Competitive Edge, Ten Types of Innovation & Why a Minimum Viable Product Isn’t Enough

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…The rule of thumb here is that if you use four, five, six or more types of innovation, specifically choosing the ones that others in the industry that you’re in, or hope to be in, have chronically ignored, you will almost always get disruptive innovation…It means you’re setting the new rules and everybody else has to respond to them.

—Larry Keeley, co-founder, Doblin (video)

Think fast: What set Henry Ford apart from the competition? The invention of the assembly line, right? It turns out that is just part of the story. When Ford started his company, there were nearly 90 automakers vying for a nascent market. Ford was the only one to focus not only on building a car, but also on building the market. Ford was the first to create a nationwide network of  franchise dealerships, vastly improving distribution. He also paid most of his workers twice the going rate. If the Model T was to be a success, Ford needed a middle class that could afford to buy them.

There were yet more innovative strategies driving (literally) the Ford success story—which you can read about in The Ten Types of Innovation: The Discipline of Building Breakthroughs, a new book by Larry Keeley, Ryan Pikkel, Brian Quinn and Helen Walters (Wiley, 2013).  

For the last 15 years, Keeley, cofounder of Chicago-based consultancy, Doblin (now part of Deloitte), and his colleagues have systematically reviewed thousands of businesses—from Ford to Toyota, Dell to Apple and Zappos to AirBnb—to better understand the nuts and bolts of innovation—defined as “the creation of a viable new offering.” 

Beyond Lean Startup ”pivots” and Design Thinking Post-its, the Dobliners' have focused on the underlying dynamics of innovation: the process over the product.

The discovery of ten distinct types of innovation led to an analytical framework for spotting weaknesses and identifying opportunities within a business, a corporate division, or across an industry sector. It works for startups, companies at their peak, businesses past their prime and for non-profits. It is a powerful tool for due diligence. And it helps to broaden perspective beyond the narrow, potentially fatal incremental thinking that can come from too tight a focus on “pain points.” Minimum Viable Products (MVPs) are just that. If innovation stops there, a budding business won’t get very far. 

The Ten Types of Innovation is part textbook, part workbook and part treatise to show innovation as a discipline. “Anyone can (and should) learn to innovate and, with practice, anyone can become better at innovating,” the authors insist. 

While that sounds a little like Ratatouille’s Chef Gusteau—”Anyone can cook!—it is true and for the very same reason. It is about mastering the basics. 

Rather than recipes, though, the Ten Types are presented as a kind periodic table for business, sorted into three broad categories. Each Type is further divided into specific “tactics”—the business equivalent of the elements.

THE TEN TYPES OF INNOVATION

1) Configuration:  logistics 

  • Profit Model: how you make money
  • Network: how you connect with others to create value
  • Structure: how you organize and align talent and assets
  • Process: how you use signature or superior methods to do your work

2) Offering: core product or service

  • Product Performance: how you develop distinguishing feaures and functionality
  • Product System: how you create complementary products and services

3) Experience: customer facing 

  • Service: how you support and amplify the value of your offerings
  • Channel: how you deliver your offerings to customers and users
  • Brand: how you represent your offerings and business
  • Customer Engagement: how you foster compelling interactions

Note that invention, insight, creativity, discovery and inspiration are not innovation, though all have roles to play. Product extensions—more colors, flavors, sizes—also don’t count as game-changers. In fact, they can be distractions to developing more profitable strategies. This dovetails into one of the book’s key messages: product is only one type of innovation. 

In the history of successful innovations, it was always the case that people were using multiple types of innovation. Nevertheless, if you ask people to innovate inside your own enterprise—you decide you have some crisis of growth—what happens almost every time is somebody runs around all the cubicles, thumps everybody on the head, picks the ones that sound ripest and sticks them in a room and says, “Okay, innovate now!”

When asked to innovate, what people assume they are trying to develop is some new product…So somebody focuses on the product per se. If there are engineers on the team, they will have axioms. They will say, “The product has to be 10x better than whatever it’s replacing.” They will have a variety of cost metrics.

But people will invariably focus predominantly on the products. We can prove this is the dumbest place to start and a completely inadequate way to finish…

—Larry Keeley, Corporate Venturing & Innovation Partnering conference  

The problem is products can be copied, so are the most difficult type of innovation to defend. Henry Ford’s genius was leveraging other types of innovation to support the Model T. He set his company apart by innovating  across the framework: Profit Model (affordably priced, half payment upfront), Network (vertical integration—he bought rubber plantations to supply tire production), Structure (better pay and hours reduced employee turnover) Process (assembly line), Product Performance (the Model T was designed for DIY repairs using inexpensive parts), Product System (modification kits to transform a car into a tractor, etc.), Channel (dealerships) and Brand (created an in-house film studio to make films that promoted Fords). 

