New Knowledge

Many, if not most, radical innovations are the product of new knowledge. Consider the computer, the product of new knowledge in the areas of binary mathematics, symbolic logic, programming concepts, and various technological breakthroughs, including the audion electronic switch. New knowledge developed by Francis Crick and James Watson in the early 1950s on the structure of the DNA molecule opened the door to innovations in medicine, agriculture, and animal husbandry. Likewise, IBM’s innovative silicon-germanium chip resulted from laboratory findings that contradicted accepted wisdom on certain properties of that alloy. The SiGe chip has now found important new uses in electronic devices where processing speed and low power consumption are critically important.

Corning, Inc., whose roots go back to the late nineteenth century, provides one of the best examples of a company that has survived and prospered on market applications developed from new knowledge, most of it generated within its own laboratories. Citing a series of landmark innovations in materials—glass lightbulbs, heat-resistant Pyrex glass, television tubes, extruded honeycomb ceramics for catalytic converters, and fiber optics—Corning Research Fellow George Beall told an audience of industrial R&D members that “the development of landmark new products at Corning has been almost always dependent on knowledge gleaned from previous exploratory research.”³

While innovations based on new knowledge are often powerful, there is generally a lengthy time delay between development of new knowledge and its transformation into commercially viable products and services. The computer took over fifty years to surface in the market. Satellite communications took even longer. Considering all the elements that are required to launch and maintain earth satellites—knowledge of calculus, physics, electronics, and aeronautical science—we can say that the timeline of satellite communications stretches back several hundred years to Newton and Kepler.

Despite the time lags involved with knowledge-based innovation, the rewards are often enormous. Consider Corning’s development of fiber optics technology, which that company now dominates. Corning scientists began learning about the light-transmitting properties of glass “light pipes” in 1966, but it wasn’t until 1970 that a team of company scientists produced a material capable of transmitting electronic impulses at the levels required by standards of the day. It took many more years for the new material to find a place in the market.

Customer Ideas

Customers are an evergreen source of innovative ideas if salespeople, service personnel, market researchers, and R&D workers listen to what customers say and probe for more. Customers, for example are often the best source of information on the weaknesses of current products: “It’s a great device, and I’d use it more often if it would fit in my briefcase.” (Idea: Make a smaller version of the device).

Customers can also be the best source for identifying unsolved problems: “Our pizza restaurant chain has never been able to generate much lunchtime business. It takes too long to prepare and bake a regular pizza.” (Idea 1: Develop an oven capable of cutting the cooking time in half; idea 2: Develop a half-prepared pizza product.)

Most companies appreciate the importance of customers as a source of new ideas, and they mine that source regularly through market research. You should also. When quizzing customers, however, be less concerned with product or service specifications and more concerned with the outcomes that customers seek. This is the advice of consultant Anthony Ulwick, founder of Strategyn. Using the example of music storage media, the preferred outcomes would be “access to a large number of songs, play without distortion over time, resist damage during normal use, and require minimal storage space. These are outcomes, not solutions.”⁴ The next step, according to Ulwick, is to prioritize the list of desired outcomes according to their importance to customers, with each outcome being quantified. For example, research might indicate that “play without distortion” is the most important value, and “resist damage” is the least important.

Learning from Lead Users

Lead users are another valuable source of potentially innovative ideas. Some studies show that between 10 percent and 40 percent of product users modify off-the-shelf products or develop others that fill their particular needs. Lead users are companies and individuals—both customers and noncustomers—whose needs are far ahead of market trends. They may be pioneering radiologists searching for better ways to produce diagnostic images. They may be military pilots, professional athletes, or mining engineers who modify off-the-shelf equipment to achieve higher effectiveness in the field. In all cases, their needs motivate them to produce innovations that suit their unique requirements—long before manufacturers think of them.

Lead users are seldom interested in commercializing their innovations. Instead, they innovate for their own purposes because existing products fail to meet their needs. And a surprising number of them will freely reveal the nature of their innovations to others. Open source software is an example of the willingness of user-innovators to share their advances. Those innovations can often be adapted to the needs of larger markets.

