by Mike Marfise

I’m on an airplane, and as I listen to my iPod I’m looking at my seatmate’s MacBook Air. These products show what an innovative company can do when it listens to a market demanding not just new editions of existing products, but new products altogether.

Here’s how.

Competition is relentless, and can come from anywhere, at any time, no matter the industry. In high tech, Saleforce.com became a threat to once market-leading Siebel in just a few years; more recently, MySpace owned the social networking space for what seemed like a few minutes, when Facebook came along. In the fashion industry there used to be four seasons; now apparel manufacturers compete in up to 18 seasons. In consumer electronics, the competitors themselves change; former television manufacturer Motorola is now known for cell phones, and when Dell broadened its offerings to include televisions it began competing not just with HP and Lenovo but with Circuit City and Best Buy.

Consumers, rather than being confused, embrace this type of change. They adopt earlier and faster, creating bigger, faster successes out of wholly new products, such as the iPod or iPhone. Their expectations around new products are higher than they have ever been, and their demand for innovation is constant. And they talk about it – in blogs, forums, online communities, podcasts, twitters, et. al. A recent survey I read showed that the most trusted source for consumer product information and insight, after family and friends, was strangers with product experience. They beat out teachers, TV, news, advertising, and other media. In 1997 this same survey placed strangers near the bottom of the list. The result: A business environment in which the need for companies to innovate is constant.

But all innovation is not the same. Some types of innovation are disruptive. Some types are sustaining. Companies need both to thrive, but must treat each differently. Disruptive innovations typically are products or services or methodologies (such as business models) that can open up whole new markets for organizations. Disruptive innovations generally form not from a single idea, but rather from a collection of ideas and thoughts that often appear in online community conversations or idea portals that provoke or spark the innovation. The new bicycle developed by Trek Bicycles (cited in a Productologist blog post, which is what sparked me to write the post you’re now reading) came about as a result of conversations carried on with current and prospective customers. Trek gathered and analyzed the requirements of casual bicycle riders to come up with a whole new design.

Sustaining innovations, meanwhile, helps organizations maintain or grow their market share typically by adding innovative new features or capabilities to existing offerings. My iPod? Disruptive. That MacBook Air? Sustaining.

But at what point do you determine you need a new product, as opposed to enhancing an existing one? To get to that point, companies first must understand that disruptive and sustaining innovations are not the same, and should not be treated the same. Each goes through different gates and takes a different path down along the new product development process. It’s very important that companies put in place an innovation process that enables them to look at and analyze innovation with an eye towards disruption as well as toward determining how to continuously improve their current products with innovative new features. Listen to the voice of the market, and you’ll hear demands not just for better products, but for new (i.e. disruptive) products.

Do that, and you just may also disrupt the revenue goals of your competitors.

by Mike Marfise

A recent blog post on The Forrester blog for technology product management and marketing professionals highlighted an interesting concept related to a product team’s dilemma when striving for customer-centric innovation — use cases vs. feature descriptions.

The use of user stories and use cases has been around for years, yet many companies I have worked with seem to skip this step or, to be frank, have not done a good job of understanding their customers’ needs. As stated in the blog post, understanding the customer’s needs and business problems is paramount to understanding how to solve those problems. That said, it’s equally important to define the requirements or features that your engineering team will eventually design, and develop a product/solution to suit. Ensuring that there is a collective understanding of the customer and their needs throughout the product innovation lifecycle is mandatory for delivering successful products to the market. In software, for example, it goes beyond production and should continue into the pricing, packing, and commercialization of that product.

So why have so many companies done a poor job of this? Simple… TIME! It’s one thing to say, “I understand my customer.” It’s another thing to spend time with enough of them to understand their collective challenges and look for opportunities to innovate. Let’s face it, if we just did everything a few customers asked for we might never invent new products or categories. So how do you get to more customers quickly, and how do you get a deeper understanding of what challenges they face? Putting the customer at the center of your innovation process starts with listening to them. With modern technologies such as web-based communities, idea portals, online surveys, and social networks, access to your customers and their ideas has become increasingly obtainable. But it still requires that, first, you either get them to participate or you go to where they are already talking and listen in, and second, that you have tools that allow you to analyze the information such that you can reduce the time it takes you to transform those ideas rapidly into qualified product concepts and ultimately to new market offerings.

Here are some suggestions on how to increase the velocity in your innovation process:

1. Identify where your customers are discussing their challenges. For some companies this may be in their backyard: support sites, web site, company-hosted communities. For others, the conversations may be on public sites such as forums, blogs, or review sites like Amazon or CNET. Don’t assume they are not happening – they are!
2. Determine the best way to reach out to your customers. This will most likely be a combination of initiatives, depending on the answer to #1. If they are coming to you, building a community to gather and harness the collective wisdom and insights of your customers is a great approach. If they are already heavily engaged in a wide range of conversations on public sites, using an application that can discover and deliver those conversations to you will be much more successful.
3. Establish a process for vetting and prioritizing what you hear. Once you open the flood gates and begin gathering this insight you need to be prepared to process this QUICKLY! Establish gates and metrics you will use to evaluate these conversations. Determine how to take the next steps in prototyping, validating, and executing on those new ideas, and who will take those steps.
4. Communicate results with your customers. Often this step is an afterthought or done only when products are out the door, via marketing. In the modern age of marketing you should leverage those same vehicles where you gathered the insight to communicate progress and even solicit additional feedback along the way. When customers are invested in your innovations they are more likely to remain loyal to your products and your company. Additionally, they will spread the word much faster than you or your company ever can.

by Bryan Plug

How could the breakdown of a decade-old washing machine become a parable for how companies must do business in the early 21st-Century?