Or, to use a more contemporary example. there are now dozens of smart phones, but Apple’s iPhone still commands nearly 40% of the US market due to the innovation of iTunes and an apps platform, but also the network of Apple stores, staffed with helpful genii happy to explain all the bells and whistles, inspiring customers to buy even more. 

The product becomes enmeshed in a series of virtuous circles. It is the alchemy of the aggregate that makes for a thriving business and an enviable bottom line. 

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DESIGN MATTERS

These days I tend to prefer my nonfiction digital, but the clever designers at Pentagram have done such an elegant job making a truly daunting amount of information accessible, old-timey print may be the better format to take in all that the book offers. 

The horizontal orientation and softcover binding is—how to put this?—lap-friendly. I read through focusing on thematic arcs and key advice, knowing that I would return to the book as a reference. The number of examples and case studies analyzed through the rubric of the Ten Types is dazzling. Very quickly, I began looking at all kinds of businesses through this lens, trying to figure out why some have succeeded and other seem headed off the rails. It helped me identify the part of a project in which I am involved has a serious weakness and what might be done about it (see chapter 19: Innovation Tactics). The discovery wasn’t necessarily a revelation, but brought greater clarity.

•••••

Innovation itself also benefits from good design. The penultimate secton of The Ten Types focuses on prototypes and pilots. 

"There are two main reasons to use innovation prototyping. The first is to reduce risk and uncertainty. To accomplish this, focus your attention efforts on the things you have to get right for the innovation to succeed. Starting with the easy problems is a recipe for disaster in commercializing innovations—it shoves all of the critically important work to the end of the process, when accumulated expense and exposure to customers is at its greatest. Instead, ask yourself which elements of the innovation idea matter most—without which your concept will simply crumble. It is an aspect of customer behavior, the feasibility of the offering, or the viability of the business model? These central elements should be the focus of your prototyping efforts. 

The second reason to use prototypes is to evolve and improve your innovation iteratively. This means that prototypes are fundamentally transitional and ephemeral; much like a lost wax mold or a miniature model, they will be consumed and discarded in the development process. Start with the cheap methods—paper, digital visualization and simple models—and transition toward higher-fidelity and higher cost methods only as uncertainty declines and validation of your concept emerges. Otherwise, you risk wasting money on prototypes you will need to discard—or worse, have cost and effort bias your judgement and lock you into flawed designs.” 

—Ten Types of Innovation (p. 218)

Of course, successful innovation only means your business has survived another round in a game that never stops. Like voting in Chicago, innovation is best done early and often. 

So get to it. 

— J. A. Ginsburg / @TrackerNews

RELATED: 

Innovation Squared

It is the genius of the obvious: applying the “Lean Launchpad” methodology of entrepreneurship to science-driven startups. 

It turns out there is not much difference between the scientific method (hypothesis / experiment / analysis / refine hypothesis / repeat) and the codified common sense business development strategy pioneered by serial entrepreneur and Stanford b-school legend Steve Blank (business hypothesis / field surveys / analysis / refine hypothesis). So why not put them together? 

Which is exactly what the National Science Foundation’s I-Corps program has done in an effort to speed up the commercialization of promising technologies developed in university labs. The inaugural class of 21 teams from across the country gathered for the very first demo day last week in Palo Alto.

The results are impressive. Notes Errol Arkilic, the NSF program officer overseeing I-Corps, “Some of these teams have made more progress in understanding what their opportunity is and repositioning their effort in six weeks than projects we’ve supported for six months.”

Xconomy’s Wade Roush has been covering the project since it was announced last summer. Here are his thumbnails describing some of the proto-businesses: 

  • TexCone (University of Virginia, Charlottesville: Laser-treated hydrophobic surfaces for reducing ice buildup on aircraft wings.
  • Ion Express (UCLA): Cheaper, simpler ion channel screening test systems for pharmaceutical companies.
  • BigData (George Washington University): Data mining for intelligence agencies and hedge-fund analysts.
  • Carbon Cultures (University of Washington): Conversion of timber waste into “biochar” for soil amendment.
  • Explosives Detection (University of Connecticut, Storrs): Nanocomposite materials that change their appearance under ultraviolet light when exposed to explosives.
  • Fluid Synchrony (USC): Miniaturized, implantable drug infusion pumps for control of chronic pain.
  • BiddingPal/iDecideFast (University of Illinois at Urbana-Champaign): Online tools based using psychological and decision science insights to help real-estate buyers and auction participants maximize their changes of submitting a winning bid.
  • Ground Fluor Pharmaceuticals (University of Nebraska, Lincoln): A cheaper, simpler system for synthesizing the radiopharmaceutical agents injected into patients before PET scans.
  • TOSCA (Rensselaer Polytechnic Institute): “Terahertz on silicon chip arrays” for defense, aerospace, and security applications that require very fast on-chip processing.
  • GlucoSentient (University of Illinois at Urbana-Champaign): Technology that tweaks existing glucose meters to test for other health indicators such as HbA1C, a marker of diabetes.
  • Graphene Frontiers (University of Pennsylvania): A chemical vapor deposition method for growing sheets of carbon atoms on plastic or glass, for use as transparent conductors in solar panels, smart windows, or advanced displays.

