The Innovation Engine Podcast: Breakthrough insights from Rowan Gibson – Part 2

Here’s the audio file and transcript from Part 2 of Will Sherlin’s interview with Rowan Gibson, author of “The Four Lenses of Innovation,” on the popular podcast “The Innovation Engine:”

Listen to the podcast here.

“Welcome to Part 2 of the Innovation Engine podcast with Rowan Gibson, the internationally bestselling author of “The Four Lenses of Innovation” and co-founder of Innovation Excellence.com, the most popular innovation website in the world. I’m Will Sherwin. Welcome back, Rowan.”

Thanks, Will.

1. Let’s look at a few examples of companies that have used your innovation lenses and have gone on to great success as a result. The first lens is called Challenged Orthodoxies. Now, Dell may not be as sexy an innovator as Apple, but today they employ more than 100K people worldwide and generate $57 billion in annual revenue. What was the orthodoxy that Michael Dell challenged when he started his company?

Well, there was Michael Dell sitting in his dorm room at the University of Texas asking himself why personal computers had to be so expensive. He looked at the price of the average PC and found that it was five times the price of the parts that went into it. So he wondered if he could start building cheaper computers for his fellow students by buying all those individual components and then assembling the PCs himself. And then he wondered if he could sell computers to people and businesses outside the university. So he was challenging industry orthodoxies, not just in terms of pricing but also in terms of distribution.

Michael Dell asked himself “Why do computer manufacturers need a network of dealers to sell their products? Why can’t they be sold directly to consumers over the phone?”

Again, this entailed a price benefit because of course it meant he could cut out the dealer’s overheads and margin. And then he challenged a few more orthodoxies, like “Why can’t computers be built to order, so that consumers can have the product configured to their own specifications? And why do computer companies manage their own inventory when their suppliers could do it for them?”

When we unpack this case we can begin to see the thinking processes that led Michael Dell to his big idea.

It was by asking these contrarian questions that he was able to spot an opportunity the computer industry had missed. That’s a good example of the first lens of innovation – challenging orthodoxies.

2. What about Rolls Royce? Clearly they are known primarily as a maker of high end automobiles, but they also have a jet engine business. Can you talk about the new service line they introduced and how it was a result of challenging orthodoxies?

This was back in the mid-1990s. Rolls-Royce used to think that their aerospace business was basically all about designing and selling engines for airplanes. They never really gave much consideration to service and maintenance. These were just after-sales issues, so essentially an afterthought. But then they sat down and began to question that business model. And the idea was “What if offer long-term service contracts for our jet engine customers, covering engine health monitoring and maintenance etc.?” Today, this business accounts for around 55 percent of the company’s revenues, so it’s more valuable than the sale of new engines.

Rolls Royce is another example that illustrates what can happen when you start challenging your traditional assumptions.

3. Let’s talk about the concept of seeing the future in the present, which is something you mention in the book. Tell me what you mean by that…

Yes. This is the second lens of innovation – harnessing trends. It’s what innovators tend to do really well. You know, they somehow intuitively understand change. They pay close attention to it. They have a knack for spotting trends that could profoundly impact the future of an industry, or that they could use themselves to drive industry revolution. And these things of course are already out there. They are not really hidden from view. But you have to be looking. You have to be sensitive to these things. You have to make sure they are on your radar screen. So it’s really about looking intently at what’s happening right now in the present and imagining where these developments might lead in the future. And then doing something about them!

Sometimes when a new development starts out, it’s pretty small. But innovators can look at a ripple on the ocean and recognize it as a potential tsunami in the future.

More importantly, they figure out how they can ride that wave by taking advantage of the trend at just the right time, usually when others haven’t even noticed it yet, or have chosen to ignore it. And when that tsunami hits an industry, the innovators are on top of it, so to speak. They are riding the wave rather than being buried by it.

Think about some of these industry tsunamis in the last couple of decades. The tsunami for Kodak, of course, was digital photography (ironically, a technology the company invented itself but failed to harness and monetize in ways that resonated with customers).

The tsunami for the music industry was digital distribution, in particular with Apple’s iTunes Music Store and the iPod. The tsunami for Nokia and BlackBerry was the touchscreen iPhone, with its instant consumer appeal and almost unlimited ways to add functionality through the App Store. (Of course, the tsunami for the iPhone today is Google Android, which is already running on 80 percent of the world’s smartphones).

