Blog: Brian Tolle

I’ve been talking about ways to help you spot opportunities for innovation. Here’s your final exam. What about this scenario represents innovation? Is it plausible? Impossible? Unlikely? Intriguing?

We’ll travel five years into the future to hear Dena, a fictitious 26 year-old, describe her experience.

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June 2014

"It took me two years but I finally did it – yesterday I drove away from my local Target store with my brand new Target X Car.  And I paid for it without having to take out a loan – even from my parents. Target made it that easy to do: 

First, the price of the subcompact model I bought was $2,000 cheaper than other comparable models I looked at. 

Second, I signed up for Target’s “Future Freedom” program about two years ago. The program gives you a special Target credit card. The more I purchased at Target with this card, the more points I earned towards the car’s purchase price (up to 10% of the purchase price). The program also has an online savings account option set up with ING Direct that pays me a slightly better interest rate than other banks. 

Third, because I selected the car model I was planning on purchasing when I first signed up, Target would send me regular updates on how close I was to having enough saved up to buy the one I wanted. But they do tempt you – sometimes I would get a notice from Target saying a particular model was available at a reduced price (overstocked situation). It may not have been the color or model I wanted but if I was willing to make those trade-offs, I could have had a car quicker and at a lower price. But I stuck with the model I had in mind.

Fourth, I did all the paperwork online before I showed up so all I had to do when I got to Target was enter my code, scan my car key, swipe it on the windshield of my new car, and off I went.

Speaking of trade-offs, there were a few I needed to make to get this brand new car. First, the car is not from a traditional car company like Honda, Ford, or VW. The car has no branding on it but the styling is great. A Canadian auto manufacturer, Magna, actually builds the car. They’ve been assembling cars for BMW and Mercedes for some time now and all the quality ratings put these X Cars at comparable to or slightly better than Japanese cars.

Another trade-off was I only had three models to choose from – small (compact), medium (sedan) or large (crossover).  All the models were pre-loaded with the standard features (A/C, iPod plug in, automatic transmission) so I didn’t have much choice there. But I could pick from a lot more colors than I could have if I went to an old fashion car company and there are all these after-market shops that can help me iBrand my car. For instance, I paid $100 to have a logo designed for me and it was easy to snap on (and off) the car so the only brand on my car is my own brand. 

Bottom line -- two years of the bus and Zipcars just didn’t give me the freedom (or personal safety) I needed so these trade-offs were no big deal. I’ve got a reliable new car and no debt. Works for me. "

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Check out my podcast with colleague Tom Crawford at www.innovate-disrupt.blogspot.com as we discuss whether this future scenario has the potential to be an opportunity for innovation.

In yesterday’s blog I talked about the behavioral traits of innovative entrepreneurs that help them spot opportunities. But there are even more ways to uncover opportunities for innovation.

Let’s use the work of Clayton Christensen and his colleagues to help you see business patterns and cycles that are ripe for innovation.

I’ll start with a common business dynamic that can help you see opportunities for innovation. We call it “performance oversupply.” As companies introduce products into the market, these companies are motivated to keep adding enhanced features and functions to attract more customers, particularly customers with high demands who are often willing to pay a premium for products or services that satisfy these high demands. In the process, these mainstream products often start to leave behind a customer group that doesn’t need the additional functionality nor is willing to pay the premium. We call these customers “overshot customers” and they usually represent a great opportunity for what Christensen calls “disruptive innovation.” Here’s why.

It is usually a start-up company that is willing to take a low-cost, exploratory approach to finding the right mix of functionality and price these overshot customers would find appealing. Often these customers are willing to make trade-offs in order to get the particular set of product dimensions they consider most critical to meeting their needs. And in their eyes, offerings that deliver better value along the product dimensions of convenience, affordability, simplicity, or accessibility, are “innovative.”  In other words, you don’t necessarily need cutting edge technology for certain customers to see your product or service as innovative.

Once the start-up company gets a foothold in this smaller, but receptive, customer base, it can start to move up its own product enhancement trajectory. The company can attract more and more customers at lower price points but still at acceptable profit margins because of the low cost, low overhead business model they have honed along the way. Disruption occurs when the start-up products start to compete head-to-head with the mainstream products. Often the mainstream products start to lose market share because greater and greater numbers of customers see the start-up product as a better value. At this point, the established company’s only recourse is to try to compete on price, which is a downward spiral because of its higher cost structure.

Bottom line -- you can spot opportunities for innovation by looking “down market” for customers who aren’t willing or able to pay for all the functionality and then offering them something easier, more convenient, or more affordable that meets their needs along key product dimensions. Keep in mind, I’m not talking about low quality. I’m talking about “good enough” performance along specific key product dimensions. Remember, sometimes “good enough” is great.

So think about this, what would be a scaled-down version of a product or service your company offers right now and who might be interested in this “good enough” version? Don’t forget to think about markets in the developing world. They can be very attractive places to get a foothold and then eventually bring the product or service into developed world markets.

Tomorrow…final exam…is it an opportunity for innovation or not?

In yesterday’s blog I talked about research that has shown innovative entrepreneurs differ from executives on four behavioral patterns they use to acquire information.

Let’s see where you fall on the range from “innovative entrepreneur” to “manager,” using the words of the researchers and my perspective.

