Point: Innovation may be less about technical specs and more about emotional connections.

Story:
When we think of innovation, we often think of intelligence, brilliance, and genius. Yet two speakers at the World Innovation Forum highlighted the large and less-rational depths of the human mind. Inside us all is an inner animal that significantly influences the path of innovation.

First, Seth Godin (author of Purple Cow, Tribes and, most recently, Linchpin) referred to the “lizard brain” — the primitive beast that lurks deep inside our heads. Humans may have evolved a nice primate brain full of intelligence, rational analysis, and dispassionate logic, but when the lizard feels threatened, s/he takes over. Second, Chip Health (author of Made to Stick and, most recently, Switch) introduced Jonathan Haidt’s notion of the rider and the elephant. The rider represents the rational, logical mind of humans. The elephant represents the more primitive, lumbering forces of emotion. In essence, the elephant is just a larger metaphor for the lizard. Godin and Heath are not the first to have noticed the inner animal. Even Plato talked of the steady charioteer vs. the surging war horse when explaining the perpetual tussle we experience between our rational and emotional sides.

What does this inner animal have to do with innovation? The inner animal explains some of the patterns of failure and success of innovations. Godin spoke of the “resistance” — that overwhelming force of fear that makes the lizard react to changes as threats. Moreover, the threatened lizard actually co-opts the more rational rider into making rationalizations — all the “yes, buts” that impede innovation. This resistance gives us the inertia of the elephant and forestalls innovation.

Yet the inner animal isn’t only about resistance to change. Heath noted that people do willingly make massive changes in their lives, such as when they get married or have kids. Clearly, affairs of the heart can bypass change resistance. This gives an avenue of advancement for innovation. Robert Brunner (former director of Industrial Design at Apple) spoke of brand as being a gut feeling and of products being more that just physical objects. Innovation and design can and should connect to people’s hearts.

Certainly our world needs innovations that deliver quantitative performance improvements, such as 20% more fuel economy or 50% less cycle time. Yet it’s the innovations that deliver oodles of more fun, excitement, and inspiration that grab public consciousness. Innovation may be less about the world of PowerPoint slides, feature checklists, and action-items. Instead, innovation that overcomes change resistance and gains large market share may be much more about the world of emotional resonance, heart, and social connection.

Action:

• Motivate the elephant with visceral/emotional stories and images — make change exciting and compelling rather than merely rational
• Direct the rider by using the emotion of the elephant to avoid paralysis by analysis
• Shape the path to make it easier for both rider and elephant (for example, Amazon’s 1-click makes purchasing efficient for the rider as well as impulsive for the elephant).

Point:
Monetize non-core innovation rather than pruning it.

Story:
Ursula Burns, CEO of Xerox, discussed innovation at her company in an interview at the World Innovation Forum June 9, 2010. She described initiatives to improve the return on innovation at Xerox’s  research centers such as PARC (Palo Alto Research Center). PARC’s ground-breaking inventions like the graphical user interface, ethernet, and postscript as inventions  had a large impact on the world but didn’t contribute enough to Xerox’s bottom line.  Let’s look at why that happened and what Xerox is doing now.

Unpredictability lies at the core of the innovation process.  Not only do innovators not know if an early-stage innovation will succeed or fail, they also can’t know all the possible applications or value latent in that innovation.  Thus, it’s far too easy for an exciting innovation to stray outside the bounds of the company’s core competence.

At some level, reaping the greatest value from a research organization means allowing researchers the freedom to explore.  Burns noted that innovators love working on interesting projects — it’s hard to stop them from doing it.  Rather than fetter its folk, Xerox found three ways to give them freedom while still reaping the value of innovations that fall outside the company’s core.

