Innovation Perspectives – Opportunities or Threats?
This is the second of several ‘Innovation Perspectives‘ articles we will publish this week from multiple authors to get different perspectives on ‘How should firms identify innovation opportunities and predict market potential at very early stages and in new areas (“green fields”) and ambiguous environments?’. Here is the next perspective in the series:
by Jeffrey Phillips
There are two questions embedded here. First, which opportunities or threats that are emerging should we pay attention to, and how do we determine which ones will have the most value in an ever-changing and uncertain marketplace?
For too long we’ve relied on the concept of the “fast follower”. Anyone who follows my writing knows that I think that fast followers, like unicorns and the lightsaber are interesting but merely fables. Yes, many firms claim to be fast followers, since that means they can explain away their lack of insight and innovation, but even those that claim to be fast followers aren’t notoriously fast, and often follow the wrong things. What we need now are insightful prognosticators, and that means trying to predict the future and getting to the right places first.
There are two tools in an innovator’s toolkit that can help them project the future effectively and ascertain what value the alternative futures hold. The first tool is scenario planning. Again, if you’ve read much about what we’ve written you’ll know we are big fans of continuous trend spotting and scenario planning. Trends will tell you what changes are likely to occur, but scenarios force many of those trends together to create a coherent picture of the future. Why more firms don’t place a greater emphasis on scenario planning is beyond me. It is not a difficult exercise but does require undivided attention from a group of senior executives who have been briefed on the methodology and prevailing trends. If you don’t have trends, or can’t train the executives, then perhaps you may want to outsource the scenario planning.
Scenarios will give you glimpses into possible futures. Then it’s time to match those futures to unarticulated or unmet needs or wants of the customer base. You can achieve these insights using qualitative insight tools like ethnography or Voice of the Customer. Note that these insights are different than traditional market research. Merely asking people on a survey whether or not they think they’ll need 200 SPF sunscreen in the future isn’t helpful. They don’t know and aren’t really engaged. Qualitative research understands customer needs through observation and analysis, not by asking the customers to fill in blanks. Once again, this is a departure from the norm for most executive teams who are more comfortable acquiring market research from industry analysts rather than an intimate experience of the customers’ lives. But when the insight is valuable, you may need to work harder or differently to acquire it.
Qualitative insights can tell you what customers want and need and how valuable those new products and services will be. Combining that insight with your assessment of the likely futures based on scenario planning will give your firm the best visibility into new products, new services and new business models long before the needs arise.
Recently we conducted a scenario planning exercise for a financial services firm. Our work indicated that it was likely that retailers would begin to extend credit to small businesses in the absence of new credit from traditional financial services firms. This report was met with skepticism within the banking community, until Sam’s Club started facilitating SBA loans for small businesses. The information was out there – small businesses needed more credit, and retailers wanted to increase sales. Someone with deep pockets was going to step into that breech. Our scenario planning indicated that retailers would provide those lines of credit if they could, to spur further acquisition.
Many firms recoil at scenario planning, trend spotting and qualitative tools because they aren’t quantitative and require investigation into a range of possibilities rather than identify a single definable outcome. In a world changing as fast as ours, with significant disruptions happening almost daily, you can’t afford to wait to see what happens and then react. Even if your team isn’t comfortable with a range of options about possible futures, understanding the possible outcomes and preparing for the most likely is far more valuable than waiting to see what unfolds.
You can check out all of the ‘Innovation Perspectives‘ articles from the different contributing authors on ‘How should firms identify innovation opportunities and predict market potential at very early stages and in new areas (“green fields”) and ambiguous environments?’ by clicking the link in this sentence.
Jeffrey Phillips is a senior leader at OVO Innovation. OVO works with large distributed organizations to build innovation teams, processes and capabilities. Jeffrey is the author of “Make us more Innovative”, and innovateonpurpose.blogspot.com.