The Optimal Way to Innovate
Innovation is a hot topic on the national agenda. President Barack Obama has a Strategy for American Innovation, companies hire chief innovation officers, universities promote innovation programs and books on innovation are best sellers. Everyone wants to be just like Apple or Google.
Based on what we read and hear, innovation requires massive investments of resources and brainpower—plus a complete rethinking of our educational system and economic structure. Innovation also seems to result from a lucky stroke of genius or from factors beyond our control, such as having a really smart corporate research and development (R&D) team.
So it is understandable to think you can’t influence innovation. However, based on my work with a large number of innovative (and not so innovative) companies, product professionals must play a leading role for innovation efforts to be successful. In reality, I rarely meet companies that don’t have really smart R&D people. And left alone without product-management guidance, these bright people will come up with clever innovations—but there is no guarantee that customers will buy them.
There are a number of approaches to innovation that product professionals often use:
- Hope that the development team comes up with an idea worth commercializing.
- React to a competitive initiative.
- Respond to a government mandate.
- Act on a request from a single customer.
Those approaches do occasionally succeed, but Booz, Allen and Hamilton research has shown that companies that innovate based on understanding customer needs financially outperform the others.
I refer to this needs-based approach as value-focused innovation, and it is built on answering this question:
How can my company deliver more value to the right customers?
Remember that innovation doesn’t always have to result in a revolutionary new product or technology to be successful. A valuable innovation delivers an improved customer experience as a result of a better way of doing things.
Value-focused innovation may necessitate that you and your organization rethink how you develop new products and services. At Baron Strategic Partners, we have identified 10 Areas of Innovation Mastery (AIMs) that are required for value-focused innovation. The AIMs touch on all aspects of innovation, including establishing a culture of innovation, managing your innovation portfolio and developing the innovation.
This article focuses on the AIM most companies stumble on: identifying your customers’ known and unknown needs.
In theory, it should be easy to talk to customers and find out what they need. Unfortunately, customers can’t always articulate it and might not even know that they have a problem or concern. Additionally, many people lack the skills, expertise and experience to uncover customer needs. They take the wrong approaches, ask the wrong questions and doom the innovation effort just as it is getting started.
As Henry Ford is quoted as saying, “If I asked my customers what they wanted, they would have said a faster horse.” It is often beyond the capability of customers to articulate the need for or to conceptualize breakthrough innovations.
As Brian Bernstein, director of product management for Philips Lighting, pointed out during a recent conversation, the wrong questions can also get you into trouble. For example, he said, if you ask a customer if they want a new feature, service or product, the customer can easily say yes. You then go off and develop that feature, only to find out that the customer wanted it, but wasn’t actually willing to pay for it. There is a better way.
Get to the Point … of Frustration
Opportunities to add value to the lives of customers can be uncovered by determining what is suboptimal in their lives. The key is to always seek to understand their world and identify points of frustration. This is very different than asking them what they want.
Observe, listen and ask the right questions of the right customers.
When UnitedHealthcare (an operating division of one of the largest health carriers in the United States) wanted to improve the customer experience, employees spent time in the homes of customers observing and asking questions. While the vast majority of members had a seamless experience, the company wanted to understand the experience that seriously ill members had when dealing with insurance. UnitedHealthcare wanted not only to observe the specific actions these people took, but identify how it impacted their lives.
Ryan Armbruster, vice president of innovation competency, reported that his team would leave the homes of these seriously ill patients with a greater sense of empathy. Not only were their eyes opened to the insurance-related issues their sickest members sometimes faced, but the observers were impacted emotionally. Armbruster recalls going into the home of a terminally ill young woman whose mother was taking care of her. Stacks of medical records, reports and insurance papers took over the kitchen to such an extent that the mother lamented that there was no space to bake cookies for her dying daughter.
As a result of these and other emotional moments, UnitedHealthcare recognized that this situation cried out for a solution. It created its innovative Sherpa program, which assigns personal advocates to seriously ill patients. Now the Sherpa program successfully fields more than 2,000 inquiries for assistance per week and is continuing to grow.
Empathy is the ability to see the world through someone else’s eyes. For UnitedHealthcare, empathy for its sickest patients led to an important innovation. You do not get the depth of these insights or an understanding of someone’s emotional pain from a survey. The key is to capture your customers’ stories about their challenges and address those frustrations.
Empathy and Innovation
Jeff Salzenstein is a former top-ranked tennis professional and NCAA tennis champion. A bright guy with an economics degree from Stanford University, he spent his playing career studying ways to improve his game. He constantly questioned the conventional wisdom about the game and how it was taught. After retiring from professional tennis, Salzenstein became one of the first online tennis coaches. And, not surprisingly, he is now considered one of the more innovative coaches in the sport. As proof of his teaching expertise, he even improved my game.
Since Salzenstein was one of the top players in the world, you might think it would be hard for him to relate to the world of his students. However, his own struggles with defeats and injuries as a player enable him to relate to the challenges and frustrations of everyday players who want to get better. Just like the most innovative companies, Jeff constantly seeks to identify the sources of frustration for his customers (students). He learned that understanding what customers’ problems need to be solved is the key to innovation.
Jeff’s innovative approach to tennis combines his background as a top 100 player with knowledge gleaned from studying a variety of martial arts. He used these insights to develop a series of unique drills and instructions that provide new ways of making tennis less frustrating to learn.
Salzenstein’s success reinforces the notion that empathy for your customers’ plight is key to innovation. He now virtually coaches more than 20,000 players in more than 30 countries.
What would you see if you actually spent a day observing what happens in a typical “day in the life” of your customers? What would you learn if you asked them specific open-ended questions about their frustrations, goals and challenges? Getting to the root of the problems they face helps you to figure out what tools you have in your arsenal to help them solve those problems.
Questions Before Answers
So empathy obtained from asking the right questions and observing customers is the key to innovation, but why is it
As Armbruster of UnitedHealthcare puts it, we are trained starting in kindergarten to provide answers. We are not taught to ask questions or identify problems.
How often have you been in a meeting when the most important question you should ask is: What problem are we trying to solve?
Despite the challenges, it is important to get input from the right customers by asking the right open-ended questions. You want to become an expert in their business, their challenges and their strategic initiatives.
Of course, the exact questions you should ask depend on your specific situation, the individuals you are speaking with and what you hope to learn.
It is often difficult to really listen to customers. Some get caught up in the tyranny of seemingly urgent activities or lack the skills and confidence to effectively interact with customers. Others let their egos get in the way, so that it becomes difficult to really hear what customers are saying.
Your stress hormones can be your worst enemy. I’ve seen the fight-or-flight response derail the conversation. You might get defensive and argue with the customer or get really nervous and rush through the conversation in an attempt to get it over with quickly. Neither approach will yield valuable insights to drive innovation.
With training, coaching and practice, product professionals can get better at asking questions and listening to the answers. On occasion, an outside expert can be engaged to ensure that these listening sessions are conducted in an objective manner, free of bias.
A key outcome from this step is a deeper understanding of your customers’ challenges and obstacles to success. You should collect these stories, share them with your colleagues and use them as the foundation for innovation.
Implementing the value-focused innovation method is not easy. If it were, more companies would do it. But focusing on solving customer problems, rather than analyzing internal research output, is the smart approach to doing innovation right.
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