"Above all, we know that an entrepreneurial strategy has more chance of success the more it starts with the users -- their utilities, their values, their realities ... the test of an innovation is always what it does for the user...it is by no means hunch or gamble. But it is also not precisely science. Rather, it is judgment." -- Peter Drucker, Innovation and Entrepreneurship
Just because a company is spending money on research (such as markets, customers, or new technologies) and development doesn't mean they will get innovation. Innovation, as with advertising, training, or many other organization investments, depends on the quality of the investment as much as the quantity of resources put in it. A high proportion of innovative new products, services, and companies flop. That's often because managers build better mousetraps without first making sure there are any mice out there. Or that people still want to catch them.
Many innovations come from a deeper level of customer and market understanding. They go beyond what current customers say they need. They solve problems that customers either don't realize they have or didn't know could be solved. These innovations create needs and performance gaps only once customers start using them and get turned on to the possibilities.
Every product and service we now take for granted was once silly, interesting, or just an odd curiosity. What would we have said to a market researcher asking about a video machine for our TV when there were few movies to rent? How about CD players when there were no CDs to buy? What about a bankcard to withdraw cash from an ATM? How about a personal computer? In the fifties, how highly would we have rated the need for jet planes when our business was conducted within a few hundred-mile...