Brand New E-Book

G. Michael Maddock

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 294

Veröffentlichungsjahr: 2011

Beschreibung

Brand New’s revolutionary innovation process is a proven road map you can put to work immediately to create successful new products, services, and business models. Written by leading innovation practitioners, and the coauthor of the bestseller Customers for Life, the authors of this tightly focused, highly entertaining book have nailed the issue perfectly when it comes to successfully introducing anything new.

Research shows people like new products and services. Indeed  they go out of their way to try to find them. Yet companies are truly terrible at providing new products and services that meet these customers’ needs.

Why are companies so bad at giving customers what they want? Because they lack a simple proven process that makes sure innovation occurs efficiently time after time.

No one knows this better than Mike Maddock and his team at Maddock Douglas, the Agency of Innovation,™ which has worked closely with more than a quarter of Fortune 100.

To solve the innovation paradox, Maddock explains the process his team has used to help the world’s best companies and shows you  how to

• Find needs and opportunity in the marketplace
• Come up with significant market insights
• Create compelling communication (using the actual words your customers use) to convince people to try your new creation

What has worked for some of the world’s most successful companies, when it comes to innovation, will work for you. Start putting the lessons of Brand New to work for you…before the competition does.

Leseprobe

Contents

Foreword

About the Authors

Part I : Preparation and Strategy

Chapter 1 : The Innovation Paradox

A Look at the Numbers

And Then It Really Falls Apart

Where Do We Go from Here?

A Unique Process

The Brand New Strategy

Execution

Coming Up Next

Chapter 2 : Creating an Efficient and Effective Innovation Process

The Big Three: How Does Industry-Changing Innovation Happen?

Coming Up Next

Chapter 3 : Circle #1: Finding the Need

Insight First, Idea Second

Narrowing Your Focus: Segmentation

Be Insight Agnostic

“It’s a wonderful need . . . just not for us.”

When Searching for Needs, Keep These Things in Mind

Coming Up Next

Chapter 4 : Circle #2: Formulating the Idea

Beginning the Process of Ideation

Let Your Mind Diverge

Filling the Idea Out

Putting This to Work

What Would ___ Do: Utilizing Points of Departure

Converge: Distilling Concepts into Categories

Concept Development

Testing What You’ve Come up With

An Ideation Creativity 12-Step Program

Coming Up Next

Chapter 5 : Circle #3: Successfully Communicating (and Profiting from) What You Have Come Up With

A Brilliant Idea Badly Communicated Becomes a Bad Idea

Three and a Half Rules for Improving Your Communication Efforts

Use Their Words as a Springboard

Pay Attention When They Speak

Remember, Your Story May Not Be Their Story

“Huh?”—Clearly Saying What You Mean

Going Commercial (or You Will Never Make any Money If You Can’t Explain What You Have)

How to Utilize Social Media: Changing the Game for the Better

Mastering Communication

Coming Up Next

Chapter 6 : Constructing Your Innovation “Portfolio”

Diversifying Your Innovation “Investments”

The Four Classes of Innovation

How to Divide Up Your Innovation “Assets”

Tactics to Increase Your Success

Budgeting in Your Innovation “Portfolio”

Coming Up Next

Part II : Tools and Tactics

Chapter 7 : Getting Outside the Jar: How to Infuse Outside Experts into Your Innovation Process

Practical Wisdom

Integration of the Left and Right Brain of an Organization

Idea “Parents” Wanted

The Role of Outside Experts in Building Your Innovation Portfolio

Coming Up Next

Chapter 8 : Sustainable Innovation: Creating (and Profiting) from a Green, White Space

Delivering on Needs and Making a Difference

Three Reasons to Find the Green Space

Steps toward Integrating Sustainability into Your Innovation Process

Actions Speak Louder than Words

The 5 Cs of Sustainable Innovation

Coming Up Next

Chapter 9 : Introducing “The Innovation Power Score”—A Method for Measuring the Potential of Your Innovation

The Insight Score

The Idea Score

The Communication Score

Conclusion

Three “Frequently Asked Questions” on the Advantages of the IPS

Coming Up Next

Chapter 10 : Investools: A Case Study in Putting Your Innovation Process to Work

Investools’ Innovation Paradox

If You Did It Once . . .