MIT professor Eric Von Hippel was the first to study lead users as a source of innovative ideas. In several of the fields he studied—notably scientific instruments, semiconductors, and computers—more than half of all innovations were made by users, not by product manufacturers. Thus, approaching these lead users and studying their unique applications and product modifications can effectively augment internal idea generation. As an example, Von Hippel suggests that an automotive brake manufacturer might seek out particular users whose requirements for effective breaking exceed those of normal users. These might be auto racing teams, producers of military aircraft, or manufacturers of heavy trucks.

In most cases, the discovery of a user innovation by a manufacturer is accidental—for example, the result of a field sales representative’s visit to a customer site. More systematic exploitation of user-generated innovation can produce much better results. Von Hippel cites research showing that 3M’s forecasted annual sales of lead user–generated ideas were conservatively estimated to be more than eight times those forecasted for new products developed in the usual 3M manner (see “A Four-Phase Process”). More important, lead user–generated projects were found to create ideas for new product lines, while traditional market-research methods were more likely to produce incremental improvements to existing lines of business.⁵

SOURCE: Adapted from Eric Von Hippel, Stefan Thomke, and Mary Sonnack, “Creating Breakthroughs at 3M,” Harvard Business Review, September–October 1999, 47–57.

Empathetic Design

As noted earlier, one of the problems that innovators face in determining market needs is that target customers cannot always recognize or articulate their future needs. Because most are unaware of technical possibilities, they tend to identify their needs in terms of current products and services with which they are already familiar. They express their needs in terms of incremental improvements to these products and services: a thinner laptop, an automobile with better fuel economy, a TV screen with better resolution, faster service. To generate innovations that go beyond incremental improvements, you must identify needs and solve problems that customers may not yet recognize. Empathetic design is a technique for doing this. Empathetic design is an idea-generating technique whereby innovators observe how people use existing products and services in their own environments. Harley-Davidson has used this technique, sending engineers, marketing personnel, and even social anthropologists to HOG (Harley Owners Group) events. These employees observed how Harley owners use and customize their bikes, the problems they encounter using Harley products, and so forth. The company has taken this ethnography approach a step further by sponsoring periodic “Posse Rides” that bring company managers and Harley owners together in 2,300-mile road trips from South Padre Island, Texas, to the Canadian border. These long treks give company participants opportunities to build relationships with customers in a relaxed setting and to observe their likes, dislikes, and biking aspirations.⁶ Those observations became the raw materials for innovative ideas. Following this same strategy, a Japanese consumer electronics company sent a young engineer to live with an American family for six months to observe how they cooked their meals, communicated with friends, and entertained themselves. Those observations were used in the design of new consumer products.

Some companies take this approach very seriously. IDEO, a leading product design company, bases its design process on an anthropologic approach. Its cofounder, David Kelley, has described some of the things he looks for when he makes a deep dive into the customer world—what people care about, what frustrates them in using current products or services. He watches for smiles or frowns.⁷

Author/professor Marc Meyer has described how Honda used this same approach in the design of its popular Element SUV. Initially conceived to address the mobility needs of a demographic group for which the company had no uniquely designed vehicle (eighteen- to twenty-six-year-old U.S. males), members of the development team went to college fraternity houses to talk with young men about their transportation-related activities—going to beach, hauling bikes and surfboards to outings, moving furniture between apartments, socializing, etc. They even brought together design team members, a small focus group, and several Honda executives for a weekend campout on a California beach. Through these and other avenues of inquiry, the development team learned that their young male target market needed a spacious interior for stowing gear, large back and side doors for getting gear and people in and out, and, of course, a powerful sound system. They also needed a cargo-area floor that was flat and easy to sweep out, and scratchresistant exterior body panels. Models and sketches developed by the design team were shared with “the guys” to obtain feedback.

