Innovation likely ranks in the top 10 of the most overused words in our industry today. But, what drives the need for Innovation — cost, new products, competitors, or something else? How does one execute — run experiments, new pilots, setup Innovation ventures?
I found Harvard Business School Prof. Sunil Gupta’s book titled “Driving digital strategy” bring this issue to the forefront in a compelling way. Prof. Gupta describes the need to fundamentally rethink a business in the lens of its customers, not around products or competitors. One of my favorite quotation from the book is “Starting an Innovation unit in a large company is like launching a speedboat to turn around a large ship; often the speedboat takes off but does little to change the course of the ship.”
So, how does one succeed? I reflected on my own experiences helping customers in their innovation journeys. Innovation should first focus on answering the simple question, What is the compelling pain OR gain I can deliver to my customers? Answer to this question begins the process of rethinking how a product or service should position itself for growth by specifically addressing customer problems and taking advantage of data & new digital technologies.
Here is an example from one of my experiences where we assisted a Medical Devices & Diagnostics manufacturer address two key questions:
– How to shift value creation from being an equipment manufacturer to a full-service provider?
– How to increase the share of wallet in my customer base (hospitals)?
This manufacturer historically focused on the strengths of the equipment, the efficacy, and clinical value, delivering differentiation through its hardware. It left a big gap. Third-party software and service providers were providing surrounding solutions that leveraged the data from this manufacturer’s diagnostic equipment along with other data assets to solve specific customer problems (diagnosis aids, improving care workflows, improving the patient experience and improving clinician productivity).
Consequently, the manufacturer was leaving untapped value on the table, operating as a participant instead of owning a larger share of its customer ecosystem. The message was clear — the company had to Innovate or risk getting left behind.
Clarity on purpose for Innovation, what problems to solve is an essential first step, but that does not guarantee success!
It brings us to the next step — Execution. Often lack of effective execution is the reason Innovation efforts fail.
Let’s look at some of the reasons for poor execution:
- Jumping too quickly into what to innovate and poor definition of the specific business problem (use case) to solve for
- Getting carried away by Technology — Digital technologies, Data, AI, Machine Learning becomes the focal point of identifying new capabilities, but not the customer need (In my diagnostics example, adding a voice capability to clinical diagnostic equipment had excellent marketing appeal and sounded different, but it did not go too far in the absence of a compelling pain or gain to solve.)
- Starting with a platform strategy too early and investing too much time and money in building platform capabilities (This introduces confirmation bias before market validation and slows down execution.)
- Not thinking upfront of downstream changes that will need to occur if an Innovation pilot succeeds (In my Diagnostics example, the pilot use case excited everyone, but an early assessment that it may introduce changes to the regulatory framework and new security considerations led to a more informed, better thought-out approach.)
- Lack of a clear business impact framework and measurement mechanisms to continually drive alignment between the Innovation strategy and execution (It is not sufficient to come up with top-level goals! Developing a framework to track granular level execution metrics brings tight alignment with the business problem.)
To avoid this pitfall, we should address vital questions upfront:
- Are we solving a real customer need, and are we able to define it clearly?
- How well do we understand the end-user journey? Often, there is a low tech but high impact answer to the problem if we can humanize the experience.
- How will we measure success? What are the Key Performance Indicators (KPIs) that will be a lead indicator of positive change and how to track them?
- What technologies, capabilities will we need to execute?
- What changes will have to occur in different parts of the value chain to commercialize such a new product or service?
- How to simultaneously demonstrate value in the short term while building for scale in the long run?
What does Innovation mean for you, and what determines its success? I’d love to get your comments and learn from your experiences!