Conclusion

Acknowledgments

Index

Additional Praise for Brand New

“Maddock Douglas was first to market with the Agency of Innovation model making this book a must-read for any executive seeking the theory and tactics that today’s ‘next level’ companies are utilizing to incorporate innovation strategies into their everyday practices.”

—Marc Roth, President, Home Warranty of America, Inc.

“As a serial entrepreneur, I look at innovation as a silver bullet. Whether you sell software, energy or insurance, the ability to efficiently hit your mark with relevant ideas is the difference between profits and losses. Want more silver bullets? Read this book.”

—Tim Stojka, CEO, Agentis Energy

“Don’t go near this book, let alone open it, if you are looking for the same old answers. Mike and his team rarely visit ‘inside the box’ and, as a result, their ideas and clients tend to more quickly and profitably enter new markets and usher in new products better than the competition. Short of hiring the Maddock team, read the book and keep it away from your competitors. Then, get ready to go to the bank!”

—Jack Daly, CEO, Professional Sales Coach, Inc.

“I have worked with Mike and his team in a variety of diverse categories, applying their creative approach to innovation. Now this book lays it out for all to benefit and drive innovation through their organizations. A wonderful compass for all leaders.”

—Christine Robins, CEO, BodyMedia

“ This book will teach you how to reinvent the value proposition of even the most conservative industries using a proven, outside-in approach that is truly something wonderful.”

—Greg Cohen, President, Moneris Solutions

Copyright © 2011 by G. Michael Maddock. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone], or fax [phone].

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Maddock, G. Michael, 1965-

Brand new : solving the innovation paradox—how great brands invent and launch new products, services, and business models / G. Michael Maddock, et al.

p. cm.

Includes index.

ISBN 978-0-470-64359-4 (cloth); ISBN 978-1-118-09593-5 (ebk); ISBN 978-1-118-09594-2 (ebk); ISBN 978-1-118-09595-9 (ebk)

1. Technological innovations. 2. New products. 3. Creative ability in business. I. Uriarte, Luisa C., 1968- II. Flaim, Javier, 1970- III. Miller, Brett S., 1969- IV. Brown, Paul B., 1954- V. Title.

HD45.M225 2011

658.5'75—dc22

2011005631

Foreword

As the founder of the Entrepreneurs’ Organization and also Gazelles, a fast-growth business consultancy, my life’s work has been devoted to helping aggressive entrepreneurial companies scale. This has given me the opportunity to work with legendary entrepreneurs from the moment they had their big idea to the time they booked their first $100 million in revenue (and moved far beyond).

Typically, people start businesses in fields they know. They are working for a firm; spot an opportunity their company can’t/won’t take advantage of and go off to do it themselves.

But today, there is a different phenomena that is much more fascinating. A significant number of companies—everything from Amazon to Zip cars—are being started by “beginners”; people with no relevant industry background. (Jeff Bezos, creator of Amazon was a “rocket scientist” on Wall Street. Zip Car founder Robin Chase’s background was in international health.)

Why is this significant? Bezos, Chase, and thousands like them are bringing multiple advantages to the table. First, they are not hamstrung by industry best-practices. (They don’t know what they are.) They don’t follow “the rules” about distribution/sales channels. (Again, because they simply are unaware of them.) And they don’t know that what they are trying to do can’t be done, because they never asked an “expert.”

From my experience, established firms tend to dismiss the success of these types as having beginner’s luck. But it is clearly more than that: It is a new way of looking at existing problems.

This is where Mike Maddock starts. I met Mike over a decade ago and have enjoyed being part of his innovation journey. His work has lead to the creation of a brand new category—the innovation agency—which is at its roots a proven process to help big companies act like entrepreneurs; he helps them act like beginners. It is this thinking that Mike and his team deliver in Brand New.

