Thirty years ago, I was a product manager for a startup company that created high-performance, multiprocessing minicomputers. Powerful, scalable, and based on open standards, they offered exceptional price/performance. In 1988, Electronics magazine gave its Computer of The Year award to the flagship model
As we introduced the system, we described the “ideal” customer: a medium to large organization that used Unix-based systems, and ran large database applications, especially Oracle applications. We trained the sales force, produced some modest direct mail campaigns, and launched.
Then reality set in. In the first three months, we sold about 45 machines to some 30 different organizations. We gathered data about our new customers and looked for correlations that would help us target prospective customers more precisely. We found nothing — no patterns in terms of size, SIC code, geography, application, and so on. The data were almost random.
We were stumped. So, we decided to interview the key decision maker in each account. We created an interview guide and fanned out to visit customers
After our visits, we dug into our findings. Again, we found no useful patterns in the demographic data. Then we started describing the key decision makers. Who were they? Why did they decide on us?
Most of the decision makers were men in their early thirties who had recently been promoted to a position typically described as VP, Data Processing. They replaced an older person who had held the same position for more than ten years. One of our marketers had a flash of insight: “It’s almost like the decision maker is saying, ‘I’m the new sheriff in town. We’re going to do things my way. This is one of my first big decisions … and we’re going to buy a hot new machine from a startup company. I’m going to make my mark.’”
It turned out to be a very accurate description. Nominally, our customers were buying our machines to run large applications. But psychology was perhaps more important. We estimated that roughly 60% of our customers fit the “new sheriff” profile.
We decided to market specifically to new sheriffs. We trawled through organization profiles and identified those that had a new VP of Data Processing. We sent each new sheriff a fairly intense mail campaign coupled with calls by our local sales rep. The campaign succeeded rather well. From the time of the launch, we grew to $300 million in revenue in about two years.
I didn’t know it at the time, but we were practicing an art that today is called, the “jobs to be done theory of innovation.” (Click here for a good introduction). Developed by Clayton Christensen and his colleagues, the basic idea is that demographic information doesn’t reveal why a person chooses to purchase a new product or service. If we misunderstand the job to be done, our innovations will miss the mark.
Our startup company, for instance, positioned around big machines for big databases. We wanted to offer ever bigger, pricier machines. The new sheriff profile, however, changed our thinking. To get in the door, we needed to make it easy for the new sheriff to buy something on his own authority. So, we introduced an entry-level machine priced just below a typical VP signature limit.
Similarly, think about why men buy pajamas. We might think they simply want to stay warm. But men in America typically don’t buy pajamas until they have a daughter who is three years old. Their motivation is not to stay warm but to preserve their modesty. If we misunderstand that, we’ll produce far too many cozy, warm, flannel pajamas that men will never buy.
In my experience, good marketers and salespeople use the jobs-to-be-done method naturally and intuitively. They’re good observers and naturally ask a basic question: why do people buy these products? They dig into the data but, more importantly, they observe how people behave and ask insightful questions. The management guru, Ted Levitt,was a natural at this. He noted that people don’t buy gasoline for their cars. Rather, they buy the right to continue driving.
The jobs-to-be-done theory suggests that the key to innovation is sociology, not technology. Do you want your company to be more innovative? It’s time to add more marketers and salespeople – and maybe a sociologist and anthropologist – to your development team.
Suellen used to work for a company founded on a great idea – there’s a lot of information out there and, if you can organize it, you can sell the organized information for a lot more than the raw data. The company, Information Handling Services (IHS), got its start by organizing and re-selling government information and military and technical specifications. (Today, the company offers a whole range of analytic and forecasting services as well).
Though IHS is very successful, I’d like to use one of their less successful products to illustrate an insight about innovation. In the early 90s, IHS identified an underserved market: home furnishing suppliers and designers. The information about home furnishings – furniture, carpets, upholstery, cabinets, fixtures, etc. – was highly fragmented. Designers who wanted to buy furnishings had an extremely difficult time identifying, locating, and evaluating their choices.
It seemed a perfect market for IHS. After all, they were experts at gathering and organizing information and making it easily searchable. And that’s just what they did. They contacted furnishings suppliers, gleaned the necessary information, and put it into an electronic system – called Showroom Online — that designers could search in a variety of ways. (For instance, “Find all Louis XIV style chairs that cost less than $1,000 and are available within six weeks”).
Then the IHS designers made a fateful technology decision. They chose to store and distribute the data on 12-inch LaserDiscs. LaserDiscs were among the first optical/laser, random-access storage and retrieval media. They were way ahead of their time. And that was the problem. Not many people had LaserDiscs, or understood them, or could afford them.
From what I remember, Showroom Online was a well-designed system. It just had one flaw. It didn’t fit.
I thought of Showroom Online as I was reading The Wide Lens, Ron Adner’s new book on innovation. Adner argues that, all too often, innovations fail because we take a narrow perspective. We focus on what we need to do. Adner calls this execution focus: “What does it take to deliver the right innovation on time, to spec, to beat the competition?”
Adner argues that execution focus is what causes failures like Showroom Online. We need to take a wider perspective. Specifically we need to recognize two types of risk:
Co-innovation risk – “…the extent to which the success of your innovation depends on the successful commercialization of other innovations.” (This seems to be what took down Showroom Online).
Adoption chain risk – “ the extent to which partners will need to adopt your innovation before end consumers have a chance to assess the full value proposition.”
This all relates to the issue of framing (which I’ve written about before). If you define your frame narrowly, you’ll miss a lot of important information. Other people – politicians, salespeople, teachers – may try to define the frame for you but you can also frame yourself. The trick is to take a step back, look around, and broaden your horizons. That’s important to you personally. It’s even more important to your innovation.
I’ve written a lot about innovation but have yet to properly introduce Rosabeth Moss Kanter, one of our leading thinkers in innovation and change management. A professor at Harvard Business School, Kanter has written a string of books on innovation, incuding some of my favorites: Confidence: How Winning Streaks and Losing Streaks Begin and End and SuperCorp: How Vanguard Companies Create Innovation, Profit, Growth, and Social Good.
Today, I’d like to draw on concepts from one of Kanter’s articles in Harvard Business Review, “Innovation: The Classic Traps“. Kanter surveys a number of different traps but two, in particular, caught my attention, mainly because I’ve seen them myself.
The first is called controls too tight. All too often, companies use traditional metrics to judge the impact of non-traditional innovations. The problem is that traditional metrics — such as hurdle rates, ROI, or NPV — all require some type of track record to produce results that might be considered reliable.
The problem, of course, is that a truly innovative product has no track record. Kanter writes that companies often fall prey “… to the impulse to strangle innovation with tight controls — the same planning budgeting and reviews applied to existing businesses.” Kanter writes that the solution is to loosen up and add flexibility to your planning and control processes. This may include innovation funds and judicious exemptions for corporate requirements and timetables. Going a bit farther afield, you might also incorporate new financial metrics like real options analysis.
The second trap might be called connections too loose. The idea is that companies often isolate innovative new products and processes in organizational units that are physically and/or culturally isolated from the mainstream. Kanter points out that GM’s Saturn brand was established as a separate unit to pioneer new ways to design, build, and market midsize cars. While Saturn itself was innovative, the innovations didn’t have much impact on the rest of GM.
The same trap can affect established units as well. Kanter points out that CBS was once the largest broadcaster in the world and also owned the largest record company in the world. But MTV, not CBS, invented the music video. Kanter also writes that “… Gillette had a toothbrush unit (Oral B), an appliance unit (Braun), and a battery unit (Duracell) but lagged in introducing a battery powered toothbrush.”
Again, I think we can go a bit farther afield and identify similar disconnects among departments within a company. Engineering designs a product and then turns it over to manufacturing. That’s often a loose connection. If manufacturing experts participated in the design process (as they do at Apple), you might get products that are not only well designed but also easy to manufacture.
What to do? Kanter writes that “… companies should tighten the human connections between those pursuing innovation efforts and others throughout the rest of the business.” This requires good leadership, good communication skills, and a willingness to “convene discussions to encourage mutual respect rather than tensions and antagonism.” It may also require good architecture as in the example of Steelcase, which built ” a design enter that would force people to bump into one another….” (This is one of the reasons I think Marissa Mayer at Yahoo! is right to require people to work at the office).
So how do you stimulate innovation? While it’s not easy, a good first step is to loosen up you processes while tightening up your people-to-people connections.
Companies spend a lot of time encouraging their employees to create and propose new ideas. We have training sessions, brainstorming sessions, retreats, team building exercises, ropes courses — you name it and we’ve tried it. So what happens when an employee actually proposes an idea? All too often, we kill the idea before it has a chance to breathe. We don’t do it on purpose. We do it because we’re not properly trained as Idea First Responders™.
An employee proposing a new idea is in a fragile situation. While she may believe it’s a great idea, she’s also unsure how others will respond. Will they like it? Will they support the idea? Or will they dismiss it with a roll of the eyes and a “that’ll never work here” comment. All too often, we suppress ideas without realizing it. If we suppress our employees’ first idea, it’s unlikely that they’ll come back with a second one. Why bother?
In the world of accidents and emergencies, first responders have two critical roles: stabilize and transport. The same thinking can apply to ideas. When an employee proposes an idea, we need to stabilize it and transport it to the next stage of the idea development process.
Stabilizing an idea involves several steps. The Idea First Responder (IFR) may need to flesh out the idea and help the proposer think through its various ramifications. Additionally, the proposer may have lots of questions, including some “dumb” questions. The IFR needs to answer these respectfully. Even a small amount of sarcasm can stifle the entire process. Stabilizing also means encouraging the process. The IFR needs to encourage the proposer to continue to propose new ideas, even if this one doesn’t work out.
The second stage is to transport the idea to the innovation process. This may involve asking the proposer to do more work before moving forward. When the work is completed (assuming it’s satisfactory), the Idea First Responder helps transport it into a more formal process. This may be a weekly staff meeting or it may be a more formal Innovation Committee. During the transport process, the IFR has several critical issues to tend to: