Imagination for Innovation

"Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world" -- Albert Einstein

Imagination is the fist stepping stone towards innovation. People imagine a future and then start to work towards making that that dream come true.

Often people ask me the question: "How can we create a culture of Innovation in our Organization?" The answer to question is quite complex and there is no one single answer. Probably there are as many possible answers as there are organizations. However, there are few root issues that are common to all innovative cultures: Strong leadership, Risk taking ability, creativity among all employees, ability to harness imagination into creative ideas, and the ability to harness creative ideas into commercially feasible innovation.

In my opinion, imagination forms the very foundation of creativity. Every innovation in the world today began as some nebulous idea or as an imagination of the future. People who are creative tend to have great ability to display their imagination.

Everyone of us are born with the natural ability to imagine things, to dream and fantasize. But most people are afraid to share that imagination with others and that ultimately stops them from implementing it.

Creative Individual

Every individual is creative. Some people have the ability to publicly discuss their imagination and few people have the ability to convert their imagination into reality. Those who are able to convert imagination into reality are called as creative persons or visionaries.

As an exercise spend some time to identify people whom you consider to be creative & list them down. Next do some research about them, about their imagination of the future etc. Or if possible interview them and ask about their imagination of the future. Once you do this study, you will notice that all these people have a very fertile imagination and they are willing to share that imagination with others.

If you are trying to build a culture of innovation, then you must start with encouraging people to share their imagination and also build a system to harness these ideas into reality.

As a photographer, before taking a picture, I try to imagine what the final result should look like: I mentally remove all the clutter, position the right scenery, the right lighting and the right moment in my mind first. Then I go about getting those things implemented - like choosing the right time to photograph, getting the composition, adjusting the light etc. In one photo session, I then take 300-400 pictures of which I choose 3-5 photos and discard the rest. The lesson I learnt from photography is that I get lots & lots of ideas - but only a few are worth something, the rest are best discarded. Creativity requires risk taking - the more I experiment, the better are the chances of getting the right picture.

Pablo Piccasso painted about three canvases a week - only to discard the other two. ( This is on an average). Da Vinci painted several works - but few became very famous: Mona Lisa, Madonna on the Rocks, Last Supper. But all of his works have their own merit of ideas.
Everyone of us is an artist - a creative individual. It just takes effort to bring out the master piece.

Imagination and the Organization

Modern organizations of the industrial age has often struggled with Individual creativity. Great Henry Ford always complained that why does the pair of hands (he has hired) comes with a brain?

Ford and several other industrial organizations have then developed several efficient techniques in form of management processes, rules & regulations that effectively kill the individual creativity. While the centrally planned innovation (read R&D Labs) worked great for several decades in the industrial age. But with then new information age or in the knowledge economy, these practices will not succeed. In 2005, Ford Motors spent a little more than $4 Billion Dollars on R&D - yet the company lost more than $12 Billion in the same year.

In this new information age or in the knowledge economy, imagination & creativity will be the central theme for growth and survival of all organization. To do that, long standing firms must change their way of life. Companies must make creativity & imagination as essential components of its business strategy.

Building a creative work culture is not easy. Organizations often times resort to hiring creative individuals - who then quit soon after. Hiring creative people first and then rushing towards innovation will not work - its like putting the cart in front of the horse. You got the right components but not in the right order. Once a major manufacturing company in India hired a talented engineer who was also a creative painter. After a few days at work, he decided to decorate his office with some of his paintings. But when the building maintenance manager ordered it to be removed - quoting a company policy: "All wall hangings must be inline with the company values and must approved by the management ..." Needless to say that the engineer quit his job within few months.

Creative people thrive in a creative organization - and for that the organization must setup a right work environment. Once the environment is conducive for creativity, creative people will gravitate towards it and soon the organization will be filled with creative folks. Just look at Google, Apple, & IDEO - see the talent these organizations are able to attract.

To create the right work environment for creativity, it is essential to understand the characteristics of imaginative people. If you are going to employ creative people, you must ensure that you can meet their needs and maximize their creative potential.

Work Environment for Creativity

All creative individuals have three basic characteristics: Strong Motivation, Risk Taking, & Social skills.

Artists, painters, writers etc., all have strong sense of internal motivation. They are internally motivated to create. However due to other factors if this motivation is removed their work suffers. Money is not a major motivator but is necessary to meet their needs. Encouragement, appreciation and enthusiasm from peers, superiors and co-workers is essential as motivating factors. The challenge for the organization is to build such an environment where creative talent is encouraged & people are motivated.

Creative people take risks. To implement an imaginative idea compels people to try out new things or try something different. In a workplace, this translates to being flexible enough to new approaches, not punishing failures, and encouraging people even when an idea failed.

Creative people are highly social. They thrive in teams of people who are also equally creative. (birds of same feather flock together) Developing a work culture centered around teams of equally creative individuals or even good listeners is essential.

Creating a right environment for creativity involves making some cultural changes. Imagination & Creativity blossoms in an environment which cherishes:

1. Freedom to try out new things
2. Encouragement to try new things
3. Recognition to individual & teams for their creative endeavors,
4. Organizational desire to be creative.
   

Freedom or empowerment of the individual is essential for creativity. Organizations often create several rules which inhibit creative freedom. The famous cliché is "Our people are free to try out new things - but only after they seek the necessary approvals" This attitude will not encourage creativity.

