Archive for category design

Replace Fear of the Unknown With Curiousity

Posted by Tim in book riffs, design, innovation strategy on 31 January 2012

The Shift Index 2011 is out now, and as with the previous two editions, it is a must-read.

I am always skeptical of “everything is different now” type arguments, but in this series of reports, John Hagel, John Seeley Brown and a number of other contributors have done a fantastic job of documenting exactly what is changing. It might not be everything, but it’s a fair bit.

Here are the four key points that they make in the summary of this year’s report:

ROA (Return on Assets) performance continues its long-term decline due to deteriorating firm performance
Layoffs and other short-term measures taken by firms are not a sustainable solution to improving long-term firm performance
Connected individuals, not companies, are the ones harnessing flows and have more power because of it
Firms have untapped opportunities to reverse their declining performance by embracing pull

Hagel and Seeley Brown have a number of recommendations about how to deal with this in their book The Power of Pull
(discussed here and here). It’s one of the best books of the past couple of years, and I recommend it.

Another book that deals with these issues is Futuretainment: Yesterday the World Changed, Now It’s Your Turnby Mike Walsh.

The book is interesting. Here is one of the key points that Walsh makes in it:

Sometimes the best way to win a game is to question why you are even playing it. The rules that govern industries are rarely made in advance – they evolve in periods of rapid change until eventually they themselves become restraints on innovation. But there is one thing you can be sure of: when consumer behavior changes, sooner or later business behavior must follow. The future is already here, you just need to know where to look.

The book itself is a great example of trying to invent the future. Walsh has deliberately made a book that only works as a physical thing. It has a gorgeous set of photos taken by Walsh (including the one above) as the background on each page. Then it has series of insightful chapters discussing the implications of the big shift. Here is how he describes the approach:

The first question my publisher asked me was why a book and not a blog? Three years ago when I started working on Futuretainment, that was already a tough question to answer. With eBooks now on the crest of critical mass, it hasn’t got any easier. Last week, my book hit the shelves. Although you can buy it on Amazon, you can’t read it on a Kindle. In fact, with 300 pages of illustrations, original photographs and custom designed typography – it is about as Kindle friendly as a bathtub. That was a deliberate decision on my part, but it comes at a time when the very concept of a book is changing.
…
There are two aspects to any book. First, there is the book as an informational construct. Put simply – an arrangement of words, sentences, paragraphs and chapters. However in our attention drained world of 140 characters, this construct increasingly boils down to a simple image – the long tail, the tipping point or the black swan. Despite fervent claims to the contrary, the vast majority of people don’t actually read books. They consume metaphors and debate in status updates.

Fortunately, there is also a second aspect of books – ‘thingness’. Whether a Sumerian stone tablet, an Egyptian papyrus, an illuminated Medieval manuscript or just a pulp paperback – there is a physical side of books which has its own life.
…
Because, as much as I love my Kindle, it is a marriage of convenience. My true mistress will always be books. The smell of print, and the sensual touch of high quality paper will never fail to seduce me. And I can only hope that my book might elicit the same response in you.

Unlike Jonathan Franzen, who recently discussed why books need to be physical without offering much more of a reason than “because I like them”, Walsh has made a book that demands to be instantiated physically.

eBooks are a great response to the informational side of books that Walsh discusses. Seth Godin wrote a great post yesterday about how to deal with this.

But to deal with the ‘thingness’ of books, you need a new business model. You need to create value not just in the words, but in the physical object as well. Walsh has succeeded in both aspects of his book.

What should the rest of us do? Maybe it’s time to heed Jorge Barba’s advice and get an MBA in curiousity.

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Two Great Innovation Misquotes

Posted by Tim in book riffs, design, evolving economic entities on 27 January 2012

There are two popular quotes that often get used when discussing innovation that were never actually said or written by the people to whom they are attributed. Despite the fact that they are fake quotes, there are still things that we can learn from them.

The first common quote is attributed to Henry Ford:

If I had asked people what they wanted, they would have said faster horses.

This quote usually comes up when people are discussing focus groups, or design-driven innovation. However, there’s no evidence that Ford ever said or wrote it.

Even though it’s not a real quote, it raises some interesting points. You can interpret it as meaning “you should ignore customers,” or some people even seem to think it means “customers are stupid.”

But that’s not really what it’s saying at all. People do have limited vision if you ask them open-ended questions. And as innovators, our job is to invent the future. Nevertheless, there is useful information in the faster horses idea.

If people really had told Ford that they wanted faster horses, what would that mean? If you frame it in a jobs-to-be-done way, it means that the main job that they’re trying to do is to get somewhere fast. That actually is a pretty good argument in favour of automobiles.