First, Xerox expanded its definition of what is core to the company.  Previously, Xerox defined itself as a copier company, looking for innovations in how to “reproduce images on paper.” That narrow definition meant that many of the early PARC inventions were not pursued. Since then, Xerox expanded to document management and is moving toward being a more general office information process company.  Rather than fear the paperless office, Xerox wants to help customers implement the paperless office.  Xerox’s recent acquisition of ACS positions Xerox in business process outsourcing — managing the non-paperless back office functions of customers and clients.  The expanding vision of Xerox brings more innovations within the scope of the company’s core. For example, the company now has a use for its smart document innovations that can automate some of the labor-intensive discovery process in legal proceedings.

Second, rather than discarding innovations that don’t fit inside the company, Xerox now looks for partners or buyers for whom the innovation does provide value.  For example, some of Xerox’s innovations in precision printing can apply to the low-cost manufacturing of solar panels.  Xerox isn’t going to become a solar panel manufacturer — that’s too far outside its core. But rather than dismissing the innovation, Xerox partnered with a West Coast firm to incubate a new company that can leverage the value of those innovations.

Third, outside companies can now hire PARC and its portfolio of specialists to tackle tough R&D problems.  CEO Burns said that most PARC’s activities remain focused on Xerox, but the option to sell non-core innovations lets the company maintain the innovative culture of PARC while monetizing its researchers’ outputs.  In short, Xerox is expanding how it leverages the fruits of innovation rather than pruning the innovation funnel.

Action

• When evaluating innovation projects, don’t immediately rule out ideas outside the company’s current strategies, customers, or core
• Instead, also ask if an innovation might be more valuable to a non-competing outsider
• Find complementary partners who can license or buy non-core innovations or innovation expertise to reap the greatest total value from the innovation process.
• Allow innovators enough freedom to enable breakthroughs.
• Expand or reenvision the core of the company to leverage innovation.

Point: Take the customer’s perspective when designing a new service model.

Story: Some of the best innovations are brilliant in their after-the-fact simplicity. Take MinuteClinic.  We all know “an ounce of prevention…” yet most of us still don’t go to the doctor for preventative care because of the cumbersome process of a office visit: scheduling an appointment, taking time off work, waiting in the doctor’s office for unknown amounts of time, sitting in the midst of other hacking/sneezing people, and being unsure how much the visit will cost.  Worse, the doctor’s advice is often the standard nostrums of “take two aspirin, eat right, drink plenty of fluids, get some rest” that didn’t require the costs and hassles of the office visit.

Michael Howe, former CEO of MinuteClinic, became known as one of the top 10 innovators of the last decade by tackling those problems and designing a straightforward solution.  Howe applied the retail concept to healthcare, putting a mini medical clinic inside a pharmacy.  All the elements of his new service model focused on the customer:

• Pharmacy locations are easy to get to and are easily integrated into the customer’s day
• The clinics are open nights and weekends, expanding convenience for time-pressed customers
• Customer wait time is no more than 15 minutes, and no appointments are necessary.
• MinuteClinic posts all its services on a “menu” with the prices listed for each service

The key behind Howe’s innovation is realizing that the old model of healthcare delivery focused on delivering healthcare to people born 1925-44. But the values of this “Greatest Generation” aren’t the same as the Boomer generation. Boomers don’t want to be directed — they want to be engaged in the healthcare process.  Likewise, Gen-X’ers (born 1965-1984) want self-sufficiency, convenience and immediate access. They, along with Boomers, constitute MinuteClinic’s target customers.
MinuteClinic focuses on providing a standardized set of services that can be provided by nurse practitioners, thus lowering the overall costs of the services.  The company doesn’t claim to compete with the expertise of Mayo Clinic. Rather, it focuses on minor illness exams, minor injury exams, skin condition exams, wellness & prevention, vaccinations, and health condition monitoring. If customers have a serious or unusual ailment, MinuteClinic will recommend that they seek more in-depth medical attention.