Encouragement for creative people can come from simple sources - a few kind words, spending time to understand their ideas etc. Leaders should take it on themselves to encourage everyone around them, and this should spread all across the organization. Employees must encourage their peers, superiors & subordinates to try out new things.

Creative people need instant recognition. This encourages them in their work. Often times, companies have recognition system - which will be their annual recognition & awards program. These annual awards program are good, but it does not serve the needs of the creative individual. The best solution is to have an instant "kudos" system where people can give an instant recognition award - without having to go through a formal procedure.
I have several organizations that have innovation boldly written in their mission statement or in the vision statement or in their goals statement. But at the work place, there is hardly any activity or encouragement to build a creative organization. Organization need to build a strong desire at the unit levels to be a creative organization. Ideally, this translates to having a role model, nominating the creative person of the month, happiest employee, having small but creative challenges - like paper aeroplane contest etc. These kind of small activities has a huge impact on creating a creative workplace.

Closing Thoughts

Creative organizations are the ones that promote the imagination of the individual - and encourages sharing those imaginations. Organization must build a work place and a worlk culture that encourages individual's imagination.

Creating such an organization from scratch is tough - and its a lot more difficult for existing organizations to change their work culture and become a creative work culture. Several Indian manufacturing firms who are planning to transform into a knowledge driven organization will find that they have to build a culture of creativity and innovation. This would imply changing the organizational culture and that's daunting task.

Service Innovation for SMEs

India is full of small & medium sized enterprises (SMEs). Today many of these firms are facing competition from global players or large companies. Typically these SMEs are run by the founders - who came up with a product or a service and they started the business. Over a period of time, the founders got fully engaged in running the business and they lost the focus on innovation. When a new competition emerges, founders of these SMEs are at loss - they do not have the time to innovate new products and all their waking hours are spent fighting against new competition, globalization and commoditization.

I have seen several enterprising persons who tried to innovate constantly - but in the end they were overcome by the forces of global economy. This story of SMEs is repeated all over the world - US, Europe, Asia, India et al.

Recently, I was asked by a owner of one such SME - " Given the fact that my business will be small - and can never grow to global scales, How can I innovate and be successful?" He makes and sells coffee powder in Bangalore. His line of business is now being threatened by giants such as Cafe Coffee Day, Barista, UniLever, Tata Tea & new competition such as Starbucks, Cafe Nero’s, McDonalds, etc. are around the corner.

Innovation Dilemma

The problem faced by the SME in Bangalore is vary familiar. The challenge must therefore be answered with innovation.

Given the risks of innovation and the amount of resources needed to sustain it, developing a new product line of gourmet coffee would be futile. Deep inside I knew the problem he was facing - he was caught in the middle of bloody Red Ocean & invariably he will be crushed if he stays put for long. I knew he needs to develop a Blue Ocean strategy. Discover a market place where he does not face competition at all.

Historically, These SMEs became successful through products. It is therefore natural for the founders to experiment with new product development. New product development is exciting - but it takes lots of work and the chances of success are slim. Given the level of Intellectual Property awareness among these SMEs, its doubtful that they would fully protect their innovation - thus becoming liable for cheaper imitation products. The best solution, therefore is to opt for service innovation. Innovating on developing innovative service or delivery to provide existing products to existing customers is definitely better.

Services today contribute to a large chunk of our economy. In developed countries, services account for more than 70% of the GDP. Given the vastness of the service domain, the scope of opportunity in services is equally vast. With ingenuity one can create immense competitive advantage. Innovations in business models, product delivery channels and customer experience can offer tremendous competitive advantages over global giants.

There are proven methods to lower the risks of innovation. For more details see: Minimizing Risks in Innovation

The coffee example

The coffee manufacturer in Bangalore - who sells commodity product decided to opt for the service innovation route - while keeping product improvements to be on par with the global giants. To begin with, he started offering custom coffee blends - where customers can get the kind of roast and the kind of blend they need. The coffee would be blended & roasted as per customer specification. This required quite some changes in the business models.

He also developed whole new range of coffee blends - spice blend, organic coffee, Brazilian Blend etc. These products could then be sold at a very high premium - at a price higher than that charged by Cafe Coffee Day or Tata Tea or Unilever. The choice of various blends of coffee and the ability to deliver these blends in small quantity - as low as 50gms for a premium price ensures higher profitability while avoiding direct competition from the global giants.

The second innovation he did was to enhance the customer experience. He tied up with several coffee estates in Kodagu ( about 250 Kms from Bangalore) and created a separate line of coffee estate tours. Customers could go and visit the estates where coffee is being grown. These visits will be arranged over the weekends and the customers have the option of buying coffee during the tour and after that tour in Bangalore. This service is similar to that of wine tasting tours conducted at Napa Valley in California.

This service innovation in form of enhanced customer experience will be unique and other global giants & local competitors will not be able to imitate that.

Both these innovations created an effective Blue Ocean strategy for this SME.

Implication to other SMEs

The opportunities for service innovation now also encompass innovations in business models, delivery channels, and the overall customer experience. Service innovation enables competitive advantage via better market position and greater responsiveness to customer requirements.

In order to maximize the benefits from service innovation:

1. One has to have a clear understanding that service innovation is not the same as invention.
   
2. Define Innovation in a broad context - look at all aspects of the value chain. Looking at all aspects of customer experience gives a wider scope for innovation.
   
