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Trendcasting and Innovation

Did you wake up this morning to realize that the world has changed and your business has not changed with it? If you are a regular reader of this column you know we discuss growth strategy and innovation and all of the challenges that accompany those pursuits. We see many companies of all sizes that are dying a slow death in a saturated market with outdated business models. They fail to get out ahead of what’s next.

Business leaders commonly attribute growth issues to a stagnant market or corporate dependency on an inferior product. These are excuses – the heart of the issue is a short-term and reactive corporate mindset. The antidote is to install a culture of proactive forethought to replace the more typical reactive market strategies.

We encourage our clients to take up trendcasting – the practice of tracking and forecasting global trends that will affect your business. This relatively new term has been used mostly for tracking and predicting consumer behavior, but we believe that it is also useful for studying industries and a productive innovation tool for those seeking growth and transformation.

To do this, you should task a group of employees with professionally diverse backgrounds to become a band of trend-spotters and form a think tank of sorts within the company. The team’s objective is to uncover emerging trends that are three to five years out. To start, they have to take a snapshot of where things are today so that they have defined a baseline for future trends. Done right, this is not just a research effort to read analyst reports and round up their assessment of existing trends. The idea is to see what others do not and to predict the next wave of trends. Have the team investigate the macroeconomic factors at work in both the global economy and the industry. They should also study the regulations underway and those that might come down the pike. Once they have a handle on current established trends, they can begin to evaluate all of the possible impacts that might set off new trends.

At this point, it may be helpful to bring in a third party to facilitate the discussion and prompt the team to stretch their thinking. Industry experience and basic human cognitive bias will cloud their ability to see beyond what happened in the past and project into a new and unexpected future.

Be on the lookout for fads, a pet rock-like flash in the pan. It is important to define a set of indicators and parameters to evaluate the size, impact and likelihood of the trend materializing. This will give the team a framework to assess risk and determine if the prospective trend is just an element to be factored in to the strategy or whether it is significant enough to warrant an innovation effort.

Unfortunately, there is no magic formula that validates trends with 100 percent certainty. However, quantitative models that assess probability and risk are useful tools when considering investment. Pinpointing emerging trends is critical to defining the boundaries for a successful innovation effort. If you want to grow through innovation, you must first understand existing trends and then trendcast to discover what might be next.

Innovation ROI

Too many organizations try an innovation effort once, under resource it, then claim failure and never try again. This over-reactive tendency to dismiss innovation as “oh, we tried that eight years ago and it didn’t work” displays a lack of real ROI thinking at an organization. In fact, if you think of your innovation mix in the same basic mental framework as you think of an investment portfolio, you will be able to find a profitable mix while mitigating risks, stimulating value-creation, and making a few, well-placed bets on outliers that may drive more revenue than ever imagined.

Innovation as Investment is a simple three-step process. The first step is to figure out the risk tolerance level at a firm. Once you establish the essence of this point you can get real with your expectations, roles, resources, and metrics. The second step is to come up with a mix, based on the risk-tolerance level of your culture. The third step is to formalize the assignment—and kick off all projects with visible executive leadership support. The executive support is critically important; it’s importance is stated in another column (https://www.memphisdailynews.com/news/2013/jun/21/three-critical-ingredients-for-innovation/).

Let’s demonstrate in a broad-stroke Case Study. You and a core team are assigned to make Innovation real at XYZ firm, a health Mid-Market manufacturing and product company in the B-2-B space. Traditionally, XYZ firm has been risk-averse and managed with rigorous metrics. After one failed trial innovation project almost a decade ago, the leadership felt burned and buckled down to achieve operational excellence. Now that operational excellence has been achieved, growth seems possible—more growth than five- or seven-percent a year. As well, the board has been inquiring more insistently about innovation and wants XYZ to reach double-digits growth and explore innovation.

So, we know that XYZ firm has a low risk tolerance. Therefore, they can develop an Innovation Mix that works for their firm. XYZ decides on an 80/15/5 strategy.  80-percent of its innovation efforts will be incremental to their existing operating business and will include product augmentations, new products in existing lines, and some process optimization (identifying cost savings) that is not yet realized. Incremental innovation requires the least amount of change and spend, but traditionally brings back the smallest returns. New metrics and a few committees are created for existing product managers, engineers, marketing, and RND, and a small budget is set aside.

