CMO Mondays: The Visionary’s Dilemma

visionarys-dilemma

The Wall Street Journal published an article yesterday entitled, “PepsiCo Wants to Sell Healthy Food, Consumers Want Chips.” In it, reporter Mike Esterl describes the dilemma that PepsiCo‘s CEO Indra Nooyi has been wading through for the last decade since she took the chief executive role: growing a business of nutritious foods while not cannibalizing its empire of sugar and salt rich foods.

When Nooyi came into her new role as CEO in 2006, she focused on capitalizing on the growing market and consumer desire for healthy snacks. But, after having to cut her profit outlook twice in 2011, PepsiCo refocused on its core business of “indulgent products”. The markets have supported this decision, as you can see from the below chart showing PepsiCo’s share price growth.pepsico-stock

In 2010, PepsiCo set a goal of tripling revenue from nutritious products to $30 billion this decade, but given its need to refocus on indulgent snacks, PepsiCo has had to adjust this goal. The new goal is to have sales growth of its nutritious products outpace the rest of its portfolio by 2025.

It shouldn’t be a surprise that visions to change the world and consumer behavior take time. A long time. Decades even. And, for a company like PepsiCo that generates over $60 billion in revenue globally, driving positive change (helping consumers eat healthier) while not cannibalizing its core business of indulgent snacks is a tough balancing act.

Perhaps the example that I think of most is Elon Musk and his companies, Tesla, SolarCity and SpaceX. All of them have big audacious goals – somewhat related and intertwined. In their own way, they’re each pushing towards better energy efficiency and to reduce our dependencies on fossil fuels. And, what Musk’s companies have faced is not unlike what PepsiCo has faced. Consumers say they want to be green, but the mass market of consumers is not actually willing to sacrifice their indulgences in order to be green. Consumers may say they want healthier foods and snacks, but the mass market of consumers are not actually willing to sacrifice their indulgences in salty, sweet goods in order to be healthier.

Musk recognized this in the energy sector and developed a long-term plan to evolve consumer behavior. With Tesla, he started out with a limited edition $100,000+ sports car and targeted wealthy, influential consumers as his customer. This created a luxury brand that consumers aspired to. Since then, he’s been moving down market to provide the same remarkable experience (beautiful car design, driving experience and ever-improving software) at a more affordable price. The main selling point isn’t that Tesla is an electric vehicle. It’s that Tesla provides a remarkable driving experience – and the cars happen to be better for the environment.

Similarly with SolarCity, recently Musk revealed three new styles of solar panels that are designed to replace your roof tiles (see video below). Not only are they beautifully designed, but they’re stronger and more durable than the roof tiles you have on your house today.

Musk recognizes that while consumers say they want to be green, the mass market won’t be willing to sacrifice the aesthetic of their house to be so. So, he’s bringing a solution to market that meets both the aesthetic needs of the consumer and the social desire to be green.

Over time, Musk and his companies will help meet a long-term vision of a self-sustaining house that is off the grid. Your solar panel roof will provide you all the energy that you need, including charging that Tesla you have in your garage. So, you’re fossil fuel consumption goes to near zero.

So, as I think about PepsiCo and Nooyi’s challenge of meeting consumers’ desire for indulgent snacks today, while pursuing a vision of helping consumers be healthier in the future, I think about those incremental steps that Musk has taken over the last decade across his companies to bring his vision to life – a vision that won’t become fully realized for at least another decade. Nooyi started out on her journey around the same time as Musk. She’s a decade in. What can she do to realize that vision in the next decade or more?

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CMO Mondays: Marketing in the Post-Capitalist Society

I spoke to a class of advertising and PR students at University of Texas last week. Below is the Slideshare of the presentation that I gave. This is an updated version of previous presentations I’ve given on my Reciprocity Theory and The Purpose Economy. I dive into foundational human behavior, technological revolutions, socio-economic evolutions of the last fifty years, and what this means for marketers.

CMO Mondays: The New Telecom

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In 2015, Verizon agreed to purchase AOL for $4.4 billion. This was a key acquisition for Verizon, as it looks to deliver more video content (and advertising) on top of its network of more than 100 million wireless users. AOL brought with it an established and growing set of content businesses, including The Huffington Post, TechCrunch, Engadget, Moviefone and Makers – as well as the advertising technologies needed to monetize this content. Indeed, per a Fortune report, CommScore says AOL’s video advertising reaches more than 50% of the U.S. population. Verizon has also been working on an over-the-top video offering since acquiring Intel’s media assets in 2014 and video delivery network EdgeCast in 2013. This year, Verizon agreed $4.8 billion for Yahoo!, which has over 1 billion monthly active users, and also brings content and ad tech into the mix. During this same period, Verizon has sold off several regions of its lucrative FiOS business, and has not expanded into new regions since 2010. Since Verizon closed its $130 billion deal to buyout Vodafone’s 45% ownership over Verizon’s Wireless business unit, Verizon is all in on content and advertising delivered over its wireless network.

AT&T, meanwhile, completed its $48.5 billion acquisition of DirecTV last year. With DirecTV came some 20 million U.S. subscribers and the lucrative NFL Sunday Ticket offering. AT&T also has over 100 million wireless subscribers. Through its Otter Media joint venture with The Chernin Group, AT&T has been acquiring some over-the-top content providers, such as Fullscreen, but nothing has really materialized from this partnership in a meaningful way from what I can tell.

Now, AT&T has announced that it seeks to acquire Time Warner for $85.4 billion. Shares for both companies have already dropped today from the announcement. Shares of Time Warner fell 3.1% to $86.74, while shares of AT&T decreased 1.7% to $36.86. Some in the industry are up in arms about the potential antitrust issues that this deal could bring, AT&T is positioning that it wants the content from Time Warner, so that it can feed that content to AT&T’s wireless, broadband and satellite subscribers, AT&T would also be absorbing Time Warner Cable’s subscribers.

I won’t pontificate about whether or not this deal will go through. Rather, I’m more intrigued the two distinct strategies that Verizon and AT&T are taking. Verizon is acquiring its way into the future, integrating its superior wireless network with premium online content and the ad tech to drive new revenues on top of that wireless network. This is critical given that the mobile subscriber market is essentially saturated. Telecom’s can’t expect to be growing their subscriber bases meaningfully for years to come.

On the other hand, AT&T is taking a very different approach: consolidate with the legacy media businesses and platforms of satellite and broadband.

Which approach will work? If the goal is to capture younger, cord-cutting audiences such as Millennials and Gen Z, while also capturing older audiences of Gen X and Boomers, then it would seem that Verizon has the better shot. Their investing in online content and ad delivery, but AOL and Yahoo! also bring the older audiences from their early Internet days. AT&T, on the other hand, is skating to where the puck has been with little visible investment in where the puck is going – even if DirecTV has seen over 900,000 net new subscribers in the last year since the acquisition.

I’m interested to see how this all plays out over the next five years, as we’ll see the impact of these acquisitions and whether or not the different strategies worked.

Managing for Collective Creativity

collective-creativity

Having spent my career working in creative industries from film and TV to marketing, I’m always interested in learning new ways to maximize the creativity in a team. This has become critical, not only in creative industries, but also in business at large. Collaboration is top of mind for CEOs as a need and skill set to drive innovation, and creativity is at the heart of collaboration.

Harvard professor Linda Hill, co-author of “Collective Genius,” has studied some of the world’s most creative companies. In this TED Talk, she shares a framework for how to harness a team’s creativity. This is an old favorite TED Talk that I thought I’d share with you today. Enjoy.

Welcome to the Post-Capitalist Society

welcome-to-the-post-capitalist-society

“In 2000, President Bill Clinton said in his last State of the Union address: ‘America will lead the world toward shared peace and prosperity and the far frontiers of science and technology.’ His economic team trumpeted ‘the ferment of rapid technological change‘ as one of the U.S. economy’s ‘principal engines’ of growth.”

I read an article in the Wall Street Journal entitled “The Great Unraveling | America’s Dazzling Tech Boom Has a Downside: Not Enough Jobs” by Jon Hilsenrath and Bob Davis. The premise is that the technology industry has not lived up to its promise of job creation – particularly since the year 2000. And, that this disappointment has led to political outsiders like Donald Trump and Bernie Sanders gaining momentum in this presidential race.

