To be great at innovation, you need a great innovation process.
Does your company consistently excel at innovation? With new product failure rates around 80 %, chances are your innovation process lets you down more often than not.
But it does not have to be this way.
Over the years managers have been conditioned to believe that innovation is an inherently random process; that the acceptance of failure must be baked into company culture; and that pivoting and failing fast is the way to make the innovation process more efficient.
We’ve proven that these beliefs are based on a misunderstanding of innovation as a process. The truth is the process of innovation can be executed in a way that delivers predictable, breakthrough results 86 percent of the time.
In this post, I explain how to take the guesswork out of innovation with a process that is used by many of the world’s leading companies. Adopting this new mindset and innovation process will enable your company to create phenomenally successful products the first time and every time—and make innovation your competitive advantage.
Companies inherently execute the innovation process backwards
Innovation is the process of devising solutions that address unmet customer needs. I like to think about the innovation process as being analogous to solving a simultaneous mathematical equation—where the goal is to consider all possible solution combinations and determine which combination will best address a fixed set of unmet customer needs.
There are two ways companies can attempt to solve this equation.
One approach, which is very common, is to come up with ideas—lots of ideas—and then try to determine which, if any of them, best address the customer’s unmet needs. From a process perspective, this “ideas-first” approach is inherently flawed and will never bring predictability to innovation. Why? It relies on correctly guessing the solution combination that will successfully address all the customer’s unmet needs—without knowing what those unmet needs are in advance.
Ask yourself this question:
“What are the chances that your product team will randomly conceptualize a solution that effectively addresses a dozen or so unmet needs, if it has not yet established what those unmet needs are?”
The chances are near zero. It’s like an archer trying to hit a target without knowing what the target is.
The ideas-first approach quite literally bakes guesswork and inefficiency into the innovation process and, worse yet, rarely will it lead to the creation of the optimal solution. More importantly, guessing more frequently or guessing faster does not improve the odds of success. This is why pivoting and failing fast are ineffective innovation strategies.
To continue the analogy, think back to your high school algebra class when you were presented with a simultaneous equation to solve. You were given two equations, such as 3x + y = 10 and 2x – 4y = 8, for example, and you were asked to solve for x and y. One way to try and solve the equation is to simply guess at values for x and y, plug them into the two equations and see if they work. If you’ve ever attempted this, you will quickly remember that this can be a long and arduous process. You can guess at different values for hours and still fail to find the correct solution.
The innovation process presents a similar but infinitely more complex situation in which there are thousands of possible solution combinations and potentially dozens of unmet needs. Guessing at what solutions will best address all the customers unmet needs (without knowing what those unmet needs are) is a near impossible task.
So let’s consider an alternative approach.
Take the guesswork out of innovation
To consistently succeed at innovation, a “needs-first” innovation process is required. In other words, a company must know all the customer’s needs and determine which are unmet before ideas are sought, collected and evaluated. While this sounds straightforward in theory, it is difficult to execute in practice.
There are a number of reasons why product teams struggle:
- 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.
Over the past 3 decades, the team at Strategyn and I have worked to create an innovation process that addresses these issues and consistently delivers breakthrough results. It is called Outcome-Driven Innovation, and it boasts of an innovation success rate that is 5X the industry average.
You can consistently achieve success at innovation if you follow this 5-step process:
1. Define your market around the job-to-be-done
People buy products and services to get a “job” done. A job-to-be-done can be a task that people are trying to accomplish, a goal or objective they are trying to achieve, a problem they are trying to resolve, something they are trying to avoid, or anything else they are trying to achieve.
Defining your market as a group of people + the job they are trying to get done provides your company with a stable focal point around which to align and orchestrate value creation efforts for years to come. While products come and go, the customer’s job-to-be-done remains stable over time. Parents trying to pass on life lessons to children and surgeons trying to repair a torn rotator cuff, for example, both constitute a market.
Defining a market in this manner provides companies a new lens through which to understand customer needs.
