Game changing innovation - Yoav Nir - ebook
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This book is the disquisition of what I know and truly believe makes products a success and how you can replicate it within your company.What is this book about? Why should I read this book? Why did you write this book? These were the three questions I received from a good friend.So what is this book about my good friend asks?This book is like a cookbook with recipes for lean innovation, a collection of concrete techniques and strategies that are invaluable and lead to the same end: game-changing innovation. The book is a compilation of what I consider the fundamental models for lean innovation and some of my own complementary models for successful innovation1. A supplement to the existing international reference works on innovation (Alexander Osterwalder, Eric Ries, Ash Maurya, Clayton Christensen…) I will complement and adapt the existing tools and methods. Enhance their flavor “monter la sauce” as they say in France. The book is mainly a “how to” book and a “lessons learned” book, substantiated by good analysis and reflection. Like a chess book to improve your play this book will improve your innovation. The book provides an analysis of proven tactics and strategies on how to win the lean innovation game as well as a post mortem on why it is so often lost.Should you read this book?Here is some bad news, if you were hoping to improve on your innovation by spending more on R&D, it won’t work. The consulting giant PWC confirmed in its Global Innovation 1000 research that just increasing R&D resources will not solve the innovation problem !The presented methodology can be quickly employed and implemented by the reader with the book as an instruction manual !

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FOREWORD
1. INTRODUCTION
Some inspiring examples
2. VERY VALUABLE TOOLS FOR PRODUCT INNOVATION
2.1. Basic concepts from lean innovation and lean startup
2.2. The Business Model Canvas and Value Proposition Canvas
2.3. Design thinking/human-centered design
2.4. Introducing “the curve”
2.5. The Kano model
3. THE ART OF CUSTOMER DISCOVERY & VALIDATION
3.1. The myth of faster horses created by Mr. Ford
3.2. Design-driven innovation is not user centric
3.3. The value of customer development
3.4. The art of customer development
3.5. Some final thoughts on the challenge of customer development
4. IMPROVING AND INNOVATING VALUE PROPOSITION IN CORPORATIONS
4.1. The product manager improving the value proposition, common practice
4.2. Benchmarking with the consumer goods industry
4.3. Why is successful game-changing innovation so difficult for corporations?
4.4. So what can you do about it?
5. HOW TO MAKE THE CORPORATION A LEAN INNOVATOR?
5.1. The corporate validated learning loop
5.2. Install culture of ongoing customer discovery EFFORT
5.3. The interaction between customer validation and customer discovery
5.4. The key role of sales
5.5. Agile & lean through the river wild of product innovation
5.6. Avoid corporate pitfalls
6. REALIZATION OF THE NEW PRODUCT/MARKET FIT
6.1. Look outside for inspiration
6.2. The 3 types of 360° review innovation workshops
6.3. Simplicity is the core essence of beauty
7. HOW TO HANDLE OPINIONS AND INTUITION/GUT FEELING
7.1. The high value of your intuition
7.2. The challenge of communicating about your intuition with others
7.3. Consciously questioning your intuition
7.4. The complementary value of our rational decision-making capabilities
7.5. Whose intuition is right?
8. THE HARD THING ABOUT HARDWARE
8.1. The validated learning loop for hardware products
8.2. Realizing the new product/market fit, agile & lean
9. SANITY CHECK ALONG THE WAY
9.1. Are you drinking your own medicine?
9.2. Can you recognize best practice in your methodology and product?
9.3. How fast are sales picking up on it?
9.4. Are customers demoing your product themselves?
9.5. Do you feel the pain of missing it?
9.6. Can you find good analogs and antilogs?
9.7. The toy story
10. CONCLUDING REMARKS

Dedicated to my parents, Anaïs, Levi, Noam, Sara, Nadav and Yonah

Decades ago the Western business world could make a difference in the rest of the world with technology. Our universities and research centers were a level higher than the rest of the world. We had better educated and trained scientists and engineers. But this is over: you can find top engineers and scientists all over the world. What is more, in our Western world the number of engineers is decreasing, while in Asia it is the opposite, it is increasing.

So in the next couple of years it will become more difficult to distinguish ourselves from our Asian competitors.

One way to achieve this is to be more creative in finding solutions for problems that our customers don’t see at the moment because they can’t imagine that there is a possible solution.

And then it starts: we have good ideas, but it is crucial to convert the bright idea into a successful product. This is where a lot of product development is failing. So many people are involved in the different stages of “making” the product and so many of things can go wrong.

There are a few handbooks about this crucial process and here Yoav Nir brings an excellent solution. He envisioned one of the most successful Barco products, ClickShare® and had an important role in its realization.

While most handbooks are written by consultants, he draws from his personal professional experience and real life.

One common thread throughout the book is understanding the need of the customer and the focus it deserves. To find out what is best for the customer: nothing less but also nothing more (otherwise the product becomes too expensive). It must be clear that the problem of the customer should be uppermost in the mind of the project leader. He must understand, feel and live with his customer’s problem. He may never be distracted from this focus: neither by his team nor by his bosses.

Another common theme is the company culture. You can achieve a successful game changing product in an innovative, creative atmosphere. This is where the CEO plays a crucial role: it is up to him or her to nurture, to lead the whole company in being creative and innovative in every department. Not only in R&D but also in Manufacturing, Service, Marketing, Sales, Financial Department, etc.

When this culture is not there it will be necessary to separate everybody who is involved in innovation from the rest of the company and create an independent body/entity where human resources is not involved.