In his HBR post on this topic, Patrick Vlaskovits sums up the issue well:

An innovator should have understanding of one’s customers and their problems via empirical, observational, anecdotal methods or even intuition. They should also feel free to ignore customers’ inputs. Because by now it should be clear that Ford’s adherence to his vision of the mass-market car and how to materialize that vision was instrumental in both his early success in growing Ford Motor Company as well as his later failure to respond in a timely and effective manner to rapid innovation in the marketplace.

The real lesson learned was not that that Ford’s failure was one of not listening to his customers, but of his refusal to continuously test his vision against reality, which led to the Ford Motor Company’s failure of continuous innovation, resulting in a catastrophic loss of market share from which it never recovered.

So the quote is useful, even if Ford never said it.

The second quote is a bit more problematic – this one is frequently attributed to Charles Darwin:

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.

As with the Ford quote, Darwin never actually said or wrote this (he never wrote “survival of the fittest” either – that was Herbert Spencer building on Darwin). This one is a bit more problematic too, because it is actually a major misinterpretation of Darwin.

Consider the Large Ground Finch, one of the species from the Galapagos Islands described by Darwin:

In a remarkable research project that has spanned nearly 40 years now, Peter and Rosemary Grant have studied the evolution of Darwin’s Finches in the Galapagos (the work was beautifully described in The Beak of the Finch: A Story of Evolution in Our Time by Jonathan Weiner – a terrific book).

Here is their key finding. When times are good, there is wide variation in the beaks of the finches. However, the Galapagos are subject to the El Niño/La Niña weather cycles, which means that they have frequent droughts. In times of drought, the finch populations dive. In the case of the Large Ground Finch, the individuals that survive these events have the biggest beaks. Why? Because the bigger beaks enable them to crack larger seeds, which would be ignored as too hard to crack when there are plenty of seeds around.

In other words, it is precisely the strongest of the species that survives.

The fake Darwin quote is completely wrong with regard to which individuals survive. But it might tell us something about which species survive. The reason that Large Ground Finches have been around for as long as they have is that there is enough variation in the species that whenever conditions are extreme, some individuals in the population will be able to adapt to the change.

If we apply this to innovation, you might think of it this way: products are like individuals and organisations are like species. To do well, products need to be the best at getting some job done for some group of customers.

However, for an organization to do well over time, it needs to be adaptable. This means that unless its environment is unusually stable, it needs to generate variety. Even though economic evolution is directed by the choices that people make, we still don’t have much control over which ideas work and which don’t. Or over which take off, and which never really click.

To maintain variety, to improve responsiveness to change, we must experiment.

Why have these two quotes become so widespread? It’s not the internet – both incorrect attributions were made in books. Both quotes are catchy and short, and they capture ideas that seem like they reflect what Ford and Darwin thought. Even though the Darwin quote is not very Darwinian, it reflects a very common misinterpretation.

The catchiness is one thing, but also, we like to argue from authority. If we don’t want to run focus groups, it’s easier to get Henry Ford to make the argument than it is for us to do it ourselves.

I wanted to think through these quotes for a couple of reasons. One is that they do offer some useful lessons. The second is that we need to figure out how to make compelling arguments ourselves. This is the key to getting our own ideas to spread – not by arguing from authority.

(The superb Large Ground Finch photo is from flickr/Steven Bedard under a Creative Commons License)

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Tools Should Be Invisible

Posted by Tim in business models, design on 23 January 2012

What is the most common mistake that I see when people try to implement management tools or frameworks?

By far the most common is mistaking using the tool for getting the outcome you are looking for.

I have been doing some consulting work recently where we are using the Business Model Canvas to develop a strategy for an engineering group inside a large organisation.

Read my previous post about this for a full description of the project. Today I want to focus on one particular part – the four ideal models that we built, and a tool that we used to conceptualise the models.

There are a couple of dimensions along which these models vary. In a couple of them, the team is responsible for identifying the problems to address, while in two others the they are working to specification as the problems are defined for them. The other source of variation is project management: how much of the solutions development process should the team be responsible for?

Manny and I took these two dimensions and mapped out the four possible roles for their Bespoke Solutions Team (BST). Here is the map:

In each quadrant, there is an indication of the project management responsibilities: I1 = problem identification, I2 = solution development, I3 = solution delivery to customers.

Last week, Manny made a revised version of that map. When he showed it to me, he said:

“I took out the I1, I2 and I3 indicators because they just seemed to confuse people.”

He was apologetic when he said because when we thought of that model, it gave us great insight into the project. But dumping it from the presentation that we give to people inside of the firm was exactly the right choice.

Here’s why.

This is a bed that my Dad made for me and Nancy as a wedding present:

He’s a very skilled woodworker, and the bed is gorgeous. But when he first finished the bed and brought it down to us, he didn’t set a saw on top of it to show us that he used that tool to build it. You can tell a fair bit about what he used just by looking at the final item. And in fact, the bed itself is what matters, not the process he used to put it together.

