How to define an effective innovation strategy
The average age of an S&P 500 company is under 20 years.
This is down from 60 years in the 1950s, according to Credit Suisse.
Disruptive technology is seen as one of the driving forces behind this reduction, as well the increased buyout activity starting in the 1980s.
As the average lifetime of companies has reduced, many have begun doing more to innovate to improve their products/services and building customer-centric cultures.
We’ve seen a rise in The Innovation Lab. Companies such as Delta Air Lines, Target, Google, Pfizer, Marriott, Autodesk, Fidelity Investments, Ford, Verizon, and Stanley Black & Decker have all announced a lab. But how many of these labs have been successful? Recently these labs have been met with scepticism and the introduction of the term Innovation Theatre:
"This happens when teams in innovation labs use lean startup tools without really understanding how they work. The teams focus their attention on making cool products, without thinking about the business models that underlie those products…"
Steve Blank
The scepticism is often for good reason, corporate innovation is often insular, ad hoc, slow, steeped in inertia and rigid process. The inward-looking nature of these teams means they end up designing features that they believe are desirable and often are so 'bluesky' they don't even make it to market, but to the customer are ancillary or sometimes a must-have requirement that they expected to be there anyway. Thus undermining the effectiveness and purpose of the innovation lab.
Big companies are afraid of self-cannibalisation, their fear of tampering with a product or service that has worked historically also hinders any real potential that does make it out of the lab.
If you’re not innovating quickly and adding real value, with impact, your industry will leave you behind. Because if you don't do it, someone else will. Advances in technology and increased competition from places you haven’t even considered put you at risk. Constant and strategic innovation based on customer deep knowledge is the key to exceeding their expectations, building loyalty and avoiding the risk of disruption from industry newcomers.
"41% of executives said their companies are extremely at risk or very at risk of disruption."
How can you define and evaluate your innovation output to ensure that you are improving and differentiating your product/service while exceeding customer expectations and creating the sought after “moments of delight”?
The customer satisfaction model
In 1984, Noriaki Kano developed the customer satisfaction model, known as the Kano Model, that measured overall product satisfaction with product functions.
Kano disagreed with the conventional theory that updating or adding new features would increase customer satisfaction levels. He believed that not all attributes were equal in the eye of the customer.
The model is designed to help innovation teams to focus on what really matters to customers and design features that have the most beneficial impact to them.
One of the most interesting elements of the model is how an initially ‘attractive’ and ‘delightful’ feature can quickly become a ‘must-have’ which in turn ceases to delight users in the way it once did.
There are a number of factors to consider; technological evolution and the emergence and innovation from competitors probably being the most prominent.
Think about your previous car vs what you drive now. Imagine buying a car in 2019 that didn’t have Bluetooth technology, we expect connectivity as a must-have feature today.
Customer expectations rise whenever a leading edge company develops new technology or uses existing technology to create a new and better experience.
As well as technological advancement affecting our expectations, external/competitive features can influence our expectations.
Anyone who has used Netflix may have experienced a change in their own expectations. I certainly have, I remember when Netflix introduced the ‘skip intro’ feature. When they first introduced it, it felt like an ‘attractive’ addition, not a ‘must-have’, after all a skipping ~30 intro wasn’t really affecting how I used the platform. However, when I switch between Netflix and Now TV, I notice how my expectations have risen. NowTV doesn’t have a skip intro feature and I miss it and even feel disappointed that the feature doesn't exist.
Product innovation evaluation
The Kano Model includes a pair of questions to help you determine the value of a feature to a customer - The Kano Questionnaire.
Before you use the questionnaire you need to be sure that the features you are exploring are strictly those that the user will get any sort of meaningful benefit from.
There are two questions, that you pair with 5 possible answers to develop a feature evaluation table:
- One asks our customers how they feel if they have the feature;
- The other asks how they feel if they did not have the feature.
There are 5 possible answers to the 2 questions above:
- I like it
- I expect it
- I am neutral
- I can tolerate it
- I dislike it
There is a full tutorial on how to use the Kano Model and Questionnaire here: IBM Design
Benefits of an innovation partnership
As mentioned earlier corporate innovation is slow. 60% of companies said it takes a year or longer to create new products. Speed in innovation is important. Without speed you risk missing the market opportunity and you can get stuck in a cycle of corporate inertia.
Partnering with smaller companies or agencies can compliment innovation teams in big companies. Big companies have the benefits of brand, customers and data. The smaller companies have knowledge of newer technologies, agile processes, they iterate, test, pivot and don’t quit until they get it right. Most agencies are also risk takers, they are intuitive and creative by nature and therefore can be a valuable partner when trying to keep up with or get ahead of the high-performing innovators in your industry.