The article goes on to list some interesting facts and statistics:

“Google’s Alphabet Inc. and Facebook Inc. had at the end of last year a total of 74,505 employees, about one-third fewer than Microsoft Corp. even though their combined stock-market value is twice as big. Photo-sharing service Instagram had 13 employees when it was acquired for $1 billion by Facebook in 2012…

…The five largest U.S.-based technology companies by stock-market value—Apple, Alphabet, Microsoft, Facebook and Oracle Corp. —are worth a combined $1.8 trillion today. That is 80% more than the five largest tech companies in 2000.

Today’s five giants have 22% fewer workers than their predecessors, or a total of 434,505 as of last year, compared with 556,523 at Cisco Systems Inc., Intel, IBM, Oracle and Microsoft in 2000.”

On the surface, yes, it looks like the technology industry has failed to meet its promise. The younger technology companies founded after the year 2000 are employing less and less people. The jobs of the Industrial Revolution are being replaced by robots and software, and this will only accelerate with the long awaited maturation of artificial intelligence / machine learning. Every business today is (or should be) a technology business in some capacity to take advantage of the operational efficiencies (i.e. cost savings) that technology can provide.

But, a closer look shows that it’s not the technology industry that failed us. It’s our rhetoric and education that failed us. We read the tea leaves wrong about the transformation that technology would bring because we looked at the past to predict the future.

The First Four Revolutions
As I’ve written about before, economist Carlota Perez taught us that every half century, society has a “big bang moment” – a technological breakthrough – that ushers in a new technological revolution.

5 Successive Technological Revolutions of the Last 250 Years

If you consider the five successive technological revolutions we’ve had, starting with the Industrial Revolution in 1771, each created more jobs than the previous. And, this would make sense. With each revolution, we built more and bigger things, and we did it by hand. Physical labor was the currency of capitalism.

6th Technological Revolution Around the Corner

Why the Fifth Revolution Is Different
But, three things changed all that in our current revolution: the Age of Information and Telecommunications, which saw its big bang moment in 1971 with the Intel microprocessor, and which is at its tale end.

  1. Moore’s Law: An observation in 1965 by Intel’s co-founder, Gordon Moore, states that the number of transistors per square inch on integrated circuits had doubled every year since their invention and would continue to for the foreseeable future. This has decreased the size of our computing devices while simultaneously increasing their processing power exponentially for fifty years. And, it is only now beginning to slow.
  2. The Internet: Have you heard of this thing? It’s pretty amazing. Throughout history, innovation has been driven primarily through physical locations. “Hot spots”, as they’re referred to in network science, were typically found where there was a concentration of people and ideas colliding. These hot spots have popped up throughout history from the coffee houses in the Age of Enlightenment to the Parisian salons of Modernism. Some of these hot spots have also been industry specific like Silicon Valley for tech, Los Angeles for film and TV, and New York for finance. The Internet (and the World Wide Web) distributed the hot spot, so that its not restricted to a centralized location. The hot spot became decentralized, and has led to innovations like Safecast, which I mentioned in yesterday’s blog post.
  3. Cloud Computing: Then, cloud computing came in and decentralized computing infrastructure. Suddenly, you didn’t need to buy or lease expensive on-premise servers to build software. You simply rent what you need – and only what you need – when you need it. The price of software development dropped exponentially. Not only do you save on hardware (server) costs, but you save by not needing expensive people that know how to service the hardware.

So, what does this all sum up to? Since the rise of capitalism and throughout the first four technological revolutions, capitalism created more jobs because the primary economic resources were physical assets: gold, land, ships, railroads, skyscrapers, cars, etc. and the labor that was needed to build and manage them. But, while the fifth revolution started this way, it is ending by headed in the opposite direction. The economic force of capitalism, combined with Moore’s Law, the Internet and cloud computing, is driving a reduced need for employees. Today, one can build a highly valuable business with exponentially lower (near $0) infrastructure, supply chain and employee costs. Every non-critical resource simply becomes dead weight.

Capitalism Has Hit Its Tipping Point.
Consider this observation that Tom Goodwin shared in a 2015 TechCrunch article entitled “The Battle for the Customer Interface”:

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

something-interesting-is-happening

The Wall Street Journal article mentioned above highlights that Instagram had only 13 employees when it was acquired by Facebook for $1 billion in 2012, and WhatsApp had only 55 employees when it was acquired by Facebook for $19 billion in 2014.