The tsunami for Blockbuster was video streaming, with digital-only services like Amazon Instant, HBO, and Netflix replacing Main Street movie rental stores almost overnight. And now we have Uber that is wrecking the traditional taxi industry, and stuff like AirBnB in the hospitality industry, so it’s very much about figuring out what these waves are going to be. Steve Jobs actually said that on one occasion.

“You can see these waves way before they happen, and you just have to choose wisely which ones you’re going to surf.” – Steve Jobs

So I like to ask companies a pointed question: “Which wave are you riding?” It could be a technology wave, or a lifestyle wave, or a demographic wave, or something else that has revolutionary potential. But what are the trends or discontinuities that are going to open up amazing new opportunities for creating new customer value and perhaps disrupting your industry?

4. One of the companies you talk about in the book as one that excels at seeing the future Is Nike. What have they figured out about how humans interact with technology in this era and what have they done to capitalize on it?

Nike realized years ago that great shoes, great apparel, and a powerful brand image are not enough to keep you at the top of the game, if you’ll pardon the pun. The looked out there and saw this huge wave called digital and social media, and knew they had to catch that wave or be buried by it. So in 2010 they created Nike Digital Sport, which launched the Nike+ ecosystem of digital products and experiences—so linking up with the iPod, and then coming up with the Nike+ SportWatch, the Fuelband, all the training apps, and the Nike+ online community etc. Now, of course, fitness wearables are all the rage, and the industry is gearing up for fivefold growth in the next three years. So Nike was right on the money. They didn’t get caught out like some of the other sports shoe and apparel brands.

5. You write about technology a good bit in the book, and it’s something that we talk about often on the podcast. Are there any technologies – or one in particular – that you’re very bullish on?

Wow! There’s so much exciting stuff going on right now – robotics, 3D printing, nanotech, self-driving cars and trucks, artificial intelligence, the internet of things. I’m pretty bullish on all these things. And of course a lot of this stuff is going to come together and compound so the prospects are mind-blowing.

Mary Meeker, the Internet analyst, says that the future will be about “Wearables, Drivables, Flyables, and Scannables.” That’s quite an accurate way of putting it, I think.

And somehow I feel – I hope, anyway – that we’re on the verge of some really big stuff, if you know what I mean. One of my sons recently said to me, “Dad, we used to get things like the printing press. Now we get selfie-sticks.” So even the kids recognize that we kind of need to make a few giant leaps again, and not just come up with trivial stuff.

I think too much innovation brainpower has been focused in recent years on things that are likely to have a pretty fast return on investment – you know, stuff like mobile apps, digital games, and other software. And of course we love and we need these things. But I’d like to maybe siphon away some of focus from this kind of technology and push it toward things that could really make a big difference to the world.

I just came back from Israel, where there’s a lot of technology innovation going on. Actually, I was there to speak at a technology conference and to pick up an award, which I’m very proud of. It’s the Global Leader of Innovation award 2015. But what makes me even more proud is the fact this award also went to two of my innovation heroes – Dean Kamen, who’s best known as the inventor of the Segway, and Ray Kurzweil, who is just a brilliant innovator and futurist. And they talked about this whole topic of doing big things for humankind.

Dean has been working on a thing called Slingshot, which is a revolutionary water purification device that can produce absolutely 100% pure drinking water from almost any source. Think about what this could mean for the 900 million people worldwide who don’t have access to drinking water, and the 3.5 million people who die annually because of diseases that result from drinking unsanitary water.

And Ray Kurzweil is working on nothing less than immortality. His focus is on life extension technologies, so what would you rather have – a new smartphone app? Or a technology that is going to reverse the effects of disease and aging? That’s what I mean by big stuff! So Ray is a director of engineering at Google, and you know that Google is into all this kind of way out technology that then suddenly doesn’t look all that way out. Who would have thought that we would have autonomous vehicles, for example? That all happened so quickly.

Google is working on dramatically extending human life and reversing the aging process. That’s why I respect them so much. They take their current profits and reinvest them into some really major endeavors that could radically change the world.

That’s kind of my attitude toward technology right now.

6. Let me ask you about the 3 Rs. What are the 3 Rs that you write about that innovative companies tend to manage well?

OK, so this is the third lens of innovation – which is called Leveraging Resources in new ways. It’s about taking skills or core competencies, along with strategic assets, and saying “How could we repurpose, redeploy or recombine these things in order to open up new growth opportunities?”