3. Consider all value adding areas such as: business models, brand names, distribution channels, product delivery, operations and also the entire customer experience.
   
4. Look at other products/services that customers use along with your product or service. If possible identify areas where you can add value by forward or backward integration.

Such broad definition provide a vast opportunity for innovation. With this wide view - look for innovations; not just in products, also include services which provide commercial value.

Leadership for Innovation

Innovation always requires strong leadership. Creative ideas may come from all employees. , but to execute these ideas, one needs a strong leadership. Leadership for innovation at SMEs is no different than that in a large organization. In case of SMEs, the founders take up the responsibility for:

• Giving direction to the innovation efforts
• Encourage creative ideas from all employees
• Provide resources, technology and empower individuals to innovate.
• Encourage & promote cross-functional collaboration within the organization for innovation.
• Eliciting customer view points - often times leaders must directly engage with the customer to get customer’s opinions or customer’s point of view. Ideally, the leader should be able to identify a few lead customers on which innovative ideas can be tried
• Encourage innovation through out the organization.
• Setup policies and procedures to harvest creative/innovative ideas. The policies must be clear to all. The selection criteria for implementing innovative projects must be fair and understood by all.
• Have a clear cut policy that explains when to discontinue the innovation project. Make everyone understand why a particular project was/is killed.
• Avoid opacity and vagueness in decision making.
• Do not setup targets or mandates for innovation - leaders should not command people to be innovative. Instead encourage innovation.
• Recognize & reward innovation publicly.
• Talk passionately and candidly about innovation at all company events.

Founders and leaders at SMEs often find that these leadership behaviors that are needed for innovation is tough to develop and sustain. The main reason is that the owners/founders often believe that they "own" the innovation burden and hence they have the monopoly over all new ideas. Often times, the founders have come from a past work culture of ‘Command and Control" and that behavior led to the success of the firm till date. Unfortunately innovation does not flourish in a ‘Command and Control’ environment.

Founders/owners of SMEs often lose sight of customer’s point of view. With the initial success and focus on profitability - the founders often view the business solely from their own perspective. To regain the customer focus and to drive innovation it may be necessary for the leader to indulge in customer anthropology. (See Innovator’s tool box: Customer Anthropology). Ensure that the anthropology study includes the entire customer use cycle: from procurement to retirement.


Closing Thoughts

SMEs often find innovation as a big challenge. Most SMEs cannot cope up with market changes due to lack of successful innovation. Organizations that are successful are the one that fail the fastest. The leaders find it difficult to abandon practices that once made them successful and are unwilling to change. So when market conditions change, the old practices are no longer valid and the organization fails.

The challenges faced by founders of SMEs is similar to that faced in large organizations - only the scales are different. So the solutions are also similar - but SMEs have the size advantage. SMEs are inherently agile and can respond faster with innovation. SMEs suffer from lack of leadership for innovation and that leads to their failure. Most SMEs fail not because they were not agile - but because they did not have the right kind of leadership.

PS: In this article, I have briefly touched upon the leadership required for innovation. I welcome your comments and opinions on the same.

Customer Anthropology

Companies are always on the lookout to increase sales, increase their market share and increase their profits. One of the ways to accomplish all this is to improve their products. While the idea to improve existing products sounds so simple and easy - and every one ought to do it. The reality is starkly different - Companies often see their products as "perfect". Therefore they cannot identify areas for product improvement.

One sure fire method to go about this is customer anthropology.

In my previous article I had written about identifying unserved market or underserved market through "Product Opportunity Gap" (Also see Product Opportunity Gap). Identifying a Product Opportunity also requires huge amount of customer anthropology.

Author Tom Kelly has described the benefits of customer anthropology in his book - Ten Faces of Innovation

The benefits and the value of customer anthropology is so immense that global companies are doing it every where. Companies that are actively using anthropology to design new products are: Nokia, Microsoft, Intel, Volkswagen, TESCO, Toyota. The competitive advantage gained by the study is so valuable that these companies won’t easily admit it - or even publish the results of the study. The value of these studies is so huge that it all the study information is kept as company secrets.

See how Nokia does its study at : http://www.janchipchase.com/

In India, Ninedots Consulting offers consulting services for Innovation using customer anthropology.

What is Customer Anthropology?

Anthropology is the study of humanity & human behavior. The study originated from humanities and is mostly considered as an art rather than science. However in the modern days, Anthropology is becoming more of a science - and can be called as most scientific of humanities subjects.

Studying how customers use a product and what they do with it, why customers don’t use your product is customer anthropology.

I got this insight while working with sofware engineers at a software product company. I have worked as a R&D engineer, architect, as a marketer, as a product managers. I know how difficult it is to produce products which customers love. I'm intimately familiar will the common problems almost all software product companies face. At all stages of my professional life, I was curious to know how customers used the products we developed - and then slowly I began to observe the customer using the product and became an Anthropologist - Customer Anthropologist.

How to be a customer Anthropologist? Developing the skills

Being an anthropologist is not easy - nor it is natural. It takes certain special skills to observe and enquire. If you are a wildlife photographer -- you're almost there. Customer Anthropology is a lot like wildlife observataion. Watch & observe the user behavior. Observe the way customers use, how customers use your products, what they would do with it, what other products they use etc.

