In recent years, more and more attention, time, effort and resources have been spent on ‘innovation’. CEOs of Fortune 500 companies have consistently ranked innovation as one of their top 3 priorities. Conferences, books and blogs have proliferated. Consultants have sprung up like weeds offering a panoply of innovation services, tools, methods and advice. Today, there is energy, experimentation, confusion, hype, turmoil, and even downright chaos in the field of innovation. In other words, it is an emerging market.

Typical of any business practice that is starting to emerge from the unstructured realms of the instinctive and ad-hoc, innovation is undergoing a renaissance. Virtually every medium- to large-sized company has innovation at ‘front-of-mind’ and is undertaking some sort of project to figure out how to get better at it. The problem is that today, there is no best practice in innovation, there are only experiments – sometimes very successful ones but also experiments that fail.

This is a challenging situation with more questions than answers: How does one take meaningful action? How can competition or alternative claims be compared? How does an idea management system relate to a ‘Voice of the Customer’ tool? What is a deep dive, a dreamscape, a strategy canvas? How do technologies like TRIZ fit with ideation, brainstorming and modeling? How do road-mapping and scenario building relate to each other? What role does market research play and when? What does strategic planning have to say about trend spotting and vice-versa? How do all of these different tools, techniques, processes, etc. relate to each other? And most importantly, what is the underlying ‘essence’ of this thing we call innovation?

A Cautionary Tale

In mid 2005, at the behest of the CEO, a Fortune 500 company started an ‘innovation initiative’ to invigorate the creation of new products that would lead to new growth. To kick off this initiative, an innovation team was formed, backed by the executive staff and supported by the divisional heads of the company. The team went to conferences, read a large number of books and articles, scoured the web, hired consultants, met, talked and argued for hours with everyone they could, both within and outside the company. Here are just some of the issues they struggled with:

• What approach should be taken? Should they focus on culture, leadership and organizational change or product and service innovation?
• How will the innovation process integrate with the company’s current processes? What effect will it have on strategy, technology R&D, design or marketing?
• What are all the available processes, methods and tools and how are they related? Is idea management enough? What’s the difference between Voice of the Customer, ethnography, and market research? Are lead users the same as open innovation? What do all these phrases such as ‘skate to where the puck will be’ or ‘find the blue oceans’ really mean and are they important?
• Who should be involved? Can we get everyone in the company to be an innovator? Should we? If so, how?
• What do we do with the results of all the one to three day workshops we’re holding? Are they effective?
• What metrics do we use to see if we are making progress?
  

After months studying, learning, developing, and answering these and other similar questions they had an innovation process. It was widely endorsed by all the executives and division heads and was rolled out with great fanfare and much effort.

Twelve months later they abandoned it. What Went Wrong How often do corporations undertake a new initiative only to abandon it the first time the going gets rough? There is typically a lot of skepticism, cynicism, inertia and downright resistance within an organization to these efforts. But something happened here that we can learn from. Activity in any new domain leaves plenty of room for mistakes – and indeed there were several in this story:

• Thinking that there was a ‘best practice’ they could adopt.
• Thinking that various approaches to innovation would work together without a common framework to accommodate them.
• Requiring everyone to ‘buy-in’ up front. The operating divisions had to be satisfied and it had to be company wide. A corporate process was adopted and everyone was going to use it.
• Moving too slow (not getting a quick first ‘win’) and Moving too fast (trying to undergo a cultural ‘shift’ all at once).
• Focusing on the software infrastructure and tools and not on the outcomes, activities and dynamics.
• Pinning the success of the effort to highly visible ‘events’ – those 1 to 3 day feel-good workshops where the ‘in’ people got together to accomplish ‘great things’

When all was said and done, and an objective assessment could be made, it was clear that this company used the same process for developing their innovation process that they used for developing their products – the products that were not innovative in the first place! They fell victim to the very problem they were trying to solve. And, to no surprise, weren’t innovative in the result!

The lesson from all of this, and the essence of any successful innovation process, is that you need to be innovative in creating your innovation process. But how is this done? Learning What’s Next Innovation is a process of ‘Learning What’s Next’ – learning what’s possible, learning why it matters, and learning what can make it happen. Innovation is dependent on the fundamental forces of possibility and opportunity.