The winners in the new capitalism are those that can create value with the least resources – including employees.

Why Our Rhetoric and Education Is Wrong
For longer than I can remember, political rhetoric around economic growth has been about job creation and good education to fill those jobs. This made sense given our history. But, what you see today is a frustration that those jobs aren’t being created – at least not in the technology industry. If anything tech is displacing those jobs.

In our new economy, employment looks more like a shorter long tail. As Chris Anderson, author of The Long Tail describes…

“The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.”

longtail

Anderson wrote his original article about the long tail in 2004, describing the effects of the Internet on commerce. iTunes and Amazon are prime examples in the music and CPG categories respectively. But, twelve years after the original article, we can now see that the same effects are happening to employment.  At the head of the tail are the largest employers – slow, lumbering legacy companies with immense overhead. Further down the head are the new class of technology companies – except that they are employing less people than their predecessors. They look more like a small, passionate and nimble tribe – with a minimal number of full-time employees supplemented by an army of flexible, contract workers (to whom you don’t have to provide expensive benefits). Consider companies like Uber, Lyft, Instacart, Luxe and Favor. Then, you get into the long tail. And, these are less so companies; more so, individuals that have learned to make a living through the digital economy. They’re building mobile apps for iOS and Android, creating subscription e-commerce businesses through Cratejoy, or selling craft goods on Etsy. They may even be content creators on YouTube, Instagram or podcasting. Indeed, the Wall Street Journal article highlights that “An Apple spokeswoman says it is ‘creating jobs in new industries like the App Economy.'”

Peter Drucker predicted such a change. In his book “Landmarks of Tomorrow”, he talked about the shift to the “post-capitalist society” where knowledge would become the primary economic resource over land, labor and financial assets. This gave rise to the concept of “knowledge workers” that is so common in management and consulting today. 

Where We Go from Here

“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”

So, our rhetoric needs to shift away from “get an expensive education, so you can get a good job and have a nice, long career” to “learn to learn, so that you can create your own income and be self sufficient.” The United States was built on entrepreneurship – on life, liberty and the pursuit of happiness. If we want to prepare our people for the pursuit, don’t give them a skill and hand them a job; teach them the game of business and let them play.

From Futurist to Nowist

Director of MIT Media Lab, Joi Ito gave TED Talk on becoming a “now-ist” instead of being a “futurist”. In this talk, Ito describes how he was in Cambridge at MIT when a magnitude 9 earthquake hit off the coast of Japan. Ito was panicked, as he watched the news and the press that was coming from the Tokyo power company about the explosion at the nuclear power plant that was only 200 kilometers away from his home where his family was at that time.

The people on TV weren’t telling Ito anything that he wanted (needed) to hear regarding the nuclear reactor, levels of radiation, etc. So, he went to the internet for information instead, and there he found people in similar situations. So, they formed a community called Safecast to measure the radiation and get the information out to everyone else because the reality was that the government wasn’t going to do it for the people. Today, Safecast has 16M data points (the largest open database of radiation measurements), data visualization tools, an app that shows radiation in Japan and around the world, and other resources for the open community.

It’s remarkable to see how people can come together so quickly under a shared purpose to build something of immense value like this. One year ago, I was in Nuevo Vallarta with my family – my wife, three kids and parents – when Hurricane Patricia hit the west coast of Mexico, just 180 miles south of where we were staying. For twenty-four hours we monitored the hurricane from our mobile devices, getting access to news from the U.S. because the Mexican government wasn’t providing any information. All we got from U.S. news outlets was fear-mongering about how deadly the hurricane was going to be – not just because of the winds, but more so because of the tsunami-sized waves that the hurricane would bring ashore. Not at all comforting when you’ve been evacuated under ground (sea) level in a bunker. Having factual, open-sourced data like this in that situation would have been invaluable. The closest I could find was the National Hurricane Center, which became my main source for information during that period.

