A good innovation strategy takes a sizeable amount of rigorous thinking, backed up by data.
It’s time for a story of personal failure. Relatively early in my career, I was a design manager at a company named Forbes-Marshall, a manufacturer of large industrial process equipment–things like boilers and pumps and valves. One of my biggest projects was working on a new handheld PH meter that the company wanted to launch. We were trying to take all of the functionality of one of our large instruments and pack it into a small handheld meter that a plant engineer could carry around as he went about his day. Without a doubt, that project was the biggest flop I’ve had so far in my professional career.
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The project was supposed to be completed in six months. It took the better part of three years. In that time, the cutting-edge performance criteria we were shooting for became yesterday’s news. When it finally came to market, the device was slow, clunky and out-dated. It barely worked. The thing was supposed to be waterproof to survive the rough conditions inside of a factory, but I’m not sure we ever actually got production models to be totally sealed. We’d projected that the product would sell in the tens of thousands. I think we sold five. To this day, former co-workers of mine can’t resist the temptation to remind me of that glorious flop whenever we meet.
Looking back at that experience, I now realize that that project was a pointed lesson in innovation strategy. My little handheld meter didn’t fail solely due to my own shortcomings (although those were ample). The target market was a plant engineer who typically didn’t buy from our company. While Forbes-Marshall excelled at making large, expensive equipment in relatively low volumes, my little PH meter was designed to be a low-cost, high-volume product. And though the company was brilliant at finding new applications for existing technologies, this project sought to create something that was new to the world, or at least to our little corner of it. In trying to create a new device, my team and I set out to make the wrong product for the wrong customer in a way that ensured the deck would be stacked against us. When I think about what I would do differently if I had to do the project over, the answer is simple. I wouldn’t make the product at all.
We all know that innovation can be challenging. It’s incredibly hard to come up with ideas for new things and even harder to bring them to life. But it’s actually far more difficult to figure out what kinds of ideas you should be coming up with in the first place.
Nortel, the recently bankrupted Canadian telecom giant, is but the latest casualty of such thinking. Its annual $2 billion R&D investment included $400 million devoted to such random projects as virtual reality applications, high-speed data networks, and collaboration software, which predictably failed to deliver new revenue to a company best known for providing a dial tone when you would pick up the phone. Not surprisingly, none of those projects created substantial shareholder value, let alone save the company from extinction. In tough times, a clear innovation strategy can help a company to get more bang from its innovation buck and avoid the costly mistakes of folks like myself and Nortel.
A good innovation strategy takes a sizeable amount of rigorous thinking, backed up by both qualitative and quantitative data. That said, the questions that drive such a strategy are fairly straightforward. If companies seek to innovate sustainably over time, they need to understand who they focus on, what they should make, and how they actually conceive and develop new products and services. An organization needs to be selective and aim for areas of high impact. Great innovation strategies don’t waste time and resources trying to innovate in areas that are ultimately of little value to end customers. When an innovation strategy succeeds, it does so because it helps a company play to its strengths.
It’s often said that innovation is about problem-solving. That’s true, and the real trick of it is knowing whose problems you should solve. You can’t be all things to all people–that’s a great way to end up meaning nothing to everyone. Great companies know who to focus their innovation efforts on. That isn’t to say they sell to only one type of person, merely that they keep a single person at the center of their focus. What results is a sense of clarity that often appeals to many customers beyond the core.
Target is the No. 2 retailer in the country, and every day, millions of Americans from all walks of life enter its stores. Yet despite its broad appeal, Target tries to focus on a single ideal guest. She’s a 35-year-old suburban mom with two kids who needs to look out for value but aspires to give her family much more than what a rock-bottom price might offer. Everything Target does seeks to delight this woman, from the house-branded products it makes to the design of its stores to the vendors whose stuff it puts on shelves. Target knows that by focusing on its core guest, it can create a clear experience that other people will find appealing as well. When trying to answer the Who question, don’t try to be all things to all people. Innovate for the best customers in your market.
A lot of companies approach innovation in a scattershot fashion. They go after as much interesting, new stuff as they can, and then they see if anything sticks. While this is fun, it also means people waste time and money trying to do too much– very little of it successfully. It’s far more successful to make fewer, bigger, and better bets that your organization can execute better than anyone else. If you can identify the three or four major growth platforms that are going to power your business, it will allow you to focus your attention and have a higher chance of success.
Apple gets this right. Usually credited for its brilliant design sensibility and focus on consumer experience, Apple actually has an equally interesting strategy story to tell. When Steve Jobs came back to run Apple after a decade in the wilderness, the company was wildly unfocused. Jobs took care of that. He killed off the Newton PDA. He ditched the printer business. Servers and game consoles? Gone. He even reduced the company’s computer models from fifteen to four. And with this lean, mean lineup, he was able to push the organization to achieve far more ambitious goals, creating groundbreaking products like the iPod and the iPhone. When thinking about our personal investments, we’re always told to diversify our portfolio and spread out our risk. But that works because investing doesn’t actually require you to do much. Innovation, however, requires attention and effort. When crafting an innovation strategy, it’s often more effective to follow Mark Twain’s advice: “Put all your eggs in one basket, and watch that basket.”
A few minutes searching on Google reveal that there are a lot of different ways to innovate. Some companies sequester their teams into skunkworks to come up with big ideas. Others set up internal venture funds that almost feel like innovation suggestion boxes. Still others have been quite successful by simply copying their competitors. There isn’t one way to innovate. Depending on the capabilities of your company, the businesses you’re in, and your corporate culture, some approaches might work better than others. Choosing the right approach is the central challenge in crafting an innovation strategy, and it requires more thought than we have time to discuss here. But the short answer is simple: play to your strengths.
Procter & Gamble
Procter & Gamble does this brilliantly. Several years ago, its leaders realized that although the company was world-class at commercializing and marketing products, it hadn’t cornered the market on good ideas. So it launched Connect and Develop, a strategy that mandates that fully 50 percent of P&G’s new products have to come from outside the company, either through acquisition or partnership. This approach has led to breakout successes like the Olay Regenerist anti-wrinkle cream, a Mr. Clean car wash franchise business, and even Press ‘n’ Seal Glad wrap, a revolutionary partnership with competitor Clorox.
There is no single best way to innovate. It’s far more important to discover what your organization’s unique strengths are, and then figure out how to do more of them. The more you play to those strengths, the more you’ll innovate, and the more you’ll get the competition to play your game instead of theirs.
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