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: Innovation doesn’t have to be expensive

Story:
Current surveys indicate that more companies are reducing innovation budgets this year, but the good news is that innovation doesn’t have to be expensive. Here two stories that show how to innovate inexpensively:

J.B. Hunt was just a truck driver in the 1940s when he saw that rice mills in Arkansas were disposing of rice hulls by burning them. Rice hulls are the fluffy tough fibrous shells removed to create white rice. The waste hulls gave Hunt an idea: he contracted with the mills to haul away their rice hulls, and then he sold the hulls to poultry farmers as chicken-house litter. After Hunt’s revelation of the potential value of rice hulls, others found additional innovative uses for the material: pillow stuffing, high-fiber additives for pet food, natural building insulation, filler for injection-molded plastics, and using rice hulls to improve apple juice extraction.

Similarly, old rubber tires are being ground up and made into roads and shoes. And clothing & outdoor gear maker Patagonia asks customers to bring in their worn-out Capiline clothing (a polyester fabric) rather than throwing it away. Patagonia has devised a way to break down the discarded fabric into plastic chips and then respin them into new synthetic yarn. Given the increasing concerns about proper waste disposal, waste products provide attractive opportunities as no-cost or low-cost sources of innovative raw materials.

In addition to innovating with waste products, companies can leverage fallow innovations. During the early 1980s, IBM Corp was spending at least a hundred times more on R&D than Apple Inc. But upstart Apple found a way to leverage some new underutilized technologies (the computer mouse, high-resolution display monitors, the power of the 32-bit microprocessor and the graphical user interface) to create the Lisa and then the Macintosh. What existing technologies could you put to use in new ways?

Action

• Survey existing supplies of materials and streams of byproducts
• Look for materials that are underutilized or are discarded
• Consider how those materials might be recombined, repurposed, or refurbished for other, valuable applications

For More Information:

Patagonia’s Common Threads Garment Recycling Program

Innovation to the Core by Peter Skarzynski and Rowan Gibson

Follow along on all other 24 Hours of Innovation events at http://www.boardofinnovation.com/events/the-24-hours-of-innovation/

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 to 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 the morning and one for the 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