AN INTRO TO

Human-Centered Innovation

A guide to discovering your innovation sweet spot

by Kristann Orton,Chief Innovation Accelerator at Inceodia

http://www.inceodia.com

Table ofContents

Introduction - Discovering Your Innovation Sweet Spot

1 – Desirability, Do Your Customers Really Need It?

2 – Feasibility, Why You?

3 – Viability, Will It Fly?

4 – Human-Centered Innovation Learning Loop

Introduction

So you want to innovate. You have a great idea that could be game changing for your business. Your idea may even have the potential to improve greater good for society. But how can you validate the idea without a huge investment? And once you have validated it, how do you convince others to help you implement it without risking your career?

Peter Drucker famously stated that the primary purpose of a business is to create and keep customers. To do that well, he argued, the core functions of an operation are innovation and marketing.

• Innovation – to continuously discover, build and deliver unique solutions that generate lasting customer value

• Marketing – to create and keep customers through compelling product-market fit

The purpose of profit in this model is to support these functions of innovation and marketing, to fuel the creation of customers. The primary goal of operations is efficiency and effectiveness, streamlining a machine that is purpose built to deliver that customer value.

Note that in this model, the primary purpose of business is not profit. Instead, profit takes a supporting role to customer value. The outcome? A seamless, effortless contribution to society and an organization filled with engaged employees.

If you are skeptical, look at the Wall-Street Journal’s list of 250 best-run companies for the 7 Companies That Do Everything Well. While this is a diverse list, the one area that these seven companies scored highest was customer satisfaction;

“Companies that are more customer-centric innovate in more powerful ways,” according to Ranjay Gulati from Harvard Business School. He believes that this is the strongest indicator of future success, a prediction I have seen fulfilled again and again.

Customers Are the Source of Innovation

Innovation Sweet Spot

The ideal innovation process is the trifecta of desirability, feasibility and viability. If ideas for innovation meet all three criteria, then they contains these essential characteristics:1. A desirable solution, one that your customer really needs2. A feasible solution, building on the strengths of your current operational

capabilities3. A viable solution, with a sustainable business model.

Desirability, Feasibility, Viability

“ If you miss any one of these, implementing your idea becomes riskier and costlier.

“The most effective way to explore your idea for innovation is through the lens of customer desirability, operational feasibility and business viability, in that order. Unlike traditional product-first approaches, this method starts with the creation of customer value, and then explores whether your business is uniquely suited to build and deliver that value.

CHAPTER ONE

1

Desirability - Do Customers Really

Need It?

Desirability

A test for desirability centers on whether your solution is a nice-to-have or a must-have for your customer. To be truly desirable, you need to solve a problem for your customer, to help them complete a task that they are struggling with.

There are two definitions for desirable in Merriam Webster; both must be true to pass the test for desirability.

1. having pleasing qualities or properties : ATTRACTIVE

2. worth seeking or doing as advantageous, beneficial, or wise : ADVISABLE

If your solution is desirable, it is both beneficial and attractive. It helps them do something they couldn’t do before, simply and elegantly. Maybe they have elaborate workarounds. Or maybe it takes a lot longer with greater effort than it should. Maybe the result is less than satisfactory.

This is the jobs-to-be-done theory of innovation, an approach defined by Clayton Christensen that explores why a customer “hires” a product to help them get something done. He estimates that 97% of new products fail because they aren’t a good fit for the job and don’t deliver a good experience. You can improve your chances by deeply understanding your customer’s functional, emotional and social measures for success.

How are you contributing to your customer’s success?

“ Desirability tests whether your innovation is solving the right customer problem

“

To explore the desirability of your idea for your customer, use 1:on:1 interviews and observation to answer the following questions:

• What task am I helping my customer complete?

• What does successful completion of that task look like for them?

• What outcomes do they try to avoid?

Looking at what they are trying to do and why it is important to them puts yourself in their shoes, lets you look at your solution idea from their eyes. If you are solving the key pain points they encounter when trying to complete this task, your solution has met the first test for desirability. If not, and there are other pain points that you haven’t addressed, then pivoting your solution might put you on a better path.

Don’t think that this approach only works if you are designing new products. Internal improvement ideas have users with unmet needs; if you don’t make your solution desirable, it won’t be used.

“ Use the desirability test with users of internal improvements, not just external customers.

“

Photo by rawpixel on Unsplash

Case Study: How Tesla Increases Desirability

As an example, let’s look at two emerging markets, car sharing and electric cars. The customers who are drawn to both are concerned about two things: the environmental impact of driving a gas-powered car, and the cost of ownership. Tesla has primarily focused on building cars that are environmentally friendly. While this works for an upscale niche of people, there are many others who can’t afford to have a Tesla sitting in their driveway, and who are concerned about both the cost of ownership and the environmental impact of building one car for every person.