Learning is about knowledge acquisition, but learning what’s next is about more than this. It’s how we acquire knowledge of plausible futures. This is fundamentally different than acquiring knowledge of historical pasts or current truths. It is a learning process that few people are taught or are experienced with.

In the story above, the innovation process being adopted was itself a new ‘product’ for the company. It was designed to be used by people in the company and, presumably, satisfied an unmet need or desire. It was an attempt at operational innovation.

The same principles apply to this endeavor as to the company’s development of a new product for their customers. By definition, an innovation must be valued and adopted by its target community.
Let’s then take a look at the essence of creating a new innovation (below). Figure 1 shows three ‘stages’ in a process of creating something new.

Discovery – This is the ‘front-end’ where new ideas are born and the seeds of success or failure are sown. This stage is characterized by uncertainty & ambiguity, people & their behaviors, complexity & non-linearity.
Development – This stage is all about creating the product that was intended. It is characterized by requirements & specifications, engineering & design, sequence & control.
Commercialization – This stage is when you find out if you have created a true innovation. It is characterized by operational efficiency, customer service, reputation and brand.

How do we understand the adoption curves? What makes one product a failure and another a blockbuster? What is behind them and how can they be influenced?
The difference between an adoption failure and a blockbuster is the difference between a product that truly satisfies the needs and desires of a community and one that doesn’t. The primary causes of this difference are the knowledge, insights and decisions made in the conception stage – the front-end. Get it right at conception and, assuming your new product development process is working well, widespread adoption will be the result.

So, what’s so difficult about the front-end that causes a 90% failure rate in the adoption of new products and services? In most existing situations, ideas come from everywhere and it’s tough to separate the good from the bad. Good ideas can also morph into bad products as they are developed and nothing ever gets killed. The result is that only 5-10% of products ever meet Return on Investment (ROI) objectives.

Now imagine the way it should be. Opportunities are continually identified and new ideas are tested against them. Only ‘good’ ideas make it through to development. Development projects are continually tested. Bad projects get killed. The result: 35% to 70% of new products and services meet ROI or even blockbuster criteria.

So why isn’t the latter scenario more common? Why is failure the more likely course? Take a look at what characterizes the front end – uncertainty, ambiguity, complexity, non-linearity – all the things that we humans have a very difficult time dealing with.

What’s the source of these characteristics? Us! The front-end is about people – about what we want, about how we think and choose, about how we form opinions and are influenced, about how we will behave. And people, as we all know, are not rational actors. Economists even have a term they use to describe this phenomenon – bounded rationality. It is our bounded rationality as humans that make learning and discovery in the front-end so frustratingly complex and that makes our decisions so difficult.

The Innovation Equation

Of course people are not the only thing we need to consider in the front end, we also need to consider technology. From technology come the possibilities – what we can do. From people come the opportunities – what we should do. These two forces underpin the entire innovation process. They inform the learning and discovery necessary to see plausible futures and make the decisions that lead to blockbuster adoption. Figure2 shows this innovation equation.


On the left side of the equation is Technology and Community. On the technology front, the ability to transform new ideas and inventions into tangible effects drives what can be done – the possibilities. The key is not how technology works, it’s the effects that they have. On the people or community front, the ability to transform needs and desires into tangible influences drives what should be done – the opportunities. The key is figuring out how people will think and choose when faced with something they have never experienced before.

Intersecting technology with community in the right way leads to innovation – the solution that will be adopted by real people. The outcomes and experiences individuals have with the solution determine the rate and extent of the adoption curve. It is the cumulative effect of individual choices that is behind the adoption curve. Blockbuster or failure is determined by the actions of individuals.

Even in the most analytic, business to business situations, individuals matter. If a new solution doesn’t satisfy their true needs and desires, it will not be adopted. One of the profound transformations that is taking place today are that these adoption decisions are becoming more and more individualistic and thus are becoming more and more problematic for companies who are used to thinking of mass markets or ‘groupthink’ purchase decisions. The emergence of mass customization and design centered innovation, of co-creation and letting your customers modify your product to their own desires, is overwhelming the ability of the traditional tools for analyzing markets. The era of individual agency has arrived.

