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Following the Money - Connecting Innovation to Consumers (The Only Ones that Really Have It)

I have long maintained that before or as we start working on an innovation, we should look at, and establish its target market, all the way to the ultimate paying customers – and ask ourselves what the benefits (vs. product/service features) to those customers are, that would cause them to actually pay money for them.  It's the critical connection.

If you're a supplier in the automotive industry and "follow the money", you will find that it may not be where you think.  Tier 1 systems suppliers don't print it or have it.  They get it from their car company customers.  Car companies don't print it (the only ones who get to do that are the government folks), or have it yet either.  They get it from their customers: the people who actually part with their money to buy a car. That's where the money is – not only for cars, but ultimately for just about every new product or service.

So, if you can agree that innovation is doing new things that customers will value, then that's where to start: at the end of the chain, following the money to the ultimate customer.

Here's an example of one automotive supplier who seems to be doing that, as written by April Wortham in Automotive News, January 28, 2008:

Brose seeks to connect more with drivers
DETROIT —
Germany's Brose Group wants to get closer to consumers.

Brose, best known for window regulators and door systems, is offering new products that give drivers and passengers more contact with the brand.

Among the technologies displayed on a Brose concept vehicle at the Detroit auto show was a unit that allows the driver and front passenger doors to be opened or closed by remote control. It's the same idea as a power liftgate found on many SUVs, but Brose added features that combine convenience with safety.

For example, anti-collision sensors detect an obstruction in the door's path, such as a child's hand or a vehicle in the adjacent parking space, and stop the door from fully opening or closing.

"Until now, a lot of Brose components were inside the door or the seat structure, not in direct contact with the consumer," said Bryan Russell, spokesman for Brose North America Inc. "But with Brose's first show vehicle, we're getting closer and closer to the consumer."

Reaching out Brose Group products that give motorists more contact with the Brose brand include -- Anti-collision sensors that detect obstructions and stop remote-controlled vehicle doors from fully opening or closing. -- Power folding rear seats that create an extended flat cargo space with the touch of a button. -- Power adjusting cargo tray that extends for easier loading.

The trend toward third-row seating has driven several Brose innovations for the rear of the vehicle. They include power folding rear seats and a power adjusting cargo tray that extends with a touch of a button for easier loading.

Most of Brose's new products derive from its existing components and technology, said David Clements, development director for Brose door and closure systems in North America. For example, the motor and hardware used in the power adjusting cargo tray are found in power adjusting front seats.

Sharing parts and technology helps lower costs and make the products attractive to customers, said Marcus Klopp, Brose vice president for new product development.

Klopp said the price of the gearbox and electronics in the cargo tray is 60 to 80 euros ($88 to $117 at current exchange rates). "But the customer could sell it as an option for $400 to $500," he said.

Said Arnd Herwig, vice president of engineering for Brose North America: "It isn't that our engineers developed something that will just get another engineer excited. These products deliver either real comfort or safety to the end user."

-end of article- (read on)

Types of Innovation

Here is one way of looking at the different types of innovation. One type isn't necessarily better than another for a given occasion - just different.  Each type can apply to a product or service.  The above example uses "widgets", e.g. a product, as an illustration of the concept.

• INCREMENTAL INNOVATION
  • Component: Making an improvement on an existing product or service, for example:
    
    • Adding a camera feature to a cell phone
    • Increasing the displacement of an engine to increase horsepower and/or torque
    • Adding a new ingredient to a plastic formulation to increase its strength
  • System: Improving service or the process that makes the product, for example:
    • Reducing the number of steps necessary to manufacture the cell phone
    • Increasing the speed of machining the engine block
    • Implementing a lower-cost process to manufacture and deliver less-than-bulk quantities of plastic compounds
• RADICAL/NONLINEAR INNOVATION
  • Component: Developing a new product based on an entirely new concept that didn't exist before, for example:
    • The iPod (a case of "Invention is the mother of necessity", and a "gotta have it" product).
    • Gasoline-electric hybrid and fuel cell-based automotive powertrains.
    • An entirely new polymer that does something existing ones couldn't, e.g., polycarbonate in the '60's: a virtually unbreakable, transparent, high heat material that enabled new applications for plastics.
  • System/Business Concept: Introducing a new way of doing things, for example:
    • Wireless phone providers essentially selling airtime, and providing cell phones at low prices as the means to use their services on an ongoing basis
    • The establishment & growth of car-sharing services in cities or at colleges - for those who don't want or need to own a car, but need one on a regular or occasional basis (an alternative to conventional car rental).
    • Stereolithography - a process for quickly creating a first product prototype by using 3D CAD data and liquid polymers to generate a part in minutes, vs. days or weeks.
  • A major innovation is a breakthrough that changes the rules of the game and the terms of competition.

