Monthly Archives: February 2015
This was first published in Huffington Post on 9 February 2015.
Value is an oft used word in business. We need to create ‘value’. But rarely do we take the time and ask ourselves, what do we actually mean by value? From a business perspective the value that matters is that which the consumer deems valuable. In this article I’m looking at value from the perspective of innovation.
Think of something you use that you really value; think about those things you really like using. For me, it’s my Nespresso machine. It’s not that I couldn’t make coffee without it, it’s just that the experience of using it works well for me. I enjoy using it and I love the coffee it makes. I’d survive without it, but I’d miss it. As a consumer I place a great deal of value on the Nespresso machine.
What would be the equivalent object for you? I took this idea from a blog written by Gideon Rosenblatt a couple of years ago. His point was that: “All products of real value are embedded with specific ways of serving customers. Through that service value is created. That which serves creates value.” In other words, if we want to understand consumer value we need to understand what the consumer values and this in turn means understanding what it is your product enables for the consumer. Nespresso machines are a great example of a company broadening their perspective from innovating the product, in this case coffee, to how the product can provide a better service for the consumer, as in the development of the Nespresso capsule system.
Queuing for value
If you want to understand the power of value, look no further than the launch of a new Apple product and the consumers prepared to stand in line for hours to wait to buy something whose functional competence is probably no greater than other equivalents. However the promise of value associated with the product drives quite extraordinary scenes of behaviour. In the case of Apple products, brand really is price plus perceived value.
Value is what the consumer experiences that encourages them to spend. Value can only exist because you make something that someone else wants – one cannot exist without the other. In a commodity market where everyone pretty much operates in the same way, the value created is pretty much the same as everyone else. To be more successful requires finding ways of adding more value. i.e. finding ways of better serving the consumer in a way they value. This then is the role of innovation. To help create new opportunities for value.
Value is perception
Consumer perceptions of value do not always match up with true cost. For example, bundling goods can change the perception of value. Research into the automotive sector has shown that when optional extras are bundled together consumers perceive a greater value. In an interesting report, John Leech of KPMG explained how different pricing strategies are employed for different demographics: “For example, in-car connectivity is essential to the young demographic, not for the average Toyota or Hyundai customer. The latter prioritise safety and general reliability over built-in satellite navigation systems. So identical optional extras are priced differently according to each model’s market segments.”
The message is clear. Businesses that don’t create value don’t survive.
A growing concern with health and wellbeing is influencing how value is perceived as is corporate and social responsibility. Sustainability and traceability are becoming hygiene factors in food production. In other words, you won’t get past first base without these things. The challenge is translating these global trends into value as perceived by the consumer. For example, ‘Fairphone’ make a mobile phone where the materials used are from ethical sources, i.e. minerals from conflict free zones. The phone matches the global trends and its very existence is testament to the way values are changing, but Fairphone does not have people sleeping on the streets at midnight waiting to buy their next product. The value of sustainability is not as great as the perceived value an iPhone delivers.
We need to listen to our consumers through social media and other tools to see how they are responding to the mega trends and then using innovation tools and techniques devise ways of adding value as perceived by the consumer. The broader minded amongst you will do this from the perspective of seeing your product in terms of the service it provides and be open to both product and product related innovations to find that value.
The pragmatic amongst you will recognise that the most successful innovative companies are not afraid of experimenting, getting it wrong, learning the lessons, building on these to create the next innovation (as Google have just done with their project Google Wave and Google Glass).
The wise amongst you will recognise you can’t go it alone. The future is about creating networks with other companies to innovate together to create value, recognising that the leverage of several companies working together can be so much more powerful than going it alone. The challenge is of course working out how each partner gets value, but the opportunities it affords are worth the effort.
The most successful of you will be actively listening into the consumer, paying attention to the mega trends, examining big data and using this information as the basis for innovating across the value chain to identify value for both your business and for the consumer. Your restless and relentless curiosity will feed a constant hunger for providing consumers with the experience that, when asked what product they couldn’t live without, will have yours at the top of the list.