It’s the same with management tools. When you use tools, the important thing is the outcome, the conclusions that you reach and the actions that you take as a consequence. We don’t need to see the tools to understand that you’ve done good work.

Our I1,I2 & I3 construction was a very useful tool in developing the business models that their BST might adopt. It helped us identify the capabilities that they will need to have in each of the four scenarios we have sketched out.

But the important outcome will be the model that they decide to adopt, and the path they map out to build the skills that they need to execute this model. Even more important will be the business results that they obtain as they execute this model.

Don’t mistake the tool for the desired outcome. That’s mistaking the map for the territory.

Instead, figure out the outcome that you want first. Then think about what people and processes you need to achieve this, and identify the right tools to support your people last.

If you do this, your tools will be invisible. And that’s as it should be.

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Business Model Analysis & the Link to Strategy

Posted by Tim in business models, design, innovation strategy on 3 January 2012

What’s the best way to use business model analysis in larger organisations?

Steve Blank has done some outstanding work looking at how Alex Osterwalder’s Business Model Canvas can be used in entrepreneurial startups (see also this post and the ones that follow it). But there are still some questions about how to best use the concept in larger firms.

That is a problem on which I’m currently working.

I’m doing a project with a very large engineering firm. They provide an off-the-shelf product to the vast majority of their customers, however, there are an increasing number of customers that need bespoke solutions to problems. We are doing some work with the team that develops these solutions, and it Business Model Analysis has ended up being a very useful tool.

I’m working with Manny, whose team is in charge of developing futures analysis skills throughout the organisation. We are working with Moe, the manager of the Bespoke Solutions Team (BST), and the project is sponsored by Jack, who manages both Manny and Moe, along with several other teams.

When we spoke with Moe, he said that there were four different views within the firm of the role his teams should be filling:

Change Agents: in this role the team identifies the problems that they should be working on, and develops solutions to these problems. They then turn the engineered solutions over to others within the firm who will manage delivery to customers.
Service Provider: here the team has the problems specified for them by another group within the firm. They develop solutions (as they do in all four scenarios), and pass them on to the other group for execution.
Service Delivery: in this role the team still works on problems specified by the second group, but after developing their solutions, they would be responsible for managing delivery as well.
Profit Centre: is a full service role. The team would identify problems to work on, develop and deliver solutions. They may do this only for the parent firm, or they might be able to sell these solutions to others in the market as well.

Manny and I took these two dimensions and mapped out the four possible roles for the BST. Here is the map:

In each quadrant, there is an indication of the project management responsibilities: I1 = problem identification, I2 = solution development, I3 = solution delivery to customers.

In a lot of ways, these possibilities map onto the Four Roles for Your Innovation Team that I identified last year, with similar issues.

Manny and I have been working with Moe to map out Business Models for each of the four different roles. One thing that has become quickly apparent is that each role has a significantly different value proposition, which leads to differences throughout the business models, particularly in the areas of Key Activities and Key Resources, but also throughout the rest of the models.

The differences between the different business models are really important – since one of the critical issues is that a business model needs to be internally consistent. As we’ve continued to work on this, we have learned several important lessons:

Two of the quadrants fail to provide stable solutions: all the way through the process, I’ve kept asking people “who owns the customer?” I think they’re sick of hearing this, but it’s a critical point. In the Change Agent role, the team is responsible for identifying problems, but they don’t handle solution delivery. Which means that two different teams need to know the customer very well. This never works. The same problem occurs in the Service Delivery role, but this time they are responsible for solution delivery, but not problem ID. Same issue – to work well, whichever team is delivering solutions needs to also be identifying problems. That way, they can get really close to the customers, and develop a deep understanding of what they need.
It makes a lot more sense to either be a Solutions Provider, with the other team responsible for both problem ID and solution delivery, or to be a Profit Centre, where the BST will be responsible for all of it. These are both more stable solutions, as ownership of the customer is clearly defined in both scenarios.
You can’t pick a little bit of each business model: as we’ve started to map out the Key Activities and the Key Resources, it has become apparent that each business model requires a different set of skills within the BST. If we make a list of the skills that they currently have, they have some from each of the four possible models, but they don’t have all of the skills needed by any one o them. Using the Business Model Canvas should help us develop a skill development roadmap for the team so that they are able to work within one coherent business model.
Why not use multiple business models? The BST currently has four distinct market segments in which they work. One question that has come up is why not use a different business model for each one? There are a few good reasons to avoid this. The main one is that it will be nearly impossible for Moe to manage four different business models within his team. Management attention is limited, and even though Moe is an excellent manager, every time I’ve seen someone trying to manage more than about two business models at the same time, trouble occurs.
The second reason is that if the team develops one business model, they will own several important skills that the firm needs. This will make it much easier to branch out into other market segments over time, or to develop into a genuine profit centre generating external revenue. Both of these will be much harder to achieve if they are running multiple business models.
Which model is right is a strategic decision: this is the most critical point. There is no absolutely correct business model to use here. The best choice depends upon the firm’s strategy. This is where Jack is important – he has to decide on the direction that his teams are going go. Either the Solutions Provider or the Profit Centre model can work. Which one to pursue depends on how much of an external market there is for BST solutions, whether they have the skills and resources to pursue those opportunities, and, most importantly, where the firm wants to be going.
If growth and innovation aren’t that critical, then putting the team into the Solutions Provider role is fine. However, if the firm wants to drive growth through innovation, they will be better off with a dedicated innovation team, which is what they get with the Profit Centre business model.

