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How to fail at innovation 2.0

June 15, 2017

A brief how-to guide for businesses seeking to miss out

The internet and today's globally interconnected world have opened up radically new opportunities when it comes to innovation management. The integration of customers into the process and the proactive exploitation of the collective intelligence and creativity that exist outside of businesses have ushered in a new era. Forward-looking businesses are adapting their systems to the new realities and are implementing open structures. This enables them to multiply their access to novel ideas, products, services and business models. If you want to mess up this opportunity, take note of the following tips.

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Tip 1: Maintain the status quo

There are managers who fail to understand that speed is of the essence when it comes to innovation. In many areas, being flexible and implementing things swiftly is far more important nowadays than hitting it big in terms of numbers and size. Management systems are no exception to this rule. Time and again, I come across managers who are overanxious to do things in a belt-and-braces way, and only take action once best practices have been established. “Our R&D is excellent - so why change anything?” But if you wait for too long, you run the risk of falling behind the curve. Paal Smith-Meyers, Head of New Business Development at LEGO, has aptly illustrated the shift in paradigms by saying: “90% of our customers just want to consume. Perhaps 10% want to make their own stuff. 1% have the skills to make something which is good enough for others to want to buy it. Perhaps 1% is high, let us say 0.1 or even 0.01%. But with a consumer base of 32 million that is still more than 3000 people! At the moment we have 150 designers at LEGO. “Businesses basking in the reflected glory of the past are especially vulnerable in this regard. There is plenty of research evidence that successful industry leaders, in particular, take long - and sometimes too long - to respond to fundamental changes in markets and technologies.

Tip 2: Despise your customers

Lothar Späth, a manager and politician, once commented that engineers hated customers. One could go on to say: “And many managers despise them.” They see customers as individuals who do not understand user guides, hog hotlines, are fickle and unreliable in terms of demand behavior, and cannot even articulate their needs clearly when taking part in market research studies. So what creative input can you expect from them as far as innovation management is concerned? What these managers fail to realize is that not all customers are the same.

Average customers may more often than not lack the capacity for active innovation. They are caught in the here and now and have no ideas other than “please make that cheaper and better”. Lead users, by contrast, are ahead of their time. This subgroup actively develops products that businesses would never have thought of. The heart-lung machine, the skateboard and the Internet are all examples of innovations brought about by users. Systematic academic analyses have revealed that in some industries lead users account for up to 90% of product innovations. Therefore, you need to differentiate and screen markets accordingly in order to be able to identify the few ideas that really hit the bull's-eye. Research carried out at 3M has, for instance, revealed that the lead-user method generates eight times more value than conventional approaches.

Tip 3: Do not look beyond your own field

If you want to tap into external creativity, it is only natural for you to first focus on your own industry. However, many managers leave it at that and carry out lead-user surveys only among their customer base. This is a grave mistake. Looking for external creativity in what is known as “analogous” fields - i.e. industries that are thematically related to your own - has turned out to be a particularly promising approach. Take chip-making and operating rooms, for instance. The two are completely different, but in both cases avoiding air contamination is crucially important. In a complex experiment, we have found that users from analogous fields wear “mental blinkers” less often and frequently also have the knowledge necessary to solve problems. They only need to transfer it. Hence, they are significantly more capable of innovation than the users in your own field. Thanks to the Internet, it has become a lot easier to gain access to analogous markets.

Tip 4: Focus only on the IT side of things when it comes to designing user integration systems

Often you cannot but wonder at the mistakes businesses make when it comes to developing IT-based user integration systems. Many of the community platforms, crowdsourcing systems or product configurators are perfect from a technical point of view - and yet completely unfit for purpose. Nobody can operate them intuitively. All the findings about what creates value for customers and what motivates users to voluntarily get involved in innovation projects are ignored. This is frequently due to the fact that the task of designing and developing these systems is outsourced to agencies that are unfamiliar with the latest approaches to integrating users. But user integration requires sensitive psychological antennae. The systems need to be fine-tuned, with great care and skill, to the motives, social norms and identities of users on the Web. In this context, little mistakes can make a world of a difference.

Tip 5: Help yourself!

In general, user communities and their creativity are mistakenly thought to be a free resource that can be used without having to worry about rights of ownership. “It's up for grabs, so let's help ourselves and capitalize on it!” While “free revealing”, i.e. the free exchange of ideas and innovations, is indeed an important hallmark of open source software development and other user communities, our research findings show that the situation is more complex. If you ignore the informal rules and social norms of innovation communities, and users perceive your behavior as “unfair”, this may have serious repercussions. As businesses such as IKEA, Playmobil, Nike or Henkel know to their cost, in today's interconnected world mistakes or gaffes in dealing with individual clients or seemingly small communities can quickly develop into full-fledged PR disasters, leaving hundreds of thousands of customers disgruntled and competitors gloating. Hence, businesses should devise strategies that enable them to adequately balance their own interests with those of users.

Tip 6: Go for it without thinking

When paradigms are shifting, you need to experiment. It is impossible to anticipate everything, there are no hard-and-fast rules and things are in a state of flux. Having said that, it is surprising to see how many businesses ignore established facts and fail to learn from the mistakes others have made. The new opportunities when it comes to integrating users into the innovation process are of such paramount importance that academics around the globe have studied them for years. Case studies and hard experiments have produced a wealth of insights into patterns, laws and success factors. However, many of these findings remain unused. For innovators, this is an extraordinary entrepreneurial opportunity. Be quick, and you can gain a lot.

What does all this mean?

If, by contrast, you prefer not to capitalize on the once-in-a-century opportunity that is innovation 2.0, simply heed our six tips - and enjoy the experience because your business may soon cease to exist.

It is, of course, a better idea to do the exact opposite of what we have recommended. So be sure to

  • constantly question existing systems, structures and processes; the fact that closed business models worked very well for a long time is no valid argument - they have had their day; the future belongs to open models.
  • take customers and users seriously - especially those who are experiencing tomorrow's needs today and proactively looking for novel solutions to the challenges facing them.
  • look beyond your own area of activity - disruptive ideas originate in analogous fields, not necessarily in the market you usually operate in.
  • design IT systems such as toolkits, configurators, crowdsourcing platforms and online communities in a flexible way, taking the needs of users into account.
  • build a stable ecosystem that creates value for your partners.

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