Can innovation consistently lead to improved prosperity? Is there a simple path to a surge in business? Can you suddenly dominate your own little niche or category with a new product or service? Is there a reliable approach to innovation that will almost always lead to increased prosperity?
Yes, yes, yes and yes!
The purpose of this particular post (in combination with the next) is to provide you with enough information to know that the whole world of innovation is rapidly changing and that new highly-effective, proven methods have been developed that accelerate the pace and quality of innovation while radically reducing the risks traditionally associated with innovation. If you are in charge of an organization or department, you cannot afford to ignore the significance of these developments.
While the pace and effectiveness of innovation are changing competitive challenges as we know them, the traditional approach to innovation is often not worth the effort. The following highlights the scary statistics associated with traditional innovation approaches. First, though, consider this: 80% of new products fail on introduction to their market. And, about 60% of “new and improved” pre-existing products fail upon reintroduction. Second, finding a new service or product is not that easy. Dell Computer built an idea-soliciting website in February of 2007 called Ideastorm. Of the 12,483 ideas posted on the site, only 366 were implemented, less than 3%. Do you know how much sweat it was to get to just one usable idea? How much impact do you think that one idea had? Or all 366? Starbucks, with its My Starbucks Idea, had even more disappointing results with a scattershot idea generation approach: 75,653 ideas yielded only 315 implementable ideas. That’s less than half of 1%. What do you think the cost was for all the work involved in gathering, sorting, screening, evaluating, developing, testing, launching and nursing those 315 suggestions? Sadly, even major corporations can have poor innovation systems (statistics provided by “How to Fix Product Development”, Mike Shipulski, November 2011, Innovation Excellence blog).
Tinkering & Tweaking or Going Deep?
Customers, floor workers and sales personnel can generate a lot of ideas for innovation. However, most of these ideas tinker with what already is; only rarely do they show the path to a major change in the marketplace. Because customers are rarely professionals who are current on the latest advances in industry and technology, their ideas are usually confined to something they’ve seen before, perhaps similar or related products in the same or another consumer sector. In fact, developing customer ideas can be dangerous. They tend to generate bland, unremarkable, stereotyped, “me – too” solutions that are met with indifference upon launch; the waste of time, money and diligent effort can yield anything from discouragement to disaster.
However, internal and external suggestions from suppliers, buyers and curious employees can lead to some solid improvements to existing products and services. Such progress (incremental improvement) has been historically necessary to retain and grow market share. This incremental improvement is crucial only for maintaining and improving the current “performance engine” that is the lifeblood of the company. Sadly incremental innovation (or improvement) is not enough to compete in today’s aggressively changing marketplace. Incremental innovation seldom disrupts the product development cycle and only rarely leads to dramatically increased market gains.
So how do we get to BREAKTHROUGH Innovation? How do we instill GAME-CHANGING DISCIPLINES within our companies?
The new realm of breakthrough innovation is built on a foundation of corporate character which includes humility, servant mentality, and a deep, intense caring for the customer.
The opposite of humility is hubris or ego. The know-it-all, expert approach seen in too many senior managers – - and others in authority – - is what blocks discovery and turns creativity dangerous. Far too much innovation is divined from the boardroom without ever getting out and truly understanding what the users are struggling with and desperately need. There is too much assuming that they know more than the buyers about what the buyers really want. In other words, they are guessing. Those guesses are usually based on feedback (solicited or not) from customers about feature upgrades; the guesses seldom get at the unresolved problems a user would pay a great deal to fix. The net result too often is that such executives “try to create a need” by marketing some incrementally better feature that too few care about enough, at least to pay more (or any) money for. This is where many disasters happen. Humility assumes the opportunities for breakthrough are still unknown and hidden underneath the surface of casual observation. They are unknown to both the customer and the supplier. Getting to these gems requires a structured rigor to uncover what customers and suppliers have never thought about.
Secondly, a servant mindset builds on humility. It is needed to ensure the diligent effort and long, patient, hard work to approach and thoroughly, skillfully develop a deep understanding through interviewing many, many customers. Mainstream buyers need to be carefully examined. Fringe purchasers need to be identified and understood. Non-buying prospects will yield amazing insight. Potential customers – - who get their jobs done with products from other direct and indirect industry suppliers – - they give the most understanding and wisdom of all.
Further, this process of understanding the customer (driven by the interviewing process) and thinking differently about what the customer is really trying to do, cannot be delegated to underlings and especially not to salespeople who have the completely wrong agenda for this task. Steve Jobs is an excellent example of a CEO who saw this as his primary role. Interviewing seems like a low-level, laborious function but it is of the highest level of importance. It is central to a better understanding of the customer. It’s where true growth can be found. Much skill is required for the discovery. And… much caring.
When the motivation for growth is greed, power and fame, the perspective will always be warped. Those so disposed are never able to see quite right. By contrast, those that know their “why” (discussed in Step One, September 2011), their vision for a better world – - and their grassroots mission to make it so – - they are the ones who can provide leadership for the whole industry. They are the ones who become the most trusted advisor. They are the ones who can capture the hearts and minds of the people they serve.
Peter Drucker was such a visionary guru for the business community. He famously said:
“Because the purpose of business is to create a customer, the business enterprise has two – - and only two – - basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”
Marketing and innovation, it turns out, are closely interrelated. Understanding the market means having an intimate knowledge of the people who collectively struggle to get their work (and pleasures) done in simpler and easier ways. Innovation is not as much about giving them what they want as it is giving them what they don’t know they want. Innovation is about finding the simple button: a way of simplifying what they are trying to “do”. The outcome should be an improvement in making the “doing” easy. Easy is the difference between taking an escalator and rolling a boulder uphill.
This type of innovation is a science and a systematic process for delivering new value to users.
Apple is an example of a modern organization that has made breakthrough innovation a part of everything they do. They don’t just do innovation for their products; they do it to everything, including their stores. Apple, who for a long time never had a retail store, has re-invented retailing, achieving $6000 per square foot sales in a market where only 5 public companies exceed $1,000 per square foot – $2,000 per square foot higher than any other publically traded company.
The targeting process begins with a selection of new markets and customers based on one’s unique and distinctive skill set, and most importantly, the identification and prioritization of opportunities. These opportunities are based on breakthrough understanding of what customers are trying to do. It ends with the delivery of new and significant “outcomes” in the form of a satisfying, need-based product or service.