This is just one way to use the Business Model Canvas in a larger firm. Paul Hobcraft’s post has many other suggestions.

But the bottom line is that it is an excellent tool, and every organisation should be thinking about their business model. And working on how to innovate it.

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Innovation Through Subtraction

Posted by Tim in book riffs, design, evolving economic entities, selection on 1 January 2012

I don’t like focus groups. I’ve found the information that you get from them to be too shallow to be useful. However, this doesn’t mean that when we’re innovating we should just pursue whatever ideas drift across our minds.

Steve Jobs was quoted last year about how Apple doesn’t use focus groups. A number of people used this quote to justify being completely out of touch with their customers, which is a perversion of the main point. The reason that Apple can skip focus groups is that they are incredibly good at understanding what people are really trying to accomplish with technology.

To do this, you have to develop a deep understanding of what the core issues in your field are. Here’s an analogy:

There is a chapter by the scientist/artist Jonathan Kingdon in the excellent new book Field Notes on Science & Nature, edited by Michael Canfield. There’s a fascinating section where Kingdon talks about drawing versus photography:

In the age of instant digital photography it may seem perversely old-fashioned to put a value on the slow, primitive, and inaccurate techniques of manual drawing. Photography teaches us that the very act of putting a line around the edge of an observed object is an artifice. Such outlines rarely appear in photographs, or, for that matter, in nature, and yet… and yet? Contemporary research on the human brain shows that it does NOT process images as a neutral camera does. The brain finds edges and builds constructions that are at least partly based on previous experience 0 possibly including past contacts with artifacts such as “drawings” as well as previous knowledge of natural objects. Visual neurobiology is a discipline in its infancy, but it confirms that visual constructions are both complex and integral to cognitive development. This implies that even an outline sketch that bears little relationship to the so-called objectivity of a photograph might actually transmit information to another human being more selectively, sometimes even more usefully, than a photograph.
…
If the brain is unlike a camera in actively seeking outlines, there is a strong implication that “outline drawings” (just to take a single type of visual expression) can represent, in themselves, artifacts that may correspond more closely with what the brain seeks than the charts of light-fall that photographs represent.

What does this mean in practice? It means that these drawings of a caracal by Kindgon may well transmit information to us that is more useful, more real, than what we could get from a series of photographs:

Those drawings do a great job of capturing something fundamental about the animal, as simple things often do. But to be able to draw them, you have to invest an enormous amount of time in observing the caracals, looking at what they do, in which contexts, to build up a deep knowledge of how their physical form expresses what they are trying to do.

You can’t ask a caracal (or even a house cat) what they are trying to express when they pin their ears back. But if you watch them long enough, the meaning becomes clear.

Now, customers can answer questions more clearly than a caracal. Usually, at least… But sometimes, this greater ease of communication actually makes it harder to understand what they’re really trying to achieve.

It’s not an accident that the Apple products look like art. The essence of great design is to be able to communicate simply by stripping down an object or a process to it’s fundamentals – which is the same problem with which artists grapple. This is filtering, and it’s how we deal with the avalanche of information which sometimes overwhelms us.

To innovate well, we need the same kind of deep understanding of our customers that artists have of their subjects. This allows us to strip our offerings down to their essence – innovation through subtraction.

(For more examples of some of the beautiful art in Field Notes on Science & Nature, check out this page from Wired.)

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How Can We Break Out of Our Thinking Ruts?

Posted by Tim in design, evolving economic entities on 13 July 2011

Nancy and I just got back from an excellent trip to Italy. We each had presentations at different events there, and we also had a chance to take some time to see the sights. One of the things that we got to see in Rome was the Colosseum. Here’s a shot of us while we were there:

One of things that is really striking about the Colosseum is how much it looks like modern sports stadiums. Building on ideas from naturally occurring amphitheatres, which were then used to make small performance venues, the Romans solved a number of problems in stadium construction in ways that we’ve continued to use for 2000 years now.