In 2006, CVS acquired MinuteClinic. I asked Howe if the acquisition meant there could be more data integration between the two merged companies. His answer was that although the regulatory statutes prevent the sharing of information like prescriptions without patient approval, it was possible to educate patients. “We can use the retail environment to inform patients of alternatives to use for preventative medicine,” Howe said. For example, during the cold and flu season, MinuteClinic could help patients by producing a list of suggested treatments to make it through flu season.

What will be the next healthcare delivery innovation? Using Howe’s model of generations and the different values which each generation has, Howe sees that Millennials (born 1985-2004) are just beginning to understand their needs and that they want technology-based connections. In that future, the mantra will move from the Boomers’ “Engage Me” to the Millennials’ “Connect Me” demand for technology-based connections to their cell phones, laptops and the digitized world of social networks.

Action:

• Look for products and services that have become costly and underutilized due to years of accumulated complexities
• Look for generational differences in expectations, tolerances, and preferences
• Create a solution that increases convenience and certainty
• Create a solution that reduces complexity and cost
• Address 80% of the problem with something simple rather than 100% of the problem with something complex

Sources:
Michael Howe spoke at the World Innovation Forum, held June 8-9, 2010 at the Nokia Theater in New York City. He also presented an online seminar in the HSMAmericas series, which can be accessed here.
See also  http://minuteclinic.com/

Point: Lower-cost testing and diagnostic tools mean new opportunities for the innovation of personalization.

Story: The declining cost of genetic assays provides a new basis for innovative products and services in medicine. The company 23andMe exemplifies this trend. The company provides a fascinating personalized service. Here’s how it works: a customer submits a saliva sample to the company, and the company analyzes the person’s DNA. In particular, 23andMe identifies common genetic variations and provides the customer with a list of the genetic variations he or she has. Further, 23andMe explains the likely implications of those variations. For example, one variation might indicate a person’s increased chance of getting a disease, like diabetes. Other variations might give clues to the person’s sensitivity to various drugs.

For the individual, 23andMe provides reports as well as forums where people can converse with others who share similar genetic patterns.

But 23andMe doesn’t just providing an innovative service — the company uses the data it gets from customers as a foundation for future innovation. Here’s how: 23andMe aggregates each individual’s data to enable analysis of broader patterns. In particular, this aggregation can lead to new lines of research that support personalized medicine.

Personalized medicine could change which drugs people take, and it could affect which drugs make it to the market. Today, pharmaceuticals that are beneficial to a subset of the population aren’t approved for use or are pulled from the market because of increased risk of adverse reactions in a different subset of the population. If genetic testing can identify which consumers would respond well to a drug and which might react poorly to a drug, then more drugs can stay on the market, available to those who would not have adverse reactions to using them.

More broadly, the story illustrates how a new dimension of low-cost testing or diagnostic technology can create a new ecosystem for innovative services and products. Lowering the cost of data on the customer improves the fit of products to customers. This increases satisfaction, reduces product returns, and enables higher profits on smaller niche customer populations. Thus, the data enables incremental innovation of new variant products and as well as more radical innovation such as 23andMe.

Action:

• Look for new low-cost technologies that enable the collection of new data on customers or enable customers to know more about their individuals needs.
• Consider how to leverage that deeper personalization data through personalized products, better segmentation of services, or affinity groups for open innovation
• Reconsider failed innovations or products — would the prior flop succeed if a low-cost test could identify the right customers for that product?

For more information: Linda Avey, co-founder of23andMe presented at the World Innovation Forum May 5-6, 2009

Point: When innovating, look at the “job” the customer hires a product to do

Story: At the World Innovation Forum, Clayton Christensen cautioned companies against focusing only on customers when they create incremental innovations. Instead, he recommended understanding the job that the product is hired to do by those customers.

To illustrate the “product’s job” concept, Christensen described a fast food chain’s milkshake sales. At the demographic level, many milkshake buyers are working-age people. But the demographic similarity is not what drives people to buy milkshakes. (When the company researched demographically similar people, the results did not improve sales.) In fact, a focus on age and gender missed the job that milkshakes perform — why do people “hire” (buy) the milkshake? What job do they want the milkshake to perform?