Want to make your company behave like the entrepreneurs that should be keeping you up at night? Read this book.

Verne Harnish

CEO, Gazelles

About the Authors

G. Michael Maddock is the founding partner and CEO of the leading innovation agency Maddock Douglas, which has helped 25 percent of the Fortune 100® invent, brand, and launch new products, services, and business models successfully. A serial entrepreneur, Mike has launched three successful businesses and chairs the Gathering of Titans entrepreneurial conclave at MIT. Mike is a featured columnist for BloombergBusinessWeek.

Luisa Uriarte is a partner and executive vice president of Maddock Douglas where she is the head of research. Luisa has more than 20 years of experience in managing research and consulting projects of international scope, covering more than 30 countries worldwide.

Javier Flaim, formerly an executive vice president at Maddock Douglas, is an expert at repositioning and launching new products and brands. Previously the CEO of Markitecture, a marketing research and innovation firm, Javi is a member of the Vocational Foundation, Inc., a non-profit organization dedicated to helping disadvantaged youth in the New York City area gain the skills they need to achieve financial independence.

Brett S. Miller, a vice president of innovation at Maddock Douglas, is a 20-year marketing veteran who has spearheaded domestic and international innovation initiatives for such clients as Allstate, Blue Cross Blue Shield, BP, Chase, GE, Jim Beam Brands, Kellogg’s, KIA, Kohler, Kraft, LG, Levis, MetLife, Miller Brewing Company, Samsung, Starbucks, Toyota, Unilever, Wal-Mart, and Whirlpool.

A long-time contributor to The New York Times, Paul B. Brown is a former writer and editor for Business Week, Financial World, Forbes, and Inc. He is the author (or co-author) of numerous best-sellers, including Customers for Life written with Carl Sewell and Your Marketing Sucks with Mark Stevens. Paul is a contributing editor to both the MIT Sloan Management Review and The Conference Board Review.

PART I

PREPARATION AND STRATEGY

CHAPTER 1

The Innovation Paradox

The problem is simple, and indeed, paradoxical. Research shows people like new products and services. They want them. And, indeed, they go out of their way to try to find them. Yet companies are truly terrible at providing the new products and services that meet their customers’ needs.

In the 1980s, research showed nine out of 10 new products failed. Some 30 years later, nothing has changed. Our research—confirmed by other firms—shows that nine out of 10 new products still fail today.

Moreover, when you look deeper—and we will walk you through our proprietary data in a minute—you actually find a second paradox within the original paradox: companies know introducing new products and services successfully is something they need to do to ensure a healthy future. And yet they readily concede that they are not devoting sufficient resources to make it happen. And at the risk of having this sound like the business equivalent of a matryoshka (those Russian dolls that nest inside one another) the reality is that there is even a third paradox within the second paradox within the initial paradox: Firms are aware that they have a problem—they openly admit that are not very good at introducing new products and services—but they have made remarkably little effort to improve their batting averages—apparently convinced that introducing new products is inherently a hit or miss process.

When you add all this up, it is easy to understand why there is a huge gap between customers’ desires for new products and the ability for companies to deliver them. We call this the innovation paradox. And the situation is far worse than most senior managers and marketing executives believe.

A Look at the Numbers

Let’s spend a couple of minutes and look at just how severe the problem is by reviewing the research we have at our fingertips. In 2004, 2008, and again in 2010, we surveyed a representative sample of the nation’s best companies. In the first survey we talked to marketers at firms of all sizes. In the second survey we limited our questions to companies that are members of the Association of National Advertisers (an organization of some 300 companies of bigger firms with a total of more than 8,000 brands). And in the third, we went back out to a representative sample of the marketing decision makers. In all three instances, almost half the people we talked to were in senior positions like director of marketing or above. Here’s what we found:

As the first line in Table 1.1 shows, about 80 percent of companies say their futures depend on introducing new products. That fact is not surprising. It is commonplace to hear a CEO say something like, “five years from now, we expect a third of our revenues to come from products that don’t exist today.”