How can we get 50,000 people close enough to see human-scale action? The Colosseum solves this – steep tiers in a round stadium.

How can we get these people in and out of the stadium efficiently? Multiple entrances leading to numbered seats in sections.

How do we generate the maximum amount of revenue from wealthy patrons? Luxury boxes – something that modern stadium builders forgot until the 1990s.

What kind of surface should we use? The Colosseum invented the ancient equivalent of astroturf – artificially constructed surfaces meant to replicate a natural playing field. You can also see behind us that underneath this surface they built the locker rooms and other facilities needed to support events in the stadium.

Remarkably, the Colosseum really isn’t that different from the places we go these days to see sporting events.

In many respects, stadium building has been pretty innovation free for the past two millenia.

I wonder if we build stadiums that look like the Colosseum because the Romans solved the problems of stadium building perfectly, or because we’re stuck in a rut in the way we think that stadiums should be built. Jeffrey Phillips makes a point about how we can stuck in these ruts (the whole post is worth reading):

Most businesses are about identifying a few important patterns, determining that the patterns are viable and sustainable, and reducing the patterns to an algorithm which can be improved and made more efficient.

If you consider most large businesses today, they work to specific patterns. Within an industry, the vast majority of competitors in an industry have the same business models and make money in the same ways. The patterns are repeated – the same customer needs are met by a range of competitors using many of the same channels, offerings and features. Over time the patterns and algorithms become more important than the market, which build walls and silos which dictate how businesses provide services to customers. These patterns and algorithms create blind spots. Businesses forget that patterns aren’t permanent, and build monolithic structures to provide ever more efficient pattern matching solutions.

Is that where we are in stadium building? It might be. Jeffrey’s post is building on another excellent post by James Gardner, thinking about innovation in classical music. He watched a string quartet perform a modern composition, which initially he didn’t like. Then he started to think about it more deeply, and realised that this is often the way that people respond to innovation.

There’s a paradox here – how do we avoid the ruts that pattern recognition and reinforcement can lead to? On the one hand, we have to know the subject intimately to have enough expertise to break out of the box. Here is how Gardner describes it:

They start playing. An original, world premiere original composition.
It is modern. It is chaos. It is terrible.
Except, it isn’t so terrible, once you begin to listen. There is order, but it is hidden away under the discords. There is harmony, but it isn’t the harmony you expect, so you don’t hear it.
In particular, there is extraordinary skill in the musicians. The whole thing sounds like a mess, but every bow is going the same direction. The timing of each note is perfect. The silences between the notes precise.

The innovation wouldn’t be possible without the technical skill. The paradox, however, is how expertise can often also prevent us from using our skill to find new ways. Glenn Wiebe makes this point nicely with a quote from the Heath Brothers in Made to Stick:

Your conversations with others in the field are peppered with catch phrases and jargon that are foreign to the uninitiated. When it’s time to accomplish a task — open a store, build a house, sell insurance — those in the know get it done the way it has always been done, stifling innovation as they barrel along the well-worn path.

How can we get around this problem?

The first step is to be aware of it. The second is to find ways to identify these basic assumptions. Finally, we then need to discover ways to work around them.

One way to do this is to find new angles from which we view the problems that we’re trying to solve. John Hagel and John Seely Brown provide a great example of doing in this an article addressing how to design work spaces more effectively. They suggest that if you focus on increasing flow, you will end up making spaces that are radically different. The shift in focus to flow, instead of efficiency is the key to innovation:

…we might apply a key principle of nature’s “constructal” design as discovered by Duke University engineers and authors of “Design with Constructal Theory”, Adrian Bejan and Sylvie Lorente. In order to survive, all systems must evolve by providing greater and greater access to the currents that flow through them. This applies to all physical, biological and social systems that survive and thrive. Whether we are talking about river basins, trees, lung design or our cities, it turns out they all obey this constructal law.

This suggests that maximising flows within and across workspaces should be a key design principle. But let’s take that one step forward. None of the systems just described are static; they are constantly evolving. This suggests another design principle: how to design for evolution rather than creating a static design optimising for the present. What would it mean to design the systems we work in to continually evolve our ability to experience more and more flow, especially the flow of people and ideas?

What kind of stadium would we get if it were designed for flow? I don’t know, but I bet that it might be something that looks quite a bit different from the Colosseum (finally!).

Thinking ruts are dangerous – they make us vulnerable to radical innovations. If you want to break out of these ruts, these are the kinds of questions to start thinking about:

What are the basic assumptions in your field – the patterns that you are trained to reproduce? What happens if you use your expertise to create something different, instead of recreating what you’ve always done? What would your product or service look like if it were designed to maximise flow?

