Business Solutions with SAP

Striving for a Customer Focused Approach to Innovation 2 of 3

March 29th, 2010 by

elevation to completionPreviously we looked at the three primary types of “innovation” most often practiced today.  Two polar opposites being what I call the Stoic approach or the Maelstrom, where the Stoic is more like continuous improvement and the Maelstrom is more like blue sky directionless brainstorming.  The third method is somewhere in between and is more of a striving for the ideal future state.  That third method relies heavily on an “innovation narrative.”

Innovation at the Point of Customer Frustration, Whether it is Articulated or Not

Previously I published a post on Apple’s innovation techniques and that my personal analysis of Apple’s approach showed it really wasn’t magic, “Business Strategy and IT Strategy to Reproduce Apple Innovation.”  Apple’s approach, as telegraphed by Steve Jobs, has always been to address customer frustration points or areas of strong customer desire that the marketplace is not addressing.

As an example, the other day I saw a Dyson vacuum cleaner advertisement.  After addressing the innovations of a bag-less vacuum, and replacing the wheels with a large pivot ball Mr. Dyson said their mission was simple, to “solve the obvious problems others seem to ignore.”  This is the perfect example of developing innovative solutions around customer frustrations.  In this case the vacuum cleaner bag and wheels had become so accepted and routine that it is doubtful many customers articulated those problems. 

The same innovative approach requires a business to understand their customers, intimately know what they are looking for and why, and then understand what the frustrations or the limitations of the current products or services are.  From there a narrative of the new product or service can be created, innovated, piloted, adjusted, and then rolled out to the marketplace.

The key to innovation success is to directly connect all innovation efforts to a specific customer or business purpose.  That connection requires you to get close enough to your customers and your marketplace to understand their frustrations, but also their difficult to articulate desires. 

Today’s Innovation is Often More About the “Creative Maelstrom” than Innovation

Innovation purists would not agree with the limitations or restrictions on the process that I have proposed.  But innovation purists also live in a creative fantasyland where they do not allow constraints like budgets, deadlines, practical application, or other real-world considerations to get in the way of their creative maelstrom.

An ugly reality for the “creative purists” who insist that is what innovation requires is the limitations of business.  Businesses of all kinds have limited resources, limited capital, and limited ability to create new things.  So an effective method to reduce the amount of time and cost to create new products or services is needed.  And not just time to market with some incremental change or enhancement, but completely new products or services.

On the other hand, many businesses are far too restrictive and shortsighted on what they refer to as “innovation.”  What many call “innovation” is a pursuit of small, incremental changes that yield smaller and smaller benefits over time.   This type of “innovation” is usually minor adjustments of existing products or services.  And while this focus on continuous improvement is useful for controlling costs, quality, and even customer satisfaction, it rarely produces innovative breakthroughs.  If an innovative breakthrough occurs within the context of continuous improvement it is generally on a micro scale (dealing with a small component or feature of a product or service) and rarely on a macro scale (a completely new design departure for a totally new product or service).

Stretch Innovation Examples with the Application of the Innovation Narrative

A very reasonable approach to innovation of new products or services is similar to that taken by Thomas Edison or Alexander Graham Bell. 

When Edison set out to invent the light bulb he was trying to solve a particular problem–, that problem was known and in some of the historical literature he was quite aware of the “ideal future state” he was trying to achieve.  He wanted to bring light to the darkness without the use of fire.  He sought to solve a customer focused problem by replacing the use of fire and fuel oils with an electric bulb.  The idea was to eliminate the risks of fire hazard or noxious fumes that the current flame based technology presented.

Edison’s relentless pursuit and passionate drive to produce a light bulb shows his understanding of pursuing an ideal future state innovation narrative, even if it wasn’t spelled out like modern mission and vision statements.

The same could be said of Alexander Graham Bell.  Bell’s narrative was that he wanted people who were far away to be able to talk to each other as if they were next door.  Bell’s was also a relentless pursuit of an ideal future state innovation narrative even if the narrative wasn’t written on paper.

