Tag Archives: strategic innovation

Converting Empathetic Observations Into Solutions

IPODSIn my last article, Driving Innovative Strategy through Empathetic Observation, I introduced the Empathy Map as a technique to aid your team in conducting insight generating field immersion research.  It is intended to supplement the hard research you collect as a part of any planning process, and should promote a deeper understanding of your industry, business product, service or customer.

The goal of conducting Empathetic Observations is to enable you to go deeper into the motivations that drive customer behavior.  This helps you to ask better questions to identify the more important problems to solve.  This is the path to achieving breakthrough ideas.

Imagine Apple, a strictly computer company in 2000.  How did they transition from making Mac and Apple computers to the revolutionary iPOD?    At that time we mostly listened to our music on CD’s.   A number of companies–including Creative Labs, and Sony-had been selling MP3 players for a few years but none of them had been big hits.   So, in this case, Apple didn’t invent the concept, but it was about to revolutionize it, by understanding consumer attitudes and desires better than all the competitors at that time.

The Apple Team was somehow able to sense the possibility of the congruence of computers, the internet, and a lightweight (MP3-like) portable and personal device that could really change the game.  They did their own assessment of the market and consumer needs.   They recognized that the slow adoption of MP3 devices was partly due to price, partly due to its features, and partly due to the lack of an enabling infrastructure.

The 1999 Creative Labs Nomad had 32 MB of memory.  That’s enough for about 1 or 2 CDs and cost US$429.   In 2000, the digital music market was still pretty young and people were being pursued in court over the violation of copyright laws when they downloaded or copied “illegal” music.   There was no organized “store” from which you could download music.  Using MP3’s was cumbersome and risky. Yet Jobs and his team saw the possibility of delivering mass customized music on demand – listeners could hear what they wanted, anywhere, and at any time.

Apple spoke with consumers and thought about the problem holistically.   Their solution:

1)      Increased memory – the first iPOD could store about 1,000 songs

2)      Simpler operator interface  –  not buttons or hard to read dials, but a circular touch-sensitive element you could direct with the light touch of a finger

3)      Lower cost  –  the first iPOD cost $250 – about half of the Creative Labs version

4)      A convenient and legal platform for easily transferring music content to the device –  Apple’s APP store was created to offer this and it ultimately morphed into iTunes

5)      Easy integration to your PC  –  by downloading iTunes on your PC, you had now one simple way to organize, categorize and manage  your music collection, create customized playlists and to easily plug-in and download to your iPod

So now a holistic solution was present, and the iPOD took off, selling a quarter billion units in 7 or 8 years, leaving the competition in the dust.  It totally transformed how we all think about media.  WE are in control.  It led to the creation of “podcasting”, and is behind the trend of streaming video, TV programs, and books.

My hypothesis is that Apple’s competitors chose to see themselves as device makers – good at mass production.  They expected the retail sector to suck their products out the end of their supply chain as they had in the past.  The Apple team (under Steve Job’s direction) came to understand it needed to integrate all the above elements to satisfy consumers.

Using Your Empathy Map

The Empathy Maps your teams create are what lead to these insights – to more problems to solve that can bring about revolutionary change.  The “problem” for the tech industry was NOT how to make a better MP3 player.   Above I listed five major problems that ALL needed to be solved, and integrated together (price, memory, user interface, access to content, and integration.)   All five needed solutions for the revolution to take place.   While I’m not sure, it is plausible that the engineers at Creative Labs looked at the problem one dimensionally, like we need to lower cost, or we need bigger memory.  (Check out the link below suggesting that by as late as 2007, Creative’s designers still didn’t get the whole picture.)

So how do you go from the empathy maps to these innovative solutions?  Here are the steps.

1)      Have your teams share with the whole group their empathy maps and their main conclusions – 3-4 bullet points from each section of the Empathy Map

2)      Invite the assembled group to begin defining as many “problems” as possible by reading each of the bullet points and allowing your mind to run free.  Remember the Linus Pauling quote when he was asked how do you come up with a good idea?   “It helps”, he replied, “to begin with a lot of them!”    Write down these problems in the form of a “how might we” statement, such as “How Might We: make it easier for customers to transfer music to their device? Write each of these How Might We statements down on individual post it notes, and transfer them to a large board or wall.  Get as many ideas down as possible.

3)      Then group the ideas according to which ones seem to be related and put a heading on each grouping.   I am imagining in the iPOD case at least five main categories as outlined above:  price, memory, user interface, access to content, and integration.    Can you picture it?   5 labels with multiple post it notes grouped nearby.

4)      Assign teams to work within each problem area to generate ideas to solve these problems.

Some of you might argue that a process such as I am advocating may be too time consuming and requires too many resources pulled away from their day jobs.   If that is your impression, I would ask only “what is the cost of failing to do the kind of thorough analysis that leads to the holistic solution?”   Apple’s market share in the iPOD business was over 75% by 2007.   It enjoyed a zero share in 2000.  Those share points came from someone.

Other Resources:

How Apple Transformed Music and Our Lives, by Sam Costello, About.com

Creative Labs NOMAD MuVo² 4 GB MP3 Player–A Failed Attempt to Rival the IPod Mini, from Yahoo Tech


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Three-Box System: Balancing Break-through Innovation with the Short-term

3 boxes

One of my favorite strategic innovation thinkers is Professor Vijay Govindarajan, from Dartmouth’s Tuck School.  He proposes an interesting idea that helps bring the idea of innovation squarely into the space of strategic planning.

One of the hardest things for executives to balance is the dichotomy between short and long-term thinking.  We all WANT to be strategic, don’t we?  We all WANT our organizations to be capable of break-through innovation, don’t we?  But we must also meet the financial metrics for this quarter or month.   Both are important.  If we are too far forward-thinking and fall out of covenant with our lenders, this can be a serious problem.   But living our entire lives dealing with quarterly financial goals and tactical matters leads to eventual problems also.  So we need to strike a reasonable balance between the short and long-term view.  My personal sense is that for most of us, our bias is too far in favor of the short-term – since these problems are likely to be more immediate.

This tension between short and long-term is perhaps the biggest impediment to strategy execution I can think of.    We have no problem thinking “big” thoughts when we engage in strategic planning.  But when the plan is created, it is hard to pull ourselves away from the pressures of meeting daily performance goals.

Senior Leader Mindset

Senior leaders need to fight this tendency, and it helps if they develop a mindset that accepts that:

  1. The world is rapidly changing.   Technology, demographics, social attitudes, economic trends and so forth are in a continual state of flux.
  2. To think you can simply keep reengineering your business around what you do today is a dangerous mistake that can lead to disaster.   Every business needs the ability to leap to the next wave at the right time.

When we think about some of the greatest innovation stories of the recent past,   Dell Computer, Amazon.com, Netflix, Zappos, etc. we marvel at how these people managed to imagine game-changing ways of creating new business value.  What interests me is the question “why did it take outsiders to develop these innovations?  Why didn’t IBM come up with Dell?  Why didn’t Sears or K-Mart develop Amazon?  Why didn’t Blockbuster create Netflix?  It is interesting that we are willing to face bankruptcy, or exit a business rather than develop new business models that are different from our primary way of operating.

Govindarajan invites us to consider that our strategic planning process should explicitly include planning around three very different sets of initiatives.   He calls his concept the Three Box System.

Here is the exercise he suggests you try when you sit down with your team to consider the next round of strategic planning.   Make a list on post-it notes of all of the major initiatives your organization is pursuing and committing major resources of money and people.  On each post-it, also write down the approximate level of resource allocation each initiative carries.   Now on a board, draw three large boxes, and place each post-it into the proper one.

The boxes should be labeled thusly:

1)      Managing the Present – driving improvement in your current operations – lowering cost, increasing quality, improving service, etc.

2)      Selectively Pruning Away the Past – making room for the future.  This is about strategically identifying things you should be planning to “kill” – like underperforming businesses, products, or segments that are consuming resources without producing desired returns.  Strategically, means we are looking at the changing environment and recognizing when the key trends are not aligning in a positive way.

3)      Creating the Future – investing in new markets, products, services, or businesses that are taking advantage of the key trend drivers in your world.  Again, this is a strategic action considering the key industry drivers and a deeper understanding of unmet consumer needs.

After you have completed the exercise, the hard part is to have a discussion about whether your resource allocation is reasonable.   My strong sense is that most of us have far too much in the first box and almost nothing in the second.

I asked earlier why Blockbuster or perhaps Barnes and Noble did not invent Amazon or Netflix.   My belief is that most of us cannot imagine creating something that would cannibalize an existing piece of business.   This may be because of ego (not wanting to admit we are not succeeding),  fear of incurring losses in a current business segment before the new one finally takes off, or possibly because we didn’t want to face the step of laying off employees.  Whatever the reason, the resulting outcome is to allow our under-performing units to die a slow and painful death – consuming even more resources on the way down.   In the end we still kill them, but we could have done so much earlier and redeployed valuable resources in more productive ways.

Deciding on the right resource allocation for your business is cannot be scientifically determined.  In general the faster and more dynamic the change environment is in your industry, the more initiatives you want in box number 3.

In my company, Robotron Corporation, box 3 was a big arena.  One of our strategic metrics was the amount of sales we had from products or services that didn’t exist three years earlier.  We tried to be at 20% or higher.  To achieve this, we spent over 7% of our sales revenue on new product development.   If anything, we may have been too biased in this area – sometimes finding ourselves on what I call “the bleeding edge of technology”.   (Robotron’s story is profiled in the book The Next Level, Essential Strategies for Achieving Breakthrough Growth, by Jim Wood.)

The main point here is that you should be thinking about making moves in all three boxes.  Strategy requires that we be deliberate in the choices we make about what products or services we will offer, to whom we will offer them, and how we will strive to achieve a sustainable competitive advantage.   As executives this means we have to bet our precious and limited chips carefully on the initiatives that can yield the greatest benefit.

Watch this 7 minute video featuring Vijay discussing the need to create new executive mindsets.

Other Resources

Transforming your Organization with the Three Box Approach, by Vijay Govindarajan and Brian Goldner

The CEO’s Role in Business Model Reinvention, by Vijay Govindarajan and Chris Trimble


Filed under Innovation, Strategy