Innovation.

The framework

1. 01

   The unexpected is the cheapest source — and the one your reporting hides.

   Drucker's first source has three faces: unexpected success, unexpected failure, and an unexpected event outside the business. His own examples were IBM in 1933 — an accounting machine built for banks that weren't buying, which Thomas Watson went on to sell by the hundred to libraries after the New York Public Library bought one — and Ford's Edsel, which he read as the failure that taught Ford the market had begun segmenting by lifestyle rather than income, and pointed the way to the Mustang. The information arrives free. What it costs is admitting the plan was wrong about something.

2. 02

   Four sources inside the building, three outside it.

   The internal four — the unexpected, incongruities, process needs, structural change in your industry or market — are visible from your own desk, in data you already hold, and they reward a regular scan. The external three — demographics, shifts in perception, new knowledge — move slowly enough to review once or twice a year, and they're where the larger and later opportunities sit. Knowing which kind you're looking at sets three things at once: how often you look, what evidence would convince you, and how long you should be willing to wait before it pays.

3. 03

   What does your industry still believe that quietly stopped being true?

   That question works the second source, incongruity — the gap between how things are and how everyone assumes they are, or thinks they ought to be. It shows up as a step in your process that everybody tolerates and nobody defends, an economic reality that has drifted away from the industry's story about itself, or a customer who buys your product and visibly wants something adjacent to it. Incongruities are cheap to act on precisely because the people around you have stopped seeing them, which is also why they survive so long.

4. 04

   Put the scan in the diary and work the sources in order.

   Drucker meant discipline literally: this is a search you conduct, not a mood you wait for. Book an hour a quarter, walk the seven in his order — cheapest and most certain first — and write one line under each rather than trying to be brilliant under any of them. Start with the unexpected because it's nearly free, and treat the seventh with respect: Drucker's own illustration was the motor industry, several hundred American automobile companies in the first decades of the century, and a handful left by 1960.