In their provocative and insightful new book, “The New Age of Innovation,” co-authors C.K Prahalad and M.S. Krishnan discuss how the business world is being transformed by three major trends: digitization, ubiquitous connectivity and globalization. The authors write that this transformation will “radically alter the very nature of the firm and how it creates value.”

The central thesis of the book is that the aforementioned business transformation will be built on two pillars:

• Value will now be based on unique, personalized experiences of consumers — business focus will now shift to the centrality of the individual, even if a company serves 100 million consumers. In this new business reality, companies will build one consumer experience at a time.
• All firms will access resources from a wide variety of other big and small firms — a global “ecosystem.” The focus here is on access to resources, not ownership of those resources (in other words, the old vertically-integrated corporate structure is dead or dying).

These are pretty radical ideas. But, when you really think about it, not so radical. These changes are already starting to show themselves in the business world around us. I would bet that your company or organization is already starting to reflect a new business philosophy of focusing on one consumer at a time (remember one-to-one marketing?) and partnering with other firms to get things done rather than having to “own” or “control” all the resources themselves.

Another theme of “The New Age of Innovation” is the fact that, to embrace this new business paradigm and succeed in this transformed business environment, companies will need to practice “co-creation.” Yep, there’s that strange new business buzzword again. If you read this blog, you know I am pretty excited about how marketers can employ the co-creation approach to improve every aspect of marketing, communications and brand building. This brilliant new book by Prahalad and Krishnan really points the way how.

I strongly suggest you get and read this book. It is as far from the usual superficial, trendy, jargon-heavy business book as Beijing is from Boston. “The New Age of Innovation” is full of fascinating examples of how companies around the world are co-creating incredibly innovative new ways to serve customers. If you thought that innovation was just about designing a cool new personal music and video device (a la the iPod Nano), or a big idea for an advertising campaign, then you really need to read this book. Based on the twin pillars of individual focus and the partnering ecosystem, big and very small companies around the world are completely shattering the old tenets of business and marketing. The details are in the book. I promise it will make you think. And that usually leads to good things!

What does all of this mean for marketers and marketing? Well, in my view, the marketing industry desparately needs a major dose of innovation (quite a few doses). And, that goes for marketers and their agencies and consultants. We in the marketing profession too often view innovation as “just” being about a hot new idea for a TV spot, or perhaps a wild Flash video for a campaign microsite, or maybe a mobile widget. For the marketer innovation is usually viewed through the lens of smart new products or services, or perhaps a brakthrough customer loyalty program.

To be sure, all of those things can be innovative. But, true innovation — the kind that transforms businesses and creates breakthrough value for consumers and their companies — goes much deeper. When was the last time you noticed something (product, program, idea, business model, etc.) truly innovative in the marketing realm? Has Starbucks done anything really innovative recently? No, and that is their big problem these days. What about eBay, formerly a hugely innovative company. Probably not. Or Dell? Have you seen anything really innovative coming from Dell recently? And I am not just talking about a PC in five different colors (I am ESPECIALLY not talking about colored Dell laptops!). Dell innovated the computer world with its unique web based retailing model and just-in-time supply chain. I have not seen many innovations from Dell in the past few years, which is likely why they are struggling right now.

Innovation is in suprisingly short supply in marketing and branding (and that includes the digital side of our profession, which probably sees itself as the innovation standard bearers of our industry). The nasty little secret about marketing is that, far from being a hotbed of innovation, marketers (and their agencies) are frequently at the bottom of the innovation totem pole (the IT department usually exhibits much more innovation then the “cool” marketing group).

In fact, we marketers tend to be shameless copy-cats. Once one new product innovation emerges, everyone copies it. Or, if a hot ad agency scores with an impactful TV spot or web video, every other “innovative/creative” agency follows suit with a similar approach. Not a lot of innovation, just a lot of follow the leader.

“The New Age of Innovation” argues that to really drive innovation, you need to “co-create” with your consumers, your partners, and anyone else who can contribute ideas, technology, experience, etc. Some companies are finally starting to embrace this approach. I mentioned in a recent post on co-creation that Chrysler had launched a new website that is encouraging consumers to join with them in co-creating new products and ideas to help save this troubled (but stored) automobile brand. I recently noticed a new Chrysler ad campaign that is trumpeting this co-creation effort. While I was not particulalry impressed with the TV spots, I give Chrysler credit for trying. Indeed, co-creation to spur innovation is Chrysler’s last best shot at survival.

Innovation is what will separate the big winners from the also-rans (and the losers) in the new transformed business environment. For all of you marketers out there, I strongly encourage you to re-think how you innovate — or whether you are even innovating at all. It’s never too late to start innovating. And if you actively and regularly reach out to collaborate (and co-create) with consumers and partners, you have made a vital step on the innovation highway.

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