Innovation distinguishes between a leader and a follower.
Let’s admit it. Innovation is sexy. It’s cool. What company wouldn’t like to appear on one of those lists of “most innovative” companies. So what’s the problem? Just brainstorm some new ideas, pick the best one, take it to market and let the good times roll. Let’s all go innovate!
Obviously, innovation is not quite that simple. Else why would Amazon.com sell 57 thousand books and Google give you 280 million hits on the subject?
Innovation is critical for long-term survival. Competitors are hell bent to take away your customers. Technology creates new opportunities that can transform industries. And customers? They have problems you haven’t solved. Yet.
As I wrote in “Customer Experience Management: Past, Present and Future,” most companies focus on fixing problems and refining what they’re already doing. That’s all well and good, but customer-centric leaders also strive to create new products and services for unmet customer needs.
One of the best in the world at this is software maker Intuit, which sells solutions for mundane tasks like accounting, personal finances, and paying taxes—and somehow makes it exciting! The company booked over $4 billion in 2012 and has been growing 10% compounded per year for the past five years. During that period, its stock price doubled while Microsoft (a key rival) and the S&P 500 stock index increased only 20 percent.
Speaking at a conference in 2011, Roy Rosin, Vice President of Innovation at Intuit, explained how Quicken Health Expense Tracker was inspired by one family’s challenges dealing with $1M in medical bills. Intuit launched the product in 2004, and then kept enhancing it for five years, improving its Net Promoter Score (a measure of customer loyalty) from terrible (-19) to awesome (+77).
By early 2011, Rosin said the software was being used by 3 million patients and 33,000 doctors. This is a great example of a new product launched based on real customer insight, and then continuously improved (another form of innovation) to reach its full potential. A success story, right?
Not exactly. Quicken shut down Health Expense Tracker in 2012 because they found a “greater need and opportunity for us to improve the way patients interact with their healthcare providers online.” That solution was Health Patient Portal, which amassed seven million subscribers by June 2013. Intuit CEO Brad Smith explained matter-of-factly the firm’s philosophy in a July 2012 interview: “If the customer is adopting it we double down. If not we shut it down.”
Think about this for a moment. Intuit solved a key customer problem. Improved the software over five years. And then killed it. This is a great example of a company doing its own creative destruction, before competitors can do it for them! How many companies are littered with products on life support, because leaders don’t have the guts to stop and move on to better solutions? (See the Google Graveyard on Pinterest for more examples.)
“Could We Do More?”
This process didn’t happen by accident. One of Intuit’s core values is “Innovate and Improve,” defined as:
We innovate to drive growth, and continuously improve everything we do. We move with speed and agility, and embrace change. We have the courage to take risks, and grow by learning from our successes and failures.
Company leaders really do encourage risk-taking. Take, for example, the Free Tax Advice service, which, as the name implies, gives tax advice. For free. Seriously?
Surely Intuit would only make this available to its paying customers. Or set up some kind of premium subscription. You can’t just give this away, right? Well, yes they can, and did. The idea came from observing that customers looked to TurboTax as a source for answers on how to use the software, but not tax advice. This raised the question, according to product manager Katie Hanson, “Could we do more?” With support from an aggressive General Manager, they decided to market it as “we give tax advice” with no use of an Intuit product required.
This service, along with many other products and services, is the result of Intuit’s Design for Delight approach to innovation. It was initiated in 2007 when founder Scott Cook realized the company wasn’t wowing customers. In contrast to the Steve Jobs model with a visionary calling the shots from the top, Cook set out to embed innovation into the culture of the organization at every level.
Source: Intuit Slideshare
Since the tax advice service involved hiring hundreds of agents, it was very risky. But Intuit believed it would increase customer loyalty and drive new product sales. Leaders were willing to take a (calculated) risk to add value to existing customers and potential customers. If this strategy stops working and a better approach appears, they won’t be afraid to move on.
With my too-good-to-be-true warning light flashing, I tried it out with a real tax question that’s been bugging me. After typing in my question, I got a list of possible answers from their online knowledgebase, followed by options to contact Intuit through its TurboTax community, online chat, and phone. Delightful. If you’re already a TurboTax customer, this service will keep you one for life. If not, the next time you’re in the market for tax software, you’ll be buying from Intuit.
Creativity, Invention and Innovation
Since most every business is constantly updating products and services and launching new ones, it’s all too easy for marketers to slap the “innovative” label on just about anything. One point of confusion is that “innovative” is often used as a fancy way of saying something is “creative.” Or, to refer to a new design “invention.”
