The Progress Economy

Are you in the 94% of executives unhappy with Innovation? You might be surprised that basing your definition of, and approaches to, innovation around adding value is the fundamental reason. Are you ready to beat luck and re-build around enabling progress?

Innovation

According to McKinsey, 84% of executives believe innovation is essential to growth — a point underscored by the 2025 Nobel prize” in economics that was awarded to researchers “for having explained innovation-driven economic growth”.

Yet a staggering 94% of those same executives are unhappy with their innovation initiatives. Whilst the IMF warns us we risk being in the “tepid 20s”, a period of weak economic growth.

These gaps – between belief and results, and between innovation and growth – are what I call the innovation problem.

In my view, the root cause is our fixation on value. Value is hard to define and leads us to a model – value-in-exchange – that has been wildly successful, but has numerous blindspots that are increasingly impactful. That model’s foundation on manufacturing observations struggles in today’s service-forward economies. And if we struggle to define and agree on what we’re chasing…we’re navigating innovation with an old map.

A better approach is to focus on enabling progress and therefore improve well-being. What job is a customer/user/guest/patient/student trying to perform, how can we make that easier or help perform more of the job? The progress economy does this. Progress-forward thinking gives us an operating model of the economy and reveals actionable tooling we can use to, as Christensen put it: compete against luck.

To understand why, we’re going to look at three key aspects:

• how innovation is typically framed today around the idea of “adding value”
• why chasing value so often leads to disappointment (page 2)
• how the Progress Economy reframes innovation in a way that is clearer, more operational, and more effective (page 3)

If you want to explore why we innovate in the first place – and how the Progress Economy reframes that question – we’ll discuss that over here.

For now, let’s begin by examining innovation through the traditional lens of adding or creating value.

Defining innovation – adding/creating value

How do you define innovation today?

I would think you do it in terms of adding or creating value. And you wouldn’t be alone. Here’s ISO’s 2025 definition; it defines innovation as “a new or changed entity, realising or redistributing value”:

Innovation: new or changed entity¹, realizing or redistributing value<sup>2


1</sup> product, service, process, model (e.g. an organizational, business, operational or value realization model), method (e.g. a marketing or management method) or a combination thereof.

² gains from satisfying needs and expectations, in relation to the resources used; examples: revenues, savings, productivity, sustainability, satisfaction, empowerment, engagement, experience, trust.

ISO 56000 (2025) – Innovation Management – Fundamentals and Vocabulary

This definition is more elegant than it might first appear. For one, it recognises that innovation can occur across a wide range of entities – products, models, methods, or any combination thereof.. – rather than our typical product view. It also defines value as a gain in satisfying needs and expectations. However the fuller definition of value later in the standard ties it back to a notion of a value exchange (see note 4 below).

value: gains from satisfying needs and expectations, in relation to the resources used

EXAMPLE: Revenues, savings, productivity, sustainability, satisfaction, empowerment, engagement, experience, trust.

• Note 1 to entry: Value is relative to, and determined by the perception of, the organization (3.2.2) and interested parties (3.2.6).
• Note 2 to entry: Value can be financial or non-financial.
• Note 3 to entry: Value can be created, realized, acquired, redistributed, shared, lost or destroyed.
• Note 4 to entry: The value of an entity is generally determined in terms of the amount of other entities for which it can be exchanged.

ISO 56000 (2025) – Innovation Management – Fundamentals and Vocabulary

Let’s explore that concept of exchanging value.

Relationship to value-in-exchange

ISO’s definition of value anchors our usual definition of innovation to a value-in-exchange mindset, rooted in manufacturing observations. In this model, value is

• progressively added through the manufacturing supply chain
• exchanged at a point of sale for something of equal value (usually cash)
• used up, or destroyed, by the new owner

Value:

• can be created, realized, acquired, redistributed, shared, lost or destroyed
• is generally determined in terms of the amount of other entities for which it can be exchanged.

ISO 56000 (2025) – Innovation Management – Fundamentals and Vocabulary

Don’t get me wrong, this model has served us well for centuries. It has helped build industries and delivered vast prosperity. Just look at the growth in England’s GDP from the time of economist Adam Smith (who wrote about value-in-exchange being the power behind economic growth).

Under such thinking, innovation reduces to ultimately increasing the value of exchange. Consequently value becomes defined in terms of the maximum someone is willing to pay.

A product’s value to customers is, simply, the greatest amount of money they would pay for it.

Golub, H., and Henry, J. (1981) “Market strategy and the price-value model” via “Delivering value to customers”, McKinsey (2000)

Classifying Innovation

When defining innovation, we should also consider how it can be classified. A common way to classify types of innovation is to look at the impact of that innovation. This gives us three types:

• incremental
• radical
• disruptive

Incremental and radical

Incremental and radical are often defined in relation to each other.

ISO 56000 (2025) defines a radical innovation as one that has a significant degree of change (where that change could relate to either the entity – product, service, process, model, method, or combination – or its impact).

Incremental innovation, it then goes on to define, as being at the other end of the continuum to radical innovation. Implying the change due to incremental innovation is not significant.

Disruptive

Disruptive innovation is often misunderstood.

Uber, for example, was “disruptive” in the everyday sense of the word – it radically changed the taxi industry – but it does not meet Christensen’s definition of disruption.

In his Innovator’s Dilemma framework, disruption begins with a new technology or business model that serves low-end or previously unserved customers, typically with simpler, more affordable offerings. Over time, as these innovations improve, they move upmarket. At the same time, incumbents are chasing after the increasing demands of high end markets. If the new entrant starts to capture the mainstream, then the incumbent(s) is said to have been disputed.

As the Christensen Institute clarify:

Disruptive Innovations are NOT breakthrough technologies that make good products better; rather they are innovations that make products and services more accessible and affordable

Christensen Institute

Uber didn’t make taxi service more accessible or affordable. It targeted the mainstream market directly, offering a superior, more convenient experience rather than a lower-performance, lower-cost alternative. It was not a disruptive innovation.

On the other hand, the personal computer disrupted the mainframe industry, streaming services the record industry, the Ford Model-T the existing high-cost automobile industry.

Alternative classifications

Other ways that people classify innovations is based on what the innovation impacts – product, process, business model, organisation innovation etc.

Or simply whether an innovation is internal or external to an entity, or if the source is within the organisation or leverages external inputs (such as Open Innovation).

All this sounds good, but here is a problem. Chasing value often disappoints. Here’s the main reasons why:

• Defining value, and agreeing on definition(s) of value, is hard
• There are many blindspots in the value-in-exchange model
• The manufacturing heritage driving our definition and activities is mismatched to our actual economy
• It drives too much internal focus
• We end up tempted into performing Innovation theatre

Read on to explore why…

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