So Tesla has been exploring other ways to help customers with their job-to-be-done: get where they want to go without contributing to climate change. They are investing in autonomous driving technology with this key customer success metric as a focus. Once Teslas become autonomous, they can drive others around after their owner has reached their destination. This approach can increase the desirability of the vehicles for their target customer and provides direction for the Tesla team to also design their cars for share-ability.

CHAPTER TWO

2

Feasibility – Why You?

Feasibility

A test for feasibility measures how well the operational capabilities of a business are leveraged in a new solution. It asks the organization to look internally and objectively assess their strengths — technology, financial, brand, customer service, partnerships, etc. If a new solution can leverage ~80% of current operational capabilities, and new capabilities can be built where an organization is already strong, it will strengthen the foundation of the company and the competitive advantage of the business.

Often teams believe that a feasible solution is one that can be built. They explore whether they have the capabilities and the talent to build it themselves or whether they will need to purchase additional assets. But the exploration of feasibility shouldn’t stop at build vs buy. A feasible solution is one that should be delivered by you.

Feasibility asks the question, will building this solution make our business healthier and stronger? If a solution requires building completely new capabilities, the investment is riskier because of the amount of resources required and because it may change the market’s perception of the company, not always for the better.

One of the hardest aspects of testing for feasibility is understanding market acceptance, whether your idea contributes to your brand. This is where customers and partners can help. Use them as a sounding board for exploring nuances of how you deliver. Product vs service, sold direct or through channels, supported by you or by partners, your customers can help you determine best fit.

Are you building on your strengths?

“ Operational feasibility explores not just can you build it but should you.

“

As an example, lets assume the 7 companies in the WSJ 250 study from chapter 1 were exploring helping consumers monitor the health of their hearts. They have talked to their customers, confirming that a wearable device would be a desirable solution. Now they need to explore feasibility, how their operation could best deliver that solution.

While the solution is a wearable device, not every company should design, build and deliver that consumer product to the market. Here are some ways these companies could solve the customer problem and build on their operational strengths:• Apple – add heart monitoring capabilities to their watch and an app on their

phone• Intel – create heart monitoring hardware that could be embedded in wearables• Accenture – help watch companies transform their wearables• P&G – create consumables that improve monitoring contact points• 3M – build wearable read-outs that could be shared with physicians• Nike – heart monitoring build into their clothes and a heart-healthy workout

evaluation application• Edwards Lifesciences – services that allow physicians to monitor their patient’s

heart and alert them of potential issuesNot every one of these companies is delivering a wearable device capable of heart monitoring but through smart partnerships, the end result for the customer is a solution that solves their problem. And because their solutions are uniquely tuned to their strengths, they will be hard for their competitors to match.

Operational strengths of the WSJ 7 most customer-centered innovative companies, assembled from their mission statements

Often, I see the worst offenders of the feasibility test in the copycat innovators category. These are teams that see their competitors winning with a solution and feel the only way to keep up is to build a similar solution. They call this innovation — after all, it is something their business hasn’t done before. But their competitors have built solutions on their own operational strengths. Trying to mimic those strengths will incur a lot of effort for a solution that will probably always be in second place.

Looking at the Tesla example again, notice that they are not proposing they build a car sharing service and compete with Car2Go or Zipcar, who have operational strength in the logistics and insurance of sharing cars. And they are not suggesting a ride share service that competes with Uber or Lyft who have built capabilities around transactions between drivers and passengers. Instead they are building on their core capabilities and brand strength to design an autonomous car that has been built for the sharing economy.

In fact what Tesla should do is build a platform for car and ride sharing in their Teslas so that it is easy for owners to participate in these ecosystems, increasing the value of the car for their customers. This is building on Tesla’s core capabilities as stated in their mission statement, “to accelerate the world's transition to sustainable transport.”

“ Feasibility tests whether your innovation increases your operational strengths.

“Case Study: A Tesla View of

Feasibility

CHAPTER THREE

3

Viability – Will It Fly?

Viability

The final test for your innovation idea focuses on the value chain of your solution to ensure that it is viable now and in the future. Testing for viability asks, does our business model fit with the way our customers want to use and pay for our solution? Is the way we build our solution and the way we buy from our suppliers profitable? And viability looks beyond profit to sustainability to ensure that your business contributes to the greater good of your community and society.In his Business Strategy Table blog post, Grant Pease from Innovation Catalyst Group argues that while the business model canvas is an important step, it only provides room to explore one model. The strategy table is a great way to explore different business models for an innovation. This exploration should be a key part of every iteration of your idea. At the core of the business model canvas is the customer value proposition. The customer value proposition map provides a way to describe exactly how your solution delivers key customer benefits that alleviate pain points and improve their experience. This value prop map is one of the clearest ways to describe the viability of your idea to stakeholders and team members using the format of a mock press release. At Amazon, any employee can present an idea to the executive team, but they have to do their homework. Innovators create a narrative that is limited to 6 pages, (although it can have more in appendices to back up their hypothesis) written like a press release for the future when the innovation goes live. A good press release reads like a story that develops from pain point to solution:• In the past it was like this …• Then something happened ….• So now we should do this … • So the future might be like this …

Do you have a sustainable business model?

