Why Innovation Is Broken and What To Do About It To Drive Organic Growth

Outcome-Driven InnovationOutcome-Driven Innovation

Why Innovation Is Broken and What To Do About It To Drive Organic Growth

Urquhart WoodInnovation and Growth Strategy Advisor

Strategyn Consulting

http://images.google.com/imgres?imgurl=http://www.bgamers.com/images/3330S-Glass%2520Chess.jpg&imgrefurl=http://www.bgamers.com/sale.htm&h=372&w=475&sz=102&tbnid=3EfeQFy1mswJ:&tbnh=98&tbnw=126&hl=en&start=14&prev=/images%3Fq%3DChess%26imgsz%3Dsmall%257Cmedium%257Clarge%257Cxlarge%26svnum%3D10%26hl%3Den%26lr%3D

2

Outcome-Driven Innovation

2 Copyright 2009 Strategyn, Inc. All Right Reserved.

Innovation is Shrouded in Confusion

Is there agreement among managersin your company as to …

YES NO

What innovation is? 95%

What a customer need is? 95%

Without agreement on these fundamental concepts, how can a company ever

expect to excel at innovation?

It can’t.

3



The Innovation Process Is Broken Because …

Lack of structure

It is being executed:• With the wrong inputs • In the wrong sequence

1

“Nothing is more important than innovation, but if you think you can organize it you are nuts … really nuts. Orderly innovation is an oxymoronic phrase, believed only by morons with ox-like brains.”

Tom Peters, HSM 2007

Bad theory and false beliefs

2

“Innovation begins with an idea.”

“Customers often do not know, or cannot effectively communicate, their actual needs and requirements.”

Wikipedia, 2007

4



…is the process of devising a product or service concept that satisfies the customer’s unmet needs.

Product/Service Innovation…

Development is the process of designing/engineering a product or service concept that has been approved for creation.

1 Stage-Gate® is a trademark of Stage-Gate Corporation

-1

Innovation & Growth Strategy

5



2y + yz3 x zy3 + yz3 x zy3 - x2y3z6 + 2x2 + 2y + yz3 x zy3 - x2y3z6 +

2X + Y = 3 and X - Y = 4

It’s Like Solving an Algebraic Equation …

X = 3 and Y = 12(3) + 1 = 3? No

X= 1 and Y = 12(1) + 1 = 3? No

X = 2 and Y = 22(2) + 2 = 3? No

6



Two Innovation Paradigms: Ideas-First Vs. Needs-First

7



Dynamics of the Ideas-First Approach

● Successful innovation is a numbers game … the more ideas, the better

● The goal is to fail fast – quickly evaluate ideas to see which are best

● Evaluations are conducted without knowing all the customers needs

● This approach is guesswork – it leads to failure 70-90 percent of the time

It’s inherently flawed for 3 reasons:

1. You never know ALL the customer needs

2. Brainstorming more ideas without knowing the customer’s unmet needs won’t increase the probability for success

3. The evaluation and filtering approach is flawed

Brainstorm

Evaluate and Filter

Select a Concept

8



Failing Faster Doesn’t Work

“Nothing is less productive than to make more efficient that which should not be done in the first place.”

Peter Drucker

70% - 90% Failure Rates

Brainstorm

Evaluate and Filter

Select a Concept

9



2X + Y = 3 and X - Y = 4

The Process Must Be Executed Needs-First

1. First, companies must uncover ALL the customers’ needs

2. Next, they must determine which are unmet

3. Only then are they prepared to devise product & service concepts that address the unmet needs

But isn’t this what VOC does now?

10



The Sought After Customer Needs Are Undefined

There is no agreement on what a “need” is

Delighters

Specifications

WANTS

NEEDSconstraints

BENEFITS

Solutions

latent needs

Exciters

must havesWISHES

IDEAS

expectationsunarticulated

needs

There is no way to know if ALL the needs have been captured

See Giving Customers a Fair Hearing, Sloan Management Review, Spring 2008

11



• Companies do not know what inputs to capture, what’s needed for innovation

• Customers offer “needs” in a language that is convenient to them

• Many firms try to translate the inputs into something useful

• A mix of input types is the result

• Bad inputs cause the product failures managers are trying to avoid

Poorly Defined Customer “Needs” Are the Norm

“You have to listen to me … I know exactly what customers want!”

Strategyn Cartoon - 2006

R&DMarketing

Sales

11

See Giving Customers a Fair Hearing, Sloan Management Review, Spring 2008

12



"People don't want to buy a quarter-inch drill. They want a quarter-inch hole!“

Theodore Levitt, 1975

The drill is a solution

The hole is the need

13



The Universal Job Map (Not a Process Map)

See The Customer-Centered Innovation Map, HBR, May 2008

Prepare• Set up• Organize• Examine

Prepare• Set up• Organize• Examine

Modify• Update • Adjust• Maintain

Modify• Update • Adjust• Maintain

Confirm• Validate• Prioritize• Decide

Confirm• Validate• Prioritize• Decide

Monitor• Verify• Track• Check

Monitor• Verify• Track• Check

Execute• Perform• Transact• Administer

Execute• Perform• Transact• Administer

Locate• Gather• Access• Retrieve

Locate• Gather• Access• Retrieve

Define• Plan• Select• Determine

Define• Plan• Select• Determine

Conclude• Store• Finish• Close

Conclude• Store• Finish• Close

A job map provides the structure needed to ensure all customer needs are captured

14



Process Step 2

Process Step 3

Process Step 5

Customers Intuitively Employ a Logical Value Measurement System

• Customers use “metrics” to define the successful execution of a specific job – these are their desired outcomes.

For any job there maybe 50 to 150 outcomes

Process Step 1

Job Activity Map

• Metric 41• Metric 42• Metric 43• Metric 44• Metric 45

Process Step 4

• Metric 1• Metric 2• Metric 3• Metric 4• Metric 5

Outcomes are customer needs

15



Jobs and Desired Outcomes are Stable Over Time

● Products come and go, but the job is stable over time

● The job’s perfect execution reflects the customer’s true definition of value

● Requirements are not captured on the product – they are captured on the job the product or service is intended to perform

Job of Storing and Retrieving Recorded Music

Satisfaction

Vinyl CD MP3

Increase the number of songs that are available

4 5 8

Minimize the amount of distortion that is heard

5 8 9

Minimize the amount of damage during normal use

3 6 9

Minimize the amount of storage space that is needed

4 6 9

Increase the degree to which the music sounds live

5 7 6

Cumulative Satisfaction

42% 64% 82%

16



How important is it that you are able to….?

Not Important At

AllSomewhat Important Important

Very Important

Extremely Important

Increase the likelihood that all potential investment options are considered

1 2 3 4 5

Minimize the time it takes to learn what is necessary to know about an investment

1 2 3 4 5

How satisfied are you with your ability to….?

Not Satisfied At All

Somewhat Satisfied Satisfied

Very Satisfied

Extremely Satisfied

Increase the likelihood that all potential investment options are considered

1 2 3 4 5

Minimize the time it takes to learn what is necessary to know about an investment

1 2 3 4 5

Uncovering and Prioritizing Opportunities

• Administer a survey (web, phone) to a significant population

• Determine the importance of each outcome

• Determine the degree to which each outcome is satisfied, given the solution(s) they are using today

• Use the Opportunity Algorithm to identify opportunities

17



Opportunity = Importance + max (Importance – Satisfaction, 0)

OUTCOME IMP SAT OPP

Minimize the time it takes to read the information about an investment

9.0 5.0 13.0

Minimize the likelihood of failing to know the right questions to ask

7.0 3.0 11.0

Minimize the likelihood that the promotional materials fail to provide needed information, e.g., cost, benefits, etc.

5.0 1.0 9.0

1. If 90% of the respondents rate an outcome a 4 or 5 for importance, the Importance value entered into the algorithm is a 9.0.

2. If 50% of the respondents rate an outcome a 4 or a 5 for satisfaction, the Satisfaction value entered into the algorithm is a 5.0

What is the Opportunity Algorithm?

18



Sat

isfa

ctio

n

Importance

Opp >15ExtremeOpportunity

Opp >10Solid Opportunity

Opp >12High Opportunity

Under-ServedAppropriately Served

LimitedOpportunity

1

2

3

4

5

6

7

8

9

10

1 2 3 4 5 6 7 8 9 10

Table Stakes

Sustaining orBreakthrough

Innovation

Over-Served

Opportunity = Importance + max (Importance – Satisfaction, 0)

Ripe for Disruption

Potential for Disruption

The Opportunity LandscapeTM

See Turn Customer Input Into Innovation, HBR, January 2002

19



● People know and agree on what needs are unmet before idea generation

● With a focus on specific unmet needs (desired outcomes), individuals are able to generate ideas they know in advance will be valued by customers

● Companies do not have to brainstorm hundreds of ideas and hope that one of them is a breakthrough idea

● Outcome statements provide an unprecedented clarity about what a product or service must do to create value; they’re highly actionable

Focused Idea Generation Replaces Brainstorming

20



Concept Generationand Evaluation

Patent PortfolioDevelopment

PipelinePrioritization

Messaging, Positioning, and Selling

Purpose BrandDevelopment

R&D & Mergers

CompetitiveIntelligence

Market Segmentation

Applying Outcome-

Driven Data

ODI Aligns Cross-Functional Strategies

Why Innovation Is Broken and What To Do About It To Drive Organic Growth

Education

Transcript of Why Innovation Is Broken and What To Do About It To Drive Organic Growth