James Euchner, vice president advanced technology at Pitney Bowes, talks about the company’s new customer-centric approach to product innovation, and how it has trebled the number of products moving from research lab into product development
Many assumptions about innovation are based on the myth of the brilliant idea: the spark of genius – the ‘Eureka!’ moment. This myth goes hand-in-hand with another: that the business challenge of innovation is selecting from alternative ideas to weed out those that are not worthy of further investment, and to nurture through to product development those that are most compelling.
Many corporate innovation processes conform to these myths, and provide a structure for generating and collecting ideas, and then qualifying, filtering, elaborating, promoting and developing just a few.
Unfortunately, this just isn’t how successful new product innovation usually works. The history of a new product’s evolution is a very different story: one of tacit insights, cross-organisational communication and serendipitous events. In this way, it is possible to address all the business issues required to achieve success.
Frequently, a raw idea (or several) that had been kicking around the organisation will be drawn into the mix and become morphed by the new context of consideration. These stories are not about filtering for great ideas, but about people creating and managing a series of contexts to nurture an innovation. What are the implications of this view of innovation for the process of new product creation? Can the innovation process be systematically managed to create a compelling new product or service? In brief, can the innovation process be driven by context as opposed to the search for the big idea?
At Pitney Bowes, we are in the third year of using a process designed to do exactly this. We call the process ‘customer-centred innovation’ because of its deep and continuing reliance on the customer for direction. It systematically navigates a shifting landscape defined by four contexts: the strategy and capabilities of the business, the needs and values of the target customers, the potential of emerging technologies, and raw economics. The story of a successful new product or service is the story of a continual search for the ‘sweet spot’ in the middle of these four contexts.
The context-driven process begins with a strategic question, and there are a few reasons for this. First, an innovative product or service is more likely to be successfully brought to market if it addresses an opportunity that the business really cares about.
Second, a well-framed strategic question will ensure the concepts are within the capabilities of the firm – many ideas falter because the organisation does not have the wherewithal to bring them to market. Finally, the focus on a strategic question can help to orient the innovators toward larger opportunities and defend against settling on the first good concept that comes along.
The strategic question identifies a market and trends or events in the world of business, technology or society that make the area of possible strategic interest.
At the start of an engagement, a cross-functional team is formed, with backgrounds in marketing, engineering, anthropology and business strategy. The team begins by clarifying the opportunity space, which is examined from multiple angles in an effort to narrow the focus of the investigation while maintaining its strategic intent.
Is the customer segment too broad or too narrow? Is the business unit’s strategic intent clear? What changes in the world make this question timely now? A careful framing of the strategic question at the outset saves the effort of running down blind alleys.
Grounded in the context of a strategic question, the innovation team begins by exploring what people in the target customers’ world are doing. This is a systematic endeavour, using tools borrowed from anthropology for the collection and analysis of qualitative information. The goal is to understand the customers’ world from the perspective of those living it.
As the observations accumulate, the team analyses the results; the goal being to identify compelling needs or values relevant to the strategic question.
Once identified and pointed out, many needs can appear obvious. The difficulty is in seeing and stating them. In practice, we find that what is most important to people is often below the surface and hard to articulate. In many cases, real problems have been accommodated by people in the work environment, and have receded into the background. They crystallise only later, during the analysis of field notes. The skills of systematic, open observation and careful analysis are essential to this phase of the work. A good set of needs serves both as constraint and as the agent for releasing remarkable creative energy.
The invention stage is multi-tiered. The first round of invention is tightly tied to seeking a deeper understanding of user needs and embodying them in novel and interesting prototypes. Each hypothesised need creates a cycle: express the need; brainstorm solutions to it; embody the solutions in very rapid prototypes; and check our understanding of the need by getting reactions to the prototypes from users in their work settings.
Structured brainstorming is a part of many innovation processes. From the brainstorms, the team will select ideas to prototype that seem both compelling and a good solution to the need under consideration. In the first round, prototypes are low-fidelity representations. Their purpose is to probe the need, to refine it, disconfirm it, or discover the underlying need has been misrepresented. We have found that people will react very directly and honestly to such prototypes, and tell us where we have gone wrong. In one instance, we mistook a need for privacy as a need for security. In another, we sought to help people find individual documents when in reality they were losing folders containing documents.
By this stage in the innovation process, we have identified, validated, iterated and prioritised a set of customer needs, wants and values. We have a few prototypes that have really resonated with users. We do not, however, have a value proposition. A value proposition provides a complete solution to a coherent set of unmet or poorly met customer needs. It significantly changes the user experience, and delivers a set of promised benefits that matter.
Creating the value proposition from the mosaic of needs and user reactions is a creative phase of the work. It usually starts with a focus on the most compelling unmet need, but goes beyond that need to the set of requirements necessary to deliver a complete user experience. It requires an explicit analysis of the trade-offs between cost and benefit, selecting among the needs to be satisfied so that the solution is both coherent to the user community and worth the cost of delivery. At this stage of development, the design context has tightened its focus to one proposed opportunity. The context has also broadened to include thinking about all four aspects of the opportunity: user value, technological feasibility, business risks and profitability. The design space has been kept manageable by balancing a narrowing of focus with the broadening of concerns.
There are questions that must be answered to fill the gaps in the experience and to demonstrate feasibility. Some of these are technical and involve targeted research into solutions. Some of them relate to the market size and a customer’s willingness to pay, and these require focused market research. Others relate to costs to deliver the solution and reach customers; they might require new ways of managing the product development or the channel.
Finding new ways of addressing these concerns — which might be called business model innovation — is usually as important as product innovation in bringing a compelling solution to market.
Once a value proposition is well defined and shows promise as a viable, marketable offering, we seek to identify the key risks inherent in the solution. Then we do the work necessary to retire those risks. We do this through a sequence of trials with real users in the context of their work. These can be as simple as evaluations of usability in situ, or as elaborate as ‘living labs’, in which users participate in the ongoing development of the solution. As questions are answered, the opportunity is either validated or called into question. Surprises are inevitable, and can lead to a cycle of risks to be retired. Often, in ‘brilliant idea’ processes, such issues are identified only during an ‘alpha test’, after the product has been largely developed. The flexibility to address them at that stage is greatly limited. If customercentred testing and refinement precedes product development, this helps to make the transition from R&D to product development a smooth one.
In the course of a typical engagement, a cross-functional team has been developed, the concept has been validated with real customers; a prototype has been tested in the context of use; and key technical and business issues have been addressed. As a result, the business case for progressing carries less risk than for many R&D projects, and efforts are already underway to retire remaining risks. Under these circumstances, the likely success of a concept emerging from the labs is greatly increased.
Success with new product development requires that the myth of the ‘brilliant idea’ be replaced with a model for innovation based on a careful understanding and systematic tightening of constraints. Customer-centred innovation manages the contexts in which innovation takes place. The concepts are not pre-existing ideas, but emerge from the contexts. The critical task of innovation is evolution, not selection. The process is to generate them, and ‘morph’ compelling concepts to meet a variety of concerns, not to weed out weak concepts and hope that a few compelling ideas survive.
The most useful crucible for managing the creation of compelling concepts is the customer site, to which we return again and again. We have found that such a discipline greatly increases the success rate for new product innovations.