“ Include your business model as a key part of your innovation.

“

Strategic Options for consumer heartrate monitors

To create some strategy tables for your team to explore• For each section of the business model canvas where you have a decision to

make, brainstorm some of the choices available to you. What key activities will you need to be engaged in? Who can you partner with? What are different value propositions tuned to different customer segments?

• Explore some strategic options for your innovation, tuned to the value you can deliver to the market. For example, your solution could be high touch, lowest cost, customized, best quality, etc.

• Follow each strategic option through the strategy tables. For example, if your strategy is high touch, what choice would you make for channels, revenue streams, costs, etc.? What choices will you have to make to deliver the high touch value proposition?

At the end of this exercise, choose the strategy that fits best with your desirable and feasible solution and explore how your organization will be able to scale this business model in the long term.

Returning to the WSJ 7 customer-centric innovators from chapter 1, above are some strategic options and choice points that these companies could explore for helping consumers with monitoring their heart. A warning: you might conclude that each of these strategic options are only available to some of the 7 companies but I don’t think that is the case. For example, Intel could develop very accurate heart monitoring technology and connect it with an app, putting “Intel Inside” any one of these strategic options; Edwards Lifesciences could develop a service that connects healthy heart experts with consumers that would be a platform play for any of these strategic options. The key is binding the value proposition with core capabilities, and then grounding it in a scalable business model.

Viability may be the hardest test, but it shouldn’t be skipped. There have been too many examples of companies that built solutions for short term profit without considering the long-term impact. One of the smartest moves that Musk made with Tesla is to build infrastructure to support drivers who needed to recharge for longer trips. His shift towards designing for the sharing economy shows similar foresight, ensuring his cars will be able not only to fit into this trend, but lead it.Returning to the proposition that the purpose of business is to create and keep customers, viability looks at how well your operations can engage new customers and keep existing customers. Experience is a key component for long-term viability, so your solution needs to be consistent across all touch points where your team engages with customers. Viability tests whether the business model you selected can be sustained cost effectively to deliver the experience in the long run. Leveraging the greater ecosystem of partners or complementary services is the secret sauce to achieving the delicate cost balance of delivering an excellent experience.Tesla is smart to focus on building their cars to participate in the car and ride sharing ecosystem. But it is not enough to pass off a piece of the experience to someone else. True industry leaders think about the entire customer journey and engage with ecosystem partners to deliver a good experience throughout that journey. For example, Tesla could work with Lyft to create a “Tesla Inside” premium ride share experience. And they could work with car share companies to create a branded experience in their app, a “Tesla Exclusive” experience. Then they can ensure that the Tesla teams selling and supporting their customers don’t pass issues with these experiences off as “not our problem” but instead follow up with ecosystem partners to solve the problem on behalf of their Tesla car owners.

“ Viability tests the long-term sustainability of the experience you deliver.

“Case Study: Long-term Viability of

Tesla Car Sharing

CHAPTER FOUR

4

Conclusion

Photo by AbsolutVision on Unsplash

HCI Learning Loop

Desirability, Feasibility and Viability results in the best innovation when conducted iteratively, with each cycle focused on learning about your customers, capabilities and business model. This Human-Centered Learning Loop approach ensures you avoid the typical bureaucratic scenario that produces innovation failure, where a short cycle of implementation is expected to produce a mature business. Instead of a fully formed solution expected as the output from innovation, an expectation that often results in trying to scale the wrong thing, the expected output is deeper knowledge and expertise. Only when the solution passes the test for desirability, feasibility and viability does implementation for scale happen.

Innovate through Learning Loops.

The Human-Centered Learning Loop approach also allows the organization to invest incrementally in an idea. Instead of a big up-front investment, each 8 – 12 week learning loop is resourced independently and concludes with a proposal for further investment. Drawing from Agile methodology, this allows the team to step back and ask, “what should we invest in next?”, comparing an idea to others awaiting resources. And because investors have received a return from their investment –learning about possible solutions to a customer problem – the organization doesn’t suffer from the same sunk-cost fallacy that keeps an innovation alive past its expiry date, resulting in wasted time and money.

Do you want to take your idea for innovation to the next level?

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