with new ideas and solutions by happy accident.
Skunkworks is the name that Lockheed Martin gave its Advanced Development Programs that were responsible for new aircraft designs.
It has come to mean an informal team of people who collaborate on a radical innovation.
Social innovation is the process of finding and delivering solutions for challenging and “often systemic” (Stanford University) social and environmental issues in order to achieve better social conditions.
Technology push is when advancements in technological innovation drives product development into the market.
A famous example is the touchscreen, which was developed by the Royal Radar Establishment and then pushed to the market commercially by Hewlett Packard in the 1980s.The technology was then further enhanced by Apple amongst others to include the ability for screens to read handwriting devices.
A unicorn company is a start-up that is privately owned and valued at over $1bn.
USP stands for unique selling point.
Ideally, your USP statement needs to fulfil a number of criteria:
- It needs to actually work and matter in the real world, especially to customers, of course.
- It should add value to financial performance, helping you to sell and generate customer loyalty and employee engagement.
- It should be something that you can keep delivering consistently.
- And of course, it does actually need to be genuinely unique!
Businesses with a truly awesome, customer-focused USP (Unique Selling Point) are successful at competing without having to cut prices, retain their target customers for longer and are more likely to generate a healthy return on their marketing investments.
For more information and access to a free USP playbook, have a look at my article How to create an awesome USP for your business.
Your value proposition is the core reason why your customers buy from you, rather than not buying at all or buying from a competitor.
Zoom (and its sequel, Re-Zoom) is a creative, wordless picture book by Istvan Banyai about perspective. Nothing in the book is quite as it first seems. As well as being a great children’s book, it is a great springboard for team strategy and innovation sessions. It helps business delegates to look at the business challenges and opportunities from different standpoints.