Table 1.1 What Executives Think about Their New Product Prowess

And it is not just the CEO who is preaching about the importance of new products. Wall Street is as well. This excerpt from the Harvard Business Review:

“Top-line revenue growth, especially organic growth, ultimately boosts shareholder value, so investors increasingly demand it. In fact, the presumption of organic growth is baked into companies’ stock value. If you decompose the stock prices of the leading consumer product companies, you’ll see that future growth accounts for as much as 54% of the stock’s value.”1

We added the emphasis in italics. But there isn’t a single senior manager we know who would disagree with this statement. You see proof of it in the second line of Table 1.1, where the majority of executives agree with the statement “our company strategy calls for a steady flow of new products.” What should follow from lines one and two is that companies are pouring tons of money into the new product development process. But that is simply not the case in practice, as you can see from line three of Table 1.1. When asked if they agreed with the following statement: “my company does not dedicate the full resources necessary to properly develop and launch new products,” more than half (53 percent) of ANA members agreed.

Theoretically, that wouldn’t necessarily be a huge problem. If the cost of new product introductions were falling, then a lack of resources is something that could be overcome by having really smart people—those with extensive experience in handling new product introductions—work full-time on getting new products into the customers’ hands. They’d come up with oodles of products, introduce them all into the marketplace, and something would be bound to resonate with consumers.

Theoretically that could work. But the reality is, as line four in Table 1.1 shows, the cost of new product introductions is going up, not down. The majority of people said the cost of new product introductions is higher than it was five years ago. So the “let’s-try-everything-and-see-what-resonates” approach is not going to work. The fact that it is more and more expensive to introduce new products—meaning the cost of new product failure is also climbing—is daunting. And the situation gets even more disheartening when we get to the question of expertise.

The cost of new product introductions climbs steadily higher. That makes bungling an introduction not only embarrassing—but increasingly expensive.

Companies understand what follows from all this and you see the depressing results in line seven: only about a third of executives believe their company “excels” at introducing new products. But, there is hope in that at least half of the people surveyed understand one of their problems in bringing new products successfully to market: They don’t have a fully integrated process for doing so.

They have a process for evaluating acquisitions. They have a process for reviewing people for raises and promotions. They even have a process for ordering paper clips, yet, as line seven in Table 1.1 tells us, they don’t have a process for something that is vital to their company’s future—handling new product introductions.

And Then It Really Falls Apart

What is seemingly clear from everything we have just talked about is that companies recognize that they need to introduce new products successfully. And yet at the same time they concede that they are not as good at the process of introducing new products as they should be. But we say “seemingly” because of the way the executives answered the questions in Table 1.1.

The Executive’s Reactions

The overwhelmingly positive response to the question “we are working to be better at developing and launching new products,” can be read two ways. Everybody says they’re doing that but it also could just be an acknowledgment that senior executives recognize that they have a problem when it comes to new product introductions and they are taking steps to improve the people and processes required to increase their success rate. It could be read that way. But, it also could be whistling past the graveyard. Who wants to admit publicly that they have a problem and aren’t doing anything about it? Of course you are going to say that you are working on fixing a problem—even if you are not really doing very much at all.

And spending an extra minute with the numbers confirms the whistling past the graveyard theory. Executives concede they don’t have a well integrated “new product/service development process and admit they do “not dedicate the full resources necessary to properly develop and launch new products or new services.”

By inference, line 11 supports the whistling past the graveyard theory. Senior executives know they are not good at introducing new products (line seven), and they told us that a key reason for that is that the people they rely on to introduce the new products—brand and product managers—don’t have the requisite skill (line five). And yet, in 2010, only four in 10 companies brought in outside resources to help.

Executives are saying, in essence, “we are going to continue to work on new products ourselves—even though:

a. we know we are not very good at it, (and as we discuss later in this chapter, the “we” includes marketers themselves);

b. we have a terrible track record when it comes to introducing new products successfully, and;

c. we really don’t have a clue what the problem is so that we can improve our performance.”