• What's the best type of innovation?  The one that provides the enterprise the best results in a given situation, and creates the best value for customers.  Small or large, incremental or radical, they all count - but only if they are acted on and implemented.
  
  
• Thinking about things in a new way is the first step.

P.S. - Speaking of "The Box" - it's been talked about so much, that it has become a cliche. Still, I maintain that valuable innovation can be done from "in the box", or "out of the box", so don't let either stop you from doing good new stuff from wherever you are - in the organization, or "the box".  If you're inside the box, do what you can from there.  However, as our parents told us, it's always good to get outside and play once in a while.

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INNOVATION AND THE CHANGE PARADOX

Innovation involves change. One one hand it's natural.  We're all interested in what's new.  It's often one of the ways we greet each other...

On the other hand, human beings are also resistant to change.  We like to live in our "comfort zones". Some say the only ones who really welcome it are...

...wet babies.

Change can be risky. Not changing, that is, not innovating is riskier.  To innovate, we have to get out of our mental "comfort zones", come up with some unconventional wisdom, then act on our new ideas.  Creativity is thinking up new things. Innovation is doing new things.

(Yes, those are two of my grandchildren in the above pictures.  Just exercising my editorial license.)

We help companies and individuals to work comfortably through this change paradox - and move forward to do new things that customers will value.

www.innovationzealot.com

INNOVATION AND THE CRITICAL CONNECTION

Innovation is an idea with a customer. 
Innovation without a customer is useless.

Often, something new and different is developed, but just doesn't sell - despite good efforts, and we ask ourselves, "why not?" Often, it's because the product was developed without a customer in mind.

"Technology push" innovations are those that have created a new product or service that hopefully, customers will buy.  "Market pull" innovations are those that result from a new product or service that is developed at the request of a customer, or from marketing/sales' input that the market and customers clearly do, or would want.  Either can work, under the right circumstances.  Together, they work better.

The critical connection is matching technology push and market pull to each other.  In the case of many innovations (particularly radical, technology-push innovation), the market doesn't tell us what it wants in clear terms.  In market research terms, this is called unarticulated needs.  If we listen carefully to the market and customers, we can translate these unarticulated needs into something the market and customers (the existence of a market does not guarantee the existence of a customer.) would want and (more importantly) value - if they saw it.  The trick is how to do that, and to use that information to direct or channel R&D efforts toward more developments that would be valued by customers.

Most companies have an R&D effort of some kind, and for discussion purposes, are spending e.g., $10 on 10 new projects.  Most such programs are well-intentioned, with the projects chosen by the best technical minds in the organization, with input from other functions such as marketing, sales, and significantly, upper management.  The success rate (those that are profitably commercialized) is usually quite low (30% is regarded as good), and that is deemed acceptable by many. 

Some say that research is turning money into knowledge.  We say that innovation is turning knowledge into money. In today's tighter spending environment, many enterprises are cutting R&D spending.  What if we could make R&D/new product development much more cost-effective - by spending fewer dollars (e.g., $7 vs. $10) concentrated on fewer projects (e.g., 5), with a markedly higher success rate (e.g., 50+%) - We could save money overall, and make more in the end as well.  Here's where innovation can provide both cost reduction together with revenue and margin enhancement - a positive paradox.

It's possible. If we get and use better market and customer knowledge, we can focus our technical knowledge and development on higher probability efforts to.  Here, the innovation is the combination of a new approach to anticipating and defining unarticulated market needs + using that information do focus R&D on those products/services that customers would value - and one that reduces spending, while increasing the chances of creating new, more profitable products.

This has been, and can be done - with a few people in a few weeks - using proven methods that work.  If you want to know more about how to do it - faster, easier and more effectively & profitably, let's talk.

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