So there are the 3 Rs – Repurpose, Redeploy and Recombine – and this has really been central to the way humans innovate for thousands of years.

Remember the story of Gutenberg’s printing press that we talked about earlier. It was a great example of recombination – leveraging his skills in metal working to make the metal, moveable type, taking the idea of the printing press itself from the wooden wine press that was commonly used in his day, combining that with readily available paper (one of his business partners actually owned a paper mill), and then picking up the idea for printer’s ink from the oil paint created by Jan van Eyck a few years earlier in Holland. So he really connected all that stuff in a very brilliant way, but it’s the principle we need to learn here. How can we apply this principle to build our own opportunities for innovation?

Again, Google is a good modern example. They started out with just a search engine. But if you look at Google today, how would you define the company? It’s not just search – which, by the way, they have stretched into all kinds of new opportunities like images, books, movies etc. – it’s also productivity tools like Gmail, Calendar, Contacts, and so on. It’s advertising tools, cloud computing, the Chrome web-browser and operating system, then Android for mobile devices and now for wearables, it’s Google TV, the Google Play store, you know, all that stuff. And then they stretched into hardware with the Nexus smartphones and tablets, Chromebook laptops, the Chromecast media streaming adapter, Google TV, Google Glass (which I still consider to be revolutionary).

Along the way Google bought Nest Labs, which is taking them into the market for home automation appliances and the Internet of Things, and Waze – the community based traffic and navigation app. They have Google Fiber for high-speed broadband, Google Clean Energy, and even a Shopping Express program that is going up against Amazon. Then we get all the flaky stuff like self-driving cars, airborne wind turbines, artificial intelligence, advanced robotics, high-altitude balloons for broadcasting Internet service to remote or impoverished areas of the world, and this research I mentioned into the biological causes of aging and its associated diseases.

So rather than developing a narrow self-image that pigeonholes the firm in a particular category, Google has been able to stretch the way it defines its business based on its collection of core competencies and strategic assets. I like the way Larry Page put it in an interview last year. He said. “I always thought it was kind of stupid if you have this big company, and you can only do, like, five things.”

So that’s the principle here. And we see this with other innovative firms like Disney, or Amazon, or Richard Branson’s Virgin Group, which started as a record store in London and transformed itself into a global conglomerate with over 400 different companies, like the airline, the mobile phone business, and so on.

In other words, you’ve got to say. “How do we extend the boundaries of our business?”

You don’t want to get locked into a particular way of looking at your company. Instead, you’ve got to try to imagine ways to stretch beyond your current business into new spaces and domains—either adjacent to your core or perhaps far outside it. And that’s why you need this third lens of innovation. You’ve got to develop an elastic view of your company. Rather than defining it in terms of what it currently is or what it does, you’ve got to try to think of your company in terms of what it knows—its unique set of skills or competencies—and what it owns—its valuable assets.

You’ve also got to look outside your own firm and search for opportunities to combine your organization’s own resources with the competencies and assets of other companies to produce innovative new solutions for customers.

7. You talk in the book about a provocative question, and one that there is a lot of kind of innovation stuff of legend around, which is “Do customers really know what they want?”

Yeah, I think Steve Jobs really nailed it when he said, “people don’t know what they want until you show it to them.” That’s often true. I mean, nobody was asking for the iPod, or the iPhone, or the Apple Store. But when Steve showed us these amazing things we realized we definitely wanted them—and needed them.

Nobody was crying out for Skype, or Facebook, or Twitter. But obviously people must have needed these things because today they can’t live without them. Did you know you needed Uber? I mean, you might have been frustrated with traditional taxi services (and who wasn’t?), but you probably couldn’t have envisaged a radical alternative like that. Did you know you needed a smart home thermostat from Nest that learns your behaviors? Nope. But you were probably frustrated with trying to control your current thermostat because it’s so damn complicated. Did you know you needed a cool set of DJ headphones for your ipod designed by by Dr. Dre. Nope. But if you think back, the sound quality of those little ear buds actually wasn’t all that great.

So all of these innovations were designed to address needs that most of us were not even aware of, which is why we were not articulating them. Or they gave us solutions we could never have imagined because we didn’t even know they were possible.

