It’s Monday Morning. What Do You Do?
STEP 1: Gather lessons learned from past innovation efforts and get into a mindset of innovation.
Learn from the past:
• Identify why your past attempts at business-model innovation have failed, succeeded, or never gotten off the ground.
• Do the same for your competition.
• From these experiences, pinpoint any organizational, sales-channel, strategic, or other barriers that may get in the way in the future. Craft plans to bypass them.
Adopt a mindset of innovation:
• Make sure that people relevant to this project have a strong grasp of common innovation behaviors (e.g., uncovering market trends, questioning what they think they know, embracing an attitude of flexibility and adaptability, networking outside their fields to find inspiration and to challenge preconceptions). Ensure that they also have access to innovation tools and reference materials.
• Provide cover for those who are bold enough to take on tough innovation challenges. Stipulate that failure will not devastate their careers, so long as they use appropriate innovation behaviors.
Are you ready for the next step?
• We understand why innovation has failed or succeeded in the past.
• We have crafted a plan for overcoming obstacles that currently stand in the way of innovation.
• We understand how we need to behave to be innovative.
• The organization is ready to provide support for those who want to innovate. Even those taking on tough challenges still feel secure in their jobs.
STEP 2: Define costovation boundaries and specific strategic initiatives.
Identify your broader innovation goals and boundaries:
• Come to consensus on why you are innovating. Ensure that your vision for costovation aligns with your organization’s overall strategic goals, appetite for change, and innovation portfolio.
• Be clear about how far you are willing to go with innovation. Are you looking to disrupt a product line? A business model? A customer? Are you focusing on the core business or on growth areas, or both? This means being explicit about what is out of bounds for this project (e.g., ideas under a certain projected financial size or time to break even).
• Define the broad metrics that you will use to define your success.
Summarize your strategic objectives for this particular innovation initiative:
• Make sure that you can succinctly state the overarching strategic goal for this innovation project. This should include details on why you are innovating, what it means to win, and where your innovation boundaries are.
• Note your organization’s competitive advantages—not to box you into traditional lines of thinking, but to act as a starting point for ideation.
Assemble a great team:
• Select team members for their ability to generate fresh thinking, to find information quickly, and to tell great stories.
• Seek diversity in your team whenever possible—particularly in years of experience in the industry, in thinking style, and in areas of functional expertise.
• Set aside protected time for costovation activities.
Are you ready for the next step?
• We have developed a clear statement for why we are innovating.
• We have defined boundaries for what will be considered, both in the core business and in growth areas, as well as in different functional areas.
• We have identified and communicated the criteria by which innovation projects will be judged.
• We have selected a team with a wide variety of skills and experiences.
STEP 3: Break out of traditional lines of thinking and choose a costovation focal area.
Identify your industry’s assumptions, and practice subverting them:
• As individuals or in a group, spend some time exploring what “traditional” thinking means to your organization and industry.
• Examine your industry from afar, as if you’re wearing binoculars. What would an industry stranger find surprising or baffling?
• Take a microscope to your industry, organization, and offerings, and question features individually.
• Look through your customers’ eyes, instead of your own. How does the way they see the world differ from the way you see them? If at all possible, get out of the conference room and talk to real customers, observe them in real situations, and understand what aspects of products, services, sales, and other cost-drivers really deliver value.
• Reconsider the way you classify your customer segments. If you couldn’t categorize them around demographics or product lines, how would you do so? How could you organize them around the jobs they are trying to get done?
• Rethink the way you view suppliers and other parties in your value chain. What is the usual relationship like? How could you push past “vendor” relationships into something more strategic?
Select a focal point to guide your ideation:
• Rally around a single area where you want to excel. Common focal areas in costovation include customer segments, jobs to be done, areas of the business (e.g., marketing, supply chain), and attributes (e.g., convenience, speed). Use your strategic objectives as a guide when choosing your focal area.
Come to a deep understanding of your chosen focal point:
• Sift through your existing consumer research and customer knowledge to compile information related to your chosen area of focus. This may mean interviewing other employees not on the costovation team who may have expertise to share.
• Take stock of questions about your customers that remain unanswered. Then create a plan for answering them and get started. This may mean conducting customer research (e.g., in-depth interviews, focus groups, in-home ethnographies), as well as bringing in experts or outsiders to weigh in with their opinions.
• Bring your target customers to life. Give them a name, describe what they do, and think through their current approaches and the challenges that they face. What motivates them? What frustrates them? What are the jobs that they are trying to get done in their lives, and what is the value to them of getting those jobs done?
Are you ready for the next step?
• We have identified our industry assumptions—and questioned each of them.
• We have selected a focal point for our costovation efforts to rally around and are committed to using it as an arbiter for choosing what trade-offs to make.
• We have come to a deep understanding of that focal area and the customer we aim to serve.
STEP 4: Costovation ideation.
Brainstorm as many ideas as you can:
• Go for quantity over quality. We like to start with individual brainstorming, where all ideas are written down on your own, silently, no matter how seemingly foolish or simple. Then share your ideas in a small group and elaborate on them, combining them with others.
• After a bit of time away from your list, identify your favorite ideas—keeping in mind that oftentimes multiple ideas can be combined to make a sum greater than its components. Ideally, look for platforms that can support multiple related ideas. Remember to push for innovations throughout the business, not just in your product (e.g., innovate in how the product is made, delivered, or sold).
• Develop some criteria for assessing ideas. These can come after you create your ideas, because you may not know what you’re looking for until after you’ve found it.
Assess the ideas:
• Score the ideas on a range of metrics, particularly those set forth in your strategic objective. This could include feasibility, risk, investment required, time to return, financial projections, and key customer jobs to be done that are satisfied.
• Prioritize a few ideas to move forward.
Are you ready for the next step?
• We have brainstormed far and wide, taking care not to nip unconventional ideas too soon.
• We have thought of ideas that innovate on areas of the business that customers do not see (e.g., how the offering is made, delivered, and sold), as well as on areas that they do see.
• We have a framework for ideation and prioritizing ideas that doesn’t simply favor the easy answers.
• We are able to deliver a sixty-second elevator pitch for each idea that we have been working on.
STEP 5: Build out promising ideas, testing early and often.
Develop more detailed plans for prioritized ideas:
• Begin to build the business case for each prioritized idea. Provide more details on what it looks like, how it might work, what your organization would need to do to launch it, and what the payoff might be. Research potential competitors and pull any data points you can find.
• Determine how early-stage concepts could be integrated into the business. Ensure that your action plans account for changes in trends, regulations, or other macro events.
Experiment, test, and get out in the field to research:
• Test your early-stage ideas early and often. This might involve short online concept test surveys or building a prototype to put into a tester’s hands. See the break-out box at the end of this checklist for more ideas on how to test cheaply.
• List out the top three to five risks and assumptions behind each idea. Pay special attention to validate them.
Create a handoff plan:
• Identify who the project will get handed off to as it proceeds toward commercialization and implementation.
• Determine what that person will require in terms of support and authority.
• Describe clear next steps, which may include more extensive testing (e.g., partial or full pilots).
• Articulate possible competitor responses and prepare a come-back for each.
Are you ready for the next step?
• We have a strong understanding of the research tools that can help us quickly assess market demand.
• We know what questions management will want to have answered before making a decision to invest in a project.
• We have clear handoff procedures to ensure that products don’t get neglected and killed off as they move into the implementation or commercialization stages.
• We embrace fast and inexpensive experimentation, and our compensation and incentive plans reflect the same values.
Low-Cost Ways to Test an Idea
COMPANIES HAVE NO SHORTAGE of ideas. The hard part is identifying which ones to throw resources behind—and when to let an idea go.
We are big fans of testing generously and often. We are surprised at how little testing actually occurs in many businesses before a project becomes massive and full-scale market research is commissioned. But testing doesn’t have to be costly or time consuming, especially not at this early stage. Test early and often. Double-check your assumptions. Like with writing, the gold is in iteration and editing.
Here are several techniques that we use in our consulting work to quickly assess the validity of a new idea:
Perform Desk Research. This is often the first stop we make. It sounds overly simple, but don’t underestimate what you can learn from the Internet. McDonald’s shrimp salad was killed not by a concept test, but by an afternoon of free Internet research on the global supply of shrimp.1 And one of our recent clients’ ideas to create a product specifically for unions was put into new perspective when we performed a quick search into the declining trend in union membership.
Conduct “What Would You Have to Believe” Analysis. This thought exercise is a quick reality check. Start with your end goal, like a revenue target, and walk backwards to determine how many units you would need to sell or the number of long-term customer relationships you would need to cultivate.
In one of our engagements, we were assessing the opportunity to provide business services to large hospitals in Mexico. It was an untapped market that fit nicely with the company’s existing services. But our back-of-the-envelope calculations quickly stopped us short: to build a $10 million business, the service would have had to be sold to every single large hospital in the country, at price ranges that were sure to be above the hospitals’ appetites.
Perform a Feasibility Assessment. List out all the capabilities you will need to launch this new idea. Want to sell directly to the consumer rather than through the traditional corporate sales channel? You’ll need social-media–based marketing skills, a rush of new content, a website that can handle a large volume of transactions, and a team of trained customer-service representatives. Then go through the list, marking the capabilities you have, the ones you can acquire, and the ones you’ll have to build from scratch. Compare this table against your strategic objectives and ensure that the proposed project is within scope.
Send Out a Quick Survey. Market-research surveys don’t have to be huge undertakings with thousands of respondents. You can often get great quick feedback using cheap online surveys or five-minute live “intercept” surveys. While assessing wellness concepts for a health system, for instance, we intercepted people outside a health-food store. It was a purposely skewed sample population. The people who shopped at a health-food store, we figured, would be most interested in the new wellness concept. If we couldn’t get positive interest from that crowd, it could be pointless to push further.
Exploit Similar Situations. A client of ours was exploring a new way to distribute its products in emerging market megacities, like São Paolo or Delhi. It would have been costly to fly a team out to Delhi, so we encouraged the company to start with a megacity closer to home, like New York City. The idea was to work out the kinks and test broad assumptions before further investment was made.
Concept Test. The key to concept testing is to make the interview situation as real as possible. That means using prototypes, images, and visits to the place where the product would be consumed. In the late 1990s, Stephen was testing flat-screen televisions in the classic fishbowl focus group—the kind in drab office buildings with one-way glass. The response was pitiful. The respondents didn’t care about having a slimmer TV. They didn’t know why we were so excited that you could hang it on a wall. Customers aren’t great at knowing what they want, and our mistake was to ask for their opinions in a situation that was totally unrealistic and as far as possible from the comfort and coziness of their living rooms. It led to an inaccurate response.
Get Scrappy. There are countless inexpensive and quick ways to test ideas. You could gauge demand for a new offering by monitoring clicks on a Google AdWords campaign that leads to a test website. You could speak for thirty minutes with an expert in the field. You can interrogate people by slipping behind them in the long Starbucks line at an industry convention (yes, we’ve done that). Hey, Charlie, a digital health app that helps opiate addicts prevent relapses, first validated its idea through a poll and discussion thread that it started on a drug-recovery thread on Reddit. BloomThat, a flower delivery startup that promises flowers in ninety minutes, tested its concept on a Valentine’s Day by buying flowers in bulk from the San Francisco Flower Mart, assembling them into bouquets, wrapping them with butcher paper, and putting out Facebook ads promising delivery in ninety minutes. They didn’t make a huge profit, but revenue wasn’t the point of the test. The most important thing was that they confirmed customer interest in their idea.