The 15 represents 15% of the total innovation efforts (resources and energy) and is focused on something that is new to the firm. We will classify this 15-percent as a disruptive innovation, as it disrupts the current flow of the business. They reassign a Product Manager as an Innovation Manager, allocate a small percentage of a multi-disciplinary team to this 15% effort, and create metrics for ideas new to the business. They will follow a Stage-Gate process and will be allowed to present new ideas for product suites and services four times a year to senior leadership. For a roughly 250K total investment, they estimate a return of 1,200,000-2,000,000 in 18-24 months.

The remaining five percent is the most aggressive and most risky investment, but necessary. This five percent is a conservative bet on a Breakthrough Innovation, something that will possibly redefine how the market thinks about a category while making the company that creates the breakthrough the market leader in the space. XYZ firm needs to not reject the ideas that come from this assigned five-percent of the Innovation ROI as outlandish or too wild as a matter of planning—it is their job to foresee trends and craft stunning ways to meet unmet needs for their customers. Therefore, they establish in their founding metrics that they will pilot at least one of these ideas within an 18-month period as part of a formal study.

Innovation ultimately is an investment. You must diversify and apply a mix that is right for your firm to make it a formal discipline.

 

Slow Down to Innovate

Somewhere in the Industrial Revolution a prejudice was created for speed.

Efficiency came to mean effectiveness. From this mindset emerged two paradigmatic biases: more is better (more work, more inventory, more money) and speed wins (time to market, time is money, etc.). This mindset was a boon in its era, but has outlived its usefulness.

As the old wisdom statement contends, progress was great until it went too far. Now, being cunningly smart and effective means out-thinking the competition, out-innovating them, not winning a race to flood the market with a glut of products and services that the planet and its people may not need.

As a curative to overpopulation and landfills surfeited with junk from the industrial era and as a curative to our addiction to the poverty consciousness where faster means better and more means prosperity, we see high-growth companies incorporate the latest findings from neurology and innovation methods to change culture, create things people find really valuable, and offering time to immerse and incubate on new concepts and ideas that will radically drive business growth in positive ways.

Fresh thinking usually comes from thinking like an outsider – and a healthy dose of daydreaming. Whether it was a shoeless Steve Jobs dreaming of personal computer use working at Atari, a nap-heavy and non-academic Einstein rethinking our theories of the cosmos as a humble patent clerk, or Anita Roddick speculating of a shop where refillable containers would be good for the earth, it takes someone with an outside perspective to re-envision our concepts of an industry and to give a renewed sense of its relevance.

Smart companies and organizations are building in this outside-in approach to perspective into its innovation and new product development processes and methods.

This process starts with real empathy for the people using a product or service, an immersion. Then, after the problems are reframed and better defined, an incubation period follows an ideation phase. At this stage, a flood of fresh thinking arises. The neurobiology of insight depends on a deep immersion and incubation in the context of the problem.

Thinking like a manager of efficiency (More! And Faster!) leads to a me-too product or a small incremental innovation. If you want to foster truly differentiating, disruptive, and breakthrough innovations, cool the engines as part of the process. Real thinking is a slow, analogue process, aided by technology, but not merely as linear. After all, humans are much more psychological than logical, as we are just beginning to understand. Aesop noted thousands of years ago that the turtle always beats the hare. The archetype of American entrepreneurism, Ben Franklin, noted that “take time for all things; great haste makes great waste.”

Challenge your organization to get off of the treadmill to the landfill, slow down, and create something of lasting value. We are all worth it: you, me, our planet.

Is Market Research Dying?

Would you believe us if we told you that traditional market research is an antiquated practice that is heading towards obsolescence?  Even the online survey, the modern successor of the traditional door-to-door and phone surveys doesn’t really cut it in today’s complex world. The world we live in today is the amorphous Big Data state which beckons us to look deeper and analyze multiple sources of information. This analysis transcends research to arrive at insights about the market and all of the participants in the value chain. These insights are qualified but not always quantified in the traditional sense. The quantification comes later, once the insight is used to build a strategy.