Funny you should ask.

Like most people, my wife and I don’t shop for washers and dryers very often. So when our washer finally gave up, we found ourselves back in the market for a new one—an endeavor we hadn’t done in about 10 years.

And what a difference a decade makes. Companies that manufacture electronics such as cell phones and flat-screen TVs now offer a full line of washers and dryers, and stores known for selling computers and software have whole sections devoted to refrigerators and washers and dryers.

And here I thought it was still a simple process – visit the store over the weekend, buy a Maytag, be back in time for lunch. Instead, it was – well, bewildering. I mean, it’s great to have choices, but we were simply unprepared for the veritable forest of brands, styles, and features we encountered. So my wife decided it was time for a bit of research.

One washer-dryer pair seemed to have features and attributes we liked most – the right capacity, a steam-drying function, something else, I don’t remember – it grilled sandwiches or walked the dog or something – so that’s where my wife started when she went onto the Internet.

Sure enough, after a bit of digging, she found reviews and postings on several completely independent blogs that discussed precisely the make and model of washer we were considering. And, sure enough, not all of the feature sentiment was positive. In fact, several people complained in detail about the lint trap that required frequent manual cleaning to prevent damp lint buildup, and the rubber door gasket that didn’t seal properly and didn’t dry out completely between cycles. The result? A musty, moldy smell that first won’t leave the washer, then won’t leave your clothes, then won’t leave your laundry room.

So we crossed that washer off our list, went back to the store, and with a salesman looked at a few different machines. When we came to this musty washer, my wife pulled out her research and asked him if he’d heard about this issue. He hadn’t.

And that’s when it hit me.

First, I realized the information control for major purchases has shifted. It no longer rests with the manufacturer, or with the retailer, or even with the experts (like Consumer Reports). It now rests entirely with consumers themselves. They generate this information, they share it, they seek it out, and they sure as heck use it.

But even more important, I thought, “Well, we discovered this important product information. I wonder if the company has, too?” This information was very important to us imagine how important it would be to the manufacturer – especially since it’s out there for anyone (like the competition) to find.

Take this further, still. What other attributes of this washer have consumers publicly disparaged? Conversely, what features are highly praised, which the company could then add to other models and which it could use as the basis for an effective marketing campaign? Based on other blog conversations, review sites, etc., how does this washer/dryer combo stack up against the competition? Also, this information is generated virtually in real-time – so if the company were to launch a new product would it learn within just a few weeks what customers thought, or would it take months of traditional research and analysis, such as through a focus group? And when the product launched, would the company already know what customers specifically didn’t like about its competitors’ products?

Now bring this anecdote into the workplace. Searching through countless blogs, discussion groups, and other online conversations is certainly akin to sifting through statistically valid volumes of market research data for tidbits and insight into market behavior. And this of course is a proven technique for deriving market insight, something you can do repeatably, predictably, in scientific fashion. So you don’t have to wait for anything in your home, or your neighbor’s or co-worker’s home, to break down. You can set about right now routinely to pull valuable nuggets of product and market intelligence out from the volume of data available now, just waiting to be mined and interpreted.

Every parable has a moral. And the moral of this story is: This is how business – even traditionally slow-moving business, like home appliances – is done, today. The information is out there. The companies that find it faster and act on it sooner will flourish.

by James Davies 

If anyone’s got any doubt as to the business potential in social media, a recent white paper from PricewaterhouseCoopers should erase those doubts once and for all. And I’m not referring to something as superficial – even silly – as letting your employees write their own blogs.

No, this report talks about something really significant – I would argue even revolutionary, and I am not being hyperbolic, here. As this report from PwC suggests, the amount of customer intelligence on your company that exists now – at this moment – is staggering, its quality – or potential for spurring growth – immeasurable.

The Internet has provided your market with the tools it needs to converse, in the form of social media – blogs, wikis, discussion forums, etc. And the conversation – or, more accurately, thousands, hundreds of thousands, millions of conversations – are taking place now, as I write this. The companies that learn to listen to, understand, and interpret these conversations, and innovate based on these conversations, are the companies for whom the sky is truly the limit.