To be an effective observer, you may require customer permission. Getting permission from the individual user for a consumer product is easy. But for industrial products there may be complications. From experience I can tell you that getting permission from corporate users is tough.To get permission, the customer company managers need to understand the need, its benefits for them and they have to be debriefed after the study so that they can:

1. Learn something about what's not working in their own organizations themselves
2. Learn about Customer Anthropology so they can do it with their customers.

Doing the actual anthropology study requires some special observation skills:

• Ability to observe in a non-introsive way.
  Ensure that your observation does not alter the customer usage of the product.Observe the user environment and capture all the possible details. Since it is not humanly possible to remember all the details - use tools such as photographs, videos, audio recorders etc.
  
• Most importantly, do not judge the user. Do not allow your experience and your knowledge to help or aid the user. Just observe even when the user may be making a mistake. Please do not report the user mistakes as a use case for additional training. This will make the user feel dumb and will not help your case. You are there to observe and learn how to make your products better - and not to judge or evaluate the user.
  
• Make the user comfortable - so that they do not see you as a threat. Have a curious mind. Note down the observations & questions as it comes.Ask insightful questions at the appropriate time. The question types: What, Why, Where, When, Which, How. Ensure that you have asked the questions that are necessary to understand the user behavior.
  
  Remember that there might be a valid reason for using your product in a particular way. So it is useful to find out those reasons while observing and by asking appropriate questions.If possible use various recording devices - Audio or Video recorders. Taking pictures or short video clips will be very very useful for analysis.
  

See http://www.janchipchase.com/ for ideas on how to observe and record details.

Improving products by Observation

If you are conducting the study to improve your product, then must note down the following:

Use Patterns: Note down exacly how the user is using the product. Do not generalize - instead note down exacly how users are using your product. Observe the pattern and record it.

Other co-used products: Note down the other products used along with your product. These products may not be made by you or your company, but it is essential for the customer to use your product. For example, Nokia made a study of how customers chargetheir cell phones - observed how people in Uganda use car battery for charging cell phones.

User challenges: Observe the challenges the user has to overcome in oder to use your product. For example, several features in the cell phone are so difficult to access - that customers are discouraged from using them. Sometimes the user challenge may arise due to lack of a specific feature in your product.

User workarounds: Record all the user workarounds. Customers are innovative and whould have found a work around for a challenge. Document all the workarounds. User workarounds are the greatest source of product improvement ideas. It is a great source of innovative ideas. If possible video record it.

Alternate uses: Users are usually more intelligent than the inventor. Often times users will have discovered several alternate uses for your product and whould be using it in ways the inventors could not have imagined. Observing the alternate uses is a great source of innovative ideas. For example, people in Uganda use pre-paid cell phone charge cards for money transfer instead of using money orders from a bank.

User environment : Customer’s use of the product is greatly influenced by the user environment. Take effort to completely document the user environment - greater the detail the better.

While you are observing the customer/user use your products, Its is also useful to watch how they use your competitor’s products. Knowing the challenges the users face while using your competitiors product will give you an insight on how you can make your product better - and also know the strengths & weakness of the competiting products. Knowing this will help you exploit the weakness of competition and neutralize the advantages of the competitor.

Benefits of Customer Anthropology

Customer anthropology is one of the basic and the best tool for innovation. Customer anthropology study provides limitless opportunity for continuous product improvements and occasionally one can come up with radical innovation based on customer observations. Apple and Nokia, for example, are able to develop several best selling products - based on customer anthropology study. Apple’s iPod customers often complained that they hate to carry two divices - a cell phone and an iPod. This promted Nokia to release "N-Series" cell phones & Apple released iPhone.

Closing Thoughts

Customer anthropology study is not an easy thing for companies to implement. There are very few external agencies that are willing to do the study. The organization’s internal departments often are not equipped to conduct a full fleged customer anthropology study. As a result most organization find it hard to do. However, there is a solution to this problem - equip every employee to be an anthropologist i.e., train employees to do anthropogy study. Ninedots consulting in Bangalore offers consulting and training services to enable companies to do customer anthropology study.

I strongly suggest readers to read Tom Kelly’s book Ten Faces of Innovation

Also see: Customer Anthropology: The Art of Observation

Business Anthropology

Companies are always on the lookout to increase sales, increase their market share and increase their profits. One of the ways to accomplish all this is to improve their products. While the idea to improve existing products sounds so simple and easy - and every one ought to do it. The reality is starkly different - Companies often see their products as "perfect". Therefore they cannot identify areas for product improvement.

One sure fire method to go about this is customer anthropology.

In my previous article I had written about identifying unserved market or underserved market through "Product Opportunity Gap" (Also see Product Opportunity Gap). Identifying a Product Opportunity also requires huge amount of customer anthropology.
Author Tom Kelly has described the benefits of customer anthropology in his book - Ten Faces of Innovation

The benefits and the value of customer anthropology is so immense that global companies are doing it every where. Companies that are actively using anthropology to design new products are: Nokia, Microsoft, Intel, Volkswagen, TESCO, Toyota. The competitive advantage gained by the study is so valuable that these companies won’t admit it - or even publish the results of the study. The value of these studies is so huge that it all the study information is kept as company secrets.

