Many people and organizations consider innovation so difficult that they are too intimidated even to try. We hardly notice when uninnovative businesses go under. We’re bored with them and no longer care. Think Kodak or all the restaurants that shutter after a good run. Startups, too. Remember TiVo? And now a host of once promising tech startups are laying off employees and staring into the abyss.
It’s sad when nobody cares if your business lives or dies. And we need more innovation. But few classes are given on the subject and epiphanies are in short supply. Brand name consultants will happily send in a team to help if you can afford to write a very big check, but no guarantees.
Why is innovation so hard, and can we do anything about it?
First, we need to agree on what constitutes genuine innovation. The word is used so often in so many contexts that it could mean almost anything. Innovation is not synonymous with invention. Innovation is not something you can do alone. It is an external result you create that affects some group of people other businesses if you’re a B2B enterprise, individuals if you’re a B2C company. In short, innovation is getting some group of people to accept a product or idea as a new best practice.
How do innovations happen? The nexus of innovation is located outside a company. Engineering, product development and R&D all happen inside, which is why so many companies fail to innovate. It is the group to whom you want to deliver a new, better way of doing things that holds the key to innovation. They must be the focus of your resources and your actions. If you don’t know your customers and how they lead their lives, then they will not consider you theinnovator.
The consequence of not really knowing the customer is that products evolve only incrementally. A bit more speed, some new colors, a better camera or going for nostalgia with a retro look are classic ways to fudge innovation. With good marketing, particularly armed with today’s technologies of manipulation, incremental innovation can sell, at least until somebody it might not even be a current competitor comes up with a different way of doing things and you are unable to respond.
This overlaps with, but is different from, the concept of disruptive innovation proposed by the late Clayton Christensen in his groundbreaking book The Innovator’s Dilemma. Disruptive innovation occurs when a competitor uses a cheaper, less mature and hence poorer quality technology to deliver their product. Industry leaders ignore or dismiss the immature, poorer quality product. They don’t spend time or money on learning the immature technology or understanding the niche market in which it typically first appears. By the time the technology and market mature, the industry leader is often hopelessly behind.
That’s how chipmaker ARM broke Intel’s monopoly on microprocessors in mobile devices, which require low power consumption. ARM understood the needs of mobile device designers. Intel ignored them, because they didn’t think that mobile device designers would ever resort to using multiple cheaper, inferior ARM devices together in a product.
When people misused the term “disruptive innovation” to describe companies like Uber and Airbnb, Christensen corrected them. Uber and Airbnb did not use immature alternate taxi and hotel technologies to take away business. In both cases the founders were frustrated or wanted something different for themselves or people they knew, so they went and created it. They truly innovated when they delivered technological solutions for ride hailing and room renting.
How do you innovate? Here are three essential steps:
1.Get intimate with actual customers : Not by quoting Net Promoter Scores or by having waiters swing by diners to ask them insincerely, “How is everything?” You do not do it with brainstorming sessions or even focus groups. You need to observe and listen not survey. You should not be a presence that disturbs how customers or potential customers go about living their lives as you observe them. You want to note what was awkward, confusing or seemed frustrating in their use of your products as well as what people do when they do not have your product. You want to ask open ended questions afterwards, about why someone did something that you did not understand and about any awkward, confusing or frustrating moments. You can do it yourself or even hire trained ethnographers to do it for you. An added benefit is that being a good empathetic listener almost always gets you invited back to test your prototypes, even wacky ones.
Of course, some group inside a company knowing what could excite customers differs sharply from a company actually doing anything about it. Most successful company cultures resist change and avoid risk why change something that works. Focusing on increasing market share incrementally is what most executives feel comfortable doing. So knowing what could excite a customer is just a first step.
2. Set innovation apart and adequately resource it: The boss or someone fully empowered to spend money and assemble resources independently of the normal course of business must take responsibility for developing innovations that emerge from intimate customer contact. Otherwise, those innovations will get lost in the shuffle of business-as-usual. The head of R&D does not qualify unless they’re given broad empowerment because R&D departments do not control production resources, so they cannot ensure anything gets to market.
3. Develop a savvy priority-setting process : The challenge facing CEOs and organizations brimming with insights is how they go about setting priorities. Innovation is ranked alongside and must compete with actions required to meet revenue and profit goals. A much better way is to set priorities on the basis of objectives, resources and timing—the three interdependent variables that are essential for executing any initiative. That way you can institute innovation projects with budgets and personnel that are not subject to change unless the life of the enterprise depends upon it.
It’s as simple as those three steps and massively challenging. It requires getting intimate with customers, which requires access, patience and empathy. It then requires the boss or someone very close to the boss to personally accept risk and responsibility. And, finally, it requires changing how the organization works at its most fundamental level priority setting and the allocation of money and resources. No wonder innovation doesn’t happen as often as it should or could. Or that organizations unwilling to face these challenges get outsmarted by upstarts.