Archive for June, 2011
The discipline of design is aimed at the creation of meaning, according to Roberto Verganti in his book Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean. Design’s role is the creation of a conversation between a firm, its customers, and a critical network of “interpreters” who are engaged in discovery and shaping of new ideas. Verganti stays away from the traditional user-centered design paradigm in favor of a model which places the responsibility for product vision squarely on the firm and establishes a pivotal role for third-party interpreters in the design discourse.
From the perspective of the firm, key steps in the design discourse are listening, interpreting, and addressing. Listening is a common ingredient in any design process, but Verganti introduces the interpreting step in order to focus on generating the firm’s own vision and ideas for new meanings to be offered in the market. Addressing is likewise important in his framework because it is at this stage that the firm clarifies and refocuses the discourse with interpreters based on the firm’s vision. He stresses the participatory nature of design driven innovation as distinct from a more passive approach where requirements and needs are assumed to be latent within the customer base.
Market! What Market? We do not look at market needs. We make proposals to people.
–Ernesto Gismondi, chairman of Artemide
Verganti does not subscribe to the user-centered design philosophy because he believes that radical innovation of meanings can best be brought about by a design discourse based on a strong vision by the firm offering the product. Users can typically only tell you about what is lacking in their current context–it is difficult for a focus group to provide a compelling vision. While user-centered design is observational, design driven innovation is participatory and involves deep research and time needed to develop a radically new meaning. The ability to develop and sustain the critical relationships with external “interpreters” is another key characteristic of design driven innovation.
A lot of times people don’t know what they want until you show it to them.
There are two common innovation strategies: quantum leaps in product performance created by breakthrough technologies and incremental improvements enabled by key insights into the needs of users. The third way is to radically innovate meaning by using design driven innovation. Examples are lamp whose meaning is not just being a beautiful object but a light that makes you feel better or athletic shoes that have more meaning than being simply inexpensive versions of leather shoes. The meaning of coffee shops was radically changed by Starbucks as the company evolved the experience of coffee and created a “third place”.
The dimension of meaning that products encompass is as important as the utilitarian and functional attributes. Although design driven innovation cannot guarantee that a given meaning will be taken up by an audience, it does provide a foundation for creating the meaning that will equate to a “proposal.” The meaning that is contained within a product is more powerful than the utilitarian innovation which is enabled through feature and function improvement.
In this video (at :50) Verganti briefly describes design’s role in innovation
Here’s an interview with Verganti about the book
Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution outlines how various innovation strategies can be applied based on context. Geoffrey Moore argues that the type of innovation that is effective will be different for different phases of market maturity (the technology adoption lifecycle) as well as enterprise type.
He identifies two primary business architectures: complex-systems and volume-operations. Because of the differences between these two architectures, innovation methods which are successful in one will not be successful in the other. Complex-systems enterprises specialize in solving unique problems with a consulting model and custom solutions. Volume-operations, on the other hand, are focused on providing high volume markets with standard products and services.
Both models can be pushed to a breaking point: too much complexity can tax a complex-systems business and too many transactions can overwhelm a volume-operations business.
Sustainable competitive advantage is built atop one or the other of these two architectures–it is not built atop a compromise between the two.
In the complex-systems model the customer is the scarce resource because there are relatively few of them. Therefore, the complex-systems business organizes itself to effectively identify, solve, and sell to individual customer needs. The entire enterprise aligns and orbits around the customer. Technology assets of the complex-system enterprise are modular and present a stable interface to customers to enable reconfiguration based on new needs.
The volume-operations business has an entirely different set of concerns. Customers for the most part are not scarce–what is scarce is the ability create and present offers to the target audience. Price, availability and selection drive the offers that are made available to the customer. Producing the products and services is the priority for volume-operations businesses.
The complex-systems enterprise evolved to serve the early stage of markets during which not all assets required to build a complete solution are available and firms must take on the entire value chain to create holistic offer. This includes customer acquisition and partner selection. Once markets mature and components become readily available, volume-operations businesses enter the scene to begin optimizing products and services.
Success for the two models also follows different rules. For the complex-systems business, qualitative research with key customers, integration of resources around unique customer needs, and value chain management are key success factors. In the volume operations world, quantitative market research, branding, and low-touch service are the name of the game.
Moore points out that the two models move in cycles: first complex-systems enter a market to serve specific customer needs. Then, as market needs standardize, volume-operations businesses take over to create uniform offerings. This leads to complex-systems businesses moving on to the next set of unmet challenges and creating new opportunities.
Because the two enterprise types occupy different positions relative to business cycles, differentiation strategies should be considered within one or the other group, but not across both. In Moore’s view, once the strategic choice has been made between one of the two enterprise types, innovation models are then naturally chosen from within that group. Differentiation strategies are aimed at the common enterprise type, not at the opposing type.
There are a lot of great resources on-line for writing a value proposition, but I’ve only come across one book dedicated to the topic. Jose Palomino outlines his I3 framework in his brief book Value Prop – Create Powerful I3 Value Propositions to Enter and Win New Markets and has some great prompters and suggestions for crafting your value proposition. He offers downloadable worksheets at his website valeuprop.com.
He views value propositions as more than just a marketing exercise–he links it directly to sales effectiveness: “Complex sales are accomplished through one-on-one human communications, not brochures, websites, mission statements or any other marketing devices…So, your sales people need language and rationale to help them persuade other human beings that your value proposition addresses their primary needs and concerns.”
Palomino’s I3 framework breaks down into three parts:
- Innovation – what’s new?
- Indispensability – what’s useful?
- Inspiration – what’s wow?
A strong value proposition…is the basis from which you can develop a well-grounded marketing message that addresses the concerns of your specific customers within a target organization.
Palomino’s definition of a value proposition is: “A set of promises, based on capabilities and credibility of the offering party, that helps prospective customers understand how an offering uniquely addresses specific problems, opportunities, and challenges.”
One of the keys of developing a solid value proposition is getting a handle on your differentiating factor. Palomino points out that although there aren’t a lot of truly different offerings in the market, a good starting point for discovering differentiating attributes is to look across the entire value chain. Many companies, even those who deal in commodities, can offer value elsewhere in the value chain to differentiate their offerings. He references The Discipline of Market Leaders and suggests that looking at customer intimacy, product differentiation, and operational excellence are some good entry points for thinking about differentiation.
To begin the process of crafting your value proposition, Palomino recommends looking at all the assets at your disposal, unaddressed needs in the market place, and a competitive analysis. From there, you’re ready to begin a process of framing, refining, testing, supporting, and adjusting your value proposition (all based on the I3 framework).
The first step, framing, is done by filling out the I3 framework for your specific offering. Palomino is looking for the reaction: “I’ve never seen that before” for Innovation. For indispensability, he asks us to consider whether our product or service will be useful over the long term and whether it integrates well with the customer’s context and environment. With respect to Inspiration, he asks whether your product’s design is a “tipping point” for the purchase decision.
Next, refining the value proposition takes the form of “We offer our sports utility vehicle to outdoor enthusiasts delivering extreme terrain navigability through a built-in winch and hydraulic lifts.” Testing the statement through several iterations looks like:
- “Without our sports utility vehicle, the outdoor enthusiasts would not realize the ability to extract themselves from muddy terrain.”
- “The outdoor enthusiasts would not realize the ability to extract themselves from muddy terrain without our winches and hydraulic lifts.”
- “The outdoor enthusiast requires winches and hydraulic lifts.”
Testing also involves looking at the marketplace to understand your position relative to a competitor. Finally, he outlines how to position and simplify your offering.
Palomino concludes the book by observing that you can’t stop at a great value proposition–you have to extend it out to your sales cases. For him, the sales cases are: the business case, financial case, technical case, competitive case and decision process case. Weaving these together with the I3 framework provides sales teams with a clear conversational path to closing sales.
Clayton Christensen introduces the concept of “jobs to be done” segmentation in The Innovator’s Solution: Creating and Sustaining Successful Growth
, his follow-on book written after The Innovator’s Dilemma. The Innovator’s Dilemma outlined how incumbent companies can be ousted by disruptive newcomers if the newcomers offer a “not good enough” solution to under served market segments. This effect occurs because the incumbents are economically motivated to protect their highest margin customers and therefore will free low-end market segments as they are being dominated by the newcomers. The Innovator’s Solution outlines a framework for becoming a disruptive force in the market.
One of the questions Christensen answers in the book is “What products will customers want to buy?” He begins the answer by providing a method for segmenting customers by “the jobs” for which they “hire” products. He gives the example of a restaurant which sells, among other things, milkshakes. It turns out that customers hire milkshakes when they want something fun to do in the car on a long commute and when they want to reward their children. Although the restaurant thought it was competing for customers with other fast-food operations, they were competing with boredom, bagels, and instant breakfast drinks on the one hand and cookie and ice cream on the other. Given this insight, the restaurant might try spicing up their milkshakes with chunks of fruit for the morning commute and making a convenient kids’ size shake for the parents. This example illustrates how examination of the “jobs to be done” leads to some interesting product modifications.
Companies that target their products at the circumstances in which customers find themselves, rather than at the customers themselves, are those that can launch predictably successful products.
Christensen points out that by viewing your market through the lens of products leads you to believe that cramming more features into your products will win the market. However, this perspective typically leads to an “arms race” of product feature introductions.
The second example he gives is the Blackberry, which, he points out, is often hired to interrupt the boredom of a less than interesting meeting. In this case, the Blackberry isn’t competing against other devices–it’s competing against the Wall Street Journal and staring out the window. He suggests that adding news headlines or quick games to the device would increase its attractiveness for the job of breaking the monotony of meetings or being productive in small time snippets.
Christensen lists several barriers to using this method of segmentation: fear of focus, demand for quantification of opportunities, the structure of channels, and advertising strategies. In the case of focus, choosing one or two jobs to be done necessarily eliminates other growth opportunities and closes off some avenues for serving customers. Quantification of market opportunities is most frequently performed based on a product, demographic, or organizational unit basis, not on jobs to be done, because that’s how corporate information systems are typically structured. Channels, such as retail outlets, have a structure and organization already in place and “jobs to be done” doesn’t usually fit into that structure. Advertising planning, like quantification, is performed based on demographics and product usage.
He concludes by pointing out that the jobs for which customers hired products don’t change very much. In the example of film and photographic technology, Christensen notes that just because there is a huge technological enablement for saving, storing, and managing pictures doesn’t mean that people spend any more time rifling through old snapshots than they did before.
Here’s Christensen describing the milkshake case:
Gartner Symposium IT XPO 2011 – In this presentation from October 2011, Christensen outlines five principles that appear frequently in his books: disruption, competing against non-consumption, supply chain disruption, targeting the job not the consumer, catching the tide of de-commoditization.
Jobs to be done: List of articles, podcasts, posts, Quora groups and other resources related to the “jobs to be done” approach.
In the first chapter of Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution Geoffrey Moore, author of the classic Crossing the Chasm, writes about the dynamics of innovation. He begins by identifying the primary motivation behind innovation: differentiation. In the absence of innovative products and services, offerings in the marketplace become commodities and compete purely on price. Innovation is what creates differentiated offerings and allows for attractive economic returns.
In addition to differentiation, there are three other outcomes from innovation: neutralization, productivity and waste.
The goal of neutralization is to eliminate negative returns. The mantra of neutralization is “seek good enough, not best in class.” Neutralization strategies aim to slow down competitors and decrease the amount of head start a competitor has in the market. The less time your competitor has as an exclusive provider, the less momentum they can generate. Examples of this outcome are SUVs (nearly all automotive manufacturers have an SUV as part of their lineup). Moore notes that “first in class, when not first to market does not earn results commensurate with the investment required.”
Productivity improvement is, for Moore, “essential to evolutionary adaptation because it frees resources that other forms of innovation can use.” A productivity outcome creates products or services in the market at a lower cost. As costs are saved, the freed up resources can be applied to other innovation initiatives.
Waste consists of three individual outcomes. The first is simply failure. Moore views this as a part of doing business. He says “if you lose a lot of bets, you probably ought to look into your betting process or change your bettors.” The second type of waste is over optimization, what Moore terms as “efforts that go [too far] beyond the neutralization goal.” But this is not the worst kind of waste. The worst kind of waste are successful projects which achieve differentiation of some sort, but don’t go far enough along the continuum of differentiation. He calls this “innovation underperformance” and asks the reader to try and recall a Chevrolet sedan from the past ten years. Then he contrasts Chevrolet with Chrysler PT Cruiser or a Corvette (all memorable cars even if you don’t care for their design).
Risk reduction mentality and lack of corporate alignment are to blame for innovation underperformance. Risk reduction is intended to sustain the status quo and existing environment. Moore calls this context. “There are penalties for failing to execute context properly, but no reward for performing it brilliantly. So there is no upside to warrant taking risk” writes Moore. Core, on the other hand, is a type of innovation that creates differentiation.
To succeed with core, you must take your value proposition to such an extreme that competitors either cannot or will not follow. That’s what creates the separation you seek.
Moore goes on to give examples of core innovation that were achieved with corporate alignment. He notes that in most companies, innovation efforts are isolated in separate business units and do not have the alignment necessary to create unassailable products and services. In these cases, “each of the breakaway companies is aligned end to end around a single value proposition.”
The failure…lies in the [inability] to prioritize a one line of innovation above all others.
Moore comes back to focus and prioritization as the two pillars of success in innovation.
In order to break away, we must overcome risk-reduction mentality and lack of corporate alignment. Neither is a natural act.
In this short video, Moore outlines the three main outcomes of innovation and describes how companies fail to achieve competitive separation from the pack.