Thursday, February 15, 2007

What Innovations Bring Most Value to Customers?

It seems like an answer to this question is pretty straightforward: those innovative solutions (products, services, platforms) which better satisfy customer needs create more value. But what needs and what value? And how to create these solutions?

In 1943, Abraham Maslow proposed Hierarchy of Human Needs, which separates between five different levels of human needs. But by looking at all solutions which exist in a marketplace, I personally tend to distinguish between 4 major categories of needs where innovation takes place (in the figure below, their importance runs clockwise):

- Basic Personal (food, healthcare, housing, security, learning, transportation, etc.)
- Work (need for money, self-actualization, satisfaction, prosperity, wealth, etc.)
- Social (communication, socializing, learning, sex, family, etc.)
- Entertainment (relaxation, joy, fun, etc.)

Today, borders between these categories are getting fuzzier in developed countries. Work can co-exist with fun and joy. A basic need for food can co-exist with socalizing and entertainment: some people prefer gourmet meals in cozy restaurants rather than consuming fast food. Playing Sims combines socializing and entertainment. Listening music helps to entertain and relax. Playing tennis helps to entertain and stay in good health.

There are endless solutions for each category of needs, and many cross the borders of each other. But by looking at these categories, it becomes obvious that most winning solutions are those which cover ALL categories of needs. For instance, even an old-fashioned "wired" phone can be used for:

- Emergency calls (Basic Personal)
- Talking to friends (Social)
- Discussing budgets during travelling (Work)
- Ordering music on interactive TV channels (Entertainment).

The same is valid for a personal car, PC, and a large variety of other products. And not just for products, but for services too: for instance, personal coaching can help to improve someone’s life in all four categories. Gaming industry evolves in this direction as well. Look at computer games. Civilization has overgrown from bringing personal entertainment to become a useful tool on world history in urban learning. If Sims helps to entertain, discuss basic personal needs, and socialize, then Second Life adds business (working) aspect to the game. This is why Second Life is getting more and more popular. I had not bought an mp3 player before podcasts started to emerge on the Internet: it is great to learn something new from podcasts during long trips, and then relax by listening to music. A single device satisfies my needs for entertainment and work. In fact, I did not buy an mp3 player: my mobile phone equipped with 4 Gb Sony SD card does all needed jobs perfectly. It shows movies too, but iPhone promises to do it even better.

So, the secret number one is simple: if you want to create a really winning solution on large scale, create something that targets all four categories of needs. But probably this is not an eye-opener. Another question arises: how to create it?

Here TRIZ helps. We already have a car, a PC, a mobile phone. How to think about something really new, or at least, how to radically improve these existing solutions? Not so difficult. TRIZ philosophy says that really new solutions result from overcoming contradictions which were created by old solutions. For instance, once I had to give 5 different phone numbers so people could reach me in any location. And still, they were unable to reach me when I was on a trip. I always faced this contradiction – when arriving to a new destination, I needed to send my new number to… how many people? But I did not have time for that. If I would spend time for calling to everyone to inform about my new number, then I would not have time to do my job. And vice versa. A contradiction which was resolved by a mobile phone.

We can look at any of the existing solutions and identify what contradictions are still caused by it or its use. Not just slightly improve the convenience of use, but solve a real contradiction. For instance, back in 1997 a CTO of a company producing traditional (“wired”) phones told me that almost no one in the world would need a mobile phone except some top executives and traveling sales people. I thought: really? But one of my basic personal needs is to call emergency on case something happens no matter where I am – and this applies to everyone! In 1999, a top manager of one of the world leading company producing photo cameras told me that digital photography was doomed… Really? I was already fed up with endless film rolls, prints, and the necessity to go to a store each time to bring my films for processing, and paying each time quite a lot of money since I liked to use quality films and quality photo paper. Looking at the costs side, I calculated that owning a digital camera for one thousand euros will be paid off just within 2-3 years. And probably the cost factor was not the most appealing: the most important to me was a contradiction that I was not in the control of the quality of the prints I used to get from the store and I did not have time to do the prints myself. Another imprortant factor was that I knew that quality of digital cameras would improve immensely pretty soon – there were no physical barriers to that. The time has shown who was right.

So, the secret number 2: find contradictions, define new goals and resolve the contradictions. And create new winning solutions.

In fact, that’s all. The rest depends on your capabilities.


Ellen Domb said...

Hello, Valerie: I agree entirely, but the basic contradiction is that your executives say that they want to innovate, and say that they want to satisfy the customer, but they don't listen to the customer! This is why the combination of QFD with TRIZ is so powerful--QFD has many avenues for understanding the customer (interviewing, active listening, "ethnographic research", etc.)

Valeri Souchkov said...

Thanks Ellen, completely agree. QFD also helps to identify contradictions between current parameters of existing solutions and customer demands and wishes which is great input for further innovation.

In general, I see two scenarios for innovation: 1) Inside-triggered, when a new principle or scientific discovery enables to create a radically new or breakthrough solution which stays ahead of current explicitly expressed customer needs and 2) Outside-triggered, when a deeper understading of customer's needs and value chains helps to create better products and services.

And it is right, executives want to innovate but the main problem is they do not know how, or think they know... Guess how many times when I asked, "Did you run QFD on your products?" I heard the answer "What is QFD?". Or, another frequent answer: "We already have top R&D people and we pay them well, so that is their responsibility to innovate". And there is no department in many organizations which is further away from a customer than R&D.