Innovation is a hot topic in technology and business circles these days. Companies are told they must innovate to survive and thrive in the digital-first customer-experience economy. Yet what is innovation? How does innovation happen? Can a company “buy” innovation from a technology vendor or a consulting firm? Is innovation solely the result of vision, inspiration, and invention? Where does it come from, and how can a company harness its benefits?
Over my 20-year career, I’ve met with hundreds of businesses seeking to navigate digital transformation. Through my experience as an early employee of CyberSource or working passionately at a string of startups and in my current role, I’ve formed some opinions about innovation. In my experience, companies, big and small, generally fall into one of two categories. In the first category are those that create a culture of openness and customer-centricity. These companies consistently churn out innovation. In the second category are insular companies, often with autocratic leadership and fear-driven cultures. Instead of innovation, these companies simply churn cash and employees.
Like the great sculptor and innovator Leonardo da Vinci, let’s start by chipping away all the things innovation is not:
- Innovation is not something done by a group of smart people locked in a lab.
- Innovation doesn’t start with the technology and then search for a problem to solve.
- Innovation is not solely the result of invention but rather of insight and discovery.
- Innovation doesn’t seek to solve small problems that don’t meaningfully impact a business outcome or customer experience.
- Innovation is not something a technology company does for its customers; it must be something done with its customers.
- Innovation does not typically come from the top down but from the bottom up.
- Innovation is not easy and not always clearly definable, except in hindsight (as in “Why didn’t I think of that?!”)
Innovation – both art and science
After carving away the misconceptions and hype, what remains? In my view, innovation happens where an identified market problem (known or latent) intersects with the creative application of new or existing technology. At the center of the intersection are “ambi-hemispheric” generalists who understand both the market problem and the art of the possible in technology (and yes, I totally made up the word ambi-hemispheric to describe people who neither left- nor right-brain dominant and can use both sides of their brain equally well).
Viable innovation must also solve market problems with pervasive impacts on business operations and customer experience. If it’s not a pervasive problem with a value sufficient to justify paying for its resolution, your innovation never makes it to market. Last, but certainly not least, innovation is most often the result of methodical insight and discovery rather than invention from “Eureka!” moments. The greatest innovations that drive change, delight customers, and build value for companies are those that start with the discovery of a problem followed by a relentless pursuit of a solution and guided by a fanatical, customer-centric view of the world.
The origins of innovation
Like any creative endeavor, the wellspring where great ideas are derived can be difficult to pin down. Henry Ford famously said, “If I asked people what they wanted, they would have said faster horses.” Steve Jobs and the iPhone are another example of a transformational product that was far more than an incremental improvement over the Handspring PDA.
Even these famous cases, which will invariably be thrown in your face if you assert that customer-centricity drives innovation, are consistent with my definition of innovation. It was the insights discovered by Jobs and Ford that drove these innovations. They studied existing products, they observed customers using these products, they understood the art of the possible in technology, and then they sought to transform the customer experience. They understood and solved market problems where even customers (and competitors) were unaware that something better was possible.
The best source of innovation is the market (customers and non-customers). Through frequent observation of customers in their natural habitat, great insights and discoveries happen. One of my favorite ideas from the pragmatic marketing program is NIHITO: Nothing important happens in the office. Innovation is a process of discovery and insight. It is not solely about technology, wild whiteboard scribblings, or spontaneous invention. Through observation, skillful questioning, and techniques like design thinking, pervasive problems can be discovered, clarified, and addressed with innovative solutions.
An instructive example is that of Ford product designers observing customers coming out of a grocery store. The engineers watched customers struggling to open the rear liftgate of their Ford SUV while trying not to drop precariously clutched bags of food. Thus was born Ford’s foot-activated liftgate. I can guarantee that thousands of auto engineers, within an instant of seeing the innovation, said, “Why didn’t I think of that?!” In hindsight, it seems so obvious.
Successful innovation comes from an outside-in approach to product and services. Too often the “voice of the market” doesn’t even have a seat at the table when it should be the primary source of both qualitative and quantitative information that sets priorities and uncovers the greatest insights that lead to innovation. There will always be customers and executives with very loud voices. These voices can drown out larger market trends, insights, and realities. If you go to market with strongly held preconceptions based on the loudest voices, you are more than likely to miss opportunities for innovation or fail altogether.
