Structured Innovation: How to Harness breakthrough ideas from within your organization.
When John Pemberton created our beloved Coca-Cola, he could not classify his concoction as an innovation of necessity. At the time of its creation there were plenty of alternative forms of refreshment and hydration, the most obvious of which was water. Pemberton couldn’t even claim that Coke was an a-ha innovation since in 1839, 47 years before Coke was invented, Eugene Rousse added flavor to Joseph Priestly’s carbonated water (a 1767 invention). He also couldn’t claim to have had the original idea of using the coca leaf in a beverage. Pemberton’s original coca formula, known as Coca Wine, was a blatant imitation of Angelo Mariani’s Vin Mariani, a Bordeaux wine infused with coca leaf. His genius was found in the way he approached solving a clearly defined threat to his Coca Wine business, the Temperance Movement. By having a well-defined problem Pemberton was able to focus his mind on solving a specific business concern, thereby giving birth to Coca-Cola. In this article you will learn how to identify and capture creative ideas from the field and turn them into reality. You will also learn how to save both time and money through the application of systems thinking and disciplined selection. Let us begin by unpacking the process of Structured Innovation.
Structured Innovation:
Step 1: The Brainstorm
Define the business problem, and then restate your problem in the form of a business opportunity. Mobilize cross-functional teams with diverse experiences and expertise. Identify what has already been done to solve the business opportunity, whether internally or externally, and then see if you can build on or reconfigure the solution to meet your specific need. Brainstorm ideas for new products, services, or systems that will address your business opportunity. Challenge all assumptions and reframe thinking to uncover new solutions. Prioritize ideas into Must (Ideas that address your most pressing pain), Should (Ideas that will provide future profitable growth or cost savings) and Nice (ideas that will be potential game changers in your industry). Create 2-3 conceptual designs or maps for the product which will lead into the next step of the process.
Step 2: The Inquiry
Take each of the 2-3 conceptual ideas from step 1 and break them down into market segments or applications. It is helpful to use a white board and post-it notes as a visual aid in this stage of the process. Once you have identified all of the promising market segments or applications, it’s time to narrow your focus by conducting both internal and external primary market research. Meaning, you must go out and interview potential customers to gather data that will help you either refine or deselect your conceptual ideas. By focusing on the most promising idea, you will be able to more effectively allocate your time and resources. Now you are ready to focus on what entrepreneurs commonly refer to as your Beachhead Market. A Beachhead Market is a well-defined strategic market segment or opportunity which you will pursue first to gain a competitive foothold. It acts as a platform for you to gain both experience and credibility within the industry you are going after.
Step 3: The Customer
After you have discovered your Beachhead Market, it is now time to identify your target market or audience. One helpful way to do this is to form an End User Profile as well as a Persona. Before creating an End User Profile or Persona, it should be noted that the end user is the one who creates the demand for the product and the customer is the one who buys your product (i.e. kids cereal; the parent is the customer, and the child is the end user) To create an End User Profile you will need to drill down and answer specific questions from 3 broad categories; demographics, motivation, and behavior. For example, what is their age range? What motivates them? Where are their watering holes? With your End User now well defined, you are ready to put a real name to the person whom best represents your primary end user. This Persona helps you to focus the design and iteration process of your product. Finally you will use the data collected by your End User demographic to see how large your beachhead market is and then calculate the revenue, on average, that one end user generates per year. Once you have that, you will need to multiply the two together to quantify what is known as your Total Addressable Market (TAM). This will help you to identify the percentage of the market that your organization can reasonably expect to capture out of the TAM.
Step 4: The Refine
In this step you conduct a Full Life Cycle Use Case to refine and develop your ideas. We will ask questions such as, how will your primary end user determine they have a need? How will they find out about your product? How will they analyze your product? How will they acquire it? How will they install your product? How will they use the product? How will they determine the value of your product? How will they pay for your product? How will they receive support for your product? How will they buy more of your product? By incorporating the answers to these questions you will be able to conceptualize what the benefits that your product will produce instead of getting caught up in the underlying technology or systemic thinking behind your product. People don’t buy products they buy benefits; by understanding these benefits you will be able to quantify your value proposition.
Step 5: The Test
In your final step you will test your product idea to ensure that it is ready to move to the production or implementation phase. An effective way to test your product is to identify your next 10 customers. You can do this by releasing an early prototype of your product to a targeted group of people who match your end-user profile. By gaining their feedback you will be able to quickly gather valuable data which will help you make small iterations that will increase your products commercial viability. This validates all of the steps before because it helps you to determine if they really all look the same as your customer persona. You will also need to test the competitive landscape. For example, if you have a first mover advantage, which one of your competitors is likely to gain a second mover advantage on you? A few helpful tools to use in this process are Porter’s 5 Forces as well as the more commonly known SWOT analysis. Now that your product has passed all of these tests you are ready to introduce your product to the world; beginning with your Beachhead Market, and then scaling up to becoming a cash cow.
As we conclude this series on Innovation, let us consider where we have been and where we are going. We first explored three ways to innovate; by necessity, by accident, or by thorough structured thinking. We also unpacked three common obstacles to the innovative process; our own cognitive biases, premature innovation and the limitations of capital. Finally we have learned the “how to” of structured innovative thinking. Although we are now ready to innovate with purpose, let us debunk a common myth about innovation. There is no such thing as the lone innovator. In fact, history is full of innovative idea generators and innovative idea executers. In other words you have fire starters and fire sustainers. Take for example John D Rockefeller and Frederick T Gates, Andrew Carnegie and Henry Clay Frick, Steve Jobs and Steve Wozniack. Each one of these pairings changed their respective industries, yet it could be argued that without the fire sustainers we might not have ever heard of the fire starters. Furthermore, innovative breakthroughs often build on existing ideas. If Joseph Priestly had never invented the process to carbonate water and if Eugene Rousse never added flavor to it, would we have ever heard of John Pemberton’s Coca-Cola? If Ada Lovelace had never thought of the algorithm to be carried out by a machine in the early 1800’s, would we have ever heard of Steve Jobs or Bill Gates? The truth is that collective collaboration of both idea generators and executers is, and has always, been the key to truly ground breaking innovation. Your company’s next game changing product or service may be closer to you than you realize. It might partly come from Jim in accounting, partly from Scott in marketing, partly from Tim in IT and partly from Bill the grounds keeper.
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Dr. Paul Campbell is one of the co-founders of Brown Venture Group, LLC. Launched in 2018, Brown Venture Group, LLC is a venture studio venture capital firm exclusively for Black, Latino, and Native American technology startups. Brown Venture Group is writing a new playbook for both those interested in launching a minority-owned technology startup and those interested in investing in new technologies. For more information go to brownventuregroup.com.
Sources:
MITx: 15.390x Entrepreneurship 101: Who is your customer?
MITx: 15.390.2x Entrepreneurship 102: What can you do for your customer?
MITx: 15. 390.3x Entrepreneurship 103: Show Me The Money