Whatever your approach, innovation needs a clear focus.
© Dominic Irvine 2015 All rights asserted.
First published in Fresh Business Thinking 28 January 2015
Innovation: It’s about appreciation & respect
“We need to become more innovative.” We must have read this a hundred times in various articles, books, newspapers and magazines. And of course it’s true. It must be hard to do given so much has been written….but is it really so difficult?
Thinking about it led us to three suggestions: One relating to the individual. The second a team approach and the third an organisational perspective.
Come into the kitchen
A large part of our work involves taking abstract concepts and finding a way of translating them into the practical things people can do to improve their performance. This can take quite a bit of thinking through and often involves several iterations of design before we pilot the programme. We used to be really wary of getting the customer involved too early in the process for two reasons. First, we didn’t want them to see how much head scratching went into the process, and secondly, we didn’t want them to think we might not be able to do what was asked.
Over the last few years we’ve got more adventurous in getting the customer involved earlier and earlier with better and better results. In our business we call it ‘inviting people into the kitchen.’ This is because if you present people with a finished meal they have only two choices – accept it or reject it. Get them involved in the dish you are making and they are far more likely to accept the final product – because they were inextricably involved in its creation.
It seems we were onto something. According to a great piece of research by Buell, Kim and Tsay reported in the Harvard Business Review, “Cooks make tastier food when they can see their customers.” It seems that customers rated the service better when they saw the chefs at work. The explanation offered is that because you can see the effort being made you are more appreciative. Seeing the customers enjoy their food motivated the chefs to raise their game. To quote the authors: “This work highlights the humanity of interactions, of service. There’s something refreshingly human about the idea that just seeing each other can make us more appreciative and lead to objectively better outcomes.”
There’s a lesson in this research for us about innovation. Ideas are created by people. Spending time with others allows us to appreciate their efforts as well as gain insights from their perspective. In our experience people really do want to do a great job. There’s nothing like experiencing something at first hand to get a good sense of the challenges they face. Appreciation and respect are a sound basis for collaboration to develop new ideas.
The real team
One of the overwhelming lessons in improving your chances of being more innovative is to build connections within and outside of your organisation. The richer and more diverse the range of inputs the more likely it is innovative ideas will emerge. This approach is not new nor particularly radical.
We’d like to suggest that tapping into that broader network is easier than you might think. For example, who would you think of if we asked you to think about your team at work? Is it your colleagues? It was during a long conversation one Friday evening with a client, the Group HRD of a well-known company, that she had an epiphany. She realised that whilst she had worked with many organisations over the years, the one group of people with whom she worked that had remained a constant are the teams of advisors, facilitators and consultants who had helped her think through the challenge of how to tackle the issues in each of the organisations in which she had been employed. We realised the same was true of a number of other clients with whom we worked.
We should make more of these long term support networks, in particular how we better integrate outside knowledge with the internal experts in order to better generate new ideas. Think of it as an integrated network of trusted people internal and external to the organisation who come together based on specific needs to deploy their diversity of backgrounds and experiences to solve problems. The advantage of the external people is they know the client very well and have a breadth of experience they can bring to the table. The internal people have a deep understanding of the nuances of why things are the way they are and the challenges that will need to be overcome if things are to change. Together, they can innovate new solutions.
This inside – outside network can also be complemented by another influential source of ideas which is called open innovation. In the past, depending solely on internal R&D to produce innovative solutions was once considered a strategic asset and a competitive advantage. No longer! Many organisations have learned through hard financial experience that not all ideas can be identified within the organisation. Some successful companies such as Intel, Microsoft, Sun, Oracle, and Genentech conduct little basic research of their own and there are many other companies which rely purely on ‘other people’s ideas’ to achieve commercial success.
Open innovation is based upon the concept of an environment in which there is an abundance of knowledge and possibilities. Think of the research and practices developed in many organisations and the fact that much of this escapes into the wider market place. Add to this the extensive university research which is published in articles, and you begin to get an understanding of why there is a need to look outwards.
In our experience very few organisations manage to achieve this effectively – they want the input from outsiders as long as it fits with their perspective. As the saying goes, he who pays the piper calls the tune. However, when there really is a strong working relationship the outcomes can be phenomenal and it makes for extremely rewarding and engaging work. But it does require appreciation and respect of each other’s skills.
Fear of the unknown
Over the years we have run a great many innovation workshops where we have attempted to challenge the way people think in order to create new products or services. It almost doesn’t matter what exercise we use, the same two challenges almost always present themselves. The first is getting people to imagine “what if….”. Typically, this requires them to imagine some aspect of what they do is either no longer possible or vice versa. There seems to be a fear that imagining it might actually make it happen and the consequences of that often seem too much of a headache. To paraphrase Christopher Columbus “You can never cross the ocean until you have the courage to lose sight of the shore”.
The second challenge is when delegates come into such sessions and focus on inputs rather than outcomes. For example, if the objective is increased sales of the product, they focus on the product rather than the objective which is increased sales. A product focus constrains you to packaging, content, structure etc. whereas a focus on sales allows you to incorporate a much wider perspective. The solution may lie in better social media campaigns or in the secondary packaging. With a focus on the product such issues will never get explored and yet they may offer cheaper, faster more effective opportunities for innovation.
Does this mean people are poor at thinking? No. We think it is the organisational context that drives anxiety about different possibilities and their consequences that constrains thinking. If we want people to think innovatively, we need to create the environment that encourages it. If you want people to come up with new ideas, think through how the organisation needs to respond to those new ideas to give them a fighting chance. We need to appreciate their contribution and respect and address their fears and concerns.
Why we have different shops with different sized clothes
It always feels great when you find a garment in the right size, in a style you like and fit for the purpose intended. It’s incredibly frustrating when one of those elements is not quite met. It’s almost good enough but not quite. In helping organisations become more innovative we are struck by the very different needs each has. A brilliant article back in 2007, by Hansen and Birkinshaw and published in the Harvard Business Review, showed very eloquently how when it comes to innovation, different organisations have different needs. Naive attempts to apply a standardised innovation process will not succeed. Innovation can be thought of as a value chain that starts with ideation and ends with successful implementation. Organisations are typically good at some of the elements involved and weak at others. It’s about addressing the weak areas and capitalising on the strengths. However, what’s missing in much of the literature for me is the human dimension.
People create ideas. People do business. The best deployment of social media is where it enables people to do more of the things people do. The best virtual working tools are those that enable people to interact in the way humans interact most effectively. The best leaders are those that understand what it takes to engage people and what makes being a follower a good thing from a human perspective. People can achieve amazing things when they are allowed to be human and are supported in the best way humanly possible. If we want organisations to be more innovative we need to think it through from a people perspective. What are the fears, concerns, issues, hopes, aspirations and desires that people have that inhibit or help them be more innovative? These are unique to each individual. How do we design organisations to address those fears and maximise the opportunities? Everything else is just noise.
Gary Hamel in his insightful critique of strategy innovation in his 1998 article in Sloan Management Review seemed to us to be hitting the nail on the head. Innovation, like strategy, is an emergent phenomenon. We need to create the preconditions that lead to innovation. We need to appreciate the ingredients so ably demonstrated by Hansen and Birkinshaw and be human in our approach to helping people deliver each of the elements in the innovation value chain.
Appreciation and respect
As Voltaire said, “Appreciation is a wonderful thing: It makes what is excellent in others belong to us as well.” When it comes to innovation, above all else we should respect it’s a profoundly human activity.
Dominic Irvine & Dr John Wilson © 2015 All rights asserted.
Read about Innovating Value here.
“The story of innovation and development is strewn with stories of success from failure ..”