The difference with this approach and those great history-making inventors is the addition of a structured approach to defining and then articulating the innovation effort.  To that end I have devised a very simple approach, or the beginnings of a process model, for moving from innovation to market “From Collaboration to Innovation to Market – Toward a Working Model.”

Creative Writing in the Innovation Process (The “Innovation Narrative”)

I was recently reading an article about a creative writer who was candid about his inability to live up to the authors he admired.  As a result he retooled his creative skills and turned to industrial design.  From what I saw some of the things he created were eye-pleasing (and popular) works of art with a functional design. 

He mentioned that he started the design work because he could construct a narrative to immerse the customer in each individual product.  I’ll call that the “innovation narrative.”

That is certainly an interesting approach and a great use of his creative writing talents.  There isn’t any reason why this type of design methodology couldn’t be used by business and technology.

The Stretch option, or the striving for the future state requires the construction of a narrative which would be similar to a home elevation or artist’s rendering rather than the entire blueprint.  Over time the details of the blueprint are filled in by the innovation architects within an organization.  Those innovation architects “build out” the various parts of the future state through development of new products or services which move toward the ideal future state. 

This type of innovation, design, and prototyping is similar to creating mission and vision statements for a business, but they are product or service focused.  They are discrete and customer or market specific. 

The Innovation Narrative as a Change in Innovative Design Approach

An “innovation narrative” is nothing but a fancy name for a written statement about the end state of a new product or service.  It incorporates positive changes about what customers do not like about a particular product or service with things a customer likes, or desires.  It also looks at un-served, underserved, or completely new applications for the product or service.  The narrative carefully evaluates the marketplace from an outsider’s perspective, or as close as possible from the customer’s perspective to understand where there are unmet desires for a product or service.  This tries to capture a customer’s perspective of “if only I could do X with this…” or “I wish this would…” or in the service sector “why do they…” or “why don’t they…” or “they really should (or should not)…”

Done effectively this narrative then serves as a guiding framework for development of the new products or services.  For products, it generally involves a departure from the current “form, fit, or functions” of current products.  For services, this would involve significant modifications to service delivery methods, quality, and polish or composure.

The skill to create an “innovation narrative” already exists in the marketing departments of most mid and large sized companies.  What is lacking is the capture of the critical data to develop the narrative and its timing. 

Marketing Involvement in Innovation

At many companies marketing involvement frequently occurs after a new or revised product is either conceived or already underway.  The marketing department then sets about how to position that business item and how to help the sales force sell it and generate “buzz” around it.  But if marketing veterans were involved in the early design stages, at what engineering refers to as the “fuzzy front end” they might be able to make a dramatic difference.  They can use their sales and marketing talent and ability to create an “innovation narrative” around what the new product or service should be at final delivery in the marketplace.  They could create that future state product or service that can only happen if they had a magic wand.

Marketing, sales, and engineering or design should be involved right from the beginning.  Talented marketers generally have a fair understanding of how to position products or services and the sales people are responsible for selling them.  By incorporating key sales and marketing people into the early stages of product or service development the entire process becomes more customer-focused. 

The idea here is to create a narrative that contains the details of the customer frustrations and marketplace aspirations.  The narrative should include the “hard stuff” like the articulation of customer aspirations that the marketplace has a hard time articulating.  And it has to be more than just meaningless marketing hype too, it must contain enough detail to immerse the narrative in the customer’s actual perspective about the new product or service.

Related Posts:

Striving for a Customer Focused Approach to Innovation 1 of 3

March 26th, 2010 by

depths of innovation

If your company does any kind of innovation, how would you describe it?

  • Stoic – slow, plodding, methodical, and generally consisting of small incremental improvements (minimalist).
  • Stretch – Evaluation of current as well as future needs and wants of the customer with some structured framework for achieving a future state (striving).
  • Maelstrom – creative “free for all,” sky’s the limit and a “no holds barred” barrage of brainstorming and chaos (directionless).

The Common Approach to Innovation, Generally Stoic or Maelstrom

There are generally two separations around innovation in practice. 

 1)      There is the “continuous improvement” type of “innovation” which is incremental or stoic.

2)      There is the complete “free for all” type of “innovation” that relies more on being creative for creativity sake and tends to be a chaotic maelstrom.