The resulting vehicle incorporated features that accommodated the lifestyles of eighteen- to twenty-six-year-old men at a reasonable price. First-year sales of the Element were twice what Honda had anticipated. To the company’s delight, many buyers were men and women in their thirties, forties, and fifties who shared one thing with the initial target audience: an active lifestyle.⁸

Procter & Gamble, a prolific new-product producer, is another user of empathetic design. It trains all new R&D personnel in what it calls “Product Research,” P&G’s approach to observing how customers use products in their day-to-day lives. The program’s goal is to put people who have knowledge of technical possibilities and design in direct contact with the world experienced by potential customers. As described by Dorothy Leonard and Jeffrey Rayport, empathetic design is a five-step process:⁹

1. Observe: As described above, company representatives observe people using products in their home and workplaces. The key questions in this step are: who should be observed, and who should do the observing?
2. Capture data: Observers should capture data on what people are doing, why they are doing it, and the problems they encounter. Since much of the data is visual and nonquantifiable, use photographs, videos, and drawings to capture the data.
3. Reflection and analysis: In this step, observers return from the field and share their experiences with colleagues. Reflection and analysis may result in returning people to the field to gather more data.
4. Brainstorm: This step is used to transform observations into graphic representations of possible solutions.
5. Develop solution prototypes: Prototypes clarify new concepts, allow others to interact with them, and can be used to stimulate the reactions of potential customers. Are potential customers attracted by the prototypes? What alterations do they suggest?

As the reader can easily imagine, empathetic design is especially important when developing consumer products for nondomestic markets, where preferences for product size, colors, and applications may be very different than those preferred by the home market.

Invention Factories and Skunkworks

Many large manufacturers generate and develop innovative ideas through formal research and development (R&D) units—innovation factories, if you will (“The Wizard’s Invention Factory” discusses the granddaddy of them all). Some enterprises support R&D at two levels: the corporate level and the business-unit level. Generally, corporate-level R&D works on radical innovations and enabling technologies that various operating units can use. Bell Labs, a research arm of Alcatel-Lucent, provides an example. Since its founding in 1925 as an R&D center for Bell Telephone, Bell Labs has produced a stream of scientific and technological breakthroughs, including sound-synchronous motion pictures, the transistor, longdistance television transmission, digital cell phone technology, the wireless local area network, and the Unix computer operating system. Our world would be notably different absent innovations spawned in this invention factory, which has a twofold mission:

• Conduct basic research in scientific fields related to communications
• Develop leading-edge products and services

SOURCE: Adapted with permission from James M. Utterback, Mastering the Dynamics of Innovation: How Companies Can Seize Opportunities in the Face of Technological Change (Boston: Harvard Business School Press, 1994), 59–60.

This mission is typical of corporate-level R&D, which is heavily focused on radical innovation. R&D at the business-unit level, in contrast, generally focuses on incremental projects that will benefit the units directly and in the short-term. Business-unit managers with profit-and-loss responsibilities are either unable or unwilling to shoulder the financial burden of long-term radical innovation projects. They look to corporate R&D for those.

In their study of eleven radical innovation projects, Richard Leifer and his colleagues found that business units were happy to accept a radical innovation hand-off from corporate R&D labs, but only after most of the expensive and time-consuming work had been done.¹⁰ The aim of these managers was to improve the performance of the mainstream business—which usually means a focus on incremental innovation.

A formal R&D program is not the only structure for creating innovative ideas. Some companies have generated and developed ideas by temporarily bringing together talented people with different perspectives with the sole purpose of solving a particular problem. (“Idea Contests” shows one way organizations get innovative ideas from within their ranks.) In some cases, these individuals are located in remote or isolated settings to keep team members focused on their mission, to minimize interference from the rest of the organization, provide autonomy, or to maintain secrecy. The term skunkworks is often applied to these focused project teams. The term was first coined in 1943 by Lockheed Aircraft Corporation (now Lockheed Martin) to describe the project center it used to develop the first U.S. fighter jet, the XP-80. Lee Sage has described a similar situation at Johnson Controls, Inc. (JCI), a major supplier of vehicle interiors to the auto industry. Besides its corporate mission, JCI had a dual goal of using more recycled materials and producing zero landfill wastes. To further that goal, it wanted to create a new material for its products, and chose to do so through a skunkworks project. As told by Sage: “[T]he company identified 30 engineers it viewed as competent and creative in the materials area, set them up in an unused company building in Holland, Michigan, and asked them to come up with a new and suitable car interior material. . . .”¹¹

SOURCE: Jörg Schepers, Ralf Schnell, and Pat Vroom, “From Idea to Business—How Siemens Bridges the Innovation Gap,” Research-Technology Management 42, no. 3 (May–June 1999): 26–31.

