The Empty Whitecoat

New Concise Introduction to Strategyn and Outcome-Driven Innovation

This short introduction to Strategyn and Outcome-Driven Innovation (ODI) is designed for a C-Level audience. It summarises the six critical capabilities companies must develop to become successful innovators, outlines the key tenets of ODI, describes what types of innovation ODI applies to and defines the varieties of organic growth it can drive. Some client testimonials and case-studies are briefly mentioned too...

Download A Short Introduction to Strategyn and Outcome-Driven Innovation (pdf)

Fixing the Innovation Process

A short post from Taverner Research summarises our view on customer needs and reasons for product failure succinctly.

90 percent of all new products fail. You see them all the time: they fill bargain trays in department stores and mark-down aisles in supermarkets.

Why is this? What's wrong with the product development process? Why is failure so much more common than success?

According to Tony Ulwick of Strategyn, it's because people have got the innovation process the wrong way around.

Here's how it usually works. Someone has an idea - a lightbulb - about a fantastic new product. The idea is evaluated and if the right people give the thumbs up, it goes ahead. Maybe the idea comes from a brainstorming session. Either way, it is pretty much guesswork about what the market needs or wants.

Another source of ideas is customer feedback. But when you ask customers what they want, their answers aren't very useful. They either tell you about features your competitors offer, or they suggest things that in the end, they don't want enough to buy.

The solution, according to Ulwick, is to start with a systematic, rigorous look at what your customers are doing, or trying to do, in their lives and work. The goal is to find holes in real-world processes, holes that the customer would like help with. Maybe a workman needs to carry more tools up a ladder. Maybe a surgeon needs to reduce the chance of unwanted bleeding. This approach, driven by real life problems and solutions, is better and more useful than dreaming up products in thought bubbles.

With that as a starting point, you can work to fill real market needs as opposed to imagined market needs. Then, and only then, it's time to innovate.

To explore these ideas and concepts further, a recent webinar by Tony Ulwick is still available on the American Marketing Association website here: Kill Bad Innovation Theory and Revolutionise the Innovation Process. I also have a version of the content that I presented recently at the 4th Strategic Innovation Forum in Barcelona. 

I shall be posting about how Outcome-Driven Innovation feeds StageGate product development processes very shortly.

Blogging again soon

After spending 200% of the last year taking Strategyn UK close to a £1m turnover business (working across Europe and in UK), I have now just kick-started my PhD (How firms develop capabilities to act upon Voice of the Customer?) and intend to start blogging again very shortly. I am delighted to be back and really look forward to contributing some new thoughts to my blog as well as participating in the conversation very soon....

Join the Strategyn UK associate network

Owing to a number of recent outcome-driven innovation client wins, we welcome speculative applications from talented individuals to become an associate of Strategyn UK delivering ODI projects in the UK and mainland Europe.

If you have a proven track record in product development, voice of the customer, innovation or marketing strategy, we are interested in hearing from you. You will have:

• A strong background in an innovation, product development or marketing strategy discipline
• Experience gained either on the client-side, in a consultancy or as an independent
• Excellent written, spoken and numeracy skills
• Strong project management capability
• Analytical and hands-on with data
• Superior client-relationship skills
• Willingness to learn and challenge long-held industry assumptions
• International languages a bonus
• Honesty and integrity

For an informal discussion about how you could become a part of the Strategyn UK associate network of innovation and marketing professionals that is helping companies adopt a new standard for innovation, please drop me a note with a copy of your CV and a covering letter. Should you be accepted, you will have an opportunity to receive funding to become trained in Outcome-Driven Innovation at the Strategyn Institute in Colorado, US  - as well as play a key role in the growth of our business with an option for a permanent position in the future. I look forward to hearing from you.

About Strategyn UK

We create product and service strategies for client companies using our patented innovation methodology. We work with a company's executive management to invigorate growth and drive share holder value through creating an internal engine for innovation. Our structured innovation process takes approximately 4 months to complete and the result is a precise view of where in the market there are opportunities for our client companies to create value. This process has created billions of dollars for value in market cap for client companies. Our list of clients includes Microsoft, Unilever, Colgate, MetLife, StateFarm, Motorola, J&J, Medtronic and AIG to name a few.

