Serious about innovation? Identify problems that matter.

Innovation and adaptation are becoming increasingly important. Today, companies need to continually rediscover and reassess their own added value. This is partly due to distinctions between business domains blurring and merging into each other, for instance we see mobility players becoming energy players and e-commerce parties going into logistics. The only constant is the contact your company has with your customers. This should mean translating your customers' underlying needs into your company delivering the right services at the right time, at the highest possible standard.

The main challenge is alternating the focus on being relevant now, and in the future. Do you continue doing what works well now or should you start looking at new things? That’s the innovation dilemma that Clayton Christensen describes in his book of the same name . Successful companies that only listen to their customers can easily be overtaken by disruptive start-ups that are redefining the market. They serve a 'forgotten' target group with poorly developed technology and improve it step by step. The textbook example of this is the introduction of small Japanese cars to the North American market. They were affordable, and accessible for students, unlike the established American car brands that only offered large, luxury cars. Today, Japanese car brands control 40% of the U.S. market.

Problem value analysis

Innovation is essential to retain relevance in the long term. In practice, however, a lot of time, money and energy is wasted on solving the wrong problems. That's because of an ill-defined pain point, an unattainable goal, or a biased solution that someone in the company has fallen in love with. One of the reasons for this is the tendency to want to think directly in ideas and solutions instead of taking a step back and thinking about the problems themselves. Why is this a problem? Who does this affect?

This article was originally published on Emerce.nl

I often use this picture in innovation sessions. A girl sleeping at school: what does she need? The immediate reactions are, a bed, rest, sleep. And then the conversation gets going. Why is she tired? Why does she need rest? The need comes from learning, study, and a test week. She can't handle the stress and ultimately, it’s not a bed she needs, but study guidance.

With customer interviews you can identify the situation and the context that problem occupies. It's not always about what customers say, it’s often in the small nuances that you find in the details that allow you to better understand the problem that you need to solve. A good tool for this is the Five whys methodology of Toyota founder Sakichi Toyoda: by repeating the why question five times, both the nature of the problem and the solution become clear.

Finding the right intersection

Every innovation process starts with a Discovery phase. This is where you identify the right course of action by focusing on the right problem. You can do this with the following three elements:

Trends. Start by looking at major developments in the market, in the digital field, new business models, and your competition. What are the dominant trends shaping your market?
Clientele. What are the jobs to be done? What are the pain points, fundamental needs, challenges, and frustrations of your customers? How are they dealing with them now.
Superpowers! What characteristics and assets do you have as a company? This includes your passions, ambitions, and identity on the one hand and your employees, knowledge and skills, brand, and data on the other. In short: what can you do?

If you look at your current problems in light of future trends, the needs of your customers and your own superpowers, you’ll often find much better problems. You can shift your focus because today’s problems will cease to be problems because of the influence of certain future trends. Or because the problem that you think is a problem is experienced very differently by your target group. Or because problems do not fit with what you are good at. In short, if you look at your problems from these three perspectives – trends, customers, and superpowers – you'll be able to identify a problem that’s worth solving and you'll be free to create and validate hypotheses and concepts, experiment and learn what works and what doesn't.

Choose your horizon

An essential question for innovation is how far into the future you should look as a company. McKinsey's Three Horizons Model provides a practical structure for distributing focus and assets:

Horizon 1: Small steps that ensure continuous innovation of the existing business model and daily business processes.
Horizon 2: Extending the existing business model to new customers, markets, or goals.
Horizon 3: Creating new opportunities to explore uncharted territory. These are disruptive innovations with the potential to create new markets.

Each horizon requires a different focus, management, tools, and goals. Previously, delivery times were attached to each horizon: 6-12 months, 1-3 years and at least three years. Today, these horizons are no longer tied to time. Another way to look at this model is from the ambitions that you set yourself as a company. How high do you set the bar? Are we going to improve our current game (Horizon 1), are we going to change the rules (Horizon 2) or are we going to create a whole new game (Horizon 3)?

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Making a real impact

Innovation that responds to the big trends, uses your company’s superpowers, offers real value for your customers, and has relevance doesn't always guarantee impact. For that you also need reach, and that’s where start-ups differ fundamentally from the large corporations. These are the brands with the arrogance to actually roll out innovation in the market. The challenge is how to link large corporations to start-up ecosystems in a positive way. The perfect quote for this comes from entrepreneur Peter Diamandis: "The best way to become a billionaire is to help a billion people." No matter how good your innovation is at solving a problem, without scale you won't make an impact. The biggest problems in the world are also the biggest business opportunities in the world.

Problems worth failing at

Not every innovation solves the problem completely. That’s precisely why the major problems in the world that affect many people are always worth a try. After a few years you can always say: we tried, and we are proud of our efforts. Like Boyan Slat, for example, who wants to rid the world's oceans of plastic with The Ocean Cleanup, a situation where every step in the right direction counts. A company that focuses on problems like this is relevant to both customers and to society.

Featuring

Uilke Duinstra

Service Line Director Strategy - iO

For 8 years now, Uilke has been forging innovation and strategy into a single offering. His secret to a successful innovation process? Getting the whole organisation on board through an exciting story. One that presents you with all the angles to shape a future-proof business.