SCOTT ANTHONY, OF INNOSIGHT AND THE AUTHOR OF THE LITTLE BLACK BOOK OF INNOVATION: HOW IT WORKS, HOW TO DO IT, SHOWS HOW TO FIND HIDDEN OPPORTUNITIES FOR INNOVATION

The insight that sparks innovation appears to occur randomly. After all, the iconic shorthand for innovation is a light bulb, implying that ideas come from sudden flashes of inspiration. While such flashes are surely good things, it is hard to depend on them, particularly if you are at a company that needs to introduce a steady stream of innovative ideas.

Steve Jobs once said, “It is not the customer’s job to know what they want.” That’s absolutely right. It is yours. And don’t think you don’t have a customer because you work in an internal support function or for a company that provides components or services. Everyone has a customer, whether it is a purchaser, user, or co-worker.

“MORE THAN 50 YEARS AGO PETER DRUCKER WROTE,

‘THE CUSTOMER RARELY BUYS WHAT THE COMPANY

THINKS IT SELLS HIM.’”

The quest to identify opportunities for innovation starts with pinpointing problems customers can’t adequately solve today. More than 50 years ago Peter Drucker wrote, “The customer rarely buys what the company thinks it sells him. One reason for this is, of course, that nobody pays for a ‘product.’ What is paid for is satisfaction.” Companies think they are selling products and services, but in reality people hire those products and services to get jobs done in their lives. As marketing guru Ted Levitt quipped to his students a generation ago, “People don’t want quarter-inch drills–they want quarter-inch holes.” A problem arises, and the customer looks around and chooses the solution that gets the job done better than competing alternatives.

To discover your quarter-inch holes, obsessively search for the job that is important but poorly satisfied (for more on the underlying theory of jobs to be done, see The Innovator’s Solution by Clayton M. Christensen and Michael Raynor). Innosight’s research and field work over the past decade suggests that following three specific activities can increase the odds of identifying innovation opportunities.

1. GET TO CONTEXT

In 2000, when A.G. Lafley became CEO of Procter & Gamble, he found a company that had lost its way. The stock had plunged almost 50% after a March 2000 warning that the company would miss earnings estimates. Lafley looked for simple ways to reenergize that company’s innovation energy. He came to the conclusion that P&G needed to fundamentally reor

ient itself. The company was world renowned for driving decisions based on deep customer understanding, but upon reflection, Lafley realized that the company had drifted away from that understanding.

Lafley is gifted at communicating complicated ideas in simple ways. He developed a simple mantra to refocus P&G: The consumer is boss. He would say something along these lines: “Fellow P&G-ers, I’d like you to meet your new boss. You may think that I, as your CEO, am boss. That’s not right. You might think that the board of directors to which I report is boss. That’s not right. You might think our shareholders are the bosses. That’s not right. You might think your line manager is boss. That’s not right. We have one and only one boss that matters. The consumer. The consumer is boss.”

Lafley urged P&G to understand their boss as never before. P&G had to hear what the consumer was saying and, much more importantly, tease out what the consumer wanted but couldn’t articulate.

“ONE OF THE DIRTY LITTLE SECRETS OF INNOVATION

IS THAT EVEN THE MOST WELL-INTENTIONED PEOPLE LIE.”

To do this, Lafley worked to create a culture where everyone in P&G–from the chairman down–would spend time living with consumers, shopping with consumers, or working alongside consumers. He would describe invaluable insights he personally obtained in his career by spending time in the market. For example, while Lafley worked on Tide branded laundry detergent, P&G would regularly administer quantitative surveys to assess the quality of its product and packaging. Consumers reported that they loved Tide’s packaging (at the time, Tide was packaged in cardboard boxes). Yet, when Lafley was interacting with a consumer, he noticed that she almost always used a screwdriver or scissors to open the Tide box. Lafley realized that the woman didn’t want to risk breaking her nails opening the cardboard box. She said she loved the packaging because she didn’t know of any alternatives, but in reality, she had to find a creative way to open the box because of its design limitations.