See how Nokia does its study at : http://www.janchipchase.com/

In India, Ninedots Consulting offers consulting services for Innovation using customer anthropology.

What is Customer Anthropology?

Anthropology is the study of humanity & human behavior. The study originated from humanities and is mostly considered as an art rather than science. However in the modern days, Anthropology is becoming more of a science - and can be called as most scientific of humanities subjects.

Studying how customers use a product and what they do with it, why customers don’t use your product is customer anthropology.

I got this insight while working with software engineers at a software product company. I have worked as a R&D engineer, architect, as a marketer, as a product managers. I know how difficult it is to produce products which customers love. I'm intimately familiar will the common problems almost all software product companies face. At all stages of my professional life, I was curious to know how customers used the products we developed - and then slowly I began to observe the customer using the product and became an Anthropologist - Customer Anthropologist.

How to be a customer Anthropologist? Developing the skills

Being an anthropologist is not easy - nor it is natural. It takes certain special skills to observe and enquire. If you are a wildlife photographer -- you're almost there. Customer Anthropology is a lot like wildlife observataion. Watch & observe the user behavior. Observe whay customers use, how customers use your products, what they would do with it, what other products they use etc.

To be an effective observer, you may require customer permission. Getting permission from the individual user for a consumer product is easy. But for industrial products there may be complications. From experience I can tell you that getting permission from corporate users is tough.

To get permission, the customer company managers need to understand the need, its benefits for them and they have to be debriefed after the study so that they can:

1. Learn something about what's not working in their own organizations themselves
2. Learn about Customer Anthropology so they can do it with their customers.

Doing the actual anthropology study requires some special observation skills:

Ability to observe in a non-introsive way. Ensure that your observation does not alter the customer usage of the product.

Observe the user environment and capture all the possible details. Since it is not humanly possible to remember all the details - use tools such as photographs, videos, audio recorders etc.

Most importantly, do not judge the user. Do not allow your experience and your knowledge to help or aid the user. Just observe even when the user may be making a mistake. Please do not report the user mistakes as a use case for additional training. This will make the user feel dumb and will not help your case. You are there to observe and learn how to make your products better - and not to judge or evaluate the user.

Make the user comfortable - so that they do not see you as a threat. Have a curious mind. Note down the observations & questions as it comes.

Ask insightful questions at the appropriate time. The question types: What, Why, Where, When, Which, How. Ensure that you have asked the questions that are necessary to understand the user behavior.

Remember that there might be a valid reason for using your product in a particular way. So it is useful to find out those reasons while observing and by asking appropriate questions.

If possible use various recording devices - Audio or Video recorders. Taking pictures or short video clips will be very very useful for analysis. See http://www.janchipchase.com/ for ideas on how to observe and record details.

Improving products by Observation

If you are conducting the study to improve your product, then must note down the following:

• Use Patterns: Note down exacly how the user is using the product. Do not generalize - instead note down exacly how users are using your product. Observe the pattern and record it.
  
• Other co-used products: Note down the other products used along with your product. These products may not be made by you or your company, but it is essential for the customer to use your product. For example, Nokia made a study of how customers charge
  their cell phones - observed how people in Uganda use car battery for charging cell phones.
  
• User challenges: Observe the challenges the user has to overcome in oder to use your product. For example, several features in the cell phone are so difficult to access - that customers are discouraged from using them. Sometimes the user challenge may arise due to lack of a specific feature in your product.
  
• User workarounds: Record all the user workarounds. Customers are innovative and whould have found a work around for a challenge. Document all the workarounds. User workarounds are the greatest source of product improvement ideas. It is a great source of innovative ideas. If possible video record it.
  
• Alternate uses: Users are usually more intelligent than the inventor. Often times users will have discovered several alternate uses for your product and whould be using it in ways the inventors could not have imagined. Observing the alternate uses is a great source of innovative ideas. For example, people in Uganda use pre-paid cell phone charge cards for money transfer instead of using money orders from a bank.
  
• User environment : Customer’s use of the product is greatly influenced by the user environment. Take effort to completely document the user environment - greater the detail the better.

While you are observing the customer/user use your products, Its is also useful to watch how they use your competitor’s products. Knowing the challenges the users face while using your competitiors product will give you an insight on how you can make your product better - and also know the strengths & weakness of the competiting products. Knowing this will help you exploit the weakness of competition and neutralize the advantages of the competitor.

Benefits of Customer Anthropology

Customer anthropology is one of the basic and the best tool for innovation. Customer anthropology study provides limitless opportunity for continuous product improvements and occasionally one can come up with radical innovation based on customer observations. Apple and Nokia, for example, are able to develop several best selling products - based on customer anthropology study. Apple’s iPod customers often complained that they hate to carry two divices - a cell phone and an iPod. This promted Nokia to release "N-Series" cell phones & Apple released iPhone.

Closing Thoughts

Customer anthropology study is not an easy thing for companies to implement. There are very few external agencies that are willing to do the study. The organization’s internal departments often are not equipped to conduct a full fleged customer anthropology study. As a result most organization find it hard to do. However, there is a solution to this problem - equip every employee to be an anthropologist i.e., train employees to do anthropogy study. Ninedots consulting in Bangalore offers consulting and training services to enable companies to do customer anthropology study.