Think about it, improvement, creativity, and innovation are distinct words with different meanings even though each can include components of the other.  Innovation generally requires application of the creative process, not just the creative process in a vacuum, and it requires the incremental process of improvement.  Therefore I am proposing an approach to innovation that uses an innovation narrative and early prototyping to achieve new products or services with limited risk and cost.

Stoic Innovation (This is Really Continuous Improvement)

A number of product oriented companies rely heavily on the “stoic” method to innovation.  They make incremental design or usability changes to existing products and product lines.  This approach has some merit as it is generally risk averse and has application in mature markets, commodities, or areas where there is little competition.

This approach is best seen in many auto manufacturers in between major model overhauls.  They will make incremental changes and improvements to an existing model for roughly 8 – 10 years and then make a complete departure with a new platform or model.

Innovation Maelstrom (Much Ado About Creative Chaos)

Some academic institutions, several Fortune 1000 companies, and those who buy into unscrupulous consulting models that promote blue sky approaches to design or innovation generally adopt the maelstrom approach.  Although this approach is capable of producing “blockbusters” it is very high risk, very expensive, and has little application outside of training exercises and academia.  Those “blockbusters” that are produced are rarer than winning massive lotteries.  The underlying problem with this approach (as anything other than a training exercise) is the deliberate disconnection of brainstorming and the creative process from constraints or limitations. 

While the creative juices may flow, and even a few truly breakthrough innovations, inventions, or novel approaches may emerge, the results are rarely (if ever) cost effective.  They are usually preceded by huge budget expenditures and string after string of “oddities” that have little or no useful application.  Here are a few blockbuster examples of innovative design work that eventually paid off, but not until mountains of money was spent to devise and develop useful applications.

Look at the laser, invented in Bell Labs which took some 20+ years to find commercial uses for it.  Or what about the original IBM tube based computer, commercial application took nearly 30+ years to begin to gain widespread business acceptance.  What this points out is that innovation for innovation sake is not a productive or cost effective use of a company’s limited resources.  And although both the laser and the computer had dramatic, life altering impacts later on, it took many years to realize the benefits and massive amounts of expenditures.  Neither of these innovations was very effective before another invention – the transistor – was able to animate them and allow for any practical productive use.

Stretch Innovation (Striving for a Future State)

The third approach, which I personally consider the most balanced of the three between achieving great results without too much risk, and without too much cost would be the “stretch.”  This approach relies heavily on the relentless pursuit of an idea or ideal.  But to bring the idea or ideal to life it relies heavily on the ability to draw key information out of your customers, or from the marketplace, and then create a special “narrative” about the new state of the product or service.  Think of it like an ideal state elevation, rather than a full blown blueprint, but committed to writing.  Just like the artist’s rendering, or the architect’s elevation does not include all of the construction details, a good narrative of the future state should produce something that people can picture and work toward.

Related Posts:

IT Outsourcing, Off Shore Support, Cost Cutting and IT Department Changes

March 23rd, 2010 by

cost savings

Businesses everywhere are looking to shore up their bottom lines by cutting costs.  As a result, cost centers, like IT departments, are prime targets for outsourcing and off-shore maintenance.  The typical business script is that as the IT organization moves into maintenance mode that cost center with high overhead becomes a prime target for reducing costs.   

However, in spite of how things might appear, cost is NOT the real driver of IT outsourcing.  The real driver of IT outsourcing has more to do with its function than its cost…

IT departments generally have not focused on customer acquisition, customer retention, profitability or revenue generation and have become commodities to be outsourced. 

How Should Your SAP Support Department Differentiate Itself?

Imagine a presentation to the Board of Directors about how much money the company could save by outsourcing the sales and marketing functions.  I mean come on here, look at the massive budgets dedicated to sales and marketing!

If you were making that presentation I would suggest you have your resume in order and already have another job lined up. 

Can you imagine outsourcing discussions with that same Board of Directors if IT were seen as a strategic business partner, a business partner integrated with and indispensible to the revenue side of the business.  What if IT were actually considered a very real or even a pseudo profit center?  Not only would outsourcing be off the table for the IT functions that are directly related to revenue generation, but budget discussions and project ideas would be much easier to navigate. [FN1]

Why Has IT Become Nothing But An Expensive Cost Center?