New Paper on Outcome-Driven Innovation

A new introductory paper on Outcome-Driven Innovation has just been released by my Strategyn US colleagues, written by founder Tony Ulwick. Here is an extract:

"Innovation is the key to company growth, yet as a business process, it is poorly understood, its execution is highly inefficient, and its output is unpredictable. Why? Dozens of plausible explanations have been published over the years by practitioners and academics alike, but when it comes right down to it, the innovation process is broken for two very fundamental reasons – there is no universal agreement on precisely what the inputs into the innovation process should be or how they should be used to drive the innovation process. It’s that simple."

To request a copy of the paper, drop me an email.

“Value”, “Value”, “Value”– the Most Vague and Over-Used Word in Marketing

Everyday, marketers, product developers, managers, all business-people in fact talk about “value”. In fact, I reckon it is probably the most popular – yet at the same time, most misunderstood - word used in everyday business conversation

(Quick “non-empirical test” using Google: Value – 776 million hits, Customer – 583 million hits, “A Definition of Value” – 606 hits!)

For the past 2-3 years - off and on admittedly, I have been interested in how value is increasingly being co-created by firms and customers. ("Traditionally, learning about customer needs and the process of value-creation occurred within the firm’s boundaries or at best within partnerships amongst firms. The role of the firm was the development and delivery of goods and services, and the role of the customer was the consumption of those goods and services. However, a perspective of the firm as an autonomous value-creator is becoming increasingly redundant … " etc etc)

Over this period, I have become increasingly aware that to understand co-creation and by extension, to understand how firms can become effective co-creators with their customers, it is first essential to have much greater clarity on what we mean by value – particularly what value is being created and when, by whom and for whom. In the book, The Service-Dominant Logic of Marketing (eds. Vargo and Lusch), Woodruff and Flint critique our understanding and use of value as being too conceptual and too vague. They suggest that value is too often talked about as a “variable or a state-of-being” and little time is spent understanding the processes behind how customers form the value judgments that they do.

In terms of providing definitions of value, Woddruff and Flint go on to identify two broad schools of thought. These are firm-centric and customer-centric perspectives.

Firm-Centric Perspectives

Much of the knowledge on customer value is from the firm’s perspective in that it emphasises one of three varieties of firm-created or -derived value:

1. Value-Added   This perspective suggests that value is embedded in the firm’s products and services and is independent of the customers’ perceptions of value. As such, value is something that is owned, created and exchanged by the firm and the emphasis is on designing offers that target customers will purchase.
2. Economic Worth of a Customer   Here, the firm’s concern is to extract value from (particularly existing) customers and to segment them according to their value potential. Much of popular CRM and customer loyalty thinking focuses on this variety of value
3. Economic Worth of a Seller’s Product / Service Offering to a Customer   This view defines a customer’s view of value in primarily monetary terms – where value is equated to price – and that customer’s measure the value attained in terms of their ability to derive a preferable deal from sellers.

We then have an important customer-centric perspective on value-definition.

Customer-Centric Perspectives

1. Value-in-Use, is a concept which defines value as something that is perceived by a customer when interacting with products and services in use situations. Rather than the value being contained in the product, here value refers to a customer’s meaning that is attached to product and service bundles relative to a use context. In other words, a customer’s valuation of a product or service depends on their experience with its use in situations that are important to them. Another way of putting this - value-in-use can be expressed as the job that customers are trying to get done. They "hire" a product or service which they believe will help them get these jobs done most effectively and efficiently.

This is of course a much more useful perspective for identifying how firms can co-create value with their customers – it is the experience or value-in-use relative to a specific context that is being co-created and which should form the primary unit of analysis for value-creation.

Now, using these definitions of value, I argue it is possible to identify two broad categories or styles of co-creation, 1) Value-Added within a Firm-Centric perspective and 2) a Customer-Centric Value-In-Use perspective

1) Value-Added Co-Creation within a Firm-Centric Perspective

1. Product “Finishing”, The customer completes the product or service and is the final co-creator of value or actor in the business system or value chain, e.g. IKEA

2. New Product Design and Development (Lead User), Here a limited number of expert customers are invited “into the firm” to share their knowledge and contribute to the development of new products and services. There is a good description of the Lego Mindstorms lead user project in February 2006’s Wired magazine. Other examples include Harley Davidson HOG events, Saturn Cars, Proctor and Gamble’s Connect & Develop programme and Silicon Graphics.