JCI’s skunkworks eventually produced CorteX, an energyabsorbing material made from recycled plastic soft-drink bottles and carpeting. CorteX found its way into vehicle overhead systems, door panels, and other auto interior features developed by the company. This idea-generation experience was so successful that JCI adopted it again—this time for a one-year project to create innovations in vehicle seats.

Open Market Innovation

Not everything must be “invented here.” Innovative ideas can often be acquired (or sold) in the open market. Bain & Company’s Darrell Rigby and Chris Zook coined the term open market innovation in describing how companies can reach outside for the ideas they need for new products and services. As described by Rigby and Zook in a Harvard Business Review article, open market innovation employs licensing, joint ventures, and strategic alliances to bring the benefits of free trade to the flow of new ideas.¹² For example, confronted with the anthrax scare that first hit the United States in late 2001, Pitney Bowes—a major producer of mail metering systems—had no ideas about how to help customer organizations whose mail put employees at risk. Needing ideas and solutions fast, it looked outside for help. With the collaboration of outside inventors, it quickly developed scanning and imaging technologies capable of spotting contaminated letters and package.

As described by Rigby and Zook, open-market innovation has four distinct advantages:

1. Importing new ideas can help you multiply the “building blocks” of innovation.
2. Exporting ideas is a good way to raise cash and keep talent.
3. Exporting ideas gives companies a way to measure an innovation’s real value.
4. Exporting and importing ideas helps companies clarify what they do best.¹³

There are, of course, risks associated with collaborating across organizational boundaries. Key among them is the danger of failing to adequately capitalize on ideas shared with others in the open market. The best safeguard against this danger is a deal structure that protects your interests.

Open market innovation can also tap the creativity of suppliers, university and government labs, and other sources through what Larry Huston and Nabil Sakkab call the “connect and develop” method. As they explained in a 2006 article on this subject, Procter & Gamble had innovated for decades from within, employing global research facilities staffed by some of the best talent.¹⁴ In 2000, management saw the need for a new approach; it dispensed with the company’s age-old “invent it ourselves” approach to innovation and embraced a “connect and develop” model. By identifying promising ideas throughout the world and applying its own capabilities to them, P&G realized it could create better and cheaper products, faster. The result is that the company now collaborates with suppliers, competitors, scientists, entrepreneurs, and others (that’s the connect part). It systematically scours the world for proven technologies, packages, and products that P&G can improve, scale up, and market, either on its own or in partnership with other companies. Thanks in part to this approach, R&D productivity at Procter & Gamble increased by nearly 60 percent. As described by Huston and Sakkab, P&G launched more than one hundred new products in 2004 and 2005 for which some aspect of development came from outside the company.

If you adopt this method, consider this advice:

• First, identify consumer needs: Clarify what you’re looking for before you begin scouring the world for ideas. Ask business-unit leaders which consumer needs, when satisfied, will drive their brands’ growth. Translate needs into briefs describing problems to solve. Consider where you might seek solutions. For example, P&G unit managers identified a need for laundry detergent that cleans effectively in cold water. They decided to search for relevant innovations in chemistry and biotechnology solutions that enable products to work well at low temperatures. Possibilities included labs studying enzymatic reactions in microbes that thrive under polar caps.
• Identify adjacencies: Ask which new product categories, related to your current categories, can enhance your existing brand equity. Then seek innovative ideas in those categories. For example, P&G expanded its Crest brand beyond toothpaste to include whitening strips, power toothbrushes, and flosses.
  • Leverage your networks: Cultivate both proprietary and open networks whose members may have promising ideas. P&G’s proprietary networks, for example, include its top fifteen suppliers, who collectively have fifty thousand R&D staff. P&G created a secure IT platform to share problem briefs with these suppliers—who can’t see others’ responses to briefs. P&G’s open networks include NineSigma, a company that connects interested corporations with universities, government and private labs, and consultants that can develop solutions to science and technology problems. NineSigma creates briefs describing contracting companies’ problems and sends them to thousands of possible solution providers worldwide.
  • Distribute and screen ideas: Once you have identified ideas for refining and further commercializing existing products or for employing technology solutions to create new products, distribute those ideas internally—ensuring that managers screen them for potential. For example, at P&G, product ideas are logged on P&G’s online “eureka catalog” through a template that documents pertinent facts—such as current sales of existing products or patent availability for a new technology. The document goes to P&G general managers, brand managers, and R&D teams worldwide. Product ideas are also promoted to relevant business-line managers, who gauge their business potential and identify possible obstacles to development.