I strongly suggest readers to read Tom Kelly’s book Ten Faces of Innovation

Also see: Customer Anthropology: The Art of Observation

Incremental Innovation tool: Buyer Utility Map

In my earlier article titled "Dimensions of Innovation", I had mapped when one should pursue incremental innovation and when to pursue radical innovation.

Product managers are responsible for improving the product throughout the product life cycle. In order to enhance the product life, the company will invest in the product in form of incremental innovation.

Incremental Innovation is primarily driven by very high competitive pressures and low risk tolerance. Companies that rely on technology based products (or manufacturing process) often tend to follow incremental innovation. Product managers at Intel, Dell, Lexmark, Cisco, AMD, Lenevo, Nvidia, ATI, Adobe, Microsoft, Oracle, etc. survive solely on incremental innovation.

Product managers have a clear mandate in terms of innovation they can pursue - Incremental innovation, the challenge for the product managers is then to figure out what incremental steps to be taken. Identifying these steps are not easy. However there exists several systematic process or a method to identify opportunities.

One such method is: The Buyer Utility Map.

The Buyer Utility Map was developed by W.Chan Kim & Renee Mauborgne. It was first published in Harvard Business Review, September-October 2000.

Buyer utility map is a tool which helps product managers to identify which business ideas have real commercial potential, identify areas of incremental innovation - by enhancing customer (buyer) utility.

Mapping a product across the buyer utility matrix - will help identify the current positioning w.r.t competitive products. This will help create new products/services - that offer exceptional value for its customers and differentiate from competitive products. Understanding the utility of the product and reposition of existing products/services is vital for market segmenting & positioning.

What is Buyer experience cycle?

Buyer experience cycle refers to all the activities the buyer will do with the product - right from purchase to its disposal. The buyer experience cycle covers the total customer’s product experience. It is based on the customer resource life cycle and consists of six stages:

1. Purchase
   Purchase stage includes buying experience, product evaluation, Financing, negotiation, Contracts, SLAs, Pricing etc. Concentrating on each phase of the purchase experience will help improve the buyer experience. For example, Dell’s success to a great extent can be attributed to its ease of purchase via web or phone. Similarly, AOL succeeded initially by widely distributing its software (for free) at stores, with newspapers etc. The ease of purchase or easy availability has a significant impact on the buying decision.
   



2. Delivery
   Delivery stage is the one between the actual purchase to its commercial/actual use. This includes physical delivery, training, installation, on-site testing etc. The initial success of Amazon.com can be directly attributed to the delivery - i.e., customers could order rare or difficult to get tiles & have it delivered to their homes. Another success story is that of 1-800-FLOWERS. The company excelled in delivering fresh flowers anywhere in the US - thus making it a household name.
   



3. Use
   Use stage refers to actual use of the product/service for its intended purpose. Often times the user will be different than the purchaser - but user will have a high level of influence over the buyer in all buying descisions. Understanding how people use a product/service and knowing their pain points is vital for incremental innovation. (see Innovator’s Toolbox: Customer Anthropology ) Nokia became the world leader in cell phone handset market mainly by focusing on how customer’s use cell phones and then developing (incremental innovation) its products to make Nokia phones even more easier to use.
   



4. Supplements
   Supplement stage refers to how users use your product along with other products/services. Most products/services will need other supporting products. Knowing how your product/service works with other products and improving the interaction will make customers happy.
   
   Recently Microsoft made it difficult for "Google Desktop" software to function smoothly with its Vista software. Similarly, Apple made it mandatory for users of iPod to use iTunes as MP3 management software. These are the cases where companies which have monopoly in the market place create hurdles for competitive products.
   
   Today, companies follow standards to ensure ease of interoperability. Wi-Fi, WiMax, Bluetooth, Ethernet, etc., are the common standards which ensure ease of interoperability. Understanding the complete list of supplements that are needed for the customer to use your product gives you an edge in terms of incremental innovation. It allows you to improve your product such that the customer can eliminate the use of a suplemental product. This strategy has been adapted by Microsoft in is Windows product line. Microsoft initially included Internet explorer with its Windows operating system. This eliminated the user’s need for another browser - Netscape.
   



5. Maintenance
   Ease of maintenance & cost of maintenance is very important to all buyers. No user will buy a car that is difficult to maintain or that has a high cost of maintenance. Warranty & guarantee issues must be looked into at a great detail in order to identiy opportunities for incremental innovation. Understanding the maintenance issues helps identify various ways improve the product. The success of tubeless tyres, Michelin’s Tweel is a good example of captilizing on user’s product maintenance issue.
   



6. Disposal
   Disposing a product also includes: selling it off, recycling, upgrading the software, data migration etc. Today due to environmental concerns companies such as McDonalds, Caterpillar, Toyota, Honda, GM, Dell, HP, etc are spending time & effort to design their products that are recyclable. Auto manufacturers also help customers dispose thier existing cars through their pre-owned car sales teams.

These six stages represent the stages in which the customer is involved with the product. Developing successful products requires a deeper understanding of buyer utility levers during each stage of buyer experience cycle.

The Six Utility levers

The six utility levers are the ways in which utility can be offered to the customer.

1. Customer productivity
   This type of utility lever can increase customers’ productivity by helping them to do things faster, better, or in different ways. An example of increasing customer productivity is the financial information company Bloomberg. They made traders more efficient by offering instant on-line analytics. SAP’s ERP solution became a great success - despite its high cost, difficult to install & maintain - Mainly because SAP was able to improve customer productivity.
   