3. Existing Product Adaptation (Customer Feedback), Here the company actively solicits expressed customer needs or feedback to improve its products, e.g. Cisco and Microsoft Knowledgebase

4. Mass Customisation, This is the provision to the customer of a limited set of company-determined choices or options with which the customer can personalise a standard product or service template. Examples include Adidas custom shoes, Dell PC’s and BMW cars (plus most other manufacturers)

5. Open Community Ideation and Product Design and Development. I differentiate the open-source movement because a) it is more distributed and b) firms cede more control to the community of users and creators. Also, open source tends to bias in digital environments, creating mods to games software for example as well as the well-known examples of Linux, Firefox and Sugar CRM. I also include Innocentive here because of its community basis for creating solutions to R&D problems.

6. New Service Design, I distinguish new service design from new product design and development (Lead User) (2 above) because service tends to involve more consumers in the innovation process and are also easier to test in markets than products through experimentation, probe and learn approaches. Also, of course, service value is inherently more adaptable than tangible product value, involving more knowledge-rich interaction. Examples include Teliasonera’s testing and piloting of new mobile phone services and Alaris Medical Systems constant dialogue with customers to improve its advocacy offering.

2) Customer-Centric Value-In-Use Co-Creation

7. Real-Time Marketing & Service Adaptation, Moving more to within markets and value-in-use with higher adaptability, this style of co-creation is characterised by high levels of customer dialogue and interaction, enabled by digital technology. This allows individual customers to change the value presented by the firm in real-time, so for example, Cemex allows its customers to modify the delivery time and quantity of cement to fit with their changing operational requirements, Fedex allows large corporate customers to change package transit times and destinations in real-time. These are enabled via an intelligent knowledge interface between the firm and the individual customer.

8. Personalised Experience Value and Knowledge Co-Creation. Finally, this is where the firm and the customer interact within an experience environment to realise unique co-created value. The unit of value is not the product or the service but the individual experience and its interaction with a host or experience network partners. Examples here include those such as iPod / iTunes (facilitates a personalised music experience, it is less about the white box and more about the experience gateway it provides), Medtronics pacemakers (less about the pacemaker technology, more about the intelligent care network ), John Deere (less about the heavy agricultural machinery, more about the remote sensing capability and adapt-to-farm conditions value) and Amazon (especially in the US which is experimenting with all kinds of personalised interfaces and content).

Capabilities for 7 and 8 Value-in-Use Co-Creation

Traditional Voice of the Customer approaches to customer needs identification tend to emphasise the value-added concept at the expense of value-in-use in their assumptions about customer needs and value. For example, the House of Quality first defined a set of capabilities and a process for collecting customer needs. Since then, many methods have been developed for translating VoC data into inputs into the value-creation process. In each instance, the firm tries to identify known or latent needs/wants of customers through a variety of mechanisms such as interviews, surveys, observational techniques, and so on. In these approaches, the firm’s capabilities are designed to help it learn about customer needs that exist in the market, beyond the boundaries of the firm. The company does the asking, the listening, the observing, experimenting and learning; customer needs/wants are the object of the study. After the firm learns about customer needs and wants, it then develops and delivers the goods and services that it feels will provide value to customers.

Now however, co-creation demands an alternative process for “co-creating the voice of the customer”, one where the customer and the firm are engaged together in the asking, listening, observing and experimenting – that is, both are engaged in learning. Importantly, the subject of the value-creation process is both the firm’s needs and wants and the customers’ needs and wants. This will be the subject of some later posts. Cheers

The OMC Group becomes Strategyn UK

A quick post to tell you about an exciting development at The OMC Group.

As of today (March 22nd 2007), for all Outcome-Driven Innovation projects, The OMC Group will be trading as Strategyn UK. We are the exclusive provider of this highly successful method to our UK and Ireland clients.

For more information on Strategyn, visit our Strategyn global website or watch this short video about how we are achieving the goal of predictability in innovation.

The OMC Group will still exist as a consultancy specialising in marketing and experience innovation and organisational capability development. Increasingly though, we are rolling in the ODI method to connect with the rest of our services. I now have the challenge of running two separate brands so it is going to be a lot of fun!

Warm Regards

Chris

Interview with Tony Ulwick, author of What Customers Want

Roger Dennis, over at IdeaPort, posts a multi-part email interview with Tony Ulwick, founder of Strategyn, and creator of Outcome-Driven Innovation (ODI) and author of What Customers Want.

Tony talks about how he originated the concept of ODI and the underlying principle of understanding the jobs that customers are trying to get done:

In my recent book, What Customers Want, (McGraw Hill, 2005), I reinforce the theory that customers buy products and services to get jobs done. [Harvard Business School professor Clayton Christensen introduced this terminology in The Innovator’s Solution. He also cites my work in his book as we have been pushing this thinking for years.] If a company wants to think like a customer, it too must focus on the jobs the customer is trying to get done. This point has far-reaching ramifications.