It is a new day, and if you are looking to drive growth and uncover innovation, you must learn to synthesize information differently. They don’t teach this in business school and it is just beginning to surface at market research industry conferences. Consider utilizing a professionally diverse team to study both the macro and micro factors at work in an industry. We use social anthropologists and economists to collect and analyze a multitude of disparate data sets. The qualitative side of the house uses ethnography, the practice of immersion in a market to record cultural norms, behavior, motivations and other psychological triggers that affect the business model.  Simultaneously, the quantitative team analyzes the effect of macro factors on the participants in the value chain and forecasts how the environment might change in the future.

Using this approach, teams can develop personas and journey maps to better understand their customer base and hone all aspects of the business.  The software industry has long used crude personas to guide their development of functionality and user interface. As well, the more sophisticated ad agencies create audience archetypes to ensure imagery and messages resonate with the target. Both B2B and B2C businesses should use these tools too. Interview and observe your customers about what drives them, what frustrates them and what delights them. Asking good questions to get good answers is super important, but careful listening, watching body language and reading in-between the lines is typically where quantitative machines fail and humans excel. Record what your subjects think, feel, say, do and be on the lookout for tensions and inconsistencies. When possible, go into their environment; homes, offices and stores to examine behavior in relation to what was said.. There are always tensions and inconsistencies in what people tell you- this is where traditional quantitative market research falls down.  Human cognitive bias dictates that we will inherently lie.  Record these things and then look for recurring patterns- you’ll find that groups of people emerge with shared attributes.

Once the personas are complete, create a journey map which records each customer type’s experience and touch points with your company and its products/services. Think of this as a process flow with a human thought and emotions overlay. This will show you which of your efforts are effective and which group of customers are most receptive to them.

To grow your business, keep your finger on the pulse of the customer. I have thousands you say? Create personas to understand them as types and segments.

Innovation for the Rest of Us

Innovation, as a discipline, tends to be special assignment work that is reserved for the creative hotshots, iconoclasts, those in hot spots like Palo Alto, or on an esteemed university campus, such as MIT.

Yet, the lack of a real practice of innovation cripples businesses and communities. The dirty secret is that anyone can do it with a little training.

Another secret is that innovation work and its methods are not competitive; rather, as a model, innovation holds the very keys to a collaborative, sustainable future for companies, nonprofits, cities and individuals. You just have to do it. Not talk about it, read about it or speculate, but do. Action wins.

To this end, several peers in the community who are passionate about innovation and its positive impact on business and the social sector started meeting to share their passion. The natural outgrowth was the Memphis Innovation Bootcamp. Organizations on the founding team included Merck, FedEx, University of Memphis, and the Southern Growth Studio.

The Design Thinking methods were adapted from Stanford’s D. School. MIB is a three-day, intensive, hands-on introduction to the latest concepts in design thinking and innovation. We have held two sessions, founded an advisory board and are building up an infrastructure of innovators who can get behind projects that make the region a better place.

Mission of MIB

Create a network of innovators who produce human-centered solutions that positively transform lives, communities, and businesses.

Approach

MIB – A 3 day hands-on, real-world, exciting, transformative immersion experience that imparts application-ready design thinking capability.

MIB Connect – MIB connects local businesses, organizations and governments with local and global resources to establish a network of robust Design Thinking programs.

MIB Engage – MIB staff engages with a select group of local organizations to impact the community and help establish Design Thinking capability.

Jay Morgan, AVP of Innovation at Merck Consumer Care says, “In our discussions with companies, community organizations and even schools administrators, we have found a very strong desire to innovate. At the same time, most admit they don’t know how. MIB’s approach established by Silicon Valley startups and taught at Stanford University, provides a proven framework sustained success.”

Kevin Boggs of the University of Memphis ties the techniques to the unique Memphis culture: “In some ways, the empathy-focused approach of the MIB is a natural extension of our local culture with its emphasis on story-telling and deep connections to community.”