This is the whole focus of the fourth lens of innovation. It’s about uncovering and addressing those deep unmet and perhaps unvoiced customer needs.

There’s no harm in asking customers about their needs, of course. There’s obviously a place for focus groups and so on, but this lens goes a lot deeper than that. If you look at P&G today, for example, they don’t just test new product ideas with focus groups, they really integrate customers into the whole product development process. I mean, they go out and actually live with consumers in their homes for several days. They do a lot of ethnographic research with video, you know, filming the way people perform every day household tasks or use hygiene or beauty products. And then they work with consumers on brainstorming new solutions, prototyping them, development them, and commercializing them. So the customer is fully integrated into P&G’s whole product-launch model.

These are very practical examples, but what it’s really about is shifting our perspective. You know, looking through this lens means trying to view things through the customer’s eyes. Developing empathy. Understanding what it’s like to be the customer.

I remember a great ad from IBM that they ran a few years back. The headline was “Stop selling what you have. Start selling what they need.” And I really love that. You know, instead of coming up with a product you think is great and then going out and marketing it (which, by the way, is how P&G used to do things in the old days) it’s about trying to discover some deep unmet need you can address and then designing an innovative solution from the customer backward.

And sometimes that means figuring what’s wrong with your product or service from the customer’s perspective – and then putting it right. That’s why we got things like diet soda, low-fat chips and ice cream, sugar-free chocolate, alcohol-free beer and lite beer. The manufacturers in these cases were trying to take the negatives out of the equation.

8. Let’s talk about the 3 distinct phases in the act of creation. What are those phases?

Scientists, psychologists, and practitioners have been studying how creativity works for over a hundred years, so I think it’s pretty safe to say that we know there’s a process involved.

There are definitely some phases we usually go through on this process on the road to a breakthrough. Some people define 3 distinct phases. Others have 4 or 5. It depends how thoroughly you want to unpack it. I actually believe there are often 8 steps involved in building a breakthrough.

Let’s come back to these three, which are, number one, Saturation – you know, really focusing down on solving some situation or problem; number two, Incubation, where you are letting your unconscious mind take over and sort of ruminating on the whole issue; and finally, number three, Illumination, when the answer or the new idea suddenly becomes apparent. You know, “Eureka! I have found it!” So that’s what we typically refer to as the Eureka moment or the Aha! moment.

But I’ve never been really satisfied with this model because I believe it’s vastly over-simplified, and as I said at the beginning;

If we’re really going to solve the mystery of where big ideas come from, we have to truly understand the thinking processes that lead to these Eureka moments.

So in the book I unpack the creative thinking process a little more, and what we find is that ideas don’t just come to us out of the blue in a sudden flash of inspiration. We actually build them in our minds. We might not be consciously aware of this building process that’s going on, but that is in fact what is happening.

An idea is a new collection of thoughts. It’s a new pattern in the mind, to come back to our discussion earlier. So at its very essence, creative thinking is about making these new combinations and connections between previously existing thoughts, ideas and domains. It’s about building these new patterns.

The most profound conclusion for me is that a big idea is always preceded by a new insight – a new understanding that shifts our perspective in some way. And that brings us back to the lenses. Because the Four Lenses give us a tool for developing these new perspectives and discovering these insights which then go on to become the stepping stones to big ideas. I actually think the last part of the book, which deals with this while issue of insights and their role in the creative thinking process, is the most profound for me.

Because instead of running off trying to come up with ideas, what we actually should be doing is looking first for new insights – the raw material out of which those big ideas will be built. And the great news is that we can now do that systematically. That’s what the Four Lenses of Innovation allow us to do, either as individuals, or as teams, or as organizations. That’s this “Power tool for Creative Thinking.”

Nice. A great note to close on, and great food for thought. Rowan, thanks so much for joining us again.

Listen to the podcast here.

If you’d like to learn more about Rowan Gibson, you can visit his website at www.RowanGibson.com. You can join his over 4 thousand followers on Twitter at @RowanGibson, and you can buy his book The Four Lenses of Innovation on Amazon.com and in bookstores around the world.

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Rowan Gibson (rg@rowangibson.com) is recognized as one of the world’s foremost thought leaders on innovation. He is the internationally bestselling author of 3 major books, an award-winning keynote speaker in 60 countries, and a cofounder of Innovation Excellence. His new book is The Four lenses of Innovation. On Twitter he is @RowanGibson.