Through further research, the fast food chain found that about half of milkshake sales occurred in the morning. These buyers came into the restaurant by themselves, bought a milkshake and nothing else, and drove away with the milkshake rather than consuming it at the restaurant. Looking deeper, researchers learned that the buyers were commuters, and the job of the milkshake was to provide distraction on a long commute and a tide them over until lunch. For this job, the milkshake competed with bananas, donuts, breakfast bars, and coffee. Commuters hired milkshakes over the competition because milkshakes take a long time to eat, don’t slosh or leave crumbs, and can be held in one hand or be put into a cupholder during the drive.

A very different group of milkshake buyers came in the afternoon and evening. These buyers were predominately dads with little kids. The dads were buying milkshakes for an entirely different job: that of assuaging guilt over not having enough time with their kids. Kids liked the milkshakes, and the dads could finally say “yes” to something and feel good about themselves.

Understanding the jobs people hire milkshakes to do is important when it comes to incremental product improvements. The two jobs for milkshakes call for diametrically different innovations. Thicker milkshakes would delight the bored commuter, but they would frustrate time-pressed dads because kids take too long to finish thicker shakes.

Simply put, innovations that would boost sales in one group would displease the other group. Commuters might want improvements like increased thickness, small added fruit chunks, and a grab-and-go purchase system that lets customers buy a milkshake without standing in the regular food line. In contrast, dads might want a smaller, thinner milkshake that provides fun but quick treat for the kids. The strategy for innovation in this case may be to have two different shake formulations: one for morning and one for afternoon/evening.

The point is to understand WHY someone buys the product, not WHO buys the product. The demographics of milkshake buyers are less important than the fact that one segment buys the product as a distraction and protracted meal while the other buys it as a sweet attraction and quick desert.

Action

• Delve into the job(s) of the product, not the consumer(s) of the product.
• Segment by purpose, not person.
• Identify and innovate around job performance dimensions rather than product performance dimensions

Point: Current non-consumers (rather than current customers) may represent the best opportunity for an innovation

Story: The future of solar power may be in the markets of Mongolia rather than in the high-tech companies of Western countries, said Harvard Business School professor Clayton Christensen at the World Innovation Forum.

Christensen’s recent visit to Mongolia led him to this view. In Mongolia’s capital, Ulan Bator, Christensen saw a very popular product in local markets: cheap solar panels attached to small portable TVs. Rural herders were buying these solar-powered products, and they were buying the products without needing government inducements to do so.

In the West, solar power competes with established power grids. As a result, solar has been seven years away from cost-competitive performance for 35 years. Solar still costs too much and needs government support (grants, subsidies or tax breaks) to create even the current low levels of adoption.

Adoption of solar power is low in the West because solar power competes with anytime/everytime electricity from 24-hour power plants and ubiquitous power grids. Sunlight, in contrast, is sporadic.

For Mongolians, the imperfections of solar aren’t a problem because the alternative is either no electricity at all or expensive disposable batteries. Almost one-third (32%) of Mongolians still live an off-grid, semi-nomadic life style. They move their collapsible, felt-lined homes to follow their flocks of goats, sheep, yaks, horses, and camels across the high plateau of Asia. Mongolians don’t expect flip-of-the-switch power for air-conditioners, hair dryers, or halogen mood lighting. Untold hundreds of millions live without power in Asia and Africa.

Christensen’s evidence suggests that solar power has the greatest opportunity to shine where it faces no preexisting electrical infrastructure. The rise of solar power may come from expanding the total base of electricity users, not from replacing one highly-optimized incumbent electrical system with another emerging innovation. For emerging technologies, emerging markets can be a key because they represent large populations of non-consumers for which the new idea needs to out-compete nothing.