To be kind, the executives’ reactions do not make sense. Can you imagine any CEO (who wants to keep his job) saying these sorts of things when it comes to business process improvement; or how the finance department should be run; or how they should go about hiring better employees? They wouldn’t dare to . . . so why should new product introductions be any different?

Marketers: One of the Enemies Within

In further looking at the numbers, we noticed marketers poorly graded their company’s ability to introduce new products. That got us to wondering how good they thought they themselves were at it. Their answer: not very.

We surveyed marketers from the same two groups we talked about earlier and said, “please rate yourself in these three main actions associated with new product marketing:

Introducing new products;Developing and introducing line extensions;And repositioning or relaunching a product.”

We asked them to give themselves an A if they were extremely good at an activity; a B if they were good; a C if they thought they were average; a D if they thought they were poor at something; and an F if they flat out stunk in a particular category. Table 1.2 shows how they responded.

Table 1.2 Grading of Strategy, Planning, and Execution

As you can see, the vast majority of marketers gave themselves extremely low marks. For example, if you look at the first column—introducing new products—you see that less than half of the respondents (49 percent) gave themselves an A or B. In the third column—introducing products into new channels or markets—the scores were just as bad.

In fact, the second column—introducing line or brand extensions—is the only place where there were more As and Bs than there were Cs, Ds, and Fs and it wasn’t by much—just 52 percent gave themselves good marks.

Where Do We Go from Here?

So where do these numbers leave us? What do they all mean? Well, for one thing, they mean the New Product Paradox we described at the beginning of this chapter is real. Customers want new products, and many companies are extremely bad at providing them. But we also know something else from the survey results. Companies are just starting to say—reluctantly—in public that they have a problem and are committed to solving it.

Jeffery Immelt, chairman and CEO of GE, in a recent address to shareholders, talked about the need for an “innovation imperative” at his company, whose stock has been essentially flat for years. Steve Ballmer, CEO of Microsoft, said in a recent interview that he believes innovation is the only way his company can satisfy customers and stay ahead of the competition. And William Ford, Jr., chairman of Ford Motor Co., says that from now on, innovation will be the compass by which his company sets its strategy.

Creating new products and services will be at the heart of those innovation initiatives and that, of course, takes us full circle: people want new products and services, and companies want to do a better job of providing them. The problem is they don’t know how. And that is where we come in.

People want new products and services, and companies want to do a better job of providing them. That makes the New Product Paradox that much more frustrating.

A Unique Process

Before we start talking about how to solve the new product paradox, you might have a few questions about who we are and why you should believe us.

Our experience as part of Maddock Douglas (the mind-to-market innovation agency that exists to bring industry-changing ideas to market) positions us perfectly to give you the freshest perspectives on rethinking how companies create anything new. In fact, 25 percent of Fortune 100 companies, and scores of small and entrepreneurial firms, have turned to us to help them identify the biggest unmet needs in their industry, brainstorm game-changing new products and services and business models that address these needs, then brand and launch the best ideas into the market. Solving the new product paradox is the part of the business world we have devoted our lives to and, because of this, we have noticed one thing over and over again: There is a root cause for the failures of almost all new product introductions and it is that, invariably, companies do not have a disciplined, replicable process that employs a mix of creativity and science to introduce new products efficiently and effectively.

Intuitively, most of us could probably list the individual components that need to be included in such a process. For example, they would include:

A dedicated “new product” team.A marketing-driven orientation within the firm (i.e., senior leadership at the company would identify a customer need in the marketplace and set out to fill it, as opposed to having finance, R&D (research and development), or some other function to come up with an idea and see if anyone was interested.Dedicated financial resources.Constant testing and re-forecasting before launch.Recognition that there is no “first-mover” advantage (so it is far better to get the product right than to be first in the marketplace).

The questions then remain: how do you tie all these elements together into a new product strategy, and how do you implement and execute the strategy you’ve developed? Answering these two questions makes up the heart of solving the innovation paradox.