The typical IT script has created an environment where it is seen as an expensive and expendable cost center.  For too long Information Technology departments have focused on applications, programs, and business support to address process improvement, operations, and quality.  These are all the cost side of the business and only look at “operational excellence.”  Once the bulk of the business processes are set up, running, and stable all those significant IT labor costs make great targets for reducing cost and overhead.  And from there the next step is to outsource, reduce staff, or off shore.

Is “operational excellence” important?  Of course it is.  But after integrating and automating the “back office” functions or operations of the business IT must then move on to product or service innovation and also revenue.

Without a move to the key revenue generation functions of the business IT will forever remain an expendable cost center rather than a key business partner.

Why Won’t CRM Applications Work to Change the IT to Business Dynamic?

A few of the applications in the market have tools and resources to help structure the customer acquisition and customer retention processes.  And some of them have some decent rules-based tools for automatically evaluating, and then stratifying customers.  There is application functionality in a number of major applications, and several niche applications for handing special offers, marketing programs, or other incentives focused on customer retention or increasing sales conversions. 

What is the CRM Problem, Why Isn’t it Delivering? 

There are three primary reasons:  1) clueless “CONsultants” who may have some exposure to a CRM application but little or no business knowledge (they lack an entrepreneurial perspective) [FN2]; 2) there are few applications, if any at all, which integrates and then actively engage customers in the business they are buying from [FN3]; 3) sales and marketing programs are poorly structured and designed and do not allow for good sales process analysis. [FN4]

In the SAP CRM space a lot of the benefit that is lacking is because of the number of frauds and fakes in the marketplace.  They entered the market when the applications were immature and experience requirements were low.  They came in droves with fake resumes, fake credentials, and little or no concept about sales and marketing.  [FN4]

Nearly all CRM applications are focused on sales processes, measuring conversion or retention, and all of the other sales process areas.  Software and IT applications do not directly engage the customer in the new product or service development cycle, quality management, marketing, feature or benefit development, or in working with them to address their product or service frustrations.  Archaic customer service centers serve as a “touch point” to the customer but beyond that customers are not intimately involved in, or incorporated into the business product or service lifecycle. 

Conclusion on IT as a Cost Center and IT Outsourcing

Until IT starts to more aggressively focus on the business side of the equation (like revenue, profitability, customer retention, customer acquisition, product development and engineering, etc.) then IT is little more than a dispensable cost center.

This model shows the IT application landscape of the future. It also shows the CIO role as a bridge between the CFO and the CEO, or between lagging and leading indicators of business performance and success. 

source: Future Technology Landscape Alignment for the CIO, IT Director, or Key IT Decision Maker

Once again I will reiterate one of my opening paragraphs here;

Can you imagine outsourcing discussions with that same Board of Directors if IT were seen as a strategic business partner, a business partner integrated with and indispensible to the revenue side of the business.  What if IT were actually considered a very real or even a pseudo profit center?  Not only would outsourcing be off the table for the IT functions that are directly related to revenue generation, but budget discussions and project ideas would be much easier to navigate.

This model shows IT in precisely this way.  Application alignment is focused on the customer–, customer retention, customer acquisition, revenue generation and profitability.

Footnotes and Resources about IT Strategic Alignment with Business – Customer Retention, Customer Acquisition, and Revenue Generation

[FN1]  See these additional resources about business to IT to customer alignment:

Changing the Direction of SAP, ERP, and IT Applications to Focus on the Customer and Innovation

CIO, CFO, and CEO Alignment – Why ROI is Lacking from Today’s System Landscape

[FN2]  Many businesses and Corporate IT departments have been sold a “bill of goods” with little to show for their investment

CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?

[FN3]  See the customer integration model for the IT landscape of the future which integrates the customer into the business process.

Business and IT Alignment – Integrating Technology and IT Spend with Business

[FN4] There is a fundamental change needed in how performance is perceived and measured to understand how to make a difference.

Designing Startup Metrics to Drive Successful Behavior

Related Posts: