Outcome-Driven Innovation Why Innovation Is Broken and What To Do About It To Drive Organic Growth Urquhart Wood Innovation and Growth Strategy Advisor Strategyn Consulting
Jan 27, 2015
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
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
Outcome-Driven Innovation
3 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
4 Copyright 2009 Strategyn, Inc. All Right Reserved.
…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
Outcome-Driven Innovation
5 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
6 Copyright 2009 Strategyn, Inc. All Right Reserved.
Two Innovation Paradigms: Ideas-First Vs. Needs-First
7
Outcome-Driven Innovation
7 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
8 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
9 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
10 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
11 Copyright 2009 Strategyn, Inc. All Right Reserved.
• 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
Outcome-Driven Innovation
12 Copyright 2009 Strategyn, Inc. All Right Reserved.
"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
Outcome-Driven Innovation
13 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
14 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
15 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
16 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
17 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
18 Copyright 2009 Strategyn, Inc. All Right Reserved.
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
Outcome-Driven Innovation
19 Copyright 2009 Strategyn, Inc. All Right Reserved.
● 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
Outcome-Driven Innovation
20 Copyright 2009 Strategyn, Inc. All Right Reserved.
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