The larger point is that Mongolia symbolizes a larger market of non-consumers with different needs and different requirements. Sometimes, an innovative product that can’t compete head-to-head with incumbent may nonetheless be vastly superior to the alternative of “nothing” in the population of consumers. Many companies have used this strategy to good effect.

For example, Southwest Airlines considered the car and bus — not other full-service airlines — as its primary competition. Intuit’s competitor for TurboTax software was the pencil, not other tax software packages. Tata’s Nano low-cost car competes with 2-wheelers in India. Non-consumers of air travel, tax software, and cars, respectively, were the targets for these new products, and non-consumers were a much larger markets than existing customers.

Action

• To find new markets, study non-consumers, not current customers
• Find markets in which a new innovation is better than nothing, despite the innovation’s imperfections
• Avoid head-to-head competition with a well-optimized incumbent.

Point: Merging functionality can create innovations in efficiency and convenience
Story: As someone who spends more than my fair share of time in airports, I’ve wondered if passengers don’t deserve frequent flier miles for distances walked all over the terminal buildings. The food court is one place, the gate is in another, and finding a power outlet to recharge the laptop for the long flight home is always a challenge. In most airports, no single location suffices for all these purposes. When sitting at the gate, one doesn’t know if one has time to go grab a bite to eat. And when sitting at the restaurant, one doesn’t know if one’s flight is about to board.

OTG tackled this problem when they designed the airport experience for JetBLue’s new T5 terminal at JFK airport. OTG created a new mixed-use approach for some of the gate space. About half the 26 gates have special 16-seat clusters called “re:vive” that lets passengers eat, recharge, and keep an eye on their flight. Touchscreen monitors and credit card readers let passengers order, pay for, and have food delivered right to the gate. The ordering process even provides a delivery time estimate before a passenger gives the final “OK” for the order.

“Re:vive” is more than just a passenger convenience. It also boosts revenues for food concessionaires by reaching the underserved market of so-called “gate huggers” — passengers who don’t want to leave the gate area.

The “re:vive” concept is not unlike the notion of mixed-use building developments for cities, which create buildings with retail on the first floor, offices on the second and residential condos or lofts on the top floors. Mixed-use reduces urban sprawl and urban commuting times in the same way that re:vive reduces airport terminal sprawl and the burden of dragging luggage to and fro. Co-locating the functions that people need provides convenience.

Action:

• Look for the customer activities that are currently separate but that could be concurrent or co-located
• Merge functionality to reduce time, opportunity costs, and logistical overhead
• Grow markets by serving those that don’t or won’t move from activity to activity

Source: World Innovation Forum presentation May 6, 2009

Point: Innovate the experience, not just the product

Story: At the World Innovation Forum today, C. K Prahalad asked the audience about their experiences with “Build-a-Bear” — an e-commerce company that lets kids of all ages design their very own Teddy Bear. Audience members reported spending as much as $200 in choosing the look of the bear, the amount of stuffing in the bear, adding a custom sound to the bear, getting the bear’s birth certificate, buying clothing for the bear, and buying accessories and siblings for the bear. This culminates in making “The Bear Promise” to care for this personalized stuffed animal. Discussing the depth of the experience and the simplicity of the physical product revealed that the bear embodies both negligible product costs and priceless customer experiences.

One of the “trick questions” for job interviews is to ask the candidate, “How would you redesign a Teddy Bear?” This example shows that the design of the bear may not change much, but the design of the experience of buying the bear may be where the real opportunities are. In fact, Build-a-Bear is more about the customer redesigning the Teddy Bear than it is about the company redesigning the Teddy Bear. Therefore, C. K Prahalad recommended that companies think more about experience innovation to complement and enhance product innovation.

The Build-a-Bear phenomenon is not unique to toys. Other companies provide experience-intensive products. These include Medtronic’s pacemaker (the device is augmented with remote monitoring, health records coordination, and provider networking services), Bridgestone Tires (by-the-mile fleet usage pricing with value-added vehicle usage services), Nike’s iPod-connected shoes (shoe sensor feedback that drives work-out feedback and performance). The point is to think about the value chain of the experience, rather than the value of chain of the product.