Gracious. 

Even the losers—those teams that won’t go on to receive next stage NSF grants—are winners, emerging from the competition with tighter business models, better positioned to go after other funding. 

Although the “lean startup” mantra of continuous consumer research has its limits (Steve Jobs was famously allergic to focus groups, saying that consumers cannot imagine they need something that does not yet exist, e.g., an iPad), it works beautifully for innovations that focus on improvements to existing technologies or address specific, readily identifiable needs. 

Add Doblin’s Ten Types of Innovation to the mix as an analytical litmus test, both to rate the odds for success and point to areas where business models can be strengthened, and NSF could find itself with a startup success rate the envy of every VC fund. 

Nerds rule!

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"Startups are not smaller visions of larger companies. Large companies execute known business modules. But startups search for them," says Steve Blank. And to help startups better figure out how to find them, he offers a free online course through Stanford University called, "The Lean Launchpad." The next class starts February 2012.

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(updated 3/26/12)

I-Corps Slideshare Presentations:

— J.A. Ginsburg / @TrackerNews

Innovation Diced & Sliced: Analyzing Past Success to Focus on the Next

There are, according to the designers at Doblin, exactly Ten Types of Innovation (R). And they should know, having diced and sliced through thousands of case studies involving hundreds of companies over nearly 14 years. 

The tool that emerged, rendered as a simple color-coded chart, is genius. It works essentially as a lens that makes it easy to focus on strengths and weaknesses. Considering that a gobsmacking 96% of innovations actually don’t return their cost of capital—in other words, they’re flops—it becomes absolutely critical to do everything possible to up the odds of being in the fortunate 4%. 

The most successful innovators and the most successful innovations—we saw this pattern time and time again—are those that are able to combine at least 5, preferably 6 or more types of innovations. 

— Geoff Tuff / Doblin / Monitor Group 

There are two Configuration Types: profit model, network, structure and process. Two Offerings: product performance and product system. And four Experiences: service, channel, customer and customer engagement.

Doblin-ers Brian Quinn and Ryan Pikkel’s presentation at the recent Design at Scale conference, Mind the Gap: Thoughts about crossing the stubborn divide between Design and Business, provides an excellent overview. (HT to Helen Walters at Thought You Should See This for posting the video, usually available only to conference attendees).

Not only do Quinn and PIkkel explain how the Ten Types can be used to guide the innovation process, but provide epiphanous insights into why business innovation can be so tricky:  

The roots of management science is operations research. And operations research is all about taking a complex problem and breaking it down into component parts, trying to use knowable data to arrive at knowable optimal solutions… It is a discipline that’s fundamentally rooted in analysis. It’s rooted in the prove-able. It’s rooted in the known. 

That makes innovation actually pretty difficult. It makes it really hard to look into the future sometimes. It can make dealing with ambiguity incredibly difficult for the average executive. 

In fact, the business world tends to root out ambiguity almost wherever it finds it. You see it in things like command and control reporting, delineating decision rights and using dashboards and scorecards to keep track of KPI’s—Key Performance Indicators… They are all about one thing: removing ambiguity and minimizing uncertainty.

So when you think about something like innovation, which is almost fundamentally about generating the new, it can make it pretty hard for the executive. Staring into the unknown can feel like staring into the abyss…

And really, who wouldn’t, given such steep odds stacked against success? 

So before getting up to pitch to a panel of VCs—who are, after all, conflicted souls torn between a desire to take risks and a mindset wired to avoid them—entrepreneurs would do well to use the Ten Types as a filter to analyze their Dream Ideas. A pitch that references at least six of them will help sift out the ambiguity, making it easier for VCs to see the Dream for the Next Big Thing it is.

— J. A. Ginsburg / @TrackerNews 

For a quick backgrounder—a prelude to Quinn and PIkkel’s presentation—here is Geoff Tuff’s six-minute explanation of The Ten Types: