Push and pull innovation: sources and overlooked factors

Innovation is a key success factor for many businesses. Fostering innovation, however, can be challenging. For much of the 20th century, management focused on push strategies for innovations, where managers would push resources into areas deemed in greatest need. This system is designed around the idea that scarce resources must be carefully allocated to meet anticipated demand (Brown, 2005). In more recent years, the pull approach to innovation has increased in popularity. This approach is characterized by allowing outsiders to create solutions to problems. This process resembles in some ways using customer feedback to identify new market opportunities -- the genesis of the innovation is external, the company is being requested to innovate and begins the process from there (Brown, 2005). This technique is more responsive to customer needs, and can be more efficient in the allocation of resources, but pull innovation is not likely to outperform push innovation in all circumstances.

Hagel and Brown (2008) note that pull strategies are often more effective under conditions of uncertainty. When demand is difficult to estimate, a push strategy is likely to be an ineffective means of allocating resources, whereas a pull strategy allows the market to dictate its needs and the company to respond accordingly. The pull strategy allows the company to break innovation gridlock by tapping the market for ideas and directions. By opening up the innovation process directly to the market, the feedback that the firm receives is likely to be more accurate than in any push strategy. The pull strategy is becoming more important for technology firms, because of the rapid pace of innovation and the importance of innovation to maintaining competitive advantage.

Where demand conditions are easier to predict, a push strategy can be successful. The push model has proven successful when companies have substantial research and development capabilities and therefore are in a position to allocate resources to their own ideas, create products and then worry later about marketing those products. In industries with a slow pace of technological change, a low rate of customer empowerment and relatively low levels of competition, this is still the most common strategy. One example would be the pharmaceutical industry, where industry researchers in general have a better sense of what gaps exist in the market. In that industry, there is less competition as well, because of the monopoly protections, and this stifles the pace of innovation. Another factor that makes pharmaceuticals well-suited to push innovation is the long lead time for new products. Management needs to anticipate demand farther out than the market can, in order to allocate resources effectively.

There are several sources of innovation. The first comes from the staff members. There are a number of strategies that companies use to foster innovation internally, from people who are not in the R&D department. Some companies like Google and Intuit give their employees time to work on their own projects; other companies rely on a culture that specifically encourages risk-taking, and empowering employees in order to tap into this resource (Inc. Magazine, 2010). Another source of innovation comes from formal techniques such as gap analysis. Such activities can be conducted by the research and development department or the executive suite and are often associated with push strategies. By scanning the environment to see what gaps might exist, ideas can be generate. Apple utilized this strategy several times to great success, scanning the market for products that were not living up to their potential, and re-imagining them.

A third source of innovation, most commonly associated with a pull strategy, is to tap into the customers in order to find out what needs they might have that are not being met. One of the reasons why the pull strategy is becoming more common is that companies, through social media in particular, are better able to receive ideas and feedback from customers that can drive innovation. By fostering more open communication with customers, companies can improve their innovation pipelines. Whether an innovation strategy is perceived to be commonly overlooked or not is irrelevant, the only issue is whether it exists and whether it can be utilized. People who read Drucker -- and that is most people -- understand that innovation has a wide range of sources, and it includes listening, thinking, perceiving and conceiving. Innovation often comes from within the companies at lower levels of the organization, but it can just as easily come from a conversation with a non-customer about why they are not a customer. It is important for managers to remain completely open with respect to the sources of ideas and innovation, including utilizing both push and pull strategies.

Flowing from Drucker's point about innovation, entrepreneurs should not be married to a single strategy, but they should nevertheless have a primary strategy. A strategy will to guide the innovation process, because it will formalize the searches for innovation, such as environmental scans, focused research or brainstorming. Without some sort of formalized process, the entrepreneur may rely too much on gut or intuition, and the resulting products may not meet any actual needs in the marketplace. Having a formal process will help to not only generate ideas, but to clarify them and vet them. The entrepreneur just has to bear in mind that innovation comes from many sources and not to overlook great ideas that come from outside the formal process.

The entrepreneur should also bear in mind his or her absorption capacity. Absorption capacity reflects the firm's ability to gather and process information, and apply it to the innovation process. A single entrepreneur is going to encounter a lot of information, but is likely going to have trouble distilling that information into one or two great ideas to pursue further. As a result of misunderstanding his or her own absorption capacity, the entrepreneur many not be spoiled for choice as much as paralyzed by it. This is one of the main reasons why the search for new, innovative ideas must be managed with a specific process. That process will help to moderate and manage the flow of information that the entrepreneur has, and allow for ideas to work through channels of analysis effectively.