Ito goes on to discuss his perspective on innovation. Three key takeaways are:

  1. “Deploy or Die” motto – Moore’s Law made the cost of trying new things (innovation) virtually zero. So, innovation has moved to the fringes where makers can make and test things first before they need to hire MBAs and raise funds.
  2. “Learning over Education” – A perspective that “education is what they do to you” whereas “learning is what you do to yourself.” This particularly resonates with me, as I’ve practically googled my way into the career that I’m in. I wasn’t a marketer by training. I stumbled into this six years ago when I left the movie business. But, curiosity and the willingness to test and try new things accelerated my success as a marketer.
  3. “Compass over Maps” – You can’t expect to plan things from beginning to end at the beginning. But, if you have a strong compass, you can discover your way to the outcome you seek. This speaks to being resourceful, which is the first thing I look for in a team member after culture fit. 

Below is Ito’s TED Talk. Hope you enjoy.

Marketing Mondays: Your Innovation Roadmap, Part 5 – Innovation Approaches

Growth Matrix

In Your Innovation Roadmap, Part 1, I introduced the innovation matrix (featured above) and covered Quadrant 1: gaining market share. In Part 2, I covered Quadrant 2: bringing your current offerings to new customers. In Part 3, I covered Quadrant 3: bringing new offerings to existing customers. And, in Part 4, I covered what context to keep in mind in deciding whether or not to pursue Quadrant 4: bringing new products/services to new customers.

In this post, I’ll share two well-known innovation processes and similarities between them, so that you can begin to craft an innovation process that is right for your organization and culture. I’ll also point you to several other innovation approaches that you can dive into deeper.

INNOVATION PROCESSES
Over the last decade, since startups entered the zeitgeist of our aspirational culture, there has been a lot of hype around new approaches and processes that can drive innovation for your startup or enterprise corporation alike. “Just follow this one approach and your innovation initiative will be a huge success!” they spout, persuading eager innovators-to-be to take up their movement. Many of these innovation approaches have been tried and tested by entrepreneurs and executives that now wish to share their wisdom, while others are crafted by consultants and intellectuals who are selling that approach as part of their services. Regardless, I believe that no single approach is right for every organization. But, I do believe that each can serve as a tool in the proverbial ‘innovation toolbox’, so that an organization can test and learn their way into an approach that fits with their culture. Below, I’ll cover two well-known innovation approaches that I have found useful.

Also, important to note is the fact that attempting to teach these techniques via a blog post would not do them (or you) justice. Thus, my goal here is to give you a high-level understanding of the approach and point you in the direction of material that explains these approaches, and others, in much more depth.

The Lean Startup
The Lean Startup, written by entrepreneur and consultant, Eric Ries, introduces the concept of validated learning, which Ries describes as follows:

“Validated learning is the process of demonstrating empirically that a team has discovered valuable truths about a startup’s present and future business prospects. It is more concrete, more accurate, and faster than market forecasting or classical business planning.”

The Lean Startup method applies the lean manufacturing management philosophy that was made famous by the Toyota Production System to startups. The philosophy aims at discovering and eliminating all wasteful activities, and, thus, leaving and focusing only on value-creating activities. Value is defined from the customer’s perspective. Value provides a benefit to the customer; the customer must be willing to pay money for it. Anything else is waste. In the context of a new venture (or ‘startup’), any activities that do not contribute to learning what a customer sees as value are wasteful. As an organization learns more about what its customers recognize as value, it can develop and sell a product that can sustain a business through those customers. Thus, Ries argues that validated learning is the core unit of progress for new ventures; validated learning always achieves positive improvements in the new venture’s key metrics. So, how do we pursue validated learning? Through the scientific method.

For those that don’t remember the scientific method from grade school, it is a process of experimentation that is used to explore observations and answer questions. The process goes as follows:

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The Lean Startup borrows from this, arguing that the two most valuable assumptions that an entrepreneur can make are:

  1. The value hypothesis, which tests whether or not the product/service really delivers value to customers once they are using it.
  2. The growth hypothesis, which tests how new customers will discover a product/service

Once the entrepreneur makes these assumptions/hypotheses, she can craft an experiment to test them. Ries argues that in the Lean Startup, an experiment is the first product. This is a departure from typical, wasteful corporate approaches to innovation, where they invest in long periods of R&D or product development to build a new product, release it to the market and find that customers aren’t willing to pay for it. Instead, in the Lean Startup, product/service development becomes an iterative process of testing and learning your way into a product that is valuable to your customers. This method is captured in the Lean Startup process of: Build –> Measure –> Learn.

