Innovation as Strategy

Innovation is often a strategic choice within the OGSP process.  So what does "innovation" mean?

I take my definition of innovation from a friend, Dr. Larry Leifer, who heads the Center for Design Research at Stanford University.  Larry simply refers to innovation as:

"Invention that sells"

This makes sense on many levels.  Innovation must be rewarded by the marketplace in a commercial sense to be considered successful, rising above what is singly invention.  The dual tension between "thinking of new stuff" and "so good people want to buy it" appeals the the business community.

In the interest of breaking down the concept of innovation into smaller easily digestible bits, it's useful to think of two broad categories of innovation - customer innovation and consumer innovation.  In this division "customer" means reseller like a retailer and "consumer" means the actual end user of a product. 

Customer innovation is any invention which helps in the distribution or selling of a product or service.  This can have enormous leverage on a company's fortunes, turning "me too" products into winners simply based on effective customer innovation.

P&G's Beckett Ridge Innovation Center (BRIC) is customer innovation "on steroids".  In this facility, all things customer are researched, displayed and worked with customer partners to improve everything from supply-chain logistics, to enhanced in-store merchandising, to streamlining the shopping experience.  Customer innovation essentially represents sharing intellectual property with customer-partners as a way to build value in the relationship which transcends mere price - oh, and did I mention, sell more stuff.

The second form of innovation, by far the sexier, flashier version, is consumer innovation.  It's the iPod/iPhone, Swiffer, Post-It notes, NetFlix and the Prius - all the products and services which pop to the top of consumer consciousness and shopping lists as they are launched into the marketplace.

So where do these come from?  And, importantly, how do I generate them on my business?  This is innovation as strategy.

Books upon books upon books have been written about this indicating a fundamental need for consumer innovation, how hard it is to generate and how unsuccessful the vast majority of effort is around this topic.  In my humble opinion, there are two books which I think are worth reading on the subject.  The is is the Innovators Dilemma by Clayton Christensen.  While not a "how to" book, it does a good job of building foundational understanding of what it takes to make innovation work, from "incremental innovation" to "disruptive innovation" - most businesses need a portfolio of innovation within these ranges.

The second book is a new arrival, The Game Changer by AG Lafley and Ram Charan.  It's full of very practical advice like defining "Where to Play, How to Win" and "leveraging what you do best" and "from generating ideas to go to market."  (Here's a link of a summary of this book from Chief Executive Magazine)  While what P&G does with innovation isn't applicable to all business and all customers, the principles are quite sound and useful.

Clicking down one level of granularity, the process of consumer innovation always, always starts in one place - with the consumer.  This means understanding the consumer, usage habits, behaviors, needs and potential benefits on both an intellectual and visceral level.  The intellectual level is best described by P&G's approach where the "Consumer is Boss" and this drives activity both large and small all in service of the "consumer".  At Intuit, it becomes visceral as managers are encouraged to "follow me home" and spend one-on-one time directly with the consumers of their products, watching over their shoulder as they pay a bill, or shuffling through a shoe box full of invoices, or helping with the math on a tax return. 

Innovation starts with consumer interaction; but consumers are not very good at telling you where to go with innovation.  As a wise boss once told me ... "consumers are really good at answering only one question - will I buy that?  Everything else is our job." 

The search for innovation revolves around consumer needs satisfied by the product and/or service benefits.  It's useful to know that consumer benefits fall into broad categories and thinking within these categories often leads to useful innovation ideas.  Consider:

• "Core Strength" Benefits - Simply, doing what your product does, only better.  Cleaning if it's Tide, moving dirt if it's an Ames True Temper shovel, running faster if it's a Nike shoe.  Examining what your product does best with consumers and then listening to them to find ways to do it better is a good place to start innovation.

• "New to the Product" Benefits - In some cases, it's possible to bring entirely new benefits to products which both surprise and delight consumers.  The iPhone is a good example of new capability (essentially laptop computer capability) made available in a cell phone.  Think "pockets on shirts" - we have always had pockets, we have always had shirts, but now we have pockets ON shirts.  Very cool.

• "New to the World" Benefits - A hard to achieve category, but a category nonetheless. This can be high science and a true breakthrough when it happens - health sensing by home appliances, location sensing and information providing eyeglasses, a swim suit that doesn't make your butt look big.  Rare, expensive, difficult to predict or build a forecast on.

• "Break the Trade-Off" Benefit - Consumers tend to live in a world of widely understood trade-offs, where a product or service will be good at one thing, but not so good at something else.  A very simple example: 2-in-1 shampoos.  Shampoos - great cleaning, fragrance, lousy "feel"; Conditioners - Great "feel", lousy cleaning, messy and dealing two products.

• "Grow the Category" Benefit - These are benefits which result in category growth, usually a result of consumers paying more or participating more in the category.  Swiffer is a good example, which grew the floor cleaner category by over $1B, essentially bundling the cleaner with implement and significantly streamlined the work process.

There is no, one right way to approach innovation.  Each business has to "innovate" the process that works for them.  The end result, however, is very clear ... invention that sells!

Comments

[Margie Adler]

I've just returned from a week on glorious Lake Superior, where I contributed some to the local economy, but I have to admit I dropped out of everything electronic and most things consumer- and customer-oriented. I'm back for a couple of days, stepping through e-mails and tackling only the highest priority projects...reading your blog was one of them. Just wanted to say how much I loved this following line. It's among many strong points in this piece. You've got a great style and voice.

P&G's Beckett Ridge Innovation Center (BRIC) is customer innovation "on steroids".