Many P&G products trace their inspiration to these kinds of observations. For example, watching a woman grow frustrated when she spilled coffee grounds on her floor helped to inspire P&G’s Swiffer quick cleaning line, which today produces more than $1 billion in annual revenue.

One of the dirty little secrets of innovation is that even the most well-intentioned people lie. They say they will do things they won’t, and purport to have interest in things they don’t. Spend time in the market so that you can know the customer better than they know themselves.

How to get started: Detail the amount of time you spent with customers or key stakeholders in the last three months. Find a way to triple that time.

 

2. WATCH FOR WORKAROUNDS

Carefully studying current and potential customers often highlights workarounds that customers create to make up for the limitations of existing solutions. Drilling into these compensating behaviors can help to unearth innovation opportunities.

Consider jeans shopping. Research shows that women find it the second-most intimidating shopping experience, behind shopping for swimwear. In 2009, as part of an ambitious innovation program, VF Corporation, which makes Wranglers and Lee Jeans, began to spend more time with customers in order to understand specific points of frustration.

One trip to a local department store proved particularly illuminating. Executives watched as a prospective female customer shopped for a new pair of jeans. She wandered around the endless racks of clothes in the store, picking up pair of jeans after pair of jeans. The VF team was struck by two observations: First, the sheer volume of jeans the woman brought into the dressing room. Second, the fact that the woman had picked up multiple sizes of just about every pair she was trying on.

The executives assumed that she must have recently experienced a weight change, so she was unsure of her size. But in fact it turned out that her experience taught her that the sizes that appeared on the labels of jeans only loosely related to what would actually fit. Her workaround involved bringing in volumes of pairs of jeans in order to find one good fit.

“THE INNOVATION EFFORTS CREATED

$100 MILLION IN INCREMENTAL REVENUE.”

These observations helped the company focus its innovation efforts on the jeans-buying process. VF changed the labeling on its jeans, developed innovative display mechanisms in retail stores, and launched an online campaign where noted style icon Stacey London helped women find jeans that would be most appropriate for their body type. In early 2011, VF reported that these and related innovation efforts had created $100 million in incremental revenue in its jeanswear division.

How to get started: Lead a round-table discussion to identify compensating behaviors that your company’s solution forces customers to follow.

 

3. FOCUS ON NONCONSUMERS

The natural tendency for would-be innovators is to study existing customers who participate in existing categories. By all means do that. But also look for people who face some kind of constraint that inhibits their ability to solve a pressing problem they are facing in their lives. Apple, Southwest, Ikea, Nintendo, and many more companies trace their success to unlocking demand that was pent up because existing solutions were too expensive or complicated. These companies found a market opportunity just sitting there, waiting for someone to develop a convenient, affordable solution.

“LOOK FOR PEOPLE WHO FACE CONSTRAINTS THAT

INHIBIT THEIR ABILITY TO SOLVE A PRESSING PROBLEM.”

Indian conglomerate called Godrej & Boyce used this approach when it developed its ChotuKool refrigerator, designed for 85% of the Indian population who didn’t purchase refrigerators. These consumers wanted some of the benefits of refrigeration, but needed something that was smaller, more portable, and less power hungry. The ChotuKool addressed these barriers to consumption. The size of a small cooler, it costs an affordable $70 and is battery powered, so it can run off the grid when electricity is down. The product exceeded sales expectations during a trial launch in 2010. In early 2011, Godrej won an award from the Indian prime minister for its efforts, with sales accelerating dramatically.

It takes some mental discipline to look to markets that don’t exist. But that discipline can pay off in the form of growth opportunities that are hidden in plain sight.

How to get started: Write down five things that a coworker or friend can only do by relying on an expert or going to a central location. Think about ideas that would let these people do it themselves.

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Spending time with customers, watching for workarounds, and exploring nonconsumption helps to highlight exciting innovation opportunities. Of course, there’s more to innovation than the spark of an insight. Innovators have to translate that insight into an idea that gets the innovation job done and delivers against whatever metric matters (revenues, profits, process performance, employee satisfaction, and so on). But the right starting point makes the journey infinitely easily.