When the job is accepted as the unit of analysis it means that companies must not capture requirements on a product or service – rather they must capture requirements on the job or jobs that the product or service is intended to perform. This means that instead of asking customers about improving a product, VOC practitioners must be more process focused and

(1) deconstruct the job the customer is trying to get done into process steps, and
(2) determine what metrics customers use to measure the successful execution of the job.

We call these metrics the customers’ desired outcomes. [I first introduced this thinking in the January 2002 HBR article, Turn Customer Input Into Innovation]. We have developed over 40 rules regarding the structure, content and format of these statements. Precision is the key to removing variability from the process.

A customer need, then, is defined as the customer’s fundamental measures of performance associated with getting a job done. This is a critical point, because after these metrics are uncovered, they are prioritized to reveal which are highly important and poorly satisfied (underserved) – thus revealing the best opportunities for growth. This valuable information (which is what I was looking for back in the days of the PCjr) is then used to prioritize the development pipeline, brainstorm new ideas, evaluate product concepts, communicate a products value, etc.

Worth a look.

Measuring Emotion in the Customer Experience

We have been doing some work recently helping a client identify appropriate means to measure  emotions in the customer experience.

Here are some example methods which I briefly describe:

1. NET PROMOTER EXPERIENCE SCORES

Used by: Intuit, American Express, Enterprise Rent-A-Car, GE Capital, Norwich Union

Net promoter scores are a tool for tracking customer emotions that uses just one question: How likely are you to recommend us to a friend? Respondents are grouped into "proponents," "detractors" and "passives." Adherents say the concept allows them to track, and quickly address, customer concerns.

Private Sector Examples

GE is using the concept in all of its businesses, to reach customers from homeowners purchasing a refrigerator to hospitals buying medical equipment. The net-promoter score is a key part of GE's growth formula. GE executives say the concept improves on past customer-tracking efforts, a patchwork of surveys and anecdotes.

GE asks customers to rate on a scale of zero to 10 how likely they would be to recommend the company to a friend. Those who rate GE a nine or 10 are promoters, seven or eight passives, and six or lower detractors. To create a net-promoter score, the company subtracts the detractors from the promoters.

Below are questions similar to those on which GE's Capital Solutions unit asks customers to rate the unit's performance on a 0-to-10 scale.

• How willing are you to recommend us to a friend or associate?
• How would you rate our ability to meet your needs?
• How would you rate our people?
• How would you rate our processes?
• What is your impression of our market reputation?
• How would you rate the cost of doing business with us?
• How would you rate the overall value of our product or service as being worth what you paid?

2. KEY RELATIONSHIP BUILDERS

We discovered evidence of companies using what have been termed, “Key RelatIonship Builders” or KRB’s. KRBs can be defined as ‘‘clear, recognisable and distinctive practices that impress customers’’. The effect of KRBs, it is argued, is that they lead to customers enjoying the interaction with the organisation and, all being well, significantly increasing the likelihood that a customer will become a potential recommender of the organisation to others. In particular, KRBs are designed to ensure that the customer feels that:

• He or she has sufficient time to think, without feeling rushed;
• He or she is appreciated as an individual;
• Dealing with the organisation is easy, convenient, efficient and enjoyable;
• The organisation genuinely cares about meeting his or her needs; and
• He or she is getting a really good deal from the organisation.

The KRB’s seem akin to setting certain emotional standards or drivers within the customer interaction.

Private Sector Examples

Norwich Union - a UK Insurer owned by AVIVA - uses KRB’s to boost their customer experience. To do so, they created a specific programme – called ‘‘Care at the Heart’’ – to consciously set specific objectives for how their customers would feel when they dealt with them. They then identified what changes they could make in how they communicated with their customers, to give them the feelings they wanted them to have. This objective – giving customers those feelings – was the key aspect of the procedure. The above from a report by an NU exec.

NU’s Care at the Heart programme involved call centre Team Leaders teaching their teams how to achieve the KRBs. Some key learnings from Norwich Union programme were as follows:

The telephone interaction between the call centre agent and the customer became guided by specific target behaviours that the agents were encouraged to put into action in a natural and – above all – authentic fashion. The reasons why authenticity was key to the programme’s success were:

• A lack of authenticity is easy to detect in voice, tone and manner.
• A commitment to offer really excellent service is often called ‘‘emotional labour’’. An agent must want to deliver the KRBs. If he or she does not, no sustained improvements are going to happen.
• If agents do not enjoy the experience of talking to customers, their jobs can be very mundane indeed. A principal purpose of the programme was to help call centre agents realise that their jobs will actually become more interesting and more enjoyable if they put these practices into action.