As Simon Sinek said at a recent SAP event, successful people and companies need to have “existential flexibility.” Many of the greatest innovations in history came from people who applied a fresh perspective from an outside field of study (coming with no preconceptions) and people with the ability to accept and act on new data even when it shatters their preconceived notions (existential flexibility).
The several habits of highly effective innovators
In my experience, there are a few consistent habits and cultural attributes that create the conditions for innovation to flourish. First, and foremost, companies that innovate have a culture of openness and direct communication, where any idea, no matter the source, is welcome. Employees at all levels feel invested in the success of the company and free to suggest ideas.
Companies that innovate have leaders who encourage openness in their company culture. These leaders may be the smartest people in the room, but they recognize the limits of their knowledge and know that the varying perspectives of their employees can unlock tremendous value and innovation. Essentially, these leaders know how to listen. To employees. To customers. To everyone.
The most transformative innovations come from companies that are driven by a relentless focus on customer experience and customer-centricity. Everything they do is based on how it will impact the customer experience. A customer-centric worldview informs all their product, service, and business process decisions. By staying close to their customers and putting themselves in their customers’ shoes, they are more likely to unlock insights that lead to innovation.
Finally, companies that innovate have systematic market feedback mechanisms built into every level of their organization. Common and highly prioritized habits include customer interviews, win/loss analysis, product usage analysis, surveys, analyst meetings, partner interviews, in-software analytics, customer service feedback, sales team feedback, social media monitoring, and social sentiment analysis. They engage in anything and everything that enables product managers and leadership to stay close to their customers and their markets.
If your organization doesn’t have systematic methods for market and customer feedback, you will be outmaneuvered by your competitors that do. Companies can combine instant operational data with qualitative experience data that measures customer-, product-, brand-, and employee-feedback data. This will accelerate the feedback loop in ways likely to uncover even more of the gems that drive innovation.
When the inmates run the asylum
One of my favorite books on product management, The Inmates are Running the Asylum, by Alan Cooper, proposes that software engineers shouldn’t be the people managing products, user interfaces, and product roadmap prioritization. In many ways, company executives and product managers who are disconnected from the customers and market are not unlike inmates running the asylum. These insulated leaders may be brilliant, but when they are autocratic, use fear as their primary motivational tool, and are the loudest and most confident voice in the room, competing data, narratives, and ideas are stifled. These leaders believe they know best and simply want employees to execute their vision – one that’s invariably full of preconceptions and uninformed by market validation. Confirmation bias rules the day, while contradictory evidence and ideas are discarded. Does this sound like any of your professional experiences?
One final thought on how not to do innovation. You’ve probably noticed that all technology companies these days have “labs.” These labs are usually full of the very best and brightest. If they exist in the “inmates” world, though, these labs operate in a vacuum. They start with the technology, rather than with a pervasive market problem. These types of labs consistently create interesting “inventions” that are rarely, if ever, adopted by the market. Disclaimer: If I’m connected with you and you work in a lab, um, I’m sure you’re the exception to the rule.
The bottom line
Innovation most often results from a methodical process of market discovery and insight, not from the invention of new products in a vacuum. Many technology companies, in my experience, will fully fund sales and marketing efforts yet cut budgets for product managers and leaders to spend time with customers outside of a sales situation. This is a self-defeating strategy that can lead to a downward spiral in product competitiveness and customer satisfaction. If the voice of the market is not understood and represented at the decision-making table, you may not only miss an opportunity for innovation, you might also miss your job after your company goes out of business.
I recently read a relevant article about Milwaukee Tool. In the Great Recession of 2008, many of Milwaukee Tool’s competitors cut R&D budgets. Milwaukee Tool did the opposite and doubled-down on research and innovation. Product managers went to construction sites to observe customers using power tools. They gained valuable insights that resulted in innovation after innovation in its line of tools and becoming a leader in lithium-ion battery technology. When the economic recovery arrived, Milwaukee Tool was miles ahead of the competition with a new line of products that vaulted it into a leadership position in the industry. Based on my visits to Milwaukee Tools’ offices, I can also report it has a culture of openness and leadership that listen.
“Innovate or Die” is truer today than ever. Entire industries are being transformed by companies that listen to their market (Milwaukee Tool) and upstarts that demolish or transform existing industries (Netflix, Uber, Airbnb).
Remember NIHITO. Nothing important happens in the office. Get out there! Ask, listen, observe, survey, learn. The insights that drive innovation will follow.
For more insight on innovation, see “Two Key Ingredients For Intelligent Innovation.”