2. Simplicity
   This type of utility lever makes life easier for the user of the product or service. IRobot’s Verro - a swiming pool cleaning robot became an instant success because it make the task of cleaning the swimming pools so simple & easy for the user.
   



3. Convenience
   The convenience utility lever is a luxury, which lets a customer save time or frustration. ATM’s is an example of the convenience lever. It saves customer’s time and frustration, because he/she does not have to go to the bank anymore to get cash.
   Similarly, newspapers in the USA were able to hold-off competition from Internet & cable TV through the convenience of having the paper delivered to homes. GM took a note on the convenience factor when designing Saturn Cars - and developed a whole new way of selling cars though a chain of customer friendly dealers.
   



4. Risk
   Another lever which is the risk lever. Customers in general are risk averse. Developing a product/service that lowers risk will become a product differentiator. For example, Online tracking of shipments by Fedex and UPS gives customer the satisfaction of choosing a risk free alternative over the US Post - and for that, the customer is willing to pay a premium.
   
   In some cases, the adventure and thrill involed in high risks can attract customers. Adventure sporting companies have sprung up all over the world to cater to this need of the customer.
   



5. Fun and image
   The fun and image lever provides fun and image to the customer. Apple’s iPod is a good example of using this lever. Customers obtain a fun and a trendy image by buying one of the MP3-players from Apple. Manufacturers of luxury goods often rely on the Image factor.
   



6. Environmental friendliness
   This utility lever is providing friendliness towards the environment. For example, the initiative of fast-food chain McDonalds to recycle materials and reduce material content can be seen as usage of the environmental friendliness utility lever.

The buyer utility map process

The buyer utility map can be used for four main activities:

1. Locating new product



2. Improving Existing product



3. Positioning new product or repositioning existing products



4. Market research

Locating the new product Identifying current products within the buyer utility map is the fist necessary step. For example, take Nokia’s N-series cell phones & map it. This is an existing product and it can be mapped as shown in figure below.

Positioning a new product

Apple introduced a new cell phone which does not directly compete with Nokia’s N-Series or other cell phones in the market. IPhone’s position can be illustrated as:

If Nokia were to respond via incremental innovation, then it now knows what modifications it must do & how to reposition the product.

Closing Thoughts

Buyer’s utility map is a powerful tool to develop new products. These products can be developed through incremental innovation or radical innovation. But this tool is ideal for identifying incremental innovation opportunities.

A product manager’s job is to develop the product road map, identifying product improvement areas and position/reposition the new products. In these aspects, buyer utility map is a powerful tool to identify new opportunities, identify existing product gaps and develop new products.

Minimizing Risks in Innovation

Often times the main objection to implement innovation is the risks associated with it. People are afraid that innovation requires a hefty investment and the returns are not predictable. It is this risk on ROI forces companies to shy away from innovation.

To many managers, innovation appears as a vague process that comes with a hefty price tag and unpredictable return. In other words, it is fraught with risk - hence avoided.

Globalization and increased competition has made it absolute necessity for companies to be innovative. This places companies in a strange paradox. On one hand, the market is forcing them to innovate - while managers are reluctant to walk down the path of innovation.

To overcome this paradox, I recommend a proven process that will help manage the risk of innovation by approaching in a process oriented way. When this process is implemented with business acumen, businesses can produce highly innovative products/service while generating predictable results.

Five step process

I have studied several companies and their approach to innovation. These companies are generally considered to be high tech & innovative. During this study, it occurred that the fundamental process of innovation, at a vast majority of the companies all over the world, is very simple. All these companies have developed a disciplined approach towards innovation and implement their approach in five simple steps. ( The actual implementation itself may not be simple, but the fundamental principle is.)

Step-1: Start with the end in Mind

Innovation must start with an end in mind. The objective of the innovation exercise must be clearly defined at the very start. Having a clear definition of the end and clear definition as when to kill the project is essential. This will minimize the risks. Management will now know what the expect, how much it costs and when to expect. Ideally one must be able to clearly define the end product, the total budget, and the expected timeline.

One should also define the exit criteria. Conditions to exist the innovation project - such as: time overruns, cost overruns, changes in market conditions etc. Having a clear exist strategy is essential for successful innovation management.

Step 2: Develop Deep Customer Insight

Developing a customer insight is not as complex as it sounds. All that it takes is some basic listening skills to listen to the voice of the customer, experience in that industry, knowledge & technical skills and ability to draw parallels from happenings in other industries. Once a person has the above skills, developing a deep insight is a child's play.

Please note that developing customer insight is not the same as relying on customer's statements. Often times it does not make sense to follow the voice of the customer alone. This is because most customer rarely tell you what they want in the future and they may not always know what they really want, and they rarely know what is technically possible.

For example, if Apple were to purely follow the customer's voice, then it could not have developed radical products such as iPhone, iPod, iMac etc. For example Harley-Davidson developed bikes that could be easily customized - this was based on studying customer's behavior and satisfying their unexpressed need for a customized bike - that was mass produced. Toyota developed hybrid cars based on their insight on pollution: customer's need for a less polluting cars and the high cost of fuel in the future. Back in 1994, no customer would have told Toyota to develop a fuel sipping hybrid cars. Hybrid car technology at that time was only in research labs - and the knowledge of such cars was beyond the customer's grasp.

