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| Home - Industry Article - Nov 06 Issue |
Finding Your Next Big Idea
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Changes in Perception
Along with greatly improved health care in the last 20 years, there has been a growing awareness of personal-care needs. Exercise equipment, health clubs, and natural foods are among the industry sectors that have experienced immense growth in the last two decades.
Consumers’ perceptions are based on moods that can be studied, analyzed, and exploited for innovative opportunities.
Using New Knowledge
When new-found knowledge is used to create sought-after products. Leaders generate ‘buzz’, publicity and funding – what people usually mean when they refer to innovation. Such innovations have the longest lead-time, with a protracted span between the acquisition of knowledge and its distillation into usable technology.
The computer required no fewer than six separate strands of knowledge:
- Binary arithmetic
- Charles Babbage’s conception of a calculating machine in the 19th century
- The punch card, invented by Herman Hollerith for the 1890 U.S. Census
- The Audion tube, an electronic switch invented in 1906
- Symbolic logic, developed between 1910 and 1913 by Bertrand Russell and Alfred North Whitehead
- Programming concepts and the feedback generated by abortive attempts during World War I to develop effective anti-aircraft guns
Although all of the necessary knowledge was available by 1918, the first operational digital computer did not appear until 1946.
Long lead-times and the need for convergence among different types of knowledge explain the peculiar rhythm of knowledge-based innovations, its attractions, and its dangers. During a long period of incubation, there is much talk and little action. Then, all of a sudden, there is a flurry of activity that produces myriad new products, followed by a shakeout and survival of only the most viable.
Between 1880 and 1890, 1,000 electric apparatus companies were founded. By 1914, only 25 were still in business. In the early 1920s, there were 300 to 500 automobile companies. By 1960, only four remained.
Knowledge-based innovation can be difficult, but competently managed. Success requires careful analysis of the different types of knowledge required to make an innovation possible. Careful investigation of the end-user’s needs and capacities is essential.
Innovators must go out into the field, observe consumers’ behavior and listen to them. Successful innovators use both the right and left sides of their brains, analyzing facts and using their creative intuition. They analyze what an innovation requires to satisfy consumer demand; after that, they study potential users’ expectations, values, and needs.
To be effective, an innovation must be simple and focused. It should accomplish only one goal; otherwise, it confuses people. The greatest praise an innovation can receive is people saying, “Of course! Why didn’t I think of that? It’s so simple.”
Recognizing a Winning Innovation
How do you differentiate between new products or services that will sustain commercial success versus those that are simply good ideas? W. Chan Kim and Renee Mauborgne have studied 100 companies that have repeatedly succeeded at innovations (Harvard Business Review on Innovation, 2001). They found that successful innovators focus on product utility: how a product changes consumers’ lives.
This perspective is critical, as the focus of product development moves from emphasis of technical features to how it will be useful to customers.
Creating Exceptional Utility
The Kim and Mauborgne ‘Buyer Utility Map’ helps managers think from the right perspective: the consumer’s. It outlines the levers companies can pull to deliver utility, as well as the different experiences customers can have.
In the left-hand column, you’ll find six utility levers, which represent the factors a customer considers when using a new product. At the top of the chart, you’ll see the different points in the product’s use cycle. A customer’s experience can be broken down into a six-stage cycle that runs sequentially from purchase to disposal.
The Six Stages of the Buyer Experience Cycle:
| | Purchase | Delivery | Use | Supplements | Maintenance | Disposal |
| Customer productivity | | | | | | |
| Simplicity | | | | | | |
| Convenience | | | | | | |
| Risk | | | | | | |
| Fun and image | | | | | | |
| Environmental friendliness | | | | | | |
Leaders must consider how a new innovation can help consumers do something faster, better or differently (the most overlooked factor). By placing a new product in one of the 36 spaces shown here, managers can clearly see how a new idea’s application differs from that of existing products. Companies can innovate by focusing on one of the six utility levers in distinct stages of the buying cycle. Using this chart reminds executives of the many unexplored innovation possibilities that exist.
This framework helps strip some of the mystery out of creating commercially successful products. While there is always an element of chance in innovation, there are also ways to bring it firmly into the realm of effective business planning.
When Innovation Leads to Complexity
Companies have strong incentives to be overly innovative in new product-development. Introducing distinctive offerings is often the easiest way to compete for shelf space, protect market share or repel a rival’s attack. Moreover, the press abounds with dramatic stories of bold innovators who revive brands or product categories. These tales grab managerial and investor attention, encouraging companies to concentrate even more intensely on product development.
But the pursuit of innovation can be taken too far. As a company increases the pace of innovation, its profitability often begins to stagnate or even erode. The reason can be summed up in one word: complexity. The continual launch of new products and line extensions adds complexity throughout a company’s operations, and as the costs of managing this complexity multiply, margins shrink.
Managers aren’t blind to the problem. Nearly 70% admit that excessive complexity raises costs and hinders profit growth, according to a 2005 Bain survey of more than 900 global executives.
What managers often miss is the true source of the problem: how complexity begins in the product line and then spreads outward through every facet of a company’s operations.
To meet the complexity challenge, you must begin at the source: the way your company views customers and their needs. In most cases, managers overestimate the value buyers place on having many choices. But some companies have begun to challenge this belief. They have launched efforts to determine how many product or service choices customers really want; then, they gear their operations to efficiently provide that degree of complexity – and no more.
When organizations prune their offerings to better-fit customers’ needs, they do more than cut costs. They often boost sales, as well.
Dr. Maynard Brusman is Founding Principal of Working Resources, a San Francisco-based leadership consulting and executive coaching firm. He is a recognized leader in psychological testing for employment screening, interviewing, and selecting emotionally intelligent people, 360 feedback performance appraisals, managing change, resiliency, interpersonal communication, leadership coaching, and strategic planning for human capital development. Maynard is frequently called upon as a trusted advisor to senior leadership teams. For article feedback, contact Maynard at mbrusman@workingresources.com
 
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