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For Most Researchers, “Practice” is Harder than “Deep”

Posted by Tim in design on 11 March 2011

I’ve been invited to participate in a symposium on Deep Practice, organised around the theme “Deepening knowledge
and innovation through design practice.” The program includes this free talk by Professor Mark Burry on March 24th in Melbourne.

To prepare for the event, we’ve been asked to write a brief piece on the topic. This is mine:

Researchers do not have enough impact on practice. In trying to encourage Deep Practice, it is important to address this problem.

Too often, going deeply into a subject leads to abstraction. Model building is an essential part of the discovery process. Unfortunately, a focus on abstract modeling often comes at the expense of practical application.

There are multiple reasons for this. One is that there are no academic metrics for practical impact. In measuring research excellence, the primary measures include things such as: publication volume, quality of publication outlets, citations, and research grant income. All of these measures are based on research conversations taking place exclusively between academics. This encourages depth in research, but it also encourages abstraction.

The recent Excellence in Research Australia also included “Application Measures”. These included commercialization income, and patents. These measures are based on an outmoded view of how research can drive innovation.

Both types of research metrics fail to address impact on practice. If we are to encourage Deep Practice, we must encourage greater interaction with practice on the part of researchers.

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Innovation – A New Match Between Need and Solution

Posted by Tim in design, innovation strategy on 21 January 2011

Guest Post: by Ralph-Christian Ohr

While revisiting some collected innovation readings, I recognized that it might be important to briefly emphasize again one “fundamental”: the distinction between needs and solutions.

According to Christian Terwiesch, co-author of “Innovation Tournaments”, innovation is defined as “… a new match between a need and a solution so that value is created.” The novelty can be in the solution, in the need or in the match. In all cases, this new match results in a specific market, leading to a demand for the solution. Customers hire solutions they perceive to serve their particular needs best. Customer perception and buying decision are based on conscious as well as unconscious drivers.

It’s the innovator’s job to come up with solutions capable of meeting those needs. In order to increase likelihood of market success, customers become integrated in the innovation process. However, the meanings of needs and solutions are often blurred while talking about customer requirements. Example: Don Norman asks in an insightful talk which I definitely recommend watching: “Is there a fundamental need for indoor toilets?” Is he actually talking about a customer need or a demand for a specific solution?

Don Norman at IIT Design Research Conference 2010 from IIT Institute of Design on Vimeo.

Dev Patnaik highlights the distinction between both in a Business Week article named “Needs + Solutions = Innovation”:

Understanding this distinction can affect how you listen to your customers, how you conceptualize new products and services, even how you analyze existing markets to create new strategic platforms. (…) Without an attention to both needs and solutions, a company can find itself optimizing products for a set of needs that no longer exist.

Lance A. Bettencourt has addressed some related assumptions in an article worth reading. I’d like to reference and comment to two of them here:

Assumption: ‘Customers Can’t Articulate Their Needs’

Bettencourt: “The myth that customers cannot articulate their needs is perpetuated by innovation success stories such as the microwave, the Sony Walkman and (more recently) the Apple iPod and iPhone. The story goes something like this: “If you had asked customers, they couldn’t have told you they needed the iPhone. Therefore, it must be true that customers cannot articulate what they need.” But there’s the rub: However brilliant it may be, the iPhone is not a customer need. The iPhone – like the microwave and Walkman before it – is a solution to a customer need. When companies get solutions and customer needs confused, it confuses the role of the customer and the company in the innovation process. Customers articulate their needs; it is up to the company to create a solution. It is not the role of the customer to provide technology ideas to the company, or even to evaluate the potential for a new technology to satisfy their unmet needs. How would they know? They are not technology experts. Confusing these roles leads to infamous stories, such as those recounted in the Fortune article, in which customers have rejected now-successful innovations. But the truth is that those customers were not guilty of being unable to articulate what they needed; they simply could not evaluate whether a proposed new technology would satisfy their needs – quite a different task. When customer needs are defined in a manner that distinguishes them from solutions, not only can customers articulate their needs, but those needs become the valued foundation of the innovation process requires.”

Point: If customers are involved in the front end to provide information on solutions instead of needs, they will likely tend to stick to solutions they already know and are familiar with – customers usually don’t leave existing regimes they are used to. Their valuation and beliefs are biased by these regimes. This restricts the innovator to come up with a novel solution that would even be better suited to meet the needs. The proper evaluation of needs by means of direct and indirect customer integration bears higher innovation potential than involving customers in the solution development. The more radical an innovation, the more it differs from existing offerings (if at all available). As existing solutions act as ‘benchmark’ for users, their input tends to be limited when it comes to the development of more radical innovation. However, research indicates that some customers are better than others at imaging how concepts address needs.