Questioning

Innovative entrepreneurs were more likely to ask questions that challenged the status quo, whereas the questions asked by managers were much more about understanding how to make existing processes work a little better.

Where would you put yourself on this continuum?

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questions status quo                                                                                      questions processes

Try focusing on being curious for an entire week. Practice asking questions in a low-key manner to get the other person talking more than you. A simple “why is that?” can surface whole new insights. You’ll rarely discover opportunities if you do most of the talking.

Observation

Compared to managers in large organizations, innovative entrepreneurs more frequently engage in active observation, primarily of consumers and end users.

Where would you put yourself on this continuum?

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observe behavior                                                                                       experts as source of insights

Put your Blackberry or iPhone down and start paying attention. Who does what and why? What situations seem to be more complicated than they need to be? Where do people seem dissatisfied or frustrated with their current options? Here’s what Scott Cook (founder and CEO of Intuit) shared with the researchers:

So one thing that I teach is when people go out and watch people work, then come back and ask just one question – What’s different than you expected? – that often generates surprising responses.

Experimenting

Compared to managers in large organizations, innovative entrepreneurs more frequently experiment and explore, particularly doing so with a hypothesis testing mindset.

Where would you put yourself on this continuum?

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test hypotheses through experimentation                              experiments viewed as costly and distracting

Can you find ways to inexpensively “try things out?” Remember you can test your hypothesis either with your hands or your head.  Expose yourself to different points of view to test out your idea; tinker with building a prototype; pay attention to what you learn as you experiment; repeat the cycle of hypothesize, test, observe, reflect, re-hypothesize.

Idea Networking

Executives were more likely to network to further their careers, to sell what they or their current company had to offer, or to build friendships with people who possessed desired resources. Innovative entrepreneurs were less likely to use networks primarily for friendships or career progression; rather, they were actively creating networks of people with diverse ideas and perspectives that they could tap into for new ideas and insights.

Where would you put yourself on this continuum?

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networking as exploration                                                                      networking as profit

Most people are a lot more interesting than they first appear to be. But it takes a sense of exploration, curiosity, and wonderment to make it happen. Try this out – purposely attend a professional event where the topic has nothing to do with your area of expertise. Come with a decent excuse for being there or bring “a native” along as your chaperone. But definitely come with the mindset of “let me see what I can learn about this line of work and the people who do it.”

So how did you do? To what extent do you engage in these behaviors that increase the likelihood that you will spot opportunities for innovative products or services? What’s in it for you to begin to incorporate these behaviors in your work habits? What barriers are in your way? This research shows that you too can learn to be an innovative entrepreneur. Agree? Disagree? Can’t wait to hear from you.

Tomorrow…spotting the big picture opportunities for innovation.

Two of my favorite subjects are innovation and entrepreneurship. What I have found to be the skill that links them is the ability to spot and leverage opportunities. At the core of spotting opportunities is the ability and desire to question, to challenge assumptions, to play with reality and turn the status quo on its head. This is why we often consider entrepreneurs creative, a gift nature bestowed on them at birth. We assume their minds work in different ways. But my experience, and others’ research, says that the ability to question is less an innate talent and more of a learned behavior.

With the economy in the dumps and our legacy auto companies going through significant transformation, lots of people are turning to innovation/entrepreneurship as the Holy Grail. So if you’re looking to getting your company growing again or moving your career in a better direction, what does it take for you to learn to be an innovative entrepreneur?

Research by professors Jeff Dyer, Hal Gregerson, and Clayton Christensen show that "innovative entrepreneurs” differ from executives on four behavioral patterns they use to acquire information:

1. questioning
2. observing
3. experimenting
4. idea networking

They also discovered that innovative entrepreneurs engaged in these behaviors with a cognitive bias against the status quo - in other words, innovative entrepreneurs consciously “seek to change the world or do something that no one has ever done before."

The common thread among these four behaviors is still the ability to question, whether it be “why can’t it work a different way?” or “why is it frustrating to do things that way?” or “why didn’t my idea work the way I thought it would? or “who has different ideas or perspectives from me that can help me challenge my thinking?” It all comes down to questioning, curiosity, and inquisitiveness.

So why can’t we buy cars at Target, Walmart, or Nordstrom’s? Why can’t I take a simple home test to tell me if I have dangerously low or high levels of a particular vitamin or nutrient? What if management training was available on your iPhone? Why can’t I update the photo of my house on Google Maps?  Get the idea?

To put a local spin on this, what I’ve seen in working with budding entrepreneurs in southeast Michigan is the natural tendency to come up with an idea that’s unusual and work hard to sell it as “innovative.” A telltale sign that an idea may not be as grounded in people’s needs is the degree to which you have to convince people of the idea’s worth. The harder the job in convincing others, the greater the likelihood you need to circle back and ground the idea in observations you have made. When you combine these observations with challenging the status quo, that’s when real innovative possibilities start to emerge.

A local entrepreneur who exemplifies these four behaviors in action is my colleague Bob Moesta of The ReWired Group. Our regular meetings are one big idea networking session and I always walk away jazzed and exhausted at the same time. His approach of grounding innovation efforts in first understanding “what is the job the customer is trying to accomplish” has opened my eyes to a wider range of innovation opportunities. He’s a great person to get to know.

In my next post, we'll explore each of the four behaviors and see where you fall on the range from "innovative entrepreneur" to "manager."