“Ideas are gifts from the universe. Every time I have them, I capture them right then. The more that you write it down and pay attention to them, the stronger the gift and the connection will become. And you will start being flooded with more and more ideas.”
Sara Blakely, Self-Made Billionaire and CEO of Spanx
When we hear the term innovation, we tend to think of a cool new product or technology that’s going to change the world. But that isn’t really what most innovation entails. A three-year study by the Boston Consulting Group on innovation found that only 13 percent of the world’s leading consumer product companies introduced a breakthrough innovation. Most innovation tends to come in incremental doses, even for companies known for innovation. Amazon founder Jeff Bezos said, “I bet 70% of the innovation we do focuses on slightly improving a process. That incremental invention is a huge part of what makes Amazon tick.” And this coming from the company who has been awarded a patent for a giant flying warehouse that acts as a launchpad for delivery drones.
The challenge with innovation is that it can be overwhelming. Try to find a word that carries with it more daunting expectations. The key is to transform this abstract blob of innovation into a practical approach to the business. The first step in this mental transformation is to see innovation’s true meaning: to create new value for customers. When we use this lens of “creating new value for customers,” innovation moves from the seemingly abstract to a more practical perspective. Customers may be internal, such as the sales force, or external, as in a channel customer or end consumer. When is the last time you and your team created truly new value for your customers?
Insight Leads to Innovation
The common core of both strategy and innovation is insight. An insight results from the combination of two or more pieces of information or data in a unique way that leads to a new approach, new solution, or new value. Mark Beeman, professor of psychology at Northwestern University, describes insight in the following way: “Insight is a reorganization of known facts taking pieces of seemingly unrelated or weakly related information and seeing new connections between them to arrive at a solution.” Simply put, an insight is learning that leads to new value.
A study of more than 5,000 executives by McKinsey & Co. showed that the most important innovation trait for managers in high-performing organizations is the ability to come up with insights. Unfortunately, the research also showed that only 35 percent of global executives believed their strategies are built on unique insights. And only 25 percent of managers believe their companies are good at both strategy and innovation.
Innovation is the continual hunt for new value; strategy is ensuring we configure resources in the best way possible to develop and deliver that value. Strategic innovation can be defined as the insight-based allocation of resources in a competitively distinct way to create new value for select customers. Too often, strategy and innovation are approached separately, even though they share a common foundation in the form of insight. As authors Campbell and Alexander write, “The fundamental building block of good strategy is insight into how to create more value than competitors can.”
When insights—learnings that create new value—do appear, it’s important to record them. You never know when the idea will germinate. At the beginning of his filmmaking career, George Lucas was working on the draft of a science fiction movie while he was mixing sound for his 1973 film American Graffiti. During one of the sound mixing sessions, the Academy Award winning film editor and sound designer Walter Murch asked Lucas for Reel 2, Dialogue 2, which he said in its abbreviated form, “R2-D2.” Lucas took note of the pleasing sounding phrase, and it later became the name of the resourceful astromech droid in the Star Wars franchise.
What if after every significant interaction during the day—one-to-one meetings, team meetings, presentations, etc.—you took five minutes to think, reflect, and record your insights on the interaction. Would that make you a higher performer? Abraham Lincoln’s comment, “It is indispensable to have a habit of observation and reflection,” reveals a powerful truth: taking time to stop and think will differentiate you from the majority of people living in a perpetual state of reactivity.
Challenges Spark Innovation
There are many fascinating origin stories from entrepreneurs regarding the insights that led to their success. Whether it was Dan Stookey’s botched glass experiment in 1952 that led to the creation of the Gorilla Glass used on today’s smartphones, or Sara Blakely’s frustration with the discomfort and appearance of women’s undergarments leading to her creating the multibillion-dollar company Spanx, innovation is spawned by challenges. Finding ways to overcome these challenges are where insights enter, and challenges can become the seeds of strategy.
A challenge is a difficulty or dissatisfaction with an activity, task, or the status quo that is stimulating to one engaged in it because the solution leads to progress. Progress manifests itself in the new value produced by helping those you serve solve their problems. If you want to move out of a reactive mode, you must help your customers solve their current challenges. Entrepreneur James Dyson spent decades working on a vacuum technology to help people with the very common challenge of cleaning. He said, “I like frustration. I like seeing things in everyday life that don’t work very well and try to make them better.”
One effective way of innovating, or creating new value, is to look at your market, customers, competitors, and own company, and ask, “What are the primary challenges people face?” Consider functional activities, tasks, processes, internal and external aspects. If you feel your group is too caught up in the feature/benefit battle with competitors, come back to the key challenges or problems and how to solve them in ways that introduce new value. Before revolutionizing the vacuum with his cyclone technology and see-through, bag-less canister, James Dyson solved a problem many of his British neighbors who worked in their yards felt: wheelbarrows getting their tires stuck in the mud. Instead of a “wheel” barrow, he introduced the Ballbarrow, which used a ball in place of the wheel to solve the problem of the wheels getting stuck in the mud.
From Challenge to Solution
To effectively use challenges to develop new value for customers, I often lead leadership teams through a four-step process to identify and prioritize the challenges in your business:
1. Challenge Funnel: Begin by creating a list of challenges that would enter the top of the funnel and then whittle down from there to approximately six or fewer based on their relevance to solve. Consider both external challenges (market trends, competitive activity, customer changes, etc.) and internal challenges (silos, unclear decision making, too many priorities, etc.).
2. Challenge Filter: Graph the challenges using two criteria: probability of solving and importance to the business. Use the framework to discuss and determine the priority of challenges.
3. Challenge Map: For the primary challenge identified, examine it and articulate the causes, effects, relevance, and outcomes.
4. Solutional Thinking: Describe the main challenge that needs to be addressed, specify the relevance—who this is important to and why, identify the gap between the current state and desired state, generate a range of 3-5 mutually exclusive options for solving the challenge, including the pros and cons of each, and finally capture the direction or recommended action plan in the form of the goals, objectives, strategies, and tactics.
New growth comes from new thinking. New thinking is sparked by insight. Insight is a learning that leads to new value. What are your top three insights from the past month? How do you and your team share insights with one another? Enter each day with an explorer’s mindset seeking new learnings in an ocean full of insights or sit on the beach and watch the business world pass you by.