Figure 3 shows the dynamic nature of the adoption curve and how the difference between blockbuster and failure is determined by the inflection, or tipping point, that occurs soon after introduction. Will the new offering putter along or go non-linear? This is determined by the cumulative actions of individuals who exhibit ‘behavior over time’, as shown by their individual adoption profiles. It is not enough to just have someone purchase the new thing. In order to propel a true innovation to blockbuster status, customers need to adopt and advocate the new thing. It is through customer advocacy that the virtuous cycle of blockbuster adoption gets started.

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People are the Key

We have come to the conundrum that plagues innovation: it’s about people. People determine what’s next. People make the difference as adopters and advocates of the new thing. People make the difference as individuals or as members of business organizations or social communities.

But people are notoriously hard to figure out, especially when trying to gauge their reaction to something that doesn’t exist. Moreover, people are individuals, they behave differently. So how do you understand people in the ways that count? How do you balance the individualistic, bounded rationality of your future customers with the need to figure out what product ‘the market’ will adopt?

Despite recent advances in cognitive science, the understanding of human behavior has always been ‘soft & fuzzy’. Clarity must come from the process and the tools used to study people – despite the complexity of human nature. If you have the right process and tools then the soft and fuzzy can become crystal clear.

It’s About the Learning

The world is changing and market research is no longer adequate. Opportunities are hidden in plain sight – yet we can’t see them. We wander around searching for what will connect with the customer.
If we can figure out how to better acquire this critical knowledge, how to learn better, we will have cracked one of the keys to innovation.

Learning needs to move further up in the process of determining what’s next with new and different skills and learning tools. Better tools for learning about future customers is the key to success. Customers are becoming more distinct and more influential and the front-end is where companies are finding the source of true value discovery. There is a whole world of learning that occurs before market research that is the fundamental, causal driver of innovation.

Companies are very good at learning new technologies that relate to their business and current competencies. In addition, they are often very good at learning or acquiring new technologies in areas they wish to enter.

Why don’t companies apply these same knowledge acquisition techniques to learning about innovation technology? Why are they so credulous to the claims of the various innovation purveyors who are advocating a specific tool or method? Why don’t they adopt the same scientific method they use when conducting technology R&D – hypothesize, test, assess, refine – and keep at it?

The same principles that apply to technology R&D can apply to community R&D, the second driver in the innovation equation. Investment in the tools, methods, resources and efforts in this area will result in tremendous benefits. The result will be insight into future customers that were never thought possible. Namely, who they are, what they want, how they will behave and why. It’s possible to understand customer experiences to create ideas for new products, services and ways of doing business that will create true customer advocates. This is what powers adoption and generates the dramatic results that others point to as ‘how to do it right.’

An Innovation Imperative

After the dozens of innovation initiatives with dozens of companies in dozens of industries with every market and technology imaginable; after the hundreds of books, articles, blogs, and papers; after the hundreds of executives, managers, entrepreneurs, educators and ‘just plain folk’ who have an opinion on innovation, what do we collectively know about innovation? The only honest answer is – not much yet, but we’re learning fast.

What we can do is list some principles and observations that collectively form an innovation imperative – a public declaration of principles and intentions:

• There are, at this time, no best practices in innovation – there are only experiments. The need for many, low cost experiments and the value of early success.
• Belief in the scientific method and the necessity of systems thinking. Theory, hypothesis, experiment, revise. Low cost experiments and prototypes are critical.
• The understanding that innovation is a process. The need for skills like creativity, problem solving, design, invention, etc. (and their associated tools) but the understanding that these are the means not the end.
• The realization that innovation is a human endeavor and embracing customers as individuals with bounded rationality and experiences as the source of value.
• The realization that models are necessary and useful but that there is no ‘one true model’. The understanding that, as an abstraction of reality, all models are wrong to one extent or another. A useful model is a lens through which we view reality and is only as good as its ability to synthesize knowledge, inform insight and promote meaningful action.
• The primacy of knowledge and the understanding that there are many forms of knowledge that are all important. The insight that there is true knowledge and there is false knowledge and while it’s often difficult for us to tell the difference, it is critically important that we do so.
• The power of storytelling to communicate the important things. The use of the story to transfer experience, and thus influence, from one person to the next. The different types of stories – branding, prototyping, design, scenarios, and roadmaps etc. – that we use to create awareness, attention, interest and desire.

Keeping all this in mind, we embark on an exploration of learning what’s next, using the theory, models, methods and tools to execute a process of innovation that is evolving and adapting.