Companies need a disciplined, replicable process that employs a mix of creativity and science to introduce new products efficiently and effectively. We are going to give it to you.

The Brand New Strategy

After more than 20 years working with hundreds of clients and interviewing literally thousands of marketing executives we have developed an over-arching strategy we call Brand New. It is a strategy specifically focused on how to create and introduce new products effectively—and with a far greater rate of success.

Phase 1: Need

There is a natural tendency to want to start with THE BIG IDEA. That is understandable but wrong. The place to begin is to find the needs/opportunity in the marketplace. But all needs are not created equal. They need to be rank ordered not only by size, but also by your organization’s ability to fill them.

Phase 2: Idea

Having identified the need, you come up with literally hundreds of ideas—including business models—that might work. Then the best ideas are refined and optimized using quantitative research to determine which concepts—and in which form—have the greatest chance of being a hit with customers. Here you are looking to discover the precise attributes consumers are looking for in terms of your potential concept’s design, price, packaging, and features.

Phase 3: Communication/Commercialization

This is, we have found, the most overlooked piece of the innovation process. Stellar communication links the idea to the need in the customers/consumers mind and an organization’s ability to make money and have the innovation become a viable commercial success. It’s what gets them to say, “You listened to me and I’ll pay you for coming up with what I told you I wanted.

Execution

Now, it is one thing to have a well-defined process for introducing new products efficiently; it is quite another to make that process a reality. Far too often it is the inability to execute the new product strategy that leads to a worthy product failing in the marketplace. To make sure that does not happen, we will spend a substantial amount of time in this book explaining how you can execute your strategy. But let us make one brief point here: a key part of your implementation plan should call for the creation of interdisciplinary teams that work together to make a new product idea a successful reality.

One of the major reasons new products fail is that individual departments work in a vacuum or silo, having little if any interaction with the overall new product development process and it simply does not work. For example, on its own, an R&D department has no mechanism for discovering what the market wants. It can come up with incredibly cool products, but that doesn’t do the company any good unless the products satisfy a consumer need. As you will see, our process calls for all the departments within a company to work together.

By tying all the departments together during the new product development process (which we will show you how to do in the pages that follow) you greatly increase your chances of coming up with a product that customers want. The net result: It becomes easier (and less costly) to bring to market new products and services that have a far greater chance of gaining acceptance in the marketplace.

It’s a perfect inverse ratio: The more silos, the less chance you have for innovation success.

You Must Remember This

1. It’s a process. Innovation, just like any other part of your business can be managed effectively. In fact, it must be. A failed innovation is both embarrassing and expensive.

2. Begin with the need. The world’s landfills are cluttered with really cool ideas . . . that no one wanted.

3. Break down the walls. The more handoffs (or walls) between departments the greater the chance that your innovation effort will fail.

Coming Up Next

You wouldn’t think of introducing an inventory management system at random, or wait for inspiration to strike before ordering office supplies. Why then would you leave the way you introduce new products or services up to chance?

In the pages ahead, we will provide you with a detailed process to use to efficiently introduce new products time after time.

Let’s begin.

1 Harvard Business Review, November 2004.

CHAPTER 2

Creating an Efficient and Effective Innovation Process

Every year, hundreds of millions of dollars—and thousands of jobs—are lost in what we call “the innovation abyss,” the place where seemingly promising new ideas go to their justifiable deaths.

While some companies have mastered nailing the right insight and consistently delivering evolutionary or revolutionary ideas against it—and create the 10 percent of new products that actually succeed—others spend their time creating new products and services that are at best irrelevant and expensive—and career ending.

If you find yourself struggling with your innovation efforts from time to time, you are probably tempted to ask, “what gives?” The answer—which we’ve learned by working with hundreds of clients over the last 20 years—is relatively easy to explain.

In this chapter, we will detail how industry-changing ideas and products are delivered into the marketplace. Simply put, the companies and marketers we see thrashing about don’t fully understand how cost effective innovation occurs. And even those who have had some success are usually starting in the wrong place and would be more successful—and far more profitable—if they modified their approach. The fact is, there is a proven method to safely and consistently deliver game-changing ideas. But it dosen’t begin where you think.