Professor Brian Janz adds, “We believe creativity is like muscle. … Everybody has them, but they need to exercised. Through the bootcamp, we awaken these dormant creative muscles, work them out and help people get reacquainted with their creative selves. This is how we’ve begun to build the creative confidence in people all over the Memphis area.”

Harold Howlett of MCC sums it up like this: “You can teach old business guys new tricks.”

Think of it as a Memphis Innovation Revolution or innovation for the rest of us.

Intellectual Property Strategy

Entrepreneurs and businesses alike wrestle with the question of patents. Patents can be an accelerator or a hurdle as new products and technology travel through the pipeline and approach the market.

The U.S. Patent and Trademark Office is inundated, resulting in added expense and time. Current estimates figure an average of five years and $20,000 before the patent might clear. Many wonder whether it is worth the effort.

The short answer is you should do everything in your power to lock up your opportunity for exclusive distribution. This gives you a leg up in the market for a period of time and can be a salable asset.

Start by defining your end game: Are you launching the new product to grow your existing business or is your intent to use this new product to make your company attractive to strategic acquirers? If your objective is the latter, patents are a box that you need to check.

Typically, investors and potential acquirers like to see some form of intellectual property in place, whether it be patents, exclusive licenses to patents or, to a lesser degree, exclusive distribution agreements and a well-protected trade secret like the secret sauce in Coca-Cola. Patents are a salable asset just like your infrastructure, contracts and brand. If your intent is to grow the business, it is good to have a solid IP strategy as it will increase the value of the company and increase leverage in the event a sale becomes a necessity rather than an option.

Even you do not intend to file for a patent, it is important to do a comprehensive intellectual property search. Competitive analysis to determine if a solution already exists is part one. Part two is ensuring that there are no pre-existing patents. The vast majority of issued patents are not actually commercialized in the market yet can sue for patent infringement.

Now, practically speaking, is an IP strategy bulletproof, assuring your market dominance? Absolutely not. Companies are often lured into a false sense of security with patents. They become complacent and lose their R&D and innovation focus that drives iterative improvements that ensure they meet market demand. This opens the door for more aggressive companies to launch innovations that render previously patented products obsolete. Larger companies move in for market share, often ignoring patents and license agreements using their deeper pockets to drown their opponent in legal fees.

The only way to develop a sustainable competitive advantage is through a well-differentiated brand. The brand is what ties the legacy and new products together and positively imprints the buyer’s mind. If done right, this is the one thing that competitors cannot take from you.

If you are lucky enough to corner the market, know that your days on top are limited. Competitors will move in and either best your offering or commoditize the market. In either case, your best strategy is an established brand with tenets that foster loyalty.

Once you are in the market the clock starts. You must work to stay on top. Do not rest on the shoulders of your aging patent.

Corporate Shamanism

Everyday we advise clients to take risks, leap into unknown and unexplored areas, express themselves in new ways – all to locate, validate and capitalize on new areas of growth.

We have formal methods and processes for unlocking potential and manifesting new realities for them. We always tell them to be true to themselves, their organizations and be a positive force on the planet. We embolden and encourage. We connect them to the real lives that use their creations.

For these reasons, we would like to state that real innovation work is a form of Corporate Shamanism.

Shaman (pronounced SHAH-maan) is a word of the Tungis people of Siberia, which means “one who sees in the dark.”

This visionary work dates as far back as 40,000 years. A shaman uses the power, wisdom and energies of a different frame of mind to create and promote constructive change in people and their environments.

A good shaman sees him or herself as a “hollow bone” through which healing and messages are transmitted to clients. Isn’t this the same work as an Innovation Catalyst who strives to connect their clients with their own humanity and the humans who use their products and services? Without imposing a pre-amped set of prejudices, innovation starts in the dark of discerning what people perceive of your offering.

Then, through a set of rigorous exercises, the energies are harnessed and the perceptions that are gathered are put into a new pattern, a new way of seeing, a new way of measuring value. This creative process holds true on individual, product and corporate levels.

As organizations are nothing more than collections of individuals, it makes deep sense that these time-tested, powerful methods can be used to restore organizations to a sense of mission, purpose and optimal creativity. In fact, many actual Shamanic practices can be applied to business issues and corporate cultures with great effect.

Besides, Innovation, as a word, has no real meaning anymore. For some organizations it is a lofty goal, for others a marketing plan, for others a new IT platform. Yet, real innovations – categorized as Disruptive or Breakthrough – change the world they inherited.

While it seems like a wild leap of fancy, calling the discipline Corporate Shamanism instead of the empty word from the industrial revolution (innovation) is a better-fitting moniker.

Corporate Shamanism re-humanizes business, focuses on the people who use a product or services, and uses a scientific approach to achieving a visionary result.

Who wants to journey into the vast land of possibility? Let’s go.

Don’t Chase White Rabbits. Prioritize Market Opportunities.

Too often companies rush to bring new products to market without first considering which verticals to sell into and which sales channels to utilize. This leads to a series of detrimental scenarios that end in lackluster market performance or white rabbit chasing that burns cash and never yields market traction. Less than stellar launch results happen when new product development teams and marketers default to their existing business model without considering broader market possibilities.  New products and services often require innovative business models and new sales channels to fully realize their potential. The other extreme is where teams are overly opportunistic and try to pursue all of the opportunities that arise. Here they fall victim to the siren song of an “in” at a retail chain or distributor. They take all of the deals that present themselves thus executing no real strategy and diluting all of their efforts.

It is best to identify an opportunity and design a new product or service to meet a specific need in the market. This way, the core market is defined and market demand validated. The only work left to do is to analyze expansion markets according to their strategic relevance and profitability.  Unfortunately, this is not the way it typically goes down.  In most cases, companies and inventors create something and blindly launch it into a saturated market or go in search of a market that exhibits demand for the product- a solution looking for a problem. They don’t think through the specifics of where to play and why. Instead, they go where the tide takes them and hope the winds of fate are lucrative.

If you find yourself with a product or service in search of a market, here is our advice:

  1. Create a model that evaluates strategic impact of each market according relevant factors like: market size and growth rate, competitive pressure, ease of entry, length of sales cycle, industry growth and latent demand. Weight each of these factors so that you can prioritize markets according to a quantitative methodology.
  2. Based on the information described above, determine which segment of the market makes the most sense to target. Can you win in the premium space or is there an opening for a value player? The answer to this question will helped you determine your pricing strategy and will also guide the sales channels you pursue.
  3. Evaluate the strategic sequencing for entering each market. There is usually a strategic logic to entering markets in a particular order. In many cases, doors won’t open at some sales channels until you have demonstrated success in others.

Growth and success in business are tightly tied to a team’s ability to methodically analyze opportunities and then have the discipline to stay the course.  Be measured in your path to market. Too many good products with legs end up back on the shelf because teams exhaust their invested capital and resources pursuing the wrong market or sales channels.

With a market prioritization strategy in hand you will be positioned to make an informed decision when opportunity knocks at your door. Be ready to let it in or ask it to come back later. First things, first.

The Role of Play in Innovation

In the Creative Economy, inspiring a sense of play in culture, marketing and innovation is critical to success. You have to engage your people so that they can engage prospects and customers with a lively sense of mission and purpose. Too often the roles we assign diminish this sense of play.

In a tightly wound corporate culture, business people can become stuck in the role they are forced to assume while at work. They are not allowed to be human and expressive. Like a mask they cannot take off, they turn into a predictable cliche with a limited set of expressions to new ideas.

Talking about breakthrough innovations with such automatons can be as odd as talking to the tax man about poetry, even though innovation could supercharge their careers and help their companies gain or regain a leadership position in a market category. These corporate zombies have lost their sense of play.

We have already discussed the immense value of play in a successful marketing mix in an internationally read article (http://bit.ly/1mCE0DZ) but now we’d like to explore the role of play in innovation.

