The Innovation Process
A comprehensive guide: Definition, Steps, and Examples
To be great at innovation, you need a great innovation process.
What is the Innovation Process?
While many organizations treat innovation as an art driven by random ideation and luck, successful innovation requires a disciplined, data-driven approach that starts with deeply understanding what customers are trying to accomplish (their “job-to-be-done”) and what metrics they use to measure success.
Without these inputs, development teams must make critical design decisions based on assumptions or incomplete information.
But when armed with precise, quantified customer needs data, development teams can make informed trade-off decisions, prioritize features appropriately, and validate that their solutions will meaningfully address customer needs before significant resources are invested.
With a structured innovation process, companies can avoid failure rates of over 80% in new product development.
By following a rigorous process rather than relying on gut feel or guesswork, organizations can conceptualize products and services that they know, with a high degree of confidence, will win the marketplace—BEFORE development even begins.
The process provides the framework, tools, and methods needed to consistently create value for customers while reducing the risks and costs of failed initiatives.
Why companies struggle with innovation
Product teams struggle because:
- They disagree on who their customers are
- They disagree on what a customer “need” is, (e.g., what type of input brings predictability to the innovation process, etc.)
- They fail to capture all the customer’s needs and instead consider only a small subset, thus leading to incremental improvement at best
- They fail to quantitatively determine which needs are unmet—and by how much
- They fail to discover and accommodate segments of customers with different unmet needs
- They lack the criteria needed to effectively evaluate a product concept
An effective innovation process must overcome all these obstacles. A company must know all the customer’s needs and determine which are unmet before idea generation begins and ideas are collected and evaluated.
Understanding the Innovation Methodologies
Design Thinking focuses on building deep customer empathy and creative problem-solving through a five-step process: empathize, define, ideate, prototype, and test. While excellent at generating creative solutions and building customer understanding, insights can sometimes be subjective and solutions may not always be feasible.
Lean Startup emphasizes rapid experimentation and learning through building minimum viable products (MVPs) and gathering market feedback. This methodology helps minimize waste and validate ideas quickly, though it may not be as effective at generating breakthrough innovations.
Agile/Scrum structures innovation into short development cycles called sprints, promoting frequent delivery and adaptation based on feedback. While great for improving team collaboration and maintaining development momentum, it can be challenging to implement in large organizations and may sometimes lack deep customer insight.
Outcome-Driven Innovation (ODI) provides a systematic, data-driven approach to understanding and addressing customer needs. Unlike traditional innovation methods that rely heavily on subjective insights or random ideation, ODI helps organizations precisely define what customers are trying to accomplish (their “jobs-to-be-done”) and what metrics they use to measure success. This rigorous methodology has proven remarkably effective, achieving an 86% success rate in new product development—five times the industry average.
Open Innovation/Crowdsourcing leverages external expertise and collaboration to generate and develop ideas. While this approach can bring in diverse perspectives and expertise, managing large volumes of contributions can be challenging.
Many organizations succeed by thoughtfully combining multiple methodologies to leverage their complementary strengths.
For example, ODI can be used to identify opportunities, design thinking can be used to generate solutions, and lean startup can be used to validate concepts. The key is selecting and integrating approaches that align with your organization’s goals, capabilities, and culture.
If you’re interested in learning more about different innovation methodologies, we’ve created this guide.
The world’s leading innovation process
Outcome-Driven Innovation
Results from Customer Alignment
5 steps of the Outcome-Driven Innovation process
1. Define your market around the job-to-be-done
People buy products and services to get a job done. Defining your market around this job-to-be-done gives your company a stable focal point around which to align and orchestrate value creation.
This step includes:
- Defining customers differently. Get to know your true customer—the job executor
- Defining the market around the job. The JTBD must be defined at the right level of abstraction.
2. Uncover desired outcomes
Customers want to get their jobs done perfectly. The 100+ metrics customers use to measure the successful execution of a job-to-be-done define what perfection means—and instruct your company how to deliver it.
This innovation process step includes:
- Understanding all of your customer’s needs. It’s possible when you define customer needs as desired outcomes.
3. Quantify which outcomes are unmet
Customers have underserved and overserved needs. Knowing with statistical certainty which needs should be the focus of your value creation and cost reduction ensures the efficient deployment of resources.
This step includes:
- Understanding where customers need help most. Determine if your markets are under or overserved and precisely which outcomes hold the key to your growth.
4. Discover hidden segments of opportunity
Customers rarely agree on which needs are unmet. Segmenting your markets into groups of people with unique sets of unmet needs allows you to pursue opportunities your competitors will fail to see.
This process step includes:
- Segmenting the market around outcomes. People struggle differently when executing the job-to-be-done.
5. Formulate and deploy a winning strategy
With a common understanding of the customer’s unmet needs, your company is able to better position and improve existing products, identify and fill gaps in your portfolio, make impactful R&D investment decisions, and more.
In other words, you have everything you need to develop a reliable innovation strategy.
Give your team the inputs they need to win
Pursue your big idea with confidence
The goal of the ideation process should not be lots of ideas and idea generation activities. Instead, the goal should be to construct the single, best solution to satisfy the unmet customer needs of the target customers and segments, enabling them to get the job done faster, more conveniently, and more effectively than ever before.
There is one belief that permeates academic literature and has influenced nearly all gated product development processes: it is the notion that the innovation process begins with an idea. This is the myth that misleads. An idea is the output of the innovation process, not the starting point. Making ideation and idea management the starting point of the innovation process, although common, turns innovation into a guessing game. It is the most inefficient approach to innovation and the root cause of low innovation success rates.
Learn how to Pursue your big idea with confidence.