Assumption: ‘Customers Don’t Know What They Need’

Bettencourt: “Such misguided thinking is especially apparent when product managers speak about new-to-the-world innovations. “If the solution we’re going to propose does not yet exist,” the managers say, “then how can customers possibly know that they need it?” But again, the managers are confusing solutions with needs. (…)

The truth of the matter is that customers “hire” solutions to help them get jobs done. When we define customer needs around the jobs that customers are trying to get done, then we can see that new innovations – even the most radical or disruptive innovations – do not create a customer need. They simply satisfy a customer need in an innovative way. Furthermore, if a company can learn how customers evaluate how well they’re able to get jobs done using today’s solutions, then it can learn precisely where customers have needs that are currently unmet by any solutions – fertile ground for innovation.”

Point: Innovation doesn’t create a need. It creates a demand for the innovative solution, depending on how well the solution is able to satisfy functional or emotional needs. In case of radical innovation, the novel solution based on new technology and/or a meaning change, is entirely different to existing ones. This kind of innovation mostly disrupts current or creates new markets by leaving existing regimes. It matches needs of an innovative minority first, rather than being driven by the majority of existing markets, being bound to the existing regimes. An analytical understanding of innovation, such as the ‘jobs-to-be-done’ approach followed by Bettencourt, aims at finding solutions for defined needs and finding needs for defined solutions, respectively. This presumes that customer needs are basically accessible and can be predicted. In case of uncertainty, i.e. if needs are not (yet) well-defined, an interpretive approach seems to be more indicated for innovation. Needs evolve and change often unforeseeable with time due to cultural, technological, economical or environmental reasons. It’s a matter of ‘foresight’ to be able to envisage those evolutions, e.g. through participating in interpreting networks. By combining vision and empathy, anticipated needs can be addressed by innovative solutions. Ideally, a ‘proposal’ becomes adopted by the market, or as Roberto Verganti puts it in his book: “That was outside the spectrum of possibilities of what people knew and did. But it was not outside what they could dream of and love, if only someone could propose it to them.”

Takeaway: The distinction between needs and solutions turns out to be crucial. Innovation is a result of a novel match of need and solution – and requires proper consideration of their different contributions to the process. Offered products and services are being positioned and valued on the basis of the customer’s personal frame of reference. This is constituted by the variety of functional and emotional needs. Given that analysis and interpretation are complementary approaches to innovation, customer orientation comprises

orientation towards the customer, i.e. translating defined customer needs into innovative solutions, and
orientation of the customer, i.e. coming up with innovative proposals to ‘mirror’ and shape emergent needs.

One of my favourite articles, “The Innovator’s DNA” outlines required skills an innovative person should possess to be successful. I think there is another one to be added to this list: abstraction. For me, abstracting from solutions to needs seems to be a prerequisite for innovators as well. If innovators focus on solutions, it will limit how they perceive the customers’ actual needs. Appropriate approaches to separate needs and solutions, i.e. solution-neutral and truly empathic front ends of innovation, are indicated.

What do you think?

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Listening to customers…. really listening.

Posted by John in business models, design, innovation, innovation strategy on 11 August 2010

One of the consistent messages from innovation surveys is that customers are a major source of innovation. Sometimes customers with more extreme uses for products will adapt products to suit their purpose and then the manufacturers find out what is happening and take these adaptations on board. If you’ve seen the videos of big wave surfing, many of the board modifications were made by the surfers and then adopted by the makers.

On other occasions, a customer might give an idea back to the producer but often they won’t give the feedback unless it is asked for. Getting to know your customer better is a good way to improve your innovation performance.

One of the featured companies in the Brisbane Innovation Scorecard was Aluminum Boats Ltd. This company is in a tough industry where costs are rising and the strong Australian dollar makes competitiveness a real challenge in export markets. Nonetheless they have managed to grow the business and continue to win contracts. For this company, the customer is central to the innovation process and the strategy of the company. To get the type of innovation they need, the company forms long-standing relationships with key partners. As stated by the managing director of the company, Roy Whitewood,

We set out to be different from the beginning. Most boat builders in our class tend to work on one-off projects.

Four years ago we chose a different direction for Aluminum Boats. We selected big clients and work with them to solve problems. We innovate openly with our clients in design and process. In this way we also manage all aspects of our boat building with the highest quality materials and latest construction techniques.

On receiving the award for product innovation at the launch of the Brisbane Innovation Scorecard, Stuart Pascoe, Aluminium’s GM, talked about the commuter ferries that were the focus of the prize. He talked about not only listening to the customer, but also the customer’s customer. So not only did they work with the ferry operator to design the right boat for the job but they also talked to the commuters who used the ferry. When they asked commuters about what is was like to live on an island in the bay and commute to Brisbane, it seems that many didn’t like the slow travel times. One of the reasons for the slow commute was the problem of hitting dugongs. These are protected animals. The result was a dugong-friendly fast ferry and as Stuart puts it in an interview, a hit might give the dugong a headache but it won’t kill it.