The issue we are really discussing is one of harnessing the most creative value out of your team. As a leader or manager you cannot set up the metrics and measurements and stranglehold the results out of your team. Instead, you have to foster a deeply playful culture that inspires an environment of breakthrough thinking. The best way to cultivate such a culture is to allow play to serve as a North Star of all endeavors.

Let’s apply a lesson from a successful author, James Michener, from his autobiography:

“The master in the art of living makes little distinction between his work and his play, his labor and his leisure, his mind and his body, his information and his recreation, his love and his religion. He hardly knows which is which. He simply pursues his vision of excellence at whatever he does, leaving others to decide whether he is working or playing. To him, he’s always doing both.”

We are not suggesting anything ridiculous here, but something cunningly pragmatic. Companies that blur the line between play and work thrive in the creative economy. Before you bring in a sandbox the size of a swimming pool, realize that we are recommending just a few simple exercises.

What we are saying is your culture needs to formalize a little playtime where the lines of work/play blur. Those responsible for innovation at your place of work should schedule a weekly exercise to expand the capacity to imagine and allow for wild possibilities of team members – one hour per week spent socializing the boon of the human imagination without judgment.

Further, we recommend that every new product development process have at least two formal points in the process where generative, creative thinking without boundaries is encouraged.

Very often, the most effective and brilliant idea sits close to the most ridiculous one, out on a limb next to the fruit and flowers. This idea will only present itself to those who blur the lines, enjoy themselves and have a mindset that scans for possibility after possibility.

In the end, innovations will be judged by revenue or cost savings – and this counting itself is a deep form of play for the mathematically minded.

Innovate with Your Hands, Old School

The industrial revolution brought efficiency but led to the decline of human creation by hand. We stopped tinkering and started operating machines, becoming inherently less ingenious. Over the past century, new product developed hinged on access to expensive machines out of reach for the individual. Thus, new production development and innovation became the domain of companies with the cutting edge equipment.

In our travels we meet with many mid-market manufacturers, the backbone of the American economy, that has next-to-no innovation initiative. Worse, they accept commoditization as a core attribute of their industry. The Fortune 500 companies cannot be counted on to bear the American imperative to innovate either.  Every day media reports of slashed R&D budgets rein in innovation efforts. Corporations lumber under their own bureaucratic heft, struggling to impact the marketplace and to bring meaningful improvements to humankind.  This deeply troubles us as ardent capitalists and proud Americans.

So what will become of American innovation? Our entrepreneurs press forward, evidence of the ever resilient human spirit. But there is also a band of innovation corporate renegades at work. A fascinating and unofficial practice of innovation, not yet found in the buzzword laden books of business pop culture has put down grass roots. “The Makers,” a relatively new movement, are Benjamin Franklin’s modern day protégés. Technologists, craftsman and artisans unite in a common spirit of creation and form a subculture that occupies a space somewhere between shop class and the computer lab. Think of it as a technology-based extension of DIY culture, a social club where like-minded individuals gather to build and create.  The Maker Culture fosters collaboration and cross pollination in electronics, robotics, 3-D printing, and the use of CNC tools, as well as more traditional activities such as metalworking, woodworking, and traditional arts and crafts.

Their objective is simple: learn practical skills from one another and apply them creatively. Much of what they create is for sheer entertainment, built simply for the joy of building. However, they do subscribe to a few core principles: begin with the end in mind, make things that combine form with function and the art of making should be appreciated and celebrated.

Frustrated corporate tinkerers gather at night and on weekends in a self-funded space, as an outlet for their insuppressible drive to create. We wonder what would happen if American companies foster this creative energy instead of suffocate it. Too few companies have a true skunk works without heavy corporate surveillance. Why not invite members of the community at large in as well to collaborate and co-create? Today, it’s the companies that are the ones left out.

Don’t ask them how they intend to monetize these creations, let them freely create and bring in the strategists to determine market viability later. Take it out of the human resources budget, if you have to justify it. Think of it as the new break room- your humans need some resources. Skip the hip Ping-Pong tables and bring in the machines. See to it that the role of HR is to procure resources for humans, not just source humans as resources to the company.

The ancient words of Archimedes serve as a modern day Makers’ battle cry: “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.”