Am I exaggerating? Not a bit. Companies now at the cusp of figuring out how to harness this galaxy of customer and market intelligence are already reaping huge rewards. A recent Business Week article discussed how Bungie – the makers of the wildly-successful Halo3 video game – observed what some of their most ardent fans were doing completely independent of the company. Bungie understood that players desired to “re-live” and share particular action sequences. So they built in a feature that enables a player to “film” his play – from any angle in a full 360-degree view – and, on the X-Box platform, recommend and share clips with up to three other people at once. The company also upgraded its Web site with features that enable players to “…use an Xbox Live account to track statistics, download saved films and edited levels, and view screenshots posted by others from within the game.” Bungie’s clever new game components not only have increased sales, but – far more importantly – will generate a stream of ongoing revenue almost unheard of in an industry in which nearly every product is, from a revenue perspective, a one-off.

In essence, you can begin leveraging the voice of the market now – this moment – to innovate in ways you literally cannot imagine. Read the PwC report for yourself.

So – are you listening? How are you embedding the customer into your business?

by James Davies 

I just finished reading an interesting article in Forbes called “Built for Innovation.” Authors Stephen Wunker and George Pohle conclude that successful companies tend to
approach innovation by embracing one of four models:

• The marketplace of ideas
• Visionary leadership
• Systematic innovation
• Collaborative innovation

While reading this article, I found myself recalling an excellent book entitled “The Discipline of Market Leaders” by Michael Treacy and Fred Wiersema. In this book the authors suggest that successful companies must predominantly focus on one (and only one) of three core disciplines: Product leadership, customer intimacy, or operational excellence.

I always struggled with the conclusion in this book because I personally believe that a successful company can (and should) pursue excellence in each of these areas. And while focus is key, focus to the exclusion of other disciplines it can also be self-limiting in, not least of all, expectations.

I draw a parallel between the book and article. Taking the four innovation models as our point of reference, my hypothesis in innovation is that successful companies must foster innovation practices in each of the three process-oriented models, wary of the fact that visionary leaders appear few and far between. In other words, embracing one innovation model in particular appears equally as self-limiting, whereas the models themselves are complimentary and not mutually exclusive.

by James Davies 

Last week I spoke with the CEO of an idea management solution provider who posed the following question: if Stage-Gate has been around for 15 years and has been embraced by an estimated 70% of US mid- to large-sized manufacturers, then why is there still such incredible waste in R&D (estimated at 76% of overall R&D spend)? Good question.

My take is that the adoption of the Stage-Gate process remains largely focused on product development rather than ideation - “building the product right.” As we know, it’s great to build the product right - unless it’s the wrong product in the first place! Until such time that we all do a better job of “building the right product,” we will continue to witness incredible R&D waste.

If I’m right, then the current wave of interest around ideation and voice-of-the-market is well-placed and readily explained. It will lead to significant improvement in R&D effectiveness. Whether the heart of the challenge is the lack of credible data feeding the Stage-Gate process (i.e. ideas) or shortcomings in the application of Stage-Gate for the ideation process itself, remains to be seen.

by James Davies

Start-up companies feel especially vulnerable with regard to revealing their technology to potential customers and partners. But the instinct to protect one’s intellectual property - the hard-earned fruits of their innovation labors - at all costs often results in missed business opportunities. I’m not saying that we should throw caution to the wind and publish our IP on myspace.com. I do suggest, however, that we contemplate what a friend and colleague advised me a couple of years ago: That Italian racing cars do not have rear-view mirrors. The reason for this is that drivers need not worry about what is happening in their wake and should at all times focus on what’s in front of them.

More often than not, the business opportunity being explored has more potential for a positive outcome than a negative one. It’s very difficult to commercialize your technology if nobody sees it. And let’s face it – if your partners and competitors want to see your technology, they’ll find a way. Keeping our eyes on the road ahead is what helps us all to keep our market leadership position and not follow in our competitors’ wake.

So I disagree with Andy Grove when he opines that only the paranoid survive. Don’t let paranoia get in the way of realizing your company’s potential.

by James Davies 

OK - I admit that the concept of crushing competition is appealing, provided we act within ethical and moral constraints. But if you take this attitude too far, you can miss out on opportunity. Here’s an example:

I recently attended an industry event recently where a competitor was a fellow exhibitor. Making the obligatory rounds, I stopped by their booth to introduce myself to the staffers there working the event. I had hoped to share opinions and insights into our market with the m. Instead I was met with utter rudeness and arrogance.

We all smile through our teeth at competitors and wish each other well. That’s what professionals do. It’s called common courtesy. However, smart professionals understand that competitors are also market development partners. So next time you talk to a competitor, treat them like a partner. I bet that you’ll learn more from the (somewhat guarded) exchange of market insight than you would by idle boasting.

by James Davies 

What part of the enterprise has not been outsourced? From a Product Lifecycle Management perspective, manufacturing and product design development have been outsourced with largely positive results. In broad strokes, these services have become commoditized - which leaves innovation as the last competitive differentiator. So far so good.

Now fast-forward to today. Only 15% of Global CEOs expect ideas for tomorrow’s winning products to originate from internal R&D organizations. Industry movements, such as customer-centric innovation and open innovation, actually serve to outsource the very aspect of your business upon which your market survival hinges – your ability to innovate!

Now that’s ironic. What’s next? Is the “next” last competitive differentiator not what you innovate, but how you innovate?