A couple of days ago I came across the rather scary result of an Accenture survey: Only 19% of the CEOs of more than 500 British, French, and US companies interviewed in the study saw their investments in “innovation” pay off. At the same time apparently more than 90% of the same CEOs believed that innovation was crucial to the success of their business strategy and more than 50% of them had increased the funding for innovation. Obviously I do not know the criteria that the particular CEOs use to gauge the success of their investments and I am not even sure they are comparable. The result seems frustrating nevertheless.
How come? Both my operative experience as well as learnings out of my consultancy engagements over the past few years would point to a still widespread understanding of innovation that dates back to 20th century Schumpeterian invention-innovation-diffusion models: R&D departments – sometimes supported by product management – spend money to produce inventions around the enterprises’ (technical) core competencies. These are then being matched with presumed customer needs, often based on some purely statistics-based market view, to form some innovation (new! cheaper! improved!) and then ultimately turned over to Sales for diffusion.
Sadly enough innovation following such a “classic” path produces returns – best case – only very late in the process – after the customer has finally “got” the innovation – or more likely even, not, when the product fails to climb the adoption curve. Attempts to compress the process to “fail faster” and improve chances of getting it right next time often don’t help much either, as for most product categories they tend to increase either stress or cost (or both) in the organization.
Interestingly enough the 19% innovation success figure is – if I remember correctly – almost identical with a number quoted in a 2008 Harvard Business Review article that demonstrates that it is feasible to almost quadruple the success rate by following a structured human centered process geared towards uncovering and addressing unmet customer needs instead of trying to invent more or less un-guidedly in hopes of hitting the jackpot at some point.
Uncovering and addressing unmet customer needs however requires going further than widely used methods like distilling down market/customer data or questioning lead customers in the wake of creating a market requirements document (remember Henry Ford’s truism: “If I had asked people what they wanted, they would have said faster horses.”). Customers can typically not tell what they really want as they are no domain experts who have insight into technical feasibility and business viability.
Unfortunately even the advances in (mainly software) product development incited by the agile movement are missing the critical point of truly understanding the job-to-be-done inasmuch as the introduction of agile methods in enterprises often regresses to a mechanistic application of work principles.
Human-centered approaches to innovation (e.g. Design Thinking, ODI) afford us radically different and distinctively more successful models by helping uncover real needs that then can then be converted into demand. More often than not the underlying required technological advances turn out to be comparably small. In many instances it just takes a re-arrangement of existing “building blocks” (Apple’s products being an impressive testimony to that).
It seems a sad state of affairs that – judging from the CEO’s responses – more than 80% of the companies in leading industrial countries have yet to adopt such methods to successfully create products that customers truly love and demand.