The work itself consisted of three key phases; a diagnostic phase, an implementation phase and a ‘‘business as usual’’ phase. The diagnostic phase posed the following key questions:

• Do we impress our customers through their service experiences?
• Do our people know how to impress customers?
• Are we supporting a contact centre environment where our agents are given the opportunity to perform to a high level?
• How can we support our front line managers in driving improvements to customer experiences?

3. MEASURING PLANNED EMOTION ELEMENTS

Similar to KRBs, this approach focuses on identifying desired experience elements, introducing them appropriately into the service encounter, customer-facing processes and marketing/brand communications and then creating new measures of the degree to which the emotions are being delivered. Companies ask themselves “what do our customers want to feel and when”. The selected emotions are usually unique to each organisation, e.g. a holiday company might emphasise fun, a sports brand such as Nike, achievement.

Private Sector Examples

First Direct, the leading UK telephone bank, is a leading proponent of planning and measuring desired emotional elements into the service encounter. They realised that the competition would not take long to copy their idea of a “bank without branches” and that one important means to sustain the value they provided to their customers was through the emotional dimension of the customer experience, which was deeply embodied in their culture.

The culture of First Direct is built on respect – for employees and customers – trust and continuous improvement. In terms of trust, the company actively breaks the emotional element down into its constituent parts to discover new opportunities for their service people to engage customers in ways to create trust (I can provide more detail on the components of trust if you wish)

The following is an extract from a report from Clicktools, an OMC partner, who can help you to measure trust:

“Trust forms a regular part of the ongoing research at First Direct. It spans the rational and emotional elements of a relationship with a customer. At its most basic, trust is about having confidence in the quality, availability and reliability of a product or service. But it goes beyond that – it embraces mutual respect, openness, honesty and is underpinned by a congruence of values.”

First Direct measures feedback about service encounters near to the event when the contact takes place, using e.g. web-based feedback tools. By doing so, event-driven feedback that includes an emotional element can provide a link to more traditional process, sales and financial measures. When all staff can see and understand / interpret these measures, this becomes a more effective means to enable change more widely.

The key to enabling change and continuous improvement at First Direct is the timeliness and visibility of the experience measures, together with their integration with financial performance measures.

If anyone needs more detail on the above or some additional insights into how firms are measuring emotion in the customer experience, please get in touch.

(picture credit: "Andros kills with no emotion", still from the existentialist 1960s B-movie The Monster that Orloff Made. More info here. )

Successful Innovation is about Process, not just Ideas

I had a great response to a question I posed to our contacts at Strategyn, creators of the Outcome-Driven Innovation method (ODI) which my company, The OMC Group, licenses for the UK. We were discussing how ODI compares to TRIZ, Voice of Customer and other innovation and idea-generation methods.

   

Here is the basis of Strategyn’s argument which I have elaborated upon – and of course, subscribe to.

   

For most companies seeking to innovate, coming up with the ideas is never the problem (TRIZ is a method for idea-generation). Far from it – often there is no shortage of good ideas as well as people willing to offer them.

   

Rather, the real challenge is two-fold; first and obviously, there is the difficulty of knowing which ideas will address the biggest opportunities in the market (for creating breakthrough value, creating new markets or disrupting existing ones) and thereby create greatest returns.

   

But the second challenge is often overlooked and is perhaps more significant. It concerns the difficulty of convincing internal decision-makers to commit to a solution that they do not buy into. “Not invented here”, a lack of appropriate risk/reward structure or internal politics can be much bigger obstacles to successful innovation than just a drought of ideas alone.

 

Put another way ... a superior capability to generate ideas and identify solutions to address valuable opportunities – whilst important - do not necessarily make a company a good innovator. Rather, Strategyn’s view is that innovation must be viewed as a business or operational process, just like any other (like six sigma, lean, project management, sales force automation, CRM etc.). Yet remarkably, it seems that few companies have a disciplined, rigorous and repeatable process for innovation. In fact, it is probably the only management activity where failure is seemingly tolerated as a worthwhile price to pay for future success.

   

Having a process for innovation means that companies have a much better chance of getting valuable and valued ideas through the layers of decision-makers and doubters. It is this which separates the successful innovators from the also-rans.

 

(Apologies for the lack of posting activity. OMC is in deep-dive mode in an ODI engagement).