Wednesday, March 10, 2021

Innovating from the outside in

 I've written about this idea more than once, but more than ever it seems so vital.  It's past time to innovate from the outside in.

What I mean by that is to start taking your cues from your customers, the environment and future realities, and shape your capabilities and products to meet those emerging wants and needs.  This is, of course, exactly opposite from what we've been told to do over our careers.  What we've been told to do is to build a product or service based on our capabilities and convince people that they need it.

Well, when it was difficult to compare products and services, and when people had less information, it was easier to market a product that didn't fit, or only partially fit, a consumer need.  The Blue Ocean folks have an entire hierarchy of needs, from fully met to partially met.  The vast majority of products we use meet some, but not all, of our needs.  In other words, we are constantly compromising.

What we innovators need to do is to turn the approach around, starting first and foremost with what customers and consumers need, rather than what we can do.  Understanding the need - in its entirety, by the way - and then understanding how to deliver that need in full, with your own capabilities or by acquiring or partnering the things you don't do well, is what will win the day.

Starting from the outside in

Imagine if you will a consumer who has a need that they can't fill - they want to solve a problem they have or address a need that simply isn't addressed.  Most of these customers are more than willing to describe what they want if only someone will listen.  The range of tools and methods to discover customer needs is enormous - focus groups, lead users, ethnography and the list goes on.  Therefore, the information is easy to get, if not always easy to assimilate.  Companies that create strong listening programs that interact with customers and consumers to understand their needs and present real market and product opportunities to their business will be rewarded.

The environment and your ability to read the business environment can tell you a lot about current and future opportunities as well.  What your teams do to understand what is happening in the market, and in adjacent markets, can tell you a lot about what customers want and what they value.  Again, this isn't hard work in the gathering process but requires creativity in the analyzing process.

Understanding how the future is likely to unfold, using trends and building scenarios, can give you insight into what people are likely to want, and moreover may signal new emerging markets or customers.  This information, again, is not hard to collect but can be challenging to synthesize.

So, starting from the outside in means wading through a lot of freely available data and having a small team capable of determining what all that data means.  The first part is easy and rarely done, the second part is rarely attempted and when it is, the result often conflicts with the status quo and is abandoned.

Getting the picture right

Once you have assimilated all of this information, you'll have a good indication of the needs that are met, and unmet, or, if you prefer ODI, jobs that are getting done, or not getting done well.  Now, you are armed with really valuable information that almost no one else has.  The trick will be turning that valuable insight into a product or service reality.

That's because the next step is confronting your internal operations with the amazing possibilities for new products and services, only to hear that the existing and planned capabilities of the firm don't address or service those needs.  So, the safe course is to create half a loaf - address as much of the need that you've defined as possible using the capabilities you have, or worse, double down on existing customers and markets with full focus on internal capabilities.

Now, any business needs to leverage its capabilities to the fullest in order to lower costs and provide value to customers, but too often companies miss the opportunity to expand into new adjacent markets or opportunities simply because they lack a capability or market access. 

The resistance to an outside-in innovation and new product development process has got to change.  Providing partial solutions to consumers, products and services that partially meet their needs or partially allow them to get their jobs done, means that they are partially fond of your product and service and are more than willing to change.  Plus, with the ubiquity of information, product reviews and information on alternatives, everyone is constantly seeking a product or service that meets as much of their need as is possible.  Incomplete products are simply not going to be successful.

Leaving the Inside Out Model

Starting with a technology or capability and building products or services and hoping customers will buy them is an old and tired model.  The amount of sales and marketing you need to create to convince customers to buy your products is indicative of how much your solution misses the ultimate need.  There's an old saying that (even as I am a marketer) has credence - marketing is the price you pay for being unremarkable.  I think that sales and marketing are the costs you bear when you create half a loaf, solving a portion of a job to be done, rather than understanding the need from the outside, from a consumer's point of view.

In the old days when there were limited channels, little product information and difficulty comparing products and services to each other, consumers were more willing to accept what they could get, and did not have the information to compare offers and features as readily as we do today.  

Today, we often know everything there is to know about a product before it is launched, and have already slotted its strengths and weaknesses against existing offers.  Therefore, the more closely you understand the real needs and wants of customers, and the more closely your product or service addresses all of the needs or the entirety of the jobs to be done - what Geoffrey Moore called the "whole product" - the more likely you are to see greater sales, greater profit and greater market dominance.

Get a new paradigm

As innovators, we need to start with a blank slate, with the willingness and ability to look at what customers want, and then apply your company's capabilities to what those needs are, and then fill the gaps with new development, partnerships and acquisitions.  It's helpful that almost any business can scale whole functions today in ways that were impossible even a few years ago.  

But thinking this way requires you to be willing to cast off for a little while what your company "does" and seek out what customers want, then try to solve for the entire problem or opportunity.  Your innovation teams need new paradigms in their approach, and the rest of the business cannot be allowed to treat radical new ideas as if they are radical COVID viruses to be killed.

So, ask yourself - is your "innovation team" thinking this boldly?  Is it allowed to?  Or is it constrained by existing capabilities and existing markets?  If you aren't thinking about new products and services from the outside in, you are doing - at best - incremental innovation, which will keep the lights on but won't change your market position or create new revenue streams or highly profitable products.

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posted by Jeffrey Phillips at 3:46 PM


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