In the Lean Startup, the first product (read ‘experiment’) you build is called the minimum viable product (or ‘MVP’). This product is merely an experiment to validate the idea behind the venture: is there demand for the product/service offering, and are customers willing to pay for that offering? Ries gives the example of how Drew Houston, the founder of Dropbox, used a video as their MVP. The video gave a 3-minute faux demo of the Dropbox product before the product was even built. This video grew Dropbox’s beta waiting list from 5,000 people to 75,000 “literally overnight.” It was a simple way to validate whether or not there was demand for the product before investing the time and money to build it. Ries gives several other examples of MVPs, but the key thing to keep in mind when building your MVP is to: “remove any feature, process, or effort that does not contribute directly to the learning you seek.” Then, measure and learn from that experiment, and craft your next hypothesis and experiment to continue the validated learning process.

Lean Startup techniques can be applied to a variety of companies, industries and projects. For example, I used Lean Startup methods while at W2O Group to grow a new and relatively small account (Verizon, which started as a $245K project) to $2M revenues in 2012 and to $5.5M in revenues in 2013, turning Verizon into W2O’s largest account at the time.

We were hired to build a custom social media analytics platform for Verizon, but didn’t have the technological acumen yet. We had one developer and one project manager that still worked off of waterfall development techniques (the PM’s original timeline to deliver an alpha product to Verizon was along the lines of six to nine months!) and no designers, UI or UX practitioners that could create meaningful data visualizations. But, we did have analysts – over sixty of them. So, we quickly pivoted from focusing on the dashboard timeline to focusing on delivering PowerPoint reports from the analytics that we would eventually visualize automatically through the dashboard. The PowerPoint reports were our MVP. And, they sold like hotcakes.

Below are two snapshots of our hockey stick growth. The first chart shows the number of reports that we delivered per month across Verizon in the first twelve months, while building the analytics platform in parallel, as well as our low, medium and high projections for future demand of reports. The second chart reflects revenue growth in the first twelve months.

Verizon hockey stick-reports

Verizon hockey stick-revenues

The analytics product that we built for Verizon then served as our MVP for a new SaaS version that W2O could offer across clients. A newly hired developer, John Steinmetz, and I saw that W2O was building these custom dashboards for other clients, and W2O was losing its shirt because of its consulting/hourly fees-based business model. So, we worked on the side to build a SaaS version. The product launched under the name Footprint and achieved over $1.3M in revenues in its first year. Steinmetz did an amazing job bringing this idea and product to reality.

In his book, The Lean Startup, Ries provides much more in depth techniques and case studies for how to achieve validated learning, including those that apply to large organizations. For example, Ries references how Intuit holds itself accountable for innovation through two KPIs (key performance indicators):

  1. The number of customers using products that didn’t exist three years ago, and
  2. The percentage of revenue coming from offerings that didn’t exist three years ago

I highly recommend reading The Lean Startup, so you can see how to apply its approach to your business.

Design Thinking
Design Thinking has been getting a lot of buzz over the last five years or so, as large companies are now looking to establish their innovation engines to compete with the startups that are ripe to disrupt them. Having seen Apple‘s success in becoming the most valuable company in the world primarily through launching wonderfully designed products, CEOs are hungry for their own design forward innovation. IDEO and frog are perhaps the two most well-known players in this space, consulting organizations on assimilating Design Thinking into their daily activities. Both have worked with Apple since the early years. And, IDEO more recently counseled IBM in creating their Design Thinking approach, which you can find here.

Design Thinking is a method for innovating routinely. It puts customers at the forefront through empathy. The goal is to empathize with the customer, which often starts with behavioral observation. What are they doing? How are they doing it? Why are they doing it? But, ultimately needs to move to understanding people’s motivations and core beliefs.

IDEO_3 factors in an innovation program

Each innovation program must align across three factors:

  1. PEOPLE: is the offering desirable by the target audience (customer)?
  2. TECHNICAL: is the offering technically feasible with today’s technologies?
  3. BUSINESS: is the offering economically viable within a business model?

Finding the sweet spot between desirability, feasibility and viability is what IDEO and the Stanford d.school define as Design Thinking.

