Where to Look for Insight:
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Hear the word “innovation,” and you might think of an R&D lab, a design group, or a start-up venture. But today innovators are in demand everywhere—from the factory floor to the salesroom, the IT help desk to the HR department, the employee cafeteria to the C-suite.
Innovation isn’t a department.
It’s a mindset that should permeate your entire enterprise.
No matter the venue, the feedstock for innovation is insight—an imaginative understanding of an internal or external opportunity that can be tapped to improve efficiency, generate revenue, or boost engagement. Insights can be about stakeholder needs, market dynamics, or even how your company works.
Several Fortune 500 companies have been founded on a single insight about what customers want. Starbucks brought a little bit of Italy to coffee shops. Home Depot gave do-it-yourselfers access to professional supplies. The Body Shop was built on the notion that buyers of beauty products care about humane animal-testing practices. Inside your company, insights can lead to more-efficient operations, simplified processes, or leaner structures.
Insights can be powerful, but how do you find them? Should you brainstorm with colleagues? Sift through masses of data? Simply introspect? Or carry on as usual and wait for the proverbial apple to fall on your head?
In our combined half-century of working with innovators at start-ups and within large corporations, we’ve found that the best insights tend to come from sources that can be categorized. We recognize that many people arrive at great ideas more or less serendipitously, but we nevertheless believe that it’s possible for individuals to approach innovation in a more systematic way.
On the basis of our experiences with and research into entrepreneurial ventures and product-development groups in varied industries around the world, we have outlined seven “insight channels” that can be used by would-be innovators in any function or role. They are listed below. By periodically tuning in to these channels and methodically running through them, you can focus your imagination, organize thinking, spur creativity, and find valuable ideas for growth.
Seven Insight Channels
Anomalies
Anomalies.
Businesses today are awash in data. Innovators pore over this information looking for promising ideas, but often they focus on means and averages, which lead to broad conclusions. Sometimes the real opportunities lie in the results that deviate from business as usual.
Consider an anomaly in global e-commerce. One might think that Russia, with more than 100 million middle-class consumers and 75 million internet subscribers, would be an attractive market for online retail. However, e-commerce accounts for a paltry 1.5% of total retail sales in the country. The entrepreneur Niels Tonsen recognized why: The Russian postal system is very unreliable, and few consumers have credit cards. This insight led Tonsen to create an online clothing store, Lamoda, which employs an army of couriers to deliver customers’ purchases to their homes, pick up cash on delivery, and even offer fashion advice. By providing an innovative experience that effectively brings the store, the style consultant, and the cash register to the customer’s front door, Lamoda built a very successful e-commerce business, uniquely suited to the Russian market. (See also “The CEO of Ozon on Building an e-Commerce Giant in a Cash-Only Economy,” HBR, July–August 2014.)
The smart innovator knows to notice and then follow up on surprising data. To look for anomalies, ask questions such as: Is your market share or revenue abnormally low or high in a geographical market? Are
you having unusual success with a specific customer segment? Are some of your salespeople unusually productive? Are some of your suppliers able to deliver unusually quickly? Then dig deeper. The deviant numbers may be the tip of the iceberg, hiding a valuable insight below.
Confluence.
When several trends come together, their intersection can be fertile ground for insights. For instance, the confluence of mobile telephony growth, social networking, and increasingly short attention spans has spurred the creation of social media applications including Vine, which allows the sharing of short videos; Tinder, a GPS-linked matchmaker; and Snapchat, which deletes anything sent through it from the receiver’s phone in a matter of seconds. Evan Spiegel and his Snapchat cofounders built on two more-specific social media trends: the urge to broadcast life as it happens and growing concerns over privacy. People express themselves spontaneously on Snapchat without worrying about self-censorship.
New social habits, technologies, and areas of interest are forming all the time across all facets of life. The smart innovator looks at how they fit together. Ask yourself: What are the major economic, demographic, and technological trends affecting my organization, industry, or market? How do those trends intersect? For instance, if you combine an aging population (a demographic trend) with mobile connectivity (a technology trend) and rising health care costs (an economic trend), you can mine the intersection to create services such as remote health care monitoring for seniors. Similarly, if you combine the rising costs and difficulty of sourcing talent with the widespread availability of mobile video, you can see an opportunity to create a video-based recruitment application to screen a large number of candidates at a low cost.
Frustrations.
Life’s irritations are often a terrific source of ideas. In the late 1990s Mark Vadon, a young consultant, went shopping for an engagement ring and found the experience intimidating and difficult. The system for categorizing and valuing diamonds is complicated, and eager salespeople only add to the pressure. Vadon reasoned that many other men were equally put off—an insight that led him in 1999 to found Blue Nile, an online jewelry dealer that offers useful tutorials and information on gems. Today the company is the largest online retailer of diamonds and sells some $250 million worth of engagement rings a year—more than 4% of total sales in the U.S. market.
Many people arrive at great ideas more or less serendipitously—but it’s possible for individuals to approach innovation in a more systematic way.
Vadon’s experience shows the value of paying attention to what annoys people and then fixing the problem. Put yourself in the shoes of customers, colleagues, or suppliers and ask: What’s most frustrating about your products, processes, or workplace? What bothers you personally about your business? What work-arounds do people use to get their jobs done? How could they be improved upon? Can you make customers’ lives easier or company meetings less painful? Can you reduce the hassles your suppliers face? If you feel people’s frustrations, you can find valuable innovation opportunities.
Orthodoxies.
When something has always been done the same way on your team or in your organization or industry, it’s worth asking if there’s an alternative. Traditions often block potential innovations because people are reluctant to abandon the tried-and-true. But when conditions change, so must traditions.
In the defense industry, for example, manufacturers have long focused on building expensive and sophisticated missiles, such as Raytheon’s Tomahawk, that sell for more than a million dollars; even the cheapest offerings, such as Lockheed’s Hellfire, cost upward of $100,000. These missiles are developed with customer funding (from the U.S. Department of Defense) and are custom-designed to be smart and powerful so that they can take out tanks and other large targets. But at Raytheon (a company to which Mohanbir Sawhney has provided consulting), the 25-year veteran Steve Ignat and his team recently upended that status quo.
Knowing that the United States and its allies needed cheaper, stealthier missiles to effectively target small groups of terrorists on the ground, they created a low-cost manufacturing facility (dubbed the Bike Shop) and, without even courting a single customer, used parts from existing production programs to assemble exactly those sorts of weapons. One of the missiles they built, the Griffin, is now in high demand.
Orthodoxies hide in every organization, industry, and market. To uncover them, ask yourself: What beliefs do we all hold sacred? Why do things have to be this way? What if the reverse were true? What opportunities would be opened up if we abandoned those assumptions and beliefs?
Extremities.
Businesses, appropriately, spend most of their time concerned with their mainstream stakeholders. But sometimes it is the “positive deviants,” as Oxford University’s Richard Pascale calls them, who are a rich source of ideas or insights, teaching us innovative ways to overcome incredible odds or solve seemingly intractable problems.
In May 2014 the famous Harvard law professor and activist Larry Lessig created Mayday, a political action committee to address the issue of corporate money in politics. The PAC would use community- and internet-based “crowdfunding” to raise similar amounts of money directly from citizens. As of August 25, 2014, it had raised $7.92 million from more than 55,000 contributors.
Positive deviants may be visionary customers who can help you see trends before they become mainstream. They may be manic coworkers who are passionate and don’t take no for an answer. They may be enlightened shareholders who can help shape your company’s strategy. Innovators must look at the fringes of stakeholder groups and ask: What can we learn from those who are most intense in their complaints or enthusiasm that we could apply to our company or our role?
Voyages.
When business turns stale, innovators get out of their own offices to visit “customers”—whether that means employees they manage, colleagues who rely on their work product, or the people who buy their goods and services. These “voyages” into different worlds are necessary because all behavior takes place within a rich sociocultural context; it’s impossible to understand what others are thinking when you’re sitting alone at your desk. Designers and product developers have long understood how important it is to take this anthropological approach.
A few years ago, Jennifer Hargreaves, a manager at the financial software company Intuit, was tasked with creating a new version of the company’s popular QuickBooks product for nonprofit organizations. Her first step was to volunteer at a local charity. After immersing herself in the new context—helping to manage the organization’s accounts for a few months—she noticed sharp differences between for-profit and nonprofit financial management processes. The focus was fundraising, not sales, and donors, not customers. This on-the-ground research helped her brainstorm extra features—such as the ability to track donations, pledges, and grants separately and to allocate expenses to particular initiatives or programs—for the new QuickBooks Premier Nonprofit, which she later launched to positive reviews and sales.
Anyone can make similar voyages. Learn how your stakeholders live, work, and behave. Ask yourself: What are the social, cultural, and environmental factors that affect their preferences and behaviors? How can we create solutions that respond to those factors?
Analogies.
Sometimes other teams, business units, companies, or industries have adopted useful ideas or systems that haven’t crossed the border, so to speak. Can you import innovation—even from a place that seems far removed or exotic?
Greg Lambrecht came up with his Coravin Wine Access System by co-opting ideas from the world of surgery. An MIT-trained engineer and an oenophile, he grew tired of uncorking bottles that he didn’t want to finish in one night, only to have the fine wine start to oxidize and deteriorate. Wouldn’t it be wonderful to be able to drink just one glass while leaving the rest perfectly preserved? He knew that surgeons had started using extra-fine needles to ensure minimally invasive surgery and wondered if the same type of needles could be used to draw wine from a bottle. He tested and developed the idea over more than a decade, and despite a few setbacks, Coravin has been well reviewed and is now widely available.
We advise innovators to study a wide range of unrelated functional groups and industries to look for analogies that they can adapt to their domains. After all, innovation is not about bringing something new into the world. It’s about usefully applying something that is new to the situation, no matter the purpose for which it was invented.Our list of insight channels has evolved over the years and will no doubt continue to change and grow. Other observers could probably add a few categories of their own. But we’ve consistently found in our research and work that these seven are powerful drivers of innovation. Although they’re most commonly used by entrepreneurs, developers, and designers, they can help you in any role and any context where new thinking is required. Few people find great ideas on a blank canvas. Most of us need our imaginations channeled.
Mohanbir Sawhney (mohans@kellogg.northwestern.edu) is the McCormick Tribune Professor of Technology and the director of the Center for Research in Technology and Innovation at Northwestern University’s Kellogg School of Management, in Evanston, Illinois. They are the authors of a book on network-centric innovation (coming in October from Wharton School Publishing).
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