Many people talk about product innovation, but few develop a full understanding of what innovation really means or what it takes to build an innovation culture and new solution engine. There are four fundamentals that must be in place for a truly innovative company:
- A profound understanding of the customers to be served, and unmet or poorly-met needs of those customers,
- A process for creating compelling solution ideas to meet those needs,
- A process for prioritizing, selecting, and funding the most promising solution ideas, and
- A development capability that rapidly turns the selected ideas into competitive products or solutions.
Furthermore, these four fundamentals must be “baked-in” to the company's major business processes; they are not activities for the occasional management retreat or offsite meeting. Let’s break each of these fundamentals down a little further:
1. A profound understanding of the customers: The inbound marketing responsibilities of most companies are usually fulfilled by a few marketing people (who may also be in charge of outbound marketing and business development), or chats with the sales reps, or possibly occasional visits to a customer by a marketing professional or an executive. Those visits are mostly sales calls, with possibly a few questions about what the customer would like to see in the future; and those sparse data, along with some studies of existing competitive solutions, are used to define the next set of products.
There are two problems with this approach: First, a sales call is a terrible way to listen to customer needs. As soon as you show your product line or jump-in to offer an immediate solution for a need you hear, the customer knows that you are not really listening. Secondly, customer needs that are collected by one person are subject to that person’s mental filtering, biases, and possible misinterpretation.
A much better approach is to have a pre-trained team of people, composed of marketing professionals, developers and others, do primary market studies by going out in pairs to interview typical customers with open-ended, “day in your life” kinds of questions. These interviews should not be coupled with sales calls, and they should not be solution-oriented. Any solutions the team members have in mind should be forgotten during the interviews – they are looking for unmet or poorly-met customer needs. The customer herself may not realize that she has an unmet need.
As example, in the early 1980s, Chrysler wanted to design an innovative car for American soccer moms and dads. They interviewed many such parents with questions like: “What problems do you have when you are trying to get your kids from the breakfast table to school?” They got frequent answers such as: “Well I usually spill my coffee on myself as I am trying to drive, even with my wide-bottom cup on the dashboard. And then the kids jump out of the back and slam the door into the next car. . .” Once the automotive engineers profoundly understood these problems, they came up with solutions like inset coffee-cup holders and sliding side doors in the hugely successful first suburban minivan – the Dodge Caravan.
2. A process for creating compelling solution ideas. Actually, this should be the easy part in most engineering organizations. Engineers are educated and trained to solve problems (at least technical problems) once those problems are well-enough understood. The issue for most companies is that they have no formal way to organize the solution-generating process, and may not always elicit the best solution ideas. They usually just hand the problem to an individual or small team and say: “Go come up with a solution.”
There are well-known and documented methods for “brainstorming” or otherwise using groups to generate ideas for satisfying unmet needs. One recent method that is consistent with Agile Product Development techniques such as Scrum is the “Product Innovation Sprint”, documented by Google Ventures at http://www.gv.com/sprint/. This method employs a group of 4 or 5 professionals (including one who is a customer with the problem), and follows a set of activities over a week to produce a working prototype solution plus a pitch about it. However they do it, every product or solution development group should have a set methodology for solution creation, and use it consistently.
3. Prioritizing, Selecting and Funding the ideas: I have assessed or studied many technology companies over a 20 year period, and I must say that I have never found one yet that has implemented and consistently used a well-honed process to ferret out and fund the most promising innovations. I recently talked to the VP of Innovation of a large Silicon Valley electronics firm and asked him: “How well does your company do innovation?” To my surprise, he just shook his head and said: “We do none. We just buy innovative companies and then ruin them.” He was only half kidding. As was pointed out by Clayton Christensen in his book “The Innovators Dilemma”, large companies have a very tough time looking beyond today’s needs and solutions because they may have a large, lucrative market to protect and because their divisions get too specialized, not looking for solutions that may fall between specialties. Therefore, many of them do depend on the acquisition of smaller, more agile and innovative companies for growth.
If company leaders truly want to have an innovation-creating engine, they should have a robust “funnel” process for new ideas that solve profoundly-understood unmet needs of their customers. This funnel process should be run periodically and consistently to select the promising ideas and a reasonable chunk of budget should be reserved to fund these ideas. Sometimes these solutions may be disruptive, cutting into the market share and profits of a mature business model within the same company. If so, leadership must have the courage to continue pushing the new solution if it adds more value for the market. I had a boss in one former large company who said “sometimes we must sacrifice our own products, before somebody else kills them.”
4. A Rapid Development Capability: In today’s fast-moving technology world, businesses cannot afford to develop more than a few new ideas if they use traditional product development methodologies such as the “Waterfall” method of sequential design, prototyping and test. In the software world, “Agile” development methods such as “Scrum” have all but supplanted the former slow and expensive methods. If we have a method that can develop a working, customer-usable prototype in a few weeks or months instead of years, then many new solution ideas can be tested on the market in a relatively short time. In addition, these Agile methods involve customers heavily in the development – changing the product specs late into the process if necessary to address the very latest needs. Consequently, the chances of the solution succeeding in the marketplace are higher.
Recently, these agile methods have been shown to work in electronic hardware development, as well as with pure software or apps. This advance was made possible by novel prototyping capabilities such as 3D printing of mechanical parts and fast-turn printed-circuit board services. Also, modeling programs in both the mechanical and electronic design fields have become so sophisticated and accurate that it is now possible to design a complex electro-mechanical product to work correctly on the first try. Test equipment has become so “smart” and sophisticated that it can tell the user why the test result differs from the modelled parameters. The result is that many electronic products (those that do not push the boundaries of physics) can be developed and demonstrated in very short times – typically a few months.
Summary: The ability to rapidly and repeatedly develop innovative solutions to common customer problems is in the grasp of technology companies today. The four principles to do so, as explained above, are to gain a profound understanding of the unmet needs of the customers to be served (the market), to develop a set of ideas for innovative solutions to those problems, to have a consistent process that selects and funds the best ideas, and to have a rapid development capability to test those solutions in the market. The final point is that these four processes must be “baked in” to the companies major business processes, not treated as special, occasional events that disrupt “normal” business.