This method follows a four-step process: Inspiration –> Synthesis –> Ideation/Experimentation –> Implementation. IDEO partner, Chris Flink, wrote an excerpt explaining their Design Thinking approach in the book Creative Confidence, written by IDEO co-founders, Tom Kelley and David Kelley. That excerpt is highlighted below:

“INSPIRATION
Don’t wait for the proverbial apple to fall on your head. Go out in the world and proactively seek experiences that will spark creative thinking. Interact with experts, immerse yourself in unfamiliar environments, and role-play customer scenarios. Inspiration is fueled by a deliberate, planned course of action.

To inspire human-centered innovation, empathy is our reliable, go- to resource. We find that connecting with the needs, desires, and motivations of real people helps to inspire and provoke fresh ideas. Observing people’s behavior in their natural context can help us better understand the factors at play and trigger new insights to fuel our innovation efforts. We shadow and do interviews with a variety of people out in the field. We speak to ‘extreme users,’ for example, discovering how early adopters make clever use of technology. Or, if we are redesigning a kitchen tool like a can opener, we may observe how elderly people use it to look for points of frustration or opportunities for improvement. We look to other industries to see how relevant challenges are addressed. For instance, we may draw parallels between customer service at a restaurant and the patient experience at a hospital in order to improve patient satisfaction.

SYNTHESIS
After your time in the field, the next step is to begin the complex challenge of “sense-making.” You need to recognize patterns, identify themes, and find meaning in all that you’ve seen, gathered, and observed. We move from concrete observations and individual stories to more abstract truths that span across groups of people. We often organize our observations on an ’empathy map’ or create a matrix to categorize types of solutions. During synthesis, we strive to see where the fertile ground is. We translate what we’ve uncovered in our research into actionable frameworks and principles. We reframe the problem and choose where to focus our energy. For example, in retail environments, we’ve discovered that if you change the question from ‘how might we reduce customer waiting time?’ to ‘how might we reduce perceived waiting time?’ it opens up whole new avenues of possibility, like using a video display wall to provide an entertaining distraction.

IDEATION AND EXPERIMENTATION
Next, we set off on an exploration of new possibilities. We generate countless ideas and consider many divergent options. The most promising ones are advanced in iterative rounds of rapid prototypes— early, rough representations of ideas that are concrete enough for people to react to. The key is to be quick and dirty— exploring a range of ideas without becoming too invested in only one. These experiential learning loops help to develop existing concepts and spur new ones. Based on feedback from end users and other stakeholders, we adapt, iterate, and pivot our way to human-centered, compelling, workable solutions. Experimentation can include everything from crafting hundreds of physical models for delivering transdermal vaccines to using driving simulators for testing new vehicle systems to acting out the check-in experience at a hotel lobby.

IMPLEMENTATION
Before a new idea is rolled out, we refine the design and prepare a road map to the marketplace. Of course, rollouts can vary wildly depending on which elements of an experience or product are involved. Going live with a new online learning platform is very different from offering a new banking service. The implementation phase can have many rounds. More and more companies in every industry are beginning to launch new products, services, or businesses in order to learn. They live in beta, and quickly iterate through new in-market loops that further refine their offering. For example, some retailers launch pop-up stores as a way to test demand in new cities. And Boston-based startup Clover Food Lab began with a single food truck at MIT to gauge the market for its sustainable vegetarian food before the company committed to opening brick-and-mortar restaurant locations.”

Like Lean Startup, Design Thinking believes in an iterative approach to innovation. Its Three Rs of Prototyping – (1) Rough, (2) Rapid and (3) Right (referring to building several models/prototypes focused on getting specific aspects of a product right) – are not unlike Lean Startup’s concept of the MVP. At first glance, Design Thinking may seem more qualitative in its approach, where as Lean Startup seems more quantitative. But, if you dive deeper, they are quite similar.

For more information on Design Thinking, I recommend reading Creative Confidence, as well as perusing the d.school’s methods.

Other Innovation Processes
There are countless other innovation processes out there. The virtual aisles of Amazon’s Kindle library are filled with them. But, below are some that are worth a read:

Once you’ve read your way through these, I invite to you reference the Reading List page on this site, where I highlight other books, papers and articles that have impacted my thinking.

To read about Quadrant 1 – grow market share – click here.

To read about Quadrant 2 – new markets – click here.

To read about Quadrant 3 – new offerings – click here.

To read about Quadrant 4 – macro and micro context in bringing new offerings to new markets – click here.