By Dr. David Weiss
Many executives believe the best way to become more innovative is to tell all employees they have to become more innovative. It is a modern variation of the suggestion box, which yielded minimal benefits and in many situations was a failure. The preferred approach is to develop a focused innovation plan anchored on an innovation question that can disrupt or invigorate the viability of the enterprise and potentially the industry.
As venture capitalists would say, the valuation of a startup company is a function of the size of the problem the company is addressing. The value of an enterprise is not defined by the innovative solution — rather, it is driven by its focus on the right problem for the enterprise. This explains why some publicly-held stocks are valued very highly even though the value is not justified by their earnings. They are valued on how big the problem is, not their results.
The primary challenge for an enterprise is to discover the big problem and then to invest, like the venture capital firm, commensurate with the magnitude of the problem.
This article explains how to discover the enterprise innovation question to ensure you focus your efforts on the big problem for your organization. In some situations, it is appropriate to identify two or three big problems, but we recommend that organizations prioritize and focus on their top priority innovation question.
Analyzing best practices and research are insufficient to discover the big problem
The classic, obvious approach to finding the big problem is to interview the executives to determine what they believe are the major opportunities and threats for their business forecasted during the next few years (i.e. SWOT analysis). Although this process can consolidate what is anticipated, often the big problem is not known or anticipated by the executives.
To discover unknown big problems, many organizations analyze the best practices of their competitors or industry comparators. The approach essentially is to identify your competitors who compete with you for the same customers, or the comparators in other jurisdictions that are not competing for your customers. For example, if you are leading an educational enterprise, you can compare your organization to another competitor who is providing similar educational opportunities in your city. You can also compare your enterprise to an educational organization in another jurisdiction, such as Finland, if that jurisdiction is known as the best practice in your educational field. Your next step is to identify if the competitor or comparator is engaged in a best practice that makes them more innovative and then focus on duplicating what they are doing to stay competitive or comparable. We call this strategy focus competitive parity or comparative parity, which means if you deliver the strategy, you will be on par with the competition.
It also is possible you will discover the competitors or comparators have deficiencies. In that case, your focus will be to develop solutions that generate sustainable competitive advantage or comparative advantage. You also can have a strategy that has both a competitive parity priority, such as neutralizing the cost advantage of a competitor and a competitive advantage priority such as providing better quality of service.
However, comparing your enterprise to competitors or comparators is insufficient for innovation because, in most cases, the competitors or comparators are only marginally better or worse than your enterprise. These incremental differences may be adequate to discover continuous improvement strategies but are unlikely to generate the big problem and innovation question to focus your enterprise.
Engaging in research also has limitations when you are trying to identify the enterprise innovation question. This classic research and development approach is often used by science-based enterprises such as medical and pharmaceutical companies. Although these research groups can discover new innovations, the process is very isolated from the rest of the organization and from the users of their services. Research tends to be most effective in industries that have long development cycles, deep financial resources to support research and, in some cases, regulatory protection (e.g. patent protection) to ensure an eventual return on investment. Most enterprises, especially in the non-profit sector, cannot afford this kind of research. Even if they can, they cannot afford the time required to generate meaningful innovation questions to investigate.
Analyze pain and gain points in the user experience to discover the innovation question
An alternative method that has a higher probability to reveal a big problem and thereby yield much better innovative questions is to analyze the user experience.
Before the advent of the iPhone in 2007, many enterprises that wanted to invest in technology asked the question, “Will the user be willing to apply the technology?” Today, with the ubiquitous use of smart phones, the question is reversed: “Can the enterprise provide the experience the user expects because they see it and are active users of the technology in other industries?” Users are already making connections between disparate industries because of their experiences with companies such as Amazon, Google, Ticketmaster, Waze, etc. They are asking why your enterprise cannot provide an experience like Amazon, even though your services are unrelated to Amazon.
As a result, design thinkers have found that a key source to reveal the big problem is to analyze the pain and gain points in the user experience. Empathy mapping, which asks users to identify what they say, do, think and feel, and user journey mapping, which does empathy mapping over time, have become popular methods to engage with the user to find out what they are experiencing. Through this analysis process, the enterprise discovers pain points. These are the big problems users find painful. They form the foundation of the enterprise innovation question. An example of a pain point was discovered in a children’s hospital. They did empathy mapping and found that the big question and pain point was how to improve the experience of families in the waiting room during surgery. Further analysis revealed that families waiting for their child’s doctor worried that they could not leave the waiting room for a minute because the doctor could show up at any time to tell the family the results of the child’s surgery. That question became the big problem that focused the enterprise’s innovation efforts. Their minimal viable solution was to give each family in the waiting room a simple handheld device that lights up when their doctor is ready, an idea borrowed from restaurants that use these devices to streamline efficiency of food ordering and table service.
A variation on the idea of pain points is to engage in empathy mapping to discover potential gain points. For example, an arts council discovered that their users did not view the council in isolation but rather as part of the larger arts and entertainment ecosystem. The ecosystem included all facets related to arts and entertainment, including the arts and entertainment offered, but also bundled tickets for admission to multiple events, integrated tours, hospitality and food services, transportation, parking, etc. The big question was, “How do we delight users by giving them an integrated experience for all their arts and entertainment desires?” Although these gain points are more challenging to discover, they can be very beneficial if it becomes the enterprise’s big question that is the focus of their innovation efforts.