2. Define customer needs as success metrics tied to the job-to-be-done
To gain a deep understanding of the customer’s job-to-be-done, a company must be able to discover the customer’s “needs” associated with getting that job done. When looking at a market through a jobs-to-be-done lens, customer needs can be discovered by studying the customer’s job-to-be-done as a process. Tactically, the core functional job can be broken down into steps using what we call a job map (as described in the 2008 Harvard Business Review article, The Customer-Centered Innovation Map).
With the job map in place, companies can then seek to discover the metrics customers use to measure success as they try to get each step in the job done. These metrics are the perfect way to think about and define the customer’s “needs.” These need statements, which we call “desired outcomes,” bring predictability to innovation. Customers often use 100 metrics or more to define and measure the successful execution of the job. They can be captured through customer interviews.
A desired outcome statement is a specially constructed need statement that has a unique set of characteristics. Desired outcomes are:
- devoid of solutions
- stable over time, measureable
- structured for reliable prioritization in a quantitative customer survey
- tied to the underlying process (or job) the customer is trying to get done
3. Determine which outcomes are under- and over-served—and by how much
Knowing with statistical certainty which outcomes should be the focus of value creation and cost reduction ensures the efficient deployment of resources. To determine which outcomes are under-served and over-served, administer a survey to a statistically valid sample of the customer population. This can be anywhere from 120 to 4000 people, depending on the situation.
In the survey, ask each respondent to think about the last time they executed the job and the context surrounding the execution of the job. Next, ask them to tell you what solution they used. Then ask them to rate their level of importance and satisfaction with each outcome.
With this data, you are able to determine which outcomes are under-served (important, but poorly satisfied) and over-served (unimportant, yet well satisfied). Knowing what opportunities exist for value creation and cost reduction guides the formulation of the innovation strategy.
4. Discover segments of customers with different unmet needs
The goal of customer segmentation is to discover segments of customers who have their own unique set of unmet needs. This informs the product roadmap and ensures products are targeted correctly at customers.
Most segmentation methods used today rely on some combination of demographic, psychographic and behavioral data to construct the segmentation scheme. This approach is nearly certain to deliver suboptimal results. Why? Demographic, psychographic and behavioral differences do not reveal or explain differences in unmet customer needs.
Inarguably, the best way to discover segments of customers with different unmet needs is to segment around unmet needs—in other words, use unmet needs as the bases for segmentation. This, of course, is impossible if you do not have a comprehensive set of customer needs (desired outcome statements) and don’t know which are under- and over-served.
But using the approach outlined in the steps above, outcome-based segmentation becomes possible. Using factor and cluster analysis, the segments are revealed. Then, each segment is studied (using the already completed research) to determine what context, circumstances and product usage is causing each segment to be under- and/or over-served.
With this powerful approach to market segmentation, you are able to discover and pursue opportunities your competitors will fail to see.
5. Target and address many of the customer’s most unmet needs
As an innovator, your role is to help customers get the job done better and/or more cheaply. With knowledge of all the customer’s outcomes and which are unmet in different segments of the market, you are prepared to formulate a breakthrough product solution.
If your goal is to gain a market leadership position, work to devise a solution that will get the job done at least 15 % better and 15 % more cheaply. This will win customers in both under- and over-served segments.
If you are targeting an underserved segment that is willing to pay more to get the job done better, then devising a solution that gets the job done better—and pricing it at a higher price point—becomes your goal.
If you are targeting an over-served segment, then devising a disruptive solution that will get the job done for significantly less cost while offering poorer performance will be your goal. These different strategies are explained in the article titled Jobs-to-be-Done Growth Strategy Matrix.
With a shared understanding of the customer’s unmet outcomes, your company is able to better position and improve its existing products, fill gaps in the portfolio, make impactful R&D investment decisions, and more.
Being great at innovation starts with a great innovation process.
Today, more than ever, companies have to get it right the first time. There is no time for pivoting and failing fast. This means that companies must adopt a different innovation mindset. They must be confident in the bets that they make. They must stop using an ideas-first approach to innovation and adopt a needs-first approach.
Companies that apply our innovation process get the right products to market faster and at a fraction of the development cost.
It truly pays to excel at innovation.
Join me on October 28th, 2020 where I will debunk the myths that currently plague innovation and give you a framework to understand your customers that unite the entire organization around a common language of the customer. Click here to register.