Getting To Thank You: A practitioner's guide to innovation


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A sample of book on innovation you have been waiting for. 12 chapters of rock solid content on how to get innovation done right.

"No one understands that innovation is a team sport better than Chris Finlay. Creating better ways to deliver value is more about how we collaborate than about technology. Getting To Thank You is a must read for any innovation junkie that wants to get better, faster."
- Saul Kaplan, Chief Catalyst, Author, Business Innovation Factory

"If you're looking for one book that demystifies the practices of user experience, design thinking, and innovation into a valuable core of ideas and practices, this is it."
- Brand Schauer, CEO, Adaptive Path

“Thank you” is how you know you are getting your product and service design right.

“Thank you” is what every customer wants to say, and what every business leader and designer wants to hear. But when 95% of innovations fail it is hard to know what to do next in order to create products that customers will fall in love with.

This book contains the essential tool set for anyone who is serious about reliably designing, building, and growing products that your customers will thank you for.

Chris Finlay's practical approach to innovation brings together the best thinking, provides real world examples, and helps you get beyond the jargon. It will transform how you understand innovation and how to deliver the right products and services to your customers.

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Getting To Thank You: A practitioner's guide to innovation

  1. 1. G E T TI N G TO TH A N K YO U A P r a c t it ione r ’s G u id e t o I n nov a t ion C H R I S F I N L AY
  2. 2. Copyright 2014 © Chris Finlay All rights reserved No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the author. Requests for permission should be directed to Publisher: Chris Finlay Editor: Todd Sattersten Copyeditor: Robyn Cummer-Olsen Proofreader: Jessie Carver Designer: Vanessa Maynard Illustrations: Alex Baranov Cover Design: Kaitlyn Wahldick ISBN 978-0-9913771-0-7
  3. 3. #TH A N K YO U
  4. 4. To the extent that I am smart, I am smart because other smart people shared with me what they knew. The way I pay them back is sharing what I know. This is the underpinning of academic life: the community of scholars. —Bill Buxton, principal researcher at Microsoft Research
  5. 5. VI GETTING TO THANK YOU TA B LE O F CO NTENTS Introduction: For You Chapter 1: Thank You Simple and powerful, getting a thank you is how you know you are getting it right—even designers and business people can agree on that. Chapter 2: Innovation Imperative Fear, fun, adrenaline, competition, and delight. Business models are born and die faster than ever before, and competition comes from the most unexpected places. Your org chart will hate it, and your manager probably will too. As my friend and brother-in-arms Michael Dila says, “This is going to hurt.” Chapter 3: Understanding Experiences Experiences are the magic in the middle. Designing experiences is like “cutting cubes out of fog,” as my innovation hero Larry Keeley likes to say. Understanding experience design fundamentally changes how you see the world and deliver your products and services. Chapter 4: Design Thinking vs. Business Thinking Innovation is why you need design thinking, and it takes more than just designers to make it happen. Designers and business people both want the same thing—they just get there a little differently. And together they are powerful. 9 13 23 41 67
  6. 6. TABLE OF CONTENTS VII Chapter 5: Teamwork Herding cats is an overused bit of wordplay, but managing innovators is like, well, herding cats. They are passionate, intrinsically motivated, and ready to rumble. They don’t require much except for a good problem, some whiteboards, and Post-its, but it’s important to think about team dynamics to improve the conditions for success. Chapter 6: Approach Having a map won’t tell you where every bump in the road will be, but it will keep you a bit safer and hopefully out of that creepy cabin in the woods. Having an overview of the process will help you develop an idea of how activities fit together, which in turn helps you identify where to play and how to win. There is no one right way to innovate, but there are a lot of wrong ones. Chapter 7: Understand There are a lot of important things that have to happen in the world before you start thinking about your project topic. Many of them relate to why you are doing this work now and your chances of success. Find out who matters, why, and what you can take from what has already been done to help you win. Chapter 8: Discover People have rich and complex lives that are always changing, and we need to seek to understand them to make stuff they love. People are not neatly divisible by job, race, income, or brand of jeans, especially when you are trying to find the new. People connect over shared values, and that is where you need to focus. Chapter 9: Transform Reliable innovation is less like magic and more like accounting. It requires us to rigorously evaluate and define the value of every detail of the research and to connect soft and hard data to point the way to the future. It is the bridge between design and business. 83 103 123 149 215
  7. 7. VIII GETTING TO THANK YOU Chapter 10: Create This is the part of innovation that starts to look a little more like magic. Using rigor through the process to get here gives you more proof than gut instinct, and you will have a more robust view of what is possible, probable, and pleasing. With the proper foundation, your mind is free to make high-value intuitive leaps. Chapter 11: Prototype Prototypes, tests, sketches, and the strong and accessible logic they create make for powerful presentation of new ideas. They give you “faster, cheaper, and deeper insight” into what is right. Use them early and often. Chapter 12: Communicate Pride or fear is what you will walk into your final presentation with. When you’ve got it right you usually know it, so don’t screw it up. Acknowledgements Recommended Reading Letter from Honest Paul Innovation Process Overview About the author 253 279 303 325 328 330 333 335
  10. 10. INTRODUCTION 11 FOR YOU This book is the result of my deep desire to share what has helped me improve my business and to share my ability to create good things in the world. I am a creator and problem solver who has spent a lifetime in service. I started my career early, at age nine, working summers at my grandparents’ hotel picking up litter and sorting beer bottles. Over the past twenty-five years I have been a waiter, chef, designer, innovation consultant, CEO of an international shoe manufacturer and retailer, and now the Director of Experience Design and Innovation for UnitedHealth Group. I grew up in, have evolved with, and been firmly employed in, the modern service economy. I studied how to create and deliver experiences in graduate school at the Illinois Institute of Technology, obtaining a master of business administration from the Institute of Design and a master of design from the Stuart School of Business. I studied how to communicate visually at the School of Visual Arts in NYC where I obtained a bachelor of fine arts. Through those experiences, I have learned a few things about getting to Thank You— and most of them the hard way. Getting your customer to say “thank you” on a regular basis is no accident. The tools and ideas being presented here are for anyone looking for a practical interdisciplinary approach to innovation. Whether you are making chewing gum wrappers a little more fun, developing a new service for delivering cancer treatments, or defining options for starting a new small business or improving an existing one, these tools can be the difference between a half-baked idea and a hit. These tools will help you identify meaningful challenges and opportunities, evaluate them rigorously, and support the development of a clear chain of logic to help you create rich ideas and a powerful case for their value. This is not an exhaustive set of tools, but they are essential for anyone who is serious about innovation. There are many ways to deepen the tools presented in this book by further investigating the specialties within the disciplines of design, business, social science, and their related specialties. I encourage you to explore them all and embrace the power and problems each one
  11. 11. 12 GETTING TO THANK YOU contains. Business strategy, management, organizational behavior, Web analytics, interaction design, graphic design, and anthropology are some of the most interesting and compelling areas of study that will further your ability to innovate. A warning about tools: Tools make it seems as though there is one right way, or if you fill in the blanks, a solution will appear. The tools I have provided are suggestions about how to organize information based on experiences, and they may or may not be appropriate for you. Tools can be a great way to increase your chances of heading in the right direction. My purpose of including tools is to support you as you learn to think in new ways. As you master them, you may come to a place where a certain tool doesn’t quite meet your need, and then you should adapt it or create a new one that helps you answer the questions you need it to. We should always be actively shaping our tools as we go. As the well known Canadian philosopher and futurist Marshall McLuhan said, “We shape our tools and thereafter our tools shape us.” Good tools always take practice to use effectively, and these tools in particular require committed people with the courage, care, and compassion to do great work. Using them is no guarantee of success, but I firmly believe that by working with them, even in rote fashion, you will come out ahead of where you would have without them. That said, if you simply view the tools as a prescription you will miss the value of the methodology as being open and iterative. Just as great chefs still use cookbooks for inspiration yet still improvise, you should use this as a starting place or reference but seek ways to improvise with the tools for the needs of your specific project. Finally, I also wrote this book to connect with other passionate folks and would love to hear from you. - Chris Finlay Connect with me on: Twitter: LinkedIn: Visit:
  12. 12. THANK YOU 13 C H A P T E R 1 TH A N K YO U
  13. 13. 14 GETTING TO THANK YOU It’s not about the world of design, but the design of the world. 1 —Bruce Mau, creative director of Bruce Mau Design and founder of the Institute without Boundaries I don’t think that anyone has really told [people] what design is. It doesn’t occur to most people that everything is designed—that every building and everything they touch in the world is designed. Even foods are designed now. So in the process of helping people understand this, making them more aware of the fact that the world around us is something that somebody has control of, perhaps they can feel some sense of control, too. I think that’s a nice ambition. 2 —Bill Moggridge, co-founder of IDEO, designer of the first laptop computer Most designers don’t understand business. 3 —John Seely Brown, author and former director of Xerox Palo Alto Research Center
  14. 14. THANK YOU 15 As you drive into Rochester, Minnesota, you will pass a few of America’s favorite chain restaurants, a mall, and a grocery store. And you’ll know you are almost downtown when you see the large water tower on the horizon painted like an ear of corn. The big summer excitement in Rochester is the county fair, and regular entertainment mostly relates to the nearby lakes or watching movies projected on the side of the community center. Rochester is a pretty humble slice of America. What makes this little town known around the world is that, despite its humble nature, it is home to the Mayo Clinic, one of the most advanced and prestigious research hospitals in the world. I spent a summer at the Mayo Clinic working as a design strategist for the SPARC Innovation Lab, which recently became the Mayo Clinic Center for Innovation. SPARC (See, Plan, Act, Refine, and Communicate) was a real-time lab for health care service innovation. It was the first of its kind and served as a model for the development of many other innovation centers in hospitals and other organizations across the country. In 1889 a tornado struck the town, and Dr. Mayo and the nuns of Rochester founded the Mayo Clinic to treat the victims. Dr. Mayo, and subsequently his sons, dedicated themselves to care that in many ways pushed the boundaries of medicine and its delivery. They saw an opportunity to improve physician education, and thereby patient care, by observing other physicians and by inviting physicians from around the world to study with them. At that time it was considered dangerous socialist behavior, but they knew they would find better ways to treat people by sharing information. Their courage to break boundaries changed the physician practice model forever. The walls of the original Mayo Clinic buildings are literally etched with the teachings and traditions of the Mayo family, including their one-hundred-year-old value statement, “The needs of the patient come Figure 1. The corn cob-shaped water tower greets those visiting Rochester, Minnesota.
  15. 15. 16 GETTING TO THANK YOU first.” That is not a hollow vision cooked up in a marketing meeting. It is lived by the employees on a daily basis. There are famous stories such as the one about an ER nurse arranging to have an eighteen-wheeler moved from the emergency lane in front of the hospital so it didn’t get towed while the owner was cared for. Or a janitor who went to a patient’s home to feed the patient’s cat. There is no shortage of these stories and they are told with pride. The small town of Rochester even has a commercial airstrip to accommodate the jumbo jets of princes, kings, executives, and politicians coming for treatment. There are very few places that are more committed, at every level, to innovation and to providing world- class service and amazing results in some of the most critical moments of people’s lives. Our team audited Mayo’s most advanced service experiences—from transplant surgery to nicotine abatement to patient check-in—and met with some of the most brilliant medical innovators on the planet. We dug into each program with its sponsors, met the operations agents above them that pulled those services together, and reported our findings on a regular basis to Mayo’s internal medicine board, which has a huge influence on the future of the clinic. We gathered insights from our observations and meetings, then developed recommendations and designs for potential services and operational models to leverage the value of existing services and knowledge in more powerful ways. We used the past and present to find the future. It was awesome. Even while surrounded by such incredible excellence and innovation, one of the service experiences that touched me most from my time in Rochester was the one I had at the Honest Bike Shop, a small store located next to the old train tracks and a not particularly inspiring Mexican restaurant. As I stepped into the Honest Bike Shop, I was greeted not by glaring fluorescent lights and crushing displays typically found at bike stores at that time, but rather by hardwood floors and lots of natural light. Present was a definite sense of openness and expertise. It was a beautifully simple presentation. It had a naturally inviting feel, a bit like the way I remember my grandfather’s tidy and well-swept garage. It was full of little innovations and care that added up to something wonderful. It was so touching because it came from such a small and approachable establishment. It showed that anyone can provide a meaningful experience for their customer.
  16. 16. THANK YOU 17 The owner, known as “Honest Paul,” greeted me and asked how he could help. He encouraged me to browse, handing me a piece of plain white paper that had clearly been printed on the store printer and saying something like, “If you would like to take a moment to read what we are all about while you look around that would be great.” Honest Paul had handed me his personal history and mission statement. That is powerfully symbolic: a one-page proclamation of what he believed, how he worked, and what I could expect from doing business with him. It was captivating in its earnestness rather than being slick and pithy. It pretty well ignored all of the marketing advice of the day, but its honesty won me over instantly. You can read the full text in the back of this book; it is an endearing biography that leads you through why he does business the way he does, describing his career in the Air Force, his humble beginnings, and his hard work. The lines that really stick out for me are his guiding principles, his criteria for designing his business: “Good repair and service, good products, fair prices and good reputation have brought about a thriving business, and he looks forward to many more good years of serving you properly.” The last lines of his statement really spoke to me. Paul went on to show me around his clean and simple shop with pride, especially proud of the work stalls that had been built not just for technicians but also for owners to visit their bikes while they were being worked on. I could tell he had considered both me as a person and what I might need to be happy—not just what he could sell me that day. Paul was asking for a relationship and telling me about his commitment to his relationships over his life. Wow. After a relatively straightforward discussion about its merits, I bought a twenty-dollar flashing safety light for my bike. No big deal. What was a big deal is that Honest Paul had convinced me to believe in his business and compelled me to tell others by connecting with me over a shared value of community, quality, and care. He expressed them overtly and Figure 2. The front of the Honest Bike Shop.
  17. 17. 18 GETTING TO THANK YOU subtly in the design of his store and the way he approached me. He showed me how much my needs mattered to him and were accounted for. I wanted his shop in my neighborhood. As I reflected on that experience, what I realized was that from the moment I walked into that shop I felt like saying Thank You. It was a simple and powerful revelation. In that moment I realized that my goal is not just to properly thank my customers for their business but also to create products and services so meaningful they feel compelled to thank me. CHEAP VS. DEEP There are many types of Thank You, and they run the spectrum from cheap to deep. Cheap thanks is given as an afterthought, as a part of participating in polite society. You give thoughtless thanks when a waiter fills your glass of water. Forced thanks when your grandma gives you something you don’t want for your birthday. Relieved thanks when a cop lets you go with a warning. These all serve their purpose in polite society, but when I write about getting to Thank You, I am talking about a thanks that you are compelled to say. A thanks that if you didn’t say it, you would regret it. It is not about debt or guilt but rather about honoring someone’s earnest effort to do something great for you. CHEAP DEEP Figure 3. Thank You runs from the cheap to the deep. Deep thanks is very different; you feel it. Your body may tingle. It is often revelatory. It is insightful. It may be associated with seeing a powerful movie, reading a book that led you to understand something more clearly, or someone sharing a deeply personal story that helped you understand the world in a new way. It is a bit like watching the sunrise on a lake when you are snuggled in a warm blanket. You are just happy you got to be there. It is more than memorable; it is meaningful. Deep thanks is the result of changing your belief about what is possible or what someone might do for you. It makes you happy to say it and happy to hear it. It is what we devote lives and careers to. In relation to products and services, a deep thanks is most often given because you
  18. 18. THANK YOU 19 feel like someone went out of their way to consider your needs and make something that feels like it was made for you. It often feels like they knew you—as an individual, as a part of a tribe—and went beyond their job requirements or tapped into some higher intelligence or power to give you what you needed at that moment. They made something awesome. They made something magical. Deep thanks opens the doors to a lifelong relationship, a relationship with meaning that leads people to pay more, tell others, and invite your company into their homes. When customers are thanking you, it means you are getting it right, and getting it right means they are going to buy from you again. When companies consistently get their customer experience right through their products and services, those companies turn out to be stars like Apple, Facebook, Amazon, Four Seasons, Disney, Twitter—companies that are known the world around as innovators. They connect to people. They are smart and careful about how they serve people. These companies show people that they care by creating joy in their lives. It’s not just for the big guys either. Small but dazzling businesses like the Honest Bike Shop can make this happen. Even small businesses can make Thank You moments that leave their customers overjoyed. Honest Paul’s version of innovation doesn’t cost much or take a lot of time. It focuses on the values that matter to Paul, work for his company, and matter to his customers. He built his business around them. He makes his choice about how to invite someone into his store, what he sells, and how he sells based on the values he has so clearly identified. They are his guiding principles. Paul is special but not because of his deep expertise in innovation. He gets to the heart of what matters and practices it daily to make his customers’ world a better place. Innovation isn’t defined by scale, budget, or time but rather by commitment and practice. Innovation is simply making something new of value or making something better.
  19. 19. 20 GETTING TO THANK YOU INNOVATION AND THANKS How to innovate is not something everyone agrees on, but Thank You is. Business people, customers, and designers understand the importance of service and gratitude at their core. They agree that we all want to get and to give thanks, and that is where we need to start to work together. Finding out what to make—and why—in order to provide these Thank You experiences is the focus of this book. We know that the best products and services that evoke this connection are what set expectations for quality, service, and experience that businesses in every industry must compete with. It is what you have to be committed to in order to succeed. In fact, it is that ethos that is at the heart of Zappos, the online retailer purchased by Amazon for just under $1 billion 4 , beloved by shoppers and the press for its deep commitment to creating Thank You experiences 5 . It makes people happy and makes people money. Those things are often one in the same. Stop worrying about innovation metrics before you worry about hearing Thank You. Thank You is certainly not the last metric you need to measure success. Thank You is both a beginning for collaboration and an end result for the customer. You may not always hear thanks directly from the customer, but if you listen through business performance, social media, front line employees, or net promoter scores, it shouldn’t be too hard to hear what people think about your business. You should be asking them anyway. Getting to Thank You won’t always require months of research but ingraining the process for research, design, and decision-making is something that takes persistence and commitment. We all know what an outstanding experience feels like but few of us know how to create them. In order to unlock and understand the power of getting to Thank You to find new spaces to play and new ways to put the pieces together, we have to start by understanding the people we want to serve. We need to understand that customers don’t just buy products and services, they buy experiences and the meaning behind them. Over the coming chapters we will dig into what an experience is, how it works, and what you can do to construct one in order to innovate and deliver value. We will explore how to uncover what is meaningful to people, generate powerful ideas from that meaning, and test and
  20. 20. THANK YOU 21 communicate those ideas to get you to Thank You. Many of the activities will feel familiar. Most of us have worked collaboratively with a colleague, built a requirements document, made a budget, or managed a project, but having the right perspectives and tools organized for innovation is something uncommon. These tools form a guide to know what to make and why in order to create and deliver value to your company and your customers in an increasingly complex world. In short, you hold a basic guide to modern innovation methods.
  21. 21. 22 GETTING TO THANK YOU NOTES 1. “Massive Change,” Bruce Mau Design, accessed March 23, 2013, http://www. brucemaudesign. com/4817/88330/work/massive-change. 2. “In Remembrance Of Bill Moggridge, 1943-2012,” Fast Co.Design, accessed March 23, 2013, in-remembrance-of-bill-moggridge-1943-2012. 3. Robert Berner, “Design Visionary,” Bloomberg Businessweek Magazine, posted June 18, 2006, design-visionary. 4. Sarah Lacy, “Amazon Buys Zappos,” TechCrunch, July 22, 2009, http://www. techcrunch. com/2009/07/22/amazon-buys-zappos. 5. Bill Taylor, “Please, Can We All Just Stop ‘Innovating’?,” HBR Blog Network (blog), Harvard Business Review, May 30,2012, taylor/2012/05/please_can_we_all_just_stop_ innovating.html.
  23. 23. 24 GETTING TO THANK YOU Profit is not the explanation, cause or rationale of business behavior and business decisions, but the test of their validity. 1 —Peter Drucker, management thought leader, author, and educator We are searching for some kind of harmony between two intangibles: a form which we have not yet designed and a context which we cannot properly describe. 2 —Christopher Alexander, architect and author
  24. 24. INNOVATION IMPERATIVE 25 My grandfather, Francis Wyatt Lawson, a submarine captain and inventor, passed away over ten years ago. While archiving his business papers last year, I came across his yellowed copy of a 1960 Harvard Business Review article titled “Marketing Myopia” 3 written by Harvard University Professor Theodore Levitt. I thought it would be a good read for novelty’s sake and was shocked by how relevant the content still is. The article turned out to be a classic. It went right to the heart of one the key concepts for innovation: Focus on what your product and service accomplishes for your customers rather than on always just tweaking the product performance attributes to convince customers to keep using your existing product. Making something smaller, faster, and in more colors won’t save your business if people don’t even want or use the core product. You should be most worried about whether or not your product is the right thing to offer at all. WHAT’S YOUR JOB? Levitt is further credited with the classic line, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!”4 People want the outcomes, not the mechanism, and whoever can deliver that will win. His ideas, summarized as “What business are you in?,” have been further championed by Clayton M. Christensen, professor at Harvard Business School and renowned innovation thought leader, in his Jobs-to- be-Done theory. The Jobs-to-be-Done theory is an excellent evolution of Levitt’s work and points to the simple but powerful idea that the job your product or service offers may not be what you think it is. In his article, Levitt gives examples of how businesses need to understand the job they are really doing for people in order to increase their competitive edge. For example, moviemakers’ jobs should be broadened to that of entertainment providers in order to compete against other forms of entertainment such as television or even fine dining. Railroad owners’ Figure 4. “Marketing Myopia” is a Harvard Business classic.
  25. 25. 26 GETTING TO THANK YOU jobs should be broadened to that of transportation, rather than as just being in the business of trains, in order to compete against trucks and cars. Christensen uses the example of a milkshake that some people bought because of boredom rather than as a dessert or for some particular nutritional value. In order to increase sales of milkshakes, an expert in fast food might be tempted to increase revenue by making a thicker or sweeter shake, but a better solution might simply be a marketing campaign to emphasize the “on-the-go value,” adding a game to the cup, or offering a cup size that was better suited for car cup holders. Identifying the role the product plays takes a deeper understanding of people’s behavior. You can see how easy it is to discover options when you know what people are trying to accomplish. Simple insights bring important ideas to life. They make our products and experiences that much better. The jobs a company’s products and services need to perform, and the level of detail with which the company needs to do its job, are both rapidly evolving. The Internet spreads the smallest of cultural trends and influences around the globe in minutes rather than in years or even seasons, morphing both meaning and value. This means that a new product feature offered in Japan yesterday can create new expectations in the U.S. today. It will change what people want because they will be inspired by what is now possible. And what is possible changes rapidly with advanced sensing technology such as accelerometers that tell your iPhone which way is up and thinking devices such as tablets and their microprocessor brains becoming cheaper and more ubiquitous. All of that technological capability creates deeper, richer, and fresher information, requiring new experiences to make sense of it. Technology has been magical and revolutionary but we will continue to see that the real magic will be the relationships we facilitate and the experiences that we build with it through design rather than how fast the processor will be and how many pixels the screen is.
  26. 26. INNOVATION IMPERATIVE 27 BUSINESS MODEL HOW A COMPANY MAKES MONEY HOW A COMPANY DELIVERS VALUE WHY COMPANIES NEED TO CHANGE PRODUCT AND SERVICE OFFERING CULTURAL AND COMPETITIVE SHIFTS Figure 5. Companies are continuously creating products and services in response to changes in culture and market conditions. KNOWING WHAT TO MAKE AND WHY This increasing complexity leads us to the “innovation gap,” a concept championed by innovation pioneer Patrick Whitney, the dean of the Institute of Design at the Illinois Institute of Technology. Prior to the 1950s, most of humankind had limited options for products and services, and all well-crafted products were precious. After the 1950s, there was an explosion of high-quality, low-cost, mass-produced consumer goods. Since then, our ability to make whatever we can dream up has rapidly increased to a huge array of products—from super colliders to the Snuggie. That wave of goods was a boon to our standard of living, but the more stuff companies make, and in greater variety, the more complex and nuanced people’s lives get, and the harder it is to know what to make and why. By being incredible manufacturers and consumers, we have complicated the supply and demand relationship exponentially. This makes for some pretty interesting challenges, and, as author John Naisbitt said in Megatrends: Ten New Directions Transforming Our Lives, “The most exciting breakthroughs of the 21st century will not occur because of technology but because of an expanding concept of what it means to be human.” 5 Businesses must get smart about engaging their customers and creating
  27. 27. 28 GETTING TO THANK YOU TIME ORGANIZATIONALKNOWLEDGE KNOWLEDGE OF HOW TO MAKE THINGS KNOWLEDGE OF PEOPLE’S LIVES INNOVATION GAP Figure 6. As companies have an increasing technical capability to make new products and services, people’s lives become more complex and the harder it is to know them: This is known as the innovation gap. complex systems for living, not just for buying and selling commodities. Innovation is about changing and moving with human behavior and culture to create desirable experiences. The best way to understand culture is by spending time with people and understanding the jobs that need to be done. Innovations are made of relationships between people, products, services, and systems that support that. Understanding those relationships and their complexity, and demonstrating how meaningful ideas function in a system, are important ways to show value. Other outcomes of this rapidly evolving definition of what it means to be human are new business opportunities. As philanthropist and Microsoft founder Bill Gates said, “Never before in history has innovation offered promise of so much to so many in so short a time.” 6 The risk of blind spots for established companies unable to stay aware of what is meaningful in the market grows daily, while the opportunity for new entrants who can see subtle but important needs grows as well. On top of that, prototyping, financing, design, and marketing resources are more accessible than ever before. Now, one sharp individual can eclipse a well-established business model. The individual innovator can now scale a product or service more rapidly than ever before to threaten
  28. 28. INNOVATION IMPERATIVE 29 large and established competitors. When a company such as Google, worth hundreds of billions of dollars, feels the need to buy up two-person start-ups who have nothing but a little revenue and a good idea, you know the world has changed. The major side effect of all of this is that, as Saul Kaplan, founder and chief catalyst of the Business Innovation Factory and former economic strategist for the state of Rhode Island, likes to say, “The half life of a business model is rapidly shortening.” SPEED QUALITY PRICE EXPERIENCE MEANING VALUE Almost 60 years after Theodore Levitt’s article was published, companies are only now beginning to understand how the richness of people’s lives informs innovation. Companies are realizing Figure 7. People have moved beyond the basic descriptors of value in terms of performance and now look for deeper values. that they exist to provide value to people, and people require products and services to express their sense of meaning and accomplish their jobs. The three classic determinants of value—speed, quality, and price—get a bit more complicated in our present-day service economy than in the former industrial economy. We increasingly live in a world where unique and powerful experiences, rather than physical objects, are the most highly valued purchases. Even Amazon founder and CEO Jeff Bezos, arguably one of the men responsible for moving the most incredible volumes of products in human history, recently said, “People don’t want gadgets, they want services.” 7 The flexibility of offerings such as services and software mean higher levels of personalization and customization are also available, transforming the creation, delivery, and consumption process. As a result, we have gone past speed, quality, and price as the main criteria for the value of a product. The new big three in the service economy are meaning, value, and experience. We have leveled up. While innovation is what drives change in, and creates value out of, our world, the approach to innovation continues to be stubbornly stuck in industrial revolution–era mechanics. This has led to a very high failure rate—some say ninety-five percent. 8 Few companies in the world practice innovation in a consistent and effective manner, and few leaders
  29. 29. 30 GETTING TO THANK YOU are satisfied with their investments in innovation, but they are driven to it because of the pace of change. INCREMENTAL VS. EXPERIMENTAL INNOVATION Innovation typically follows two very broad paths: incremental innovation or experimental innovation. Both are valid, valuable, and necessary. We could get into specific types of innovation built around process, product, service, radical, disruptive, and probably another good twenty or so other types of innovation that consultants like to try to own, but fundamentally there are only two. The one that keeps the money rolling in on established products and services, and the one that introduces new product and service offerings. INCREMENTAL INNOVATION EXPERIMENTAL INNOVATION TOTAL INNOVATION BUDGET Figure 8. The majority of innovation budgets are spent on incremental innovation, a more reliable and predictable form of innovation. Incremental innovation means doing things a little better through iteration, variation, cost effectiveness, reducing environmental impact, and better design and engineering. It is focused on delivering functional value by maximizing an existing product or service offer. Incremental innovation is also done to extend product lines, such as the Swiffer or the iPod, that start as big breakthrough innovations and are then iterated and improved upon to extract the maximum value. The addition of the Swiffer WetJet and each subsequent iPod model are good examples of incremental innovation. It is how to make a great idea keep on giving.
  30. 30. INNOVATION IMPERATIVE 31 Incremental innovation is the lifeblood of most companies and what keeps customers coming back on a regular basis. This is where the majority of growth-focused budgets are spent, and with good reason. The returns are easier to predict, and they capitalize on a strong and proven product or service. Unfortunately, only following the path of incremental innovation leads to a zero-sum game or a red ocean strategy—a scenario where all competitors are fighting for a piece of the same action in a well-defined space. When a company gets caught there, it’s tempting to believe that “faster, cheaper, and more” is a good strategy to outlast or outrun the competition, but the company will likely follow its product’s price to the bottom as competitors copy the product and offer it cheaper. A profit margin—even a small one—reinforces strategy and makes it hard to change. People get committed to an idea and won’t let go if it makes money, even in the face of impending doom. As the brilliant technologist and author Clay Shirky says, “Institutions will try to preserve the problem to which they are the solution.” 9 For example, Blockbuster saw Netflix coming but thought they could outlast them. It wasn’t about being caught off guard. It was about both not understanding the threat and Blockbuster’s senior leadership being too attached to what worked in the past. The consequence was billions of dollars of value rapidly wiped from the company and ultimately sending the eight-ton gorilla of video rentals into bankruptcy. Ouch. Belief is a kind of blindness, and billions of dollars make you believe that you are right and that everything is OK—until it’s not. Saul Kaplan calls this getting “Netflixed” in his book The Business Model Innovation Factory, 10 and that term seems pretty appropriate. When an idea is brought to market, it is optimized for operational efficiencies in order to maximize value, but the idea risks being process- driven and dying a slow, painful death due to over-management. Starbucks is a great example of a company that became totally focused on maximizing revenue through process, and then forgot the job it originally aimed to perform. The company maximized shelf space, product lines, brand extensions, and store locations, which led to reduced quality and poor experiences. To reclaim its former high-level quality and return to its vision of creating a desirable space and great coffee, Starbucks brought back its former CEO Howard Schultz. He returned
  31. 31. 32 GETTING TO THANK YOU the focus to providing a meaningful service to customers, turning the company around even after it had been declared beyond saving. Schultz’s return to meaning vaulted Starbucks back into a leadership position with its Via Ready Brew instant coffee, which reached $100 million in global sales only ten months after launch, capturing about thirty percent of the $330 million premium single serve/pod category. 11 Via is a product that critics scoffed at. That comeback process was important as it led to the evolution of the Via product, but purpose is what builds excitement and ultimately captures market share. Schultz offered a great new product, slowed store expansion to improve the quality of experience—a central value in the original Starbucks’ success—and signaled an overall return to the values that delivered on its promise of a place for people to spend time outside of work or home on a regular basis, reinforcing a concept known as the “third place.” Experimental innovation is the stuff that inspires and creates the foundation for companies such as Apple, Amazon, Twitter, and Microsoft. It pushes failing companies back to the top of the charts and tips industries on end, reshuffling competitors and long-held beliefs. It leverages the knowledge generated from specialists but often requires the generalist perspective that can see how to bring together the right solutions to the right problems at the right time. This is the kind of innovation people fight for and salivate over, the stuff that makes it to the cover of Time, Wired, and Fast Company. PURPOSE DRIVEN PROCESS DRIVEN PURPOSE MAINTAINED 2ND WIND Figure 9. Keeping a company fresh takes a strong sense of purpose. (Mats Lederhausen, BECAUSE, 2008)
  32. 32. INNOVATION IMPERATIVE 33 Experimental innovation or “disruptive innovation,” as Harvard Business School Professor Clayton M. Christensen calls it, 12 is the highest risk type of innovation. This type of innovation is pursued to find the future and disrupt the present. A disruptive innovation goes outside the current trajectory of the industry or product category to leapfrog another competitor or business. It often opens the door to a new population of consumers by offering a low-cost version of a similar product, a new technology, or a combination of technologies, in a way that is unexpected. The now-discontinued Flip video camera disrupted larger, established video camera producers by offering a low-cost, high-quality video recorder that was easy to operate while the rest of the industry, even other low-end video camera makers, were still adding incremental features and sustaining innovations. If we apply Christensen’s concept here, it’s evident that the Flip camera “open[ed] the door to ‘disruptive innovations.’ ”13 Other well-known disruptors include the transistor radio that made listening to music on the go cheap and accessible and the early Honda motorcycles that made transportation cheap and accessible. All of these products identified the value to be delivered and created a simple, inexpensive entry product that fit people’s lives and looked cool while meeting their needs. Disruptive products and services don’t always have to be cheap. They tend to be cheap because, rather than chase premium categories that are expensive to break into, they isolate the key value to be delivered and then deliver it efficiently. The Amazon Kindle is a great study in this. Its initial product was cheap, looked good, and had the essential function and a smart system being grown behind it. It gave a lot of people a lot of value at a very low price. Since its launch, it has become entrenched and has grown up into a premium quality competitor.
  33. 33. 34 GETTING TO THANK YOU Incumbents often leave themselves open to competition by continuing to make their existing products only marginally better and more complicated, excluding a large customer base. They get lost in features rather than delivering value. The way to avoid this nasty business is to look for and commit to meaning and shared values that can unite a ninety-year-old woman and a fourteen-year-old boy. People relate to things by Figure 10. The now-discon- tinued Flip camera disrupted the video camera market. what matters to them. The Nintendo Wii is an excellent example of a company that identified and leveraged the power of meaning to give its product a unique advantage and a jump on the trends. In the past, the market leaders— Nintendo, Xbox, and PlayStation—all listened carefully to gamers, responding to their requests with more features and options in the games and the controllers people used to play them. They sought the “best” customers, the ones who were the most vocal and the biggest consumers, but they ended up making products for an increasingly niche market, which by nature becomes smaller over time. Console makers were losing people who had previously played games when the controls were easier to manage. People now had to be masters of the multiple-button combos or else face the taunts of twelve-year-olds. Nintendo took a step back and asked how it might be able to solve the problem differently. It sought to understand people, not just current customers—a critical move and a critical distinction. People have rich lives and experiences. They are not just customers, neatly packaged into single servings. Customers can be flopped into an Excel spreadsheet, safely controlled away from the chaos and risk of the real world. However, Nintendo rolled up its sleeves and dug into the meaning of play. It realized that video game players and non–video game players alike shared a love of play, but the complicated interface of the game consoles limited the number of people who would or could invest the time to master the existing gaming platforms.
  34. 34. INNOVATION IMPERATIVE 35 1975 1985 1995 2005 Atari 2600 Atari 5200 NES Genesis SNES PS1 PS2 N64 Wii Xbox 360 PS3 2008 iPad Figure 11. Video game controllers consistently increased complexity over time till the Wii and iPad disrupted them and now the iPad has created a new rival and partner in the gaming industry. (Source unknown) This simple idea of play massively broadened Nintendo’s market by reinventing the way that people played video games. Not only did Nintendo create new opportunity for itself, it created opportunity for its partners to create new games and new hardware, and it found a huge surge in demand for the new console. In fact, the new console was in such demand that it was constantly out of stock for two seasons while Nintendo ramped up production. An important part of the Nintendo Wii story is that the CEO, Satoru Iwata, was able to make such a huge change to the product line. This is still a rare event as leaders of established businesses often have not changed their business model within their careers. They either don’t know how to or can’t pivot because their business’s existing infrastructure is built on one product line or idea of value they deliver. It is a very industrial-era approach and a habit that is hard to shake and hard to address. Leaders must recognize the need to change, or their companies will have no chance at maintaining a trajectory of success.
  35. 35. 36 GETTING TO THANK YOU THINKING IN EXTREMES People are often scared of innovation because they are unaware of the more reliable and repeatable methods of innovation. This is exacerbated by a kind of blindness to options. As the saying goes, when you have a hammer, everything looks like a nail. We are naturally inclined to do what we know, and it is scary when we are tasked with purposely finding something that is outside what we know or is at the edges of our knowledge. Unfortunately, people who are hired to maximize an existing market opportunity are also often forced to experiment when they may not be prepared to. Maximization takes high degrees of focus and operational acuity while experimentation requires ambiguity, empathy, and a generalist’s perspective to seamlessly integrate a variety of disciplines to succeed—critical attributes of design thinkers. Requiring people to change mindsets so significantly without arming them with the proper capabilities sets them up for disaster and reinforces fear of experimentation. It is a rare person who can solve highly specialized challenges while also dealing with the complexities and ambiguity of innovation. Additionally, humans have a strange tendency to think in extremes, particularly when they are projecting themselves into an unknown future. Starting a project with the goal of creating something new is like staring into an abyss; it can be overwhelming to say the least. People often worry they will be expected to create the next Swiffer or iPhone—a daunting task that feels a bit like building a skyscraper on its side and trying to stand it upright. Hard work, to say the least. Even the world-famous architect Frank Gehry (the man who designed some of the world’s best known structures, including the Guggenheim Museum in Bilbao, Spain, and the Walt Disney Concert Hall in Los Angeles) experiences this fear in his work. In an interview for Peter Sims’ book, Little Bets: How Breakthrough Ideas Emerge From Small Discoveries, Gehry calls this anxious feeling a “healthy insecurity.” Gehry said about starting a new project, “Its’ a terrifying moment. And then when I start, I’m always amazed: “Oh, that wasn’t so bad.’ ” That worry that you might not find something new or interesting is even felt by the very best designers in the world. Everyone is afraid to fail but the most successful people prepare themselves to succeed by finding the tools that work for them and honing their craft.
  36. 36. INNOVATION IMPERATIVE 37 Even worse than figuring out how to be that successful is the fear of creating what might be seen as a first-rate failure, creating the next New Coke or Segway. The truth is, most value creation is generally somewhere in between those extremes. People would do well to recognize this spectrum instead of believing that they need to hit a home run every time. The innovation process is manageable, but results take some time, persistence, and a great foundation. As product innovation expert and founder of Timesulin, an innovative insulin monitoring system, Marcel Botha says, “There is a lot of room to make life better in the simplest of ways.” Figure 12. People tend to think of innovation in its extreme successes and failures rather than realizing most of the value and work is done in the middle. When you are offering something new, you will often be reaching early adopters, but these people don’t have to be those living in a far-out future, they can be people who simply want or are open to a new feature or benefit. These are people who are willing to try something new and will hopefully spread their understanding of the innovation’s value to others. Early adopters don’t require a revolution; they care about value. In fact, innovation effectively boils down to getting valuable information about the past and present, then deciding what you think the future should look like. It just takes some proper organization, contextualization, and a little bit of inspiration. PAST PRESENT FUTURE What has happened. What is happening. What you think should happen.
  37. 37. 38 GETTING TO THANK YOU To deal with ambiguity, and to identify what’s important in the broad spectrum of possibilities, companies need generalists who are deeply curious, can manage interdisciplinary teamwork, and, to paraphrase XPLANE founder and author, Dave Gray, “get from point A to point B without knowing what point B looks like.” Most of all, they need both people who are passionate about creating experiences that are deeply human, and people who understand that the “obvious” never is.
  39. 39. 40 GETTING TO THANK YOU NOTES 1. Peter F. Drucker. 2003. The Essential Drucker: The Best of Sixty Years of Peter Drucker’s Essential Writings on Management. Collins Business. 2. Christopher Alexander. 1964. Notes on the Synthesis of Form. Cambridge: Harvard University Press. 3. Theodore Levitt, “Marketing Myopia,” Harvard Business Review, July 2004, 4. Clayton M. Christensen, Scott Cook, and Taddy Hall, “What Customers Want From Your Products,” HBS Working Knowledge (blog), Harvard Business School, posted January 16, 2006, html. 5. John Naisbitt Quote, Great-Quotes, accessed March 24, 2013, http://www.great- quote/39460#.UO8KL4njnQ0. 6. Think, accessed August 9, 2013, never_before_in_ history_has_innovation_offered/147274.html. 7. Matthew Panzarino, “Amazon’s Bezos: ‘People don’t want gadgets, they want services’,” posted September 6, 2012, mobile/2012/09/06/amazon-stats/ amazon-stats. 8. Carmen Nobel, “Why Companies Fail—and How Their Founders Can Bounce Back,” HBS Working Knowledge (blog), posted March 7, 2011, http://hbswk.hbs. edu/item/6591. html. 9. Kevin Kelly, “The Shirky Principle,” The Technium (blog), posted April 2, 2010, http://www. 10. Saul Kaplan. 2012. The Business Model Innovation Factory: How to Stay Relevant When the World is Changing. New Jersey: John Wiley & Sons, Inc. 11. Noreen O’Leary, “Starbucks Brews Success With Via,” Adweek, posted August 6, 2010, starbucks-brews-success-103004. 12. Clayton Christensen, “Disruptive Innovation Explained,” YouTube video from the Harvard Business Review, 7:52, posted on “Disruptive Innovation,” Clayton Christensen’s website, accessed March 23, 2013, http://www.claytonchristensen. com/key-concepts. 13. Clayton Christensen, “Disruptive Innovation,” Clayton Christensen’s website, accessed March 23, 2013,