As a rule of the thumb: don't rely exclusively on the voice of the customer - but listen to what they have to say. You should also look at how customers are using your current product & your competitor's products, observe and document their behavior in the buying process. Understand the value of your current offerings as perceived by the customer.

This can be done by an anthropology study of the customer, customer's product usage and buying habits

Step 3: Feel free to Borrow Proven Ideas from other Industries

Almost all innovations in this world are based on existing knowledge. The challenge you are facing in your industry is probably solved in nature or in another industry. Therefore you only need to adapt that solution into your industry. For example CD was developed based on ideas from light detectors (LDR - Light detecting resistors) and the floppy disk technology. Idea for hybrid car was taken from diesel-electric locomotives.

The key here is to focus on the core issue and identify other industry that deal with similar issues. Often times people outside your industry will have the different perspective you need to help you move ahead. Most great ideas come from unlikely sources: Outsiders, consultants or people hired from other industries.

Applying techniques from one industry to your own is a key ingredient in rapid, risk-reduced innovation.

Step 4: Take a disciplined approach to Innovation

Companies that are new to innovation often have a wrong perception to innovation: Innovation comes from mad scientist or a nutty professor or a solitary person working in isolation - undisciplined people in an unfocused process. This image was created by Hollywood movies. This idea is often reinforced by artists & writers - who take a solitary approach to creativity - and then brag how they got the creative spark when they were thinking alone.

In the commercial world, the reality is far different. Innovation requires team work, structured approach and above all - discipline. Corporate innovation is based on the same principles as that of all other corporate functions - except that the risk tolerance needs to be higher for innovation.
The risks associated with innovation are the uncertainty & unpredictability of the outcomes. By approaching innovation with a systematic process - with solid project planning, one can accurately predict the outcomes. ( The end result is known - but the timeline may have little variance)

By saying the word discipline, I mean:

1. A disciplined rigor to define the destination:
   
   Clearly define the desired outcome. The management leaders should give a clear definition of the desired outcome. The expected outcome must be made known to all those who are involved in innovation. At Intel, this desired outcome was called as "landing zone" - i.e., it contained a list of acceptable outcomes within the defined parameters.
   For example, an automobile company may define the objective of its innovation efforts to be:
   
   Improve fuel efficiency by at least 20%
   
   Ensure safety of passengers when a collusion occurs at 45-60 Mph - while keeping the cost of manufacturing the same.
   
   
2. A disciplined methodology for technical innovation
   
   Innovation needs a methodology framework - framework that defines the series of steps involved, how to test the design in each of the steps, how to implement etc. Having a predefined methodology ensures that the innovation project does not go astray. It is important to define the methodology and then make everyone aware of it.
   
   During the innovation process if there came a need to modify the methodology, then the changes to the methodology must be managed through a change management process defined by the change management board. Any change in methodology must be taken very seriously and the need to change and the actual change must be studied in detail and approved - before the change is implemented. (For more details on change management please refer to IT Infrastructure Library)
   
   
3. A disciplined process to drive the required alignment within the organization
   
   Innovation requires involvement of other departments within the organization. For example if the development team is working on developing a new product line, then manufacturing must be involved.
   
   Large organizations often have problems getting different parts of the organization to cooperate and coordinate for a common innovation purpose. These issues must be cleared by the top leadership.
   
   
4. A discipline to stay the course when distractions occur
   
   Innovation often takes time. During that time, there will be several distractions. These distractions often make managers lose focus on innovation and the innovation project gets side tracked or suspended (and ultimately shelved).
   
   If innovation projects are managed in a professional way with a proper project plan, then the managers responsible for innovation will be able to keep their focus on innovation irrespective of other distractions.

Step 5: Create a Culture of Creativity & Innovation

When I go around and ask people - "According to you, what are the most innovative companies?" The answers are usually: Apple, Google, Nokia, Sony, Intel, Microsoft, IBM etc. These companies are successful and one of the main reason for that is they have lots of creative employees. If you were to talk to any employee of these companies, they will tell you how much they value innovation and how innovation is critical for their success.

An innovation culture starts at the top of an organization: the CEO. CEO must be a person who has enough authority and respect to oblige others across the company to think in a new way. If I were to look at the top management of the Google, Apple, Microsoft etc, the top leaders were innovators. The innovation culture starts at the top and spreads to every level. Innovation is a process that must involve the entire company.

Once a culture of innovation is built into the company, all employees will be monitoring what's going on in the world, what the trends of technology and marketing are and ask, "what is the next generation of products customers will want?" How can we improve the existing products? How can we enhance customer experience? How can we make this product more profitably?

Former Procter & Gamble chief executive, John Pepper led an effort to train 6,000 engineers and scientists to think in a more innovative way. He felt that if every one of those 6,000 employees worked 5% more innovatively, the company as a whole would operate much more effectively. How do you like that for a culture of innovation?

Closing Thoughts

If your company is at the early stage of walking down the innovation path, then you must think of steps to minimize risks. It is possible to lower the risks of innovation and at the same time keep the returns high. It requires an organization wide culture of innovation, strong leadership and good management skills. During the innovation process, one should not be shy to copy from other industries or even imitate the competition - Imitation is also a form of innovation.

Successful innovation is a disciplined, process oriented approach led by strong leadership.