The Big Three: How Does Industry-Changing Innovation Happen?

Innovation occurs at the synchronized intersection of:

1. A meaningful insight or market need;

2. A new product, service, or business model that meets that need, and;

3. Communication that connects the two.

While the three interlocking rings in Figure 2.1 show you exactly where innovation occurs (you can see it in the middle represented by “MD”), there’s another way to think about it, one that could explain why you might be having trouble introducing new products and/or services successfully.

Figure 2.1 Where Innovation Happens

Think of our definition of innovation as a three-legged stool. Most companies successfully build only one or two of the legs, causing their innovation efforts to topple and fail. You need all three legs, or pillars (if you prefer a building metaphor) to be successful. And you will be a lot more successful, and waste far less money, if you take the right steps in the right order.

Determining the Need to Formulate the Idea

We know that including all three pillars as a part of their brainstorming is not what most companies do. They usually start first with a really cool idea for a product or service idea. For instance, somebody in research and development (R&D) develops a cell phone that will allow you to make calls from the top of Mount Kilimanjaro to anywhere in the world; or a bunch of really smart people sit in a room and decide “what this new Internet thing needs is its own online currency” that can serve as an alternative to credit cards; or someone in the company says, “I have the perfect solution to the fact that there are too many cars on the road, and people are too lazy to walk short distances or take a bike. Why don’t we create a two-wheel motorized scooter?”

In these examples, what resulted from these product ideas were (in order): the Iridium phone, Flooz currency, and the Segway. In each case the product did exactly what it was designed to do. But, in terms of our three-legged model, there wasn’t a very large need. Not enough people cared. (Oceans of red ink, and pink slips by the ream, followed shortly thereafter.) That’s why you want to start by devoting a disproportionate amount of your time to discovering the market need.

Now, if you think you already have The Greatest Idea Ever, by all means test it. Ask if people want to be able to call anywhere at any time (just about everyone would say yes) then tell them what it would cost not only for the phone (a lot) but per minute (yikes!) and then see if your potential market still thinks your new product is a good idea. It’s okay if they don’t. It sounds strange, but failure is a key part of innovating efficiently. You just don’t want those failures to cost you a fortune (more on this later).

It sounds strange, but failure is a key part of innovation.

The best way to develop your new product, service or business model efficiently is by figuring out what the market needs and, more specifically, what the market needs that they would readily accept coming from you, your brand, or a company you could acquire. We will be talking about how you determine that need in Chapter 3. But we also suggest you do more: We will recommend that you infuse outside experts in all of these well-tested methodologies. Ask them to be part of the customer interactions, the data review, and the insight development. They will help you see things that your expertise keeps you from seeing and they will help you come up with even more needs than you would on your own, and this is a good thing. In fact, we’ve literally increased insights ten-fold by adding outside experts to traditional processes. We know larger quantities of insights increases the likelihood of breakthrough ideas.

Now, take the most compelling insights and quantitatively test them to see which ones your customers tell you are the most valuable. While your favorite insight may not make the cut here, you want to fish where the most fish are, so it is important that you leave your ego aside and focus your team on developing products against the needs that rank highest. The process that you go through will be eye-opening and valuable in terms of discovering insights through both successes and failures.

Small Disasters Welcome

Failure isn’t fatal. In fact, as we said earlier, failure is actually a requirement for innovation success. Common sense tells you the odds are ridiculously small that you are going to get your new product or service absolutely right the first time so, in order to make your new idea everything it can be, it needs to be repeatedly soft-launched with both internal stakeholders and external customers, with the understanding that it will be modified (perhaps extensively) based on how they react.

This means you are going to fail—maybe a lot—before you get it right. You need to accept this fact if you are going to do your best work. And it is a concept you must get across to your team—and indeed your entire company—in order to free it from the innovation-limiting shackles of trying to be perfect from the start.