The Role of Mental Preparation

Many ideas are generated unintentionally through random observations, routine contacts with customers, and even unintended laboratory results. However, to quote Louis Pasteur, “Chance favors the prepared mind.” A prepared mind is more likely to formulate a problem-solving idea or recognize an opportunity.

The value of a prepared mind is underscored by the invention of 3M’s fabric protector, Scotchgard, a development triggered by a 1953 laboratory accident. Researcher Patsy Sherman was conducting fluorochemical polymer experiments when a lab assistant accidentally spilled some of the solution on her tennis shoes. Sherman tried to remove it using soap and water, alcohol, and other solvents, but nothing worked. As often happens in cases where the people involved have technical training, keen powers of observation, and native curiosity, a light went on in Sherman’s mind. She reasoned that if the substance was impervious to solvents and other substances, it also might protect textiles from stains. Further development of the substance led to a successful new product.

SOURCE: Scott Anthony, Matt Eyring, and Lib Gibson, “Mapping Your Innovation Strategy,” Harvard Business Review, May 2006.

Preparation is often cited as the first step in the creative process that leads to innovation. To prepare themselves for idea generation, would-be innovators should immerse themselves in the problem at hand. According to an article by Arthur Shapero, an expert on managing creativity, they should:

• Search the literature
• Look at all sides of the problem
• Talk with people who are familiar with the problem
• Play with the problem
• Ignore the accepted wisdom¹⁵

How Management Can Encourage Idea Generation

If innovation is a key function of companies, then management has a responsibility to encourage the generation of innovative ideas. Both traditional and nontraditional tools can be used for that task: rewards, a climate of innovation, hiring innovative people, encouraging the cross-pollination of ideas, and providing support for innovators. Management’s responsibilities in the area of innovation are treated extensively in chapter 14, nevertheless, let’s consider here some of the things that management can do to encourage the idea generation part of the process.

Four Idea-Generating Techniques

Companies use a variety of techniques to generate new ideas. Four are offered here: brainstorming, nominal group technique, TRIZ, and catchball.

Catchball

Among their other contributions to management methods, the Japanese have given us catchball. Catchball is a cross-functional method for accomplishing two goals: idea enrichment/improvement, and buy-in among participants.¹⁹ Once you’ve generated an idea, you can build and improve on it using this method.

Here’s how it works. An initial idea is “tossed” to collaborators for consideration, as in figure 2-1. The idea may be a new strategic goal, a new product, or a way to improve some work process. Whoever “catches” the idea assumes responsibility for understanding it and improving it in some way. That person then tosses the improved idea back to the group, where it is again caught and improved still further. And around it goes in a cycle of gradual improvement. As people participate, they develop a sense of shared ownership and commitment to the idea that takes form.

Catchball’s underlying principle goes back to the Socratic method of dialogue first articulated by Plato. Try using it the next time your organization needs to develop a raw idea and get people committed to it.

FIGURE 2-1

Catchball

Summing Up

Ideas are the nutrients of innovation. You can’t get anywhere without them. And in the innovation race, organizations with many good ideas to pick from have a real advantage. This chapter has examined key sources of innovative ideas:

• New knowledge: Though the trail from new knowledge to marketable products is often long, this is the source of many, if not most, radical innovations.
• Customers’ ideas: These ideas can tell you where current products fall short and point to unmet needs.
• Lead users: These are people (or companies) whose needs are far ahead of market trends. Look at what they’re doing today to meet needs that others many discover tomorrow.
• Empathetic design: This is an idea-generating technique whereby innovators observe how people use existing products and services in their own environments. So try going out and observing how customers and potential customers do things and attempt to solve problems.
• Invention factories and skunkworks: These are R&D labs and special projects with singular missions and their own quarters.
• Open market innovation: Open market innovation relies on the free trading of ideas between entities through licensing, joint ventures, and strategic alliances.
• Idea-generating techniques: Such techniques include brainstorming, nominal group technique, TRIZ, and catchball.