Tuesday, October 21, 2014

Open to adjacency

We work with a lot of firms to build innovation processes and culture, hopefully leading to the development of what we call an innovation competency.  Trying to get a larger, complacent firm to embrace the risk and uncertainty of innovation is not easy.  There are often many preconceived notions about what the firm and its people should do, where they should spend their time, what's "important" and what isn't.

But the truth is with the right coaching and a good set of tools and methods you can overcome a lot of learned avoidance, and actually create some good ideas.  Good ideas, that is, up until the point where someone asks the question:  Is this what a firm in (fill in the blank) industry should do?  What we have here is a predicate question - asking whether or not the firm should solve the problem, often before or instead of understanding if the customer has a need, and whether or not that need should be filled.  Whether or not a firm in a specific industry or market  segment "should" solve the problem is beside the point.  Either it will or it won't.  If it decides that the solution or offering is outside it's capabilities, well and good.  If the need is pressing and customers are willing to solve it, someone or some other firm will solve the problem.

Where this thinking matters is when an innovation team starts every discussion with:  is this what our firm or industry should do?  Too often there are preconceived, and very powerful notions, about what an organization should, or shouldn't do.  These notions argue that once a business model or industry focus or customer segment strategy is developed and perfected, all future opportunities should be viewed from this lens.  Nothing, my friend, can be further from the truth.

Imagine, since Apple is always used as an example, if Steve Jobs had said, "well, we are in the PC business, so no matter how terrible those little MP3 players are, and no matter how terrible managing music becomes, we can't solve that.  We are a PC company, after all!"  I didn't have the privilege to meet Jobs, but I'd like to think that he was able to see problems and needs in markets adjacent to his own, which he had the vision or technology to solve.  He believed that these needs were important and that customers wanted solutions.  He then asked:  even if we aren't in that business, do we have the underlying technologies, capabilities and relationships to be credible in that space?  He found that the answer was yes.  He didn't allow the fact that Apple was a PC company to keep it from identifying and solving vital and interesting customer needs.

Now, there's a fine line here between identifying and solving "adjacent" needs or extending capabilities or business models to new customers, and entering completely new lines of business.  Richard Branson is probably the only person I've heard of who succcessfully enters completely new lines of business.  He is innovating marketing and customer experience, rather than products and business models, so his model may be a bit easier to replicate.  But back to Jobs.  There are two other things that make this story compelling.  First is the fact that one of his first acts upon returning to Apple was to cut about 80% of the product line.  He simplified the product suite to focus more attention on fewer products.  So in some regard he compressed and consolidated the space he thought Apple should be in.  But then he looked for opportunities to use Apple's design capabilities, its customer experience, its ability to integrate and bring disparate items together to solve a number of problems, from the iPod to the iPhone and the iPad.  Apple wasn't initially a phone company, or a MP3 player company and many of its initial attempts to enter consumer electronics had not been successful (see the Newton).  But he didn't allow the organization to simply reject good ideas that solved customer needs that were outside of its cultural purview.  The other thing that Jobs didn't do is focus Apple on things it clearly couldn't and shouldn't do, however.  He understood the proximity of consumer electronics, cellular phones and tablets, and the distance between Apple and other factors like toaster ovens.  But one last thing you'll notice is that every innovation opened the door to another adjacent space.  For example dominance in handsets now means that Apple is relevant in payments and has released perhaps the most secure payments mechanism for individuals.  Would Apple be relevant in payments as a PC company?  Probably not, but it is relevant as a payments provider with a dominant marketshare in the handheld space.

On the other hand, almost every corporate innovation team I work with rejects a lot of innovation opportunities out of hand.  It's not in our business model, they'll say, or a "blank" company doesn't do that, or wouldn't be accepted if it did "X".  So they leave behind the most urgent needs customers define to pursue ideas that both they and their customers have less investment in. 

Can your leopard change its spots?  Can your teams identify and continue to contemplate opportunities outside your defined business model or sweet spot without complete cognitive dissonance?
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posted by Jeffrey Phillips at 8:01 AM


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