The insight is that user experience has become a valid source of innovation questions and, in many situations, even a better source than best practices and research.
Analyze the margins to reveal the big problem and the innovation question
In every industry there are those on the “margins.” The margin refers to the users who are not serviced because they are too much of a risk, they are too expensive to service, or the economic return is not worth the effort. For example, in automotive insurance the margins would be those people who have had accidents and whom the major insurers are no longer willing to insure or will insure only if they pay exorbitant premiums. These user groups on the margins have a big problem to find a way to meet their needs with limited support and resources.
Many startups look to the margins as a customer base to begin the process of disrupting an industry. Essentially, startups that target services for users in the margins can be very experimental and innovative because the users in the margins have little choice to go elsewhere. If the startup company perfects their innovative approach on the margins and can scale it for broader use, they can enter the mainstream with their new approach and disrupt an industry.
One example is a cooperative insurance company that began in one jurisdiction because farmers were deemed by incumbent major insurers as too risky and too expensive to insure. The farmers needed insurance, so they formed their own cooperative and cross-subsidized each other in the event a disaster befell one of the members. Eventually, the cooperative insurance company developed its own unique way of doing business and entered the mainstream as a competitor of the incumbent insurers.
Many organizations that are pursuing insights from the margins are also studying countries where there are limited resources. For example, in Africa a cell phone company called TIGO broke the paradigm that only rich people wanted life insurance (see https://www.youtube.com/watch?v=0FOH9E1pe9o). They discovered that poorer people wanted life insurance too — they just couldn’t afford it. They decided to include minimal life insurance for free in their cell phone packages as a way to create greater customer retention for their cell phone packages. The outcome was very encouraging: Even the poorest people would change their behaviour and stay with their cell phone package over another competitor, even if the competitor offered lower cell phone prices (but without the life insurance). Eventually, the same innovative insights that work with users in the margins could be scaled to meet mainstream market requirements and disrupt the cell phone and life insurance industries.
Implications for executives and their boards as the enterprise investigates the innovation question
As part of a strategy, an enterprise needs to discover the innovation question that will be the focus of exploration over the next few years. The challenge, though, is that the innovation question is unstable. An innovation question that is derived from the pain or gain points of users or from studying what is happening on the margins will be imprecise and ambiguous. Executives and their boards need to realize that discovering and investigating the innovation question will differ from their former experiences with best practices and research in which the questions are usually stable, clear and focused.
Here are four implications of how these ambiguous, unstable innovation questions should shape the way executives lead the enterprise as they search for innovative solutions to their big problem. Boards of directors should be mindful of these new expectations of executives as they approve strategy and select and mentor executive leadership.
1. The question is iterative. As you do a deep dive into the innovation question, the question will evolve and become more precise, but it may change over time. Executives need to accept and expect that the innovation question will need to be revised several times as a discovery team gains insight and refines the question.
2. The discovery team needs diverse members and a leader of innovation. No one discipline will be able to resolve the big problem, so the discovery team needs to bring together people with different perspectives, experiences and knowledge bases and needs to include users (if possible). Also, the team leader does not need to be the most innovative person, but needs to be a leader of innovation who is capable of drawing out the insights and discoveries from the diverse team members. Executives also need to assign their most effective leader of innovation to lead the discovery team.
3. The potential innovative solution needs to be iterative. The innovation question is usually complex and is characterized by ambiguity and uncertainty. No one discipline knows how to resolve the big problem, and as indicated previously, the innovation question keeps iterating as well. It would be presumptuous to assume that a discovery team can identify the perfect solution. What happens more often is that the discovery team identifies a partial solution that they can test with early-adopt users to see if it generates any positive movement to resolve the big problem. They can then isolate the element in the partial solution that seems to work and expand and deepen it to produce another slightly better solution to test on users again. This iterative process more rapidly generates solutions to complex, ambiguous and uncertain problems. Executives should be ready to engage early-adopt users with partial and imprecise solutions designed to advance the discovery process through iteration.
4. The discovery team needs extended timelines and dedicated resources. The executives need to appreciate that work on an unstable innovation question is not like work on a defined continuous improvement challenge. The process of gaining insight into the innovation question will be messy and at times painfully slow, and the solutions will be partial and imprecise. Executives need to embrace and struggle with the ambiguity, give the discovery team the time, resources and budget to uncover innovative solutions, and trust that the process will yield meaningful outcomes for the enterprise.
In summary, executives and the board must have a focused innovation plan that is anchored on a big problem innovation question. The best sources to reveal the big problem are through empathy mapping with current or prospective users and by analyzing what is occurring in the margins for underserved or neglected users. The big problem then is studied iteratively to reveal the innovation question that will become the focus for the enterprise’s innovation efforts. It is then important to profile the big problem and innovation question in the enterprise strategic plan, resource the discovery team efforts properly, and communicate progress on the innovation question regularly. In today’s turbulent business context, discovering the enterprise big problem innovation question is a key success factor to ensure the ongoing viability of the enterprise.