Quantify where competitors’ products fall short
Competitive analysis, when seen through a jobs-to-be-done lens, is not about head-to-head comparisons. Instead, it’s about assessing how much better or worse a product is at helping the customer get a job done.
Traditional competitive analysis almost always involves a technical comparison of product specifications and features, yet the analysis is conducted without knowing how customers measure value or how much value competing features deliver to the customer. This is the problem, and the myth that misleads: companies are not competing against other companies or their products. They are competing for the customers, and their one goal is to create value for them. And there is only one way to do that: by offering a product or service that is better than any other at helping them get their jobs done.
Learn how to leapfrog the competition.
Test your concept with confidence
Through a jobs-to-be-done lens, the goal of the concept testing process is to validate that a product concept is better than competing solutions at helping customers get a job done. To make this determination, we must know what metrics the customers use to measure the successful execution of the job-to-be-done. Our methods work because they are built around these customer metrics.
Be confident that your product will win in the market.
Position your product perfectly with customers
The goal of product positioning is to present a product or service to the customer in a way that effectively communicates its value. When looking at the product positioning process through a jobs-to-be-done lens, we see that the best way to communicate value to customers is to explain (1) how the product helps them execute the functional job better than competing solutions and (2) how it satisfies the emotional jobs that are associated with getting the functional job done.
Learn to Communicate function and appeal to emotion.
Size your market and Invest in high-growth markets
The size of a market can be calculated based on the number of potential job executors, the frequency with which they execute the job, and their willingness to pay to get the job done better. An attractive market consists of a large number of underserved executors who have a high willingness to pay to get the job done better. This forms an effective market sizing calculation.
Companies often size the market they are interested in by determining the dollar volume of the products being sold. Using that calculation, they decide to invest or divest in a market based on trends in revenue growth.
But here is the problem, and the myth. A product is not a market. Every product will one day become a thing of the past. Vinyl records and cassettes gave way to CDs and MP3s, but in time those formats too will fade. But just because a technology or a product becomes obsolete doesn’t mean the market disappeared. It means that the market (the people who hired the product to get a job done) moved on to buy another product; one that helped them get the job done better.
Learn how you can invest in high-growth markets.
Frequently Asked Questions
What does the innovation process begin with?
According to Tony Ulwick’s Outcome-Driven Innovation (ODI) framework, the innovation process begins with a deep understanding of the job-to-be-done. This approach emphasizes starting with a clear and precise definition of what customers are trying to achieve. The first step is to identify the customer and the job they are trying to get done. This involves gathering and analyzing customer needs and desired outcomes using unique quantitative research methods. By focusing on the job-to-be-done, companies can align their innovation efforts with customer-defined performance metrics, leading to more predictable and successful outcomes.
What happens during the last step of the innovation process?
The last step of the innovation process is formulating the product strategy. This step involves creating a comprehensive plan that outlines how a company will develop and deliver new products or services that align with the identified customer needs and market opportunities. The product strategy ensures that the innovation efforts are effectively translated into actionable steps for product development, addressing the most critical and underserved customer outcomes.
Key activities in this final step include:
- Defining the Product Features and Specifications: Based on the insights gathered throughout the innovation process, the team specifies the features and characteristics of the new product or service that will best satisfy the targeted customer outcomes.
- Developing a Product Roadmap: A detailed plan that outlines the timeline for product development, including key milestones, resource allocation, and dependencies.
- Aligning with Market Strategy: Ensuring that the product strategy is consistent with the broader market strategy formulated in the previous steps, thus ensuring a cohesive approach to entering and succeeding in the market.
By the end of this step, companies should have a clear, actionable plan that guides the development and launch of new offerings, optimized to meet customer needs and achieve competitive advantage.
What are some common challenges companies face when implementing the ODI process, and how can they be overcome?
According to Tony Ulwick’s book “Jobs to be Done: From Theory to Practice,” there are several common challenges and recommended strategies to overcome them:
Understanding and Prioritizing Customer Needs:
- Challenge: Companies often struggle to identify and prioritize customer needs accurately.
- Solution: Ulwick emphasizes the importance of using a structured approach to capture and categorize needs. Companies should employ the Jobs-to-be-Done Needs Framework to gather and organize customer insights systematically. This framework helps define, capture, organize, and prioritize customer needs, ensuring that all relevant aspects are considered.
Building Internal Competency in ODI:
- Challenge: Many organizations lack the internal expertise to implement ODI effectively.
- Solution: Ulwick recommends creating a dedicated team of internal ODI practitioners who are trained in both the theoretical and practical aspects of ODI. Strategyn offers online education courses for ODI certification to help build this internal competency. Additionally, companies can leverage external support from Strategyn for initial projects while building their internal capabilities.
Overcoming Resistance to Change:
- Challenge: Shifting to an outcome-driven approach can meet organizational resistance, especially if it involves changing established processes and mindsets.
- Solution: To address this, Ulwick advises securing buy-in from key stakeholders by demonstrating the value and benefits of ODI. This can be achieved through workshops and training sessions that highlight ODI’s practical applications and successes. Engaging cross-functional teams in the ODI process helps foster a common language for innovation and align the organization towards shared goals.
Companies can successfully implement the ODI process and drive innovation closely aligned with customer needs by addressing these challenges with structured frameworks, dedicated training, and stakeholder engagement.
Tony Ulwick
Tony is the pioneer of Jobs-to-be-Done Theory, inventor of the Outcome-Driven Innovation® (ODI) process, and founder and CEO of Strategyn. Philip Kotler calls Tony “the Deming of innovation,” and Clayton Christensen credits him with “bringing predictability to innovation.” Published in Harvard Business Review and MIT Sloan Management Review, Tony is also the author of 2 best sellers: What Customers Want and JOBS TO BE DONE: Theory to Practice.
Best-Selling Book