After the launch of the scorecard, I took a taxi back to the university to catch up on work. I was set to make a few phone calls on the way when I realized that the taxi driver was a very talkative fellow, so I put the phone away. One thing about Australian taxi drivers is that they are very likely to ask you everything about your life, without any sense of this being inappropriate. This driver wanted to know what I had been doing in the city, so I told him about the launch of the Innovation Scorecard and the companies that had been recognized for their leadership in innovation. When I mentioned Aluminium Boats he turned to me and said that he knew the company well and thought they were an excellent business.

It turned out that my driver was a volunteer coast guard and was a part-timer skipper of one of their boats. He said that they had a few boats but the one designed by Aluminium was by far the best. When I asked him why, he said that the company had spent a lot of time talking to everyone who worked on these boats. They really wanted to know what it was like to be searching for people in the water at night and what it was like to spend a long time on the boats during an emergency. My driver had told them about vision problems in low light conditions and the need to have a special set up in the cockpit with night-vision. This need was incorporated into the final design. Tim writes about empathy-driven innovation and Aluminium Boats is a very good example of what he is talking about.

The thing is that Aluminium is organized for ‘listening’ and its not just something that is part of their marketing. Having 90% permanent staff in an industry where subcontracting is common, fewer customers where long-term relationships can be formed and sticking with design and construct jobs are all strategic choices that help them to listen better.

As Stuart Pascoe, GM says

We don’t bash the problem over the head with a hammer. We go out, meet the agencies and find a way around it.

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Innovating Meaning

Posted by Tim in book riffs, design, innovation strategy on 15 July 2010

Often when we someone asks us to describe a product or a service, we tell them about features. What does it do? How does it do it?

This is a mistake. Products and services are not about features – they are about meaning, and they are about getting jobs done.

Here’s an example – listen to Dan Ariely talk about the Toyota Prius:

Ariely is not describing the Prius as a set of features – he is describing what it means to drive a Prius. The features may influence this meaning, but the innovation in the Prius is not really in what it does – the innovation is in what it means to people.

Clay Shirky has another example in his new book Cognitive Surplus: Creativity and Generosity in a Connected Age:

When McDonald’s wanted to improve sales of its milkshakes, it hired researchers to figure out what characteristics its customers cared about. Should the shakes be thicker? Sweeter? Colder? Almost all of the researchers focused on the product. But one of them, Gerald Berstell, chose to ignore the shakes themselves and study the customers instead. He sat in a McDonald’s for eighteen hours one day, observing who bought milkshakes and at what time. One surprising discovery was that many milkshakes were purchased early in the day – odd, as consuming a shake at eight A.M. plainly doesn’t fit the bacon-and-eggs model of breakfast. Berstall also garnered three other behavioral clues from the morning milkshake crowd: the buyers were always alone, they rarely bought anything besides a shake, and the never consumed the shakes in the store.

The key to understanding what was going was to stop viewing the product in isolation and to give up traditional notions of the morning meal. Berstell instead focused on a single, simple question: “What job is a customer hiring that milkshake to do at eight A.M.?”

If you want to eat while driving, you need something you can eat with one hand. It shouldn’t be too hot, too messy, or too greasy. It should also be moderately tasty, and take a while to finish. Not one conventional breakfast item fits that bill, and so without regard for the sacred traditions of the morning meal, those customers were hiring the milkshake to do the job they needed done.

All the researchers except Berstell missed this fact, because they made two kinds of mistakes… The first was to concentrate mainly on the product and assume that everything important about it was somehow implicit in its attributes, without regard to what role the customers wanted it to play – the job they were hiring the milkshake for.

The second mistake was to adopt a narrow view of the type of food people have always eaten in the morning, as if all habits were deeply rooted traditions instead of accumulated accidents.

The innovation in both cases is in what the product means. None of the features of the milkshake changed to turn it into a breakfast meal – the innovation was driven by customers, who invented a new use (and a new meaning) for milkshakes. The change that Ariely talks about with the Prius is not feature-driven either – he is arguing that the Prius has been successful because it means something different.

This is exactly what Roberto Verganti is talking about in Design-Driven Innovation – the role of design in innovation is to create new meanings for things. This is a huge innovation opportunity.

The lesson here is this: don’t get hung up on features, or on what things do. Instead, think about what they mean. One good way to approach innovation in meaning is to focus on the job to be done. If you can innovate meaning you have a chance to create a significant competitive advantage.

(you can see the academic article from Berstell and colleagues discussing jobs to be done here – via Graham Hill).

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