But these terms are not synonyms. Creativity means looking at the world in novel ways. If you’ve worked with creative people in music, arts or business, you know they excel at coming up with ideas. Simplifying a bit here, creativity in a business context means generating ideas.
You can be as creative as you like and invent lots of new products, but if they aren’t commercially successful, it’s not really innovative.
Ideas may, or may not, get turned into an invention, which means a “unique or novel device, method, composition or process.” Some inventions can be patented to protect the intellectual property rights of the inventor. Steve Jobs didn’t invent typefaces, but he is credited with taking the idea of beautiful typography and implementing in a personal computer—the Macintosh. Speaking to a graduating class at Stanford in 2005, he said he got the idea when he dropped out of college and decided to take a class in typography. Ten years later, Jobs designed the first Mac, an invention that came with a selection of fonts unlike anything the PC industry had seen.
Just as not all ideas become inventions, not all inventions become innovations. Because innovation means bringing something new to market that creates economic (or social) value. In other words, you can be as creative as you like and invent lots of new products, but if they aren’t commercially successful, it’s not really innovative.
Which Comes First, Ideas or Needs?
The progression from ideas to inventions to innovation makes logical sense. And ideas are plentiful. Perhaps too plentiful. In recent years social media and ideation tools have been used to generate ideas even faster. Visit My Starbucks Idea and you’ll see thousands of ideas for new products, experiences and even community involvement. As of this writing, only a handful are moving forward, such as non-smoking patios, healthier food options and soft pretzels.
Many companies have implemented a similar approach for collaborative idea generation—part of the open innovation movement—including Dell, Sara Lee, IBM and P&G. Sophisticated ideation tools can help users submit ideas and manage voting and ranking activities to find the most popular. Ideas can also be mined from social media, include Facebook, Twitter, blogs and community forums.
While stimulating or mining ideas may lead to innovation, it’s backwards and inefficient, according to Tony Ulwick of Strategyn, an innovation consulting firm. Starting with ideas first is a “guessing game” because companies “hope that the idea will be in a market that’s big enough to make sense for them to pursue.”
Ulwick instead advocates for “outcome-driven innovation,” which starts with a market big enough to pursue, and then strives to find unmet needs in that market.
The goal is really to pick the correct market, discover where to focus in that market, see if it’s worth focusing on creating a solution in that market, and once all those questions are asked, then come up with a solution that addresses the unmet needs in the market.
He offers as an example, the development of the Bosch CS20 circular saw. Bosch had hundreds of ideas, but couldn’t figure out which ones to pursue in a market that seemed saturated. Through painstaking research they identified a segment with important but unmet needs which indicates “where customers are struggling to get the job done better.” Bosch put 14 different features on the CS20 saw to meet those needs at a competitive price, and it’s become their fastest growing product in North America history.
Making Innovation a Habit
While innovation requires creativity, it shouldn’t be like catching lighting in a bottle. Great companies manage innovation as repeatable process or organizational habit. That means making it part of the culture like Intuit.
Here are some quick words of advice:
- Make it OK to fail.
In fact, maybe you should celebrate failure, because without failure there is no innovation. People won’t try something risky otherwise. Leaders must set the tone, recognize winners, and not punish those who don’t succeed every time.
- Use appropriate metrics
Innovation should not be a popularity contest or a marketing slogan. You need objective evidence of progress. Innovation expert Robert Brands recommends using a combination of leading (e.g. number of ideas generated, patents filed, etc.) and lagging (new product sales as percentage of total, number of patents issued, etc. ) measures.
- Start with customer needs
There’s a place for truly disruptive technologies and ideas that can transform an industry. But these are few and far between. A Cooper-Edgett Ideation Study found Voice of Customer methods the most popular and effective, including customer visit teams, customer focus groups for problem detection, and lead user analysis.
Intuit puts it this way: “We want to delight our customers so profoundly, they can’t imagine going back to their old ways.” Fixing problems isn’t enough. In the end, it’s up to business leaders to make innovation a priority and implement sustaining processes and reward systems.
- Customer-Centric Innovation is Driven by Outcomes, Not Ideas (Interview with Tony Ulwick)
- 8 Step Process Perfects New Product Development (Robert Brands)
- Ideation for Product Innovation: What are the best methods? (Dr. Robert Cooper and Dr. Scott Edgett)
- Let Your Customers Inspire You! Four Stages of the Customer-Centric Journey
- The Innovation Catalysts (Harvard Business Review)