The word "innovation" is bandied about in the executive suite like "change" is on the presidential campaign trail--spoken with verve and conviction but often lacking in substance. Life, liberty, and the pursuit of innovation: Who can argue with that?

The arguments surface when innovation moves from ideological concept to organizational mission. Does innovation mean refining and enhancing products and processes (straightforward and palatable)? Or is it more about overhauling how we think about and interact with customers, suppliers, and other partners (disruptive but potentially game-changing)?

C.K. Prahalad and M.S. Krishnan, University of Michigan professors and leading authorities on business and technology management, argue that true innovation slopes heavily in the latter direction. In their upcoming book, The New Age Of Innovation (McGraw-Hill), they portray a future where leading businesses will innovate in two overarching ways: by "co-creating" value with their customers, treating each one as an individual; and by regularly tapping resources from specialized third parties worldwide rather than trying to do most things themselves, the culmination of the truly global and integrated supply chain.

While most multinational companies already have far-flung supplier networks, Prahalad and Krishnan note, those have been assembled mostly to reduce costs rather than deliver value (think Wal-Mart). Meantime, most companies haven't even started to co-create value with their customers. Even Dell's world-class build-to-order model is more about giving customers choices from a set menu than letting each customer truly customize computers and other products, the authors maintain.

Prahalad and Krishnan offer some striking examples of new age innovation already in progress. Tire maker Bridgestone is experimenting in Europe with charging trucking fleet owners per mile of tire usage rather than up-front fees. Pricing contracts are based on such factors as truck loads, vehicle maintenance, routes traveled, and driver training levels. Variables such as tire pressure and truck speed can be monitored via censors and reported to the Bridgestone data center. As such, Bridgestone is moving from a transactional relationship with its customers to a tailored service relationship with each one. The data it gathers is shared with fleet owners to improve their operations and customer engagement.

The authors also present Apple, Google, ING, McDonald's, and Starbucks, as well as smaller, lesser-known companies, as being on the leading edge of personalized, globally sourced innovation. But the book gets really interesting--and controversial--when the authors' vision of next-generation innovation raises questions about privacy and security.

One case in point is that of ICICI Prudential, which has introduced a life insurance product in India priced according to customers' compliance with a personalized health program. In applying that model to diabetics, ICICI regularly tests blood-sugar levels and other vital statistics, ultimately in near real time via remote diagnostics. ICICI has assembled a network of medical providers, pharmaceutical companies, diagnostic and testing firms, even fitness clubs to keep customers on track. It adjusts insurance rates, say, every two weeks, as a customer's compliance with the program varies.

Extraordinary innovation. But imagine the logistical and technical complexity, the security challenges--and the hue and cry from privacy advocates if such a service were to be introduced in this country. As a lifelong diabetic, I will be blogging more on this subject (and others) on a micro-site that launches April 1, newageofinnovation.com, where Prahalad, Krishnan, and a range of other innovation luminaries also will mix it up--hopefully with you--on the many social, economic, business, and technological issues surrounding the book. See you there.

Rob Preston,
VP and Editor in Chief
rpreston@techweb.com

To find out more about Rob Preston, please visit his page.