Action:

• Seek to solidify customer relationships through well-designed experiences
• Innovate to improve the value of the experience, not just the performance/cost of the product
• Leverage customer innovation through co-creating experiences and products
• Create an ecosystem of collaborators to support the experience

Point: Breakthrough innovation requires nonlinear change

Story: In his presentation at the World Innovation Forum, strategist and Dartmouth professor Vijay Govindarajan used the analogy of Olympic high-jumping to illustrate the non-linear thinking that companies need to make to create breakthrough innovations. The traditional approach to high-jumping until 1920 was the “scissors” approach: jumping over the bar with a scissoring motion similar to what is used by hurdlers. The highest jump possible was about 5′ 3″.
The best approach to jumping higher, however, is to identify the limiting factor in the jump. For high-jumping, the limiting factor is the jumper’s configuration of body parts relative to their center of gravity and to the bar. In the 1920s, the innovation called the “western roll” changed the jumping style from a hurdling over the bar with a scissors kick to rolling over the bar sideways with the jumper’s back to the bar. In the 1960s, the innovation of the straddle changed the center of gravity even further with the jumpers keeping their belly to the bar. And in 1968 the Fosbury flop (invented by Dick Fosbury) changed the motion yet again: jumpers launch themselves straight up into the air using both feet, and then they twist over the bar so that the head clears first.
The challenge for organizations: you can’t win by incrementally improving the incumbent scissors kick if your competitors are inventing the western roll or the Fosbury flop. Breakthrough innovations require removing or changing the limiting factor. This often means breaking old assumptions. Prior to the Fosbury flop, all high jump techniques assumed that the jumper goes feet-first over the bar and lands on their feet. Fosbury jumped head first over the bar to flop on the mat and extended the possible jumping height to over 8 feet.
Action:

• Document the fundamental limits that seem to prevent further incremental innovation
• Consider ways to break those limits or bend those limits
• Examine the “how we’ve always done it” assumptions to find opportunities for radical change

See Vijay Govindarajan’s blog here.

Point: When forecasting, keep in mind that simple signs can have a deeper meaning if you take the time to look.

Story: At the Cultivating Intuition: Effective Forecasting in the Face of Rapid Change workshop preceding the World Innovation Forum, forecaster Paul Saffo described how to watch for signs of the future. In 1991, as he and his newlywed bride were driving to Mendocino County for their honeymoon, he saw a new road sign that was so intriguing that he turned around, drove back, and took a photograph of it while his exasperated bride waited. The sign simply said, “End Emergency Call Boxes.” But the sign told Saffo of both the near-term future and the long-term future. First, the literal interpretation of the sign told Saffo that he and his wife were on their own. If they had any problems, they couldn’t expect to quickly reach the authorities for help. Yet fear of being incommunicado was not why Saffo stopped at the sign.

Second, and more crucially, the sign indicated to Saffo that people’s expectations had changed. Why would the California Highway Department think that such as sign was needed? Prior to the 1990s, no one expected to be in constant communication. But now, the advent of the solar-powered call boxes meant that people expected more.

The sign was part of a series of long-term changes in communications. Only a couple of years later, the sign was gone because the call boxes extended all the way to the Canadian border. Low-cost communications enabled almost-universal coverage. About a decade later, the call boxes themselves were gone, because everyone had cell phones. Yet that sign triggered Saffo’s thinking about communications and how changing technology led to changing expectations and future changes in technology.

Action

• Look at signs and signals in the environment. (Paul recommends carrying a camera at all times to snap pictures of these signs)
• Examine the deeper meaning of those signs — what do the signs say about the changing expectations of consumers and citizens?
• Consider how your future products and services can meet those changing expectations