This way of working has been at the heart of all successful Barco products. The most well-known is the Digital Cinema Projector with which Barco is worldwide leader. Here the focus on the customer was never lost because the customer was involved. In this case Joost Bert, CEO of Kinepolis, lives and breathes cinema, so he could continuously lead us in the right direction. But also the first worldwide successful Barco product, the Television Monitor for TV studios, was developed in close cooperation with the customer, the then BRT (Belgian Radio and Television).

This book is written for CEO’s and everybody involved in achieving a successful product: Human Resources, Marketing, Sales, Service, Manufacturing, R&D, and, of course also future project leaders.

I hope that this book becomes obligatory reading in management courses.

This book by Yoav Nir will help you to make your product successful.

Hugo Baron Vandamme CEO Barco 1983-2001

“Too often large companies and startups make the wrong products right”

Yoav Nir

What is this book about? Why should I read this book? Why did you write this book? These were the three questions I received from a good friend.

So what is this book about my good friend asks?

This book is like a cookbook with recipes for lean innovation, a collection of concrete techniques and strategies that are invaluable and lead to the same end: game-changing innovation. The book is a compilation of what I consider the fundamental models for lean innovation and some of my own complementary models for successful innovation1. A supplement to the existing international reference works on innovation (Alexander Osterwalder, Eric Ries, Ash Maurya, Clayton Christensen…) I will complement and adapt the existing tools and methods. Enhance their flavor “monter la sauce” as they say in France. The book is mainly a “how to” book and a “lessons learned” book, substantiated by good analysis and reflection. Like a chess book to improve your play this book will improve your innovation. The book provides an analysis of proven tactics and strategies on how to win the lean innovation game as well as a post mortem on why it is so often lost.

Should you read this book?

Here is some bad news, if you were hoping to improve on your innovation by spending more on R&D, it won’t work. The consulting giant PWC confirmed in its Global Innovation 1000 research that just increasing R&D resources will not solve the innovation problem2!

Some companies are lucky enough to have a CEO with visions being the closest thing to holy prophecy with a hint of messianic dimension. Yet, most of us are not that lucky.

If you do not know what the term lean innovation stands for and you are even only remotely involved in innovation then this book is a lifesaver for you. You will not only learn what lean innovation is about but you will get a look into the soul of lean innovation. You will get a smell and taste of lean innovation and an appetite to start implementing it in your organization today.

The fundamental innovation tools and concepts are presented in Chapter 2 and are illustrated with practical examples and tips.

If your company is already using innovation tools the book will help to improve the way the tools are used and how to choose the right people profiles to use the tools. This book will help you with the difficult and sometimes mystifying process of coming up with successful new products. If you do it extremely well and luck is on your side the new product could even be a game changer.

The book presents the challenging subject of product innovation in a fun way and makes it accessible to the laymen. The many real-life use cases make the book easy to read. More than seventy different products and companies are referred to in the use cases. Some of the use cases are known, some of them will be new to the reader. All use cases are pleasant and are within the context of the chapter. Every chapter is supplemented with quotes at the beginning of and throughout the chapter. Most of the quotes are from smart and famous people, except for a few quotes by yours truly. The use cases and quotes are like the oil in an engine, they keep the book fluent and easy to read. And then there are the tips to help you in game-changing innovation. Not just ten tips as is typically the case (Just google “ten tips” and see how many results you get) but more than seventy tips!

The presented methodology can be quickly employed and implemented by the reader with the book as an instruction manual; the many tips as encouragement and the quotes as inspiration.

All the quotes and tips are referenced at the back of the book. We also included an index that will direct the reader to all the key terms and concepts within the book. The index will facilitate the reader to use the book as a reference book.

This book is the disquisition of what I know and truly believe makes products a success and how you can replicate it within your company.

The book is relevant for hardware products, software products and services. Most books on (lean) innovation focus on software. The methodologies presented in the book take up the specifics of hardware development that are different or non-existent with software development. Chapter 8 is dedicated to the specifics of lean hardware development.

The entire spectrum of companies from startup to the multinational corporations will relate to the concepts and methodologies in the book. Most books on (lean) innovation focus on startups. This book will delve into the dynamics of lean innovation in corporations and explore the best practice to become an innovation powerhouse. Chapter 4 will analyze why it is so challenging for corporations to innovate and Chapter 5 will provide practical solutions on how corporations can become lean game-changing innovators.

Being conscious of the typical corporate pitfalls will help to avoid them.

“Experience without theory is blind, but theory without experience is mere intellectual play”

Immanuel Kant

And to the final question, why did I write this book?

I am frustrated by the problem that despite the combination of good tools, good people, motivation and hard work; companies fail to truly innovate their business models, to truly innovate their value propositions, to make game-changing products. It is my hope that this book will be a contribution in resolving that problem. I have always had a drive to learn, understand and share. Learn from the wisdom of others and from my own success and failures. Understand the (sometimes peculiar) behavior and thinking of myself and others. Share my insights with others who are also eager to learn and understand.

My drive for learning and understanding was either to apply what I have learned to practice and become better at what I do or to gain insight into matters of personal interest. For over twenty years I built up quite some tacit knowledge from my own practice, believe me I carry the scars to prove it, as well as from observing the successes and failures of others. The easy part was learning about abstract innovation concepts like, for example, the KANO model that I will explain early on in the book. The difficult part for me was understanding the dynamics of our decision making, the forces driving our behavior, both as individuals and as a team. I expanded my search beyond the engineer’s comfort zone of logic and hard tangible facts into the scary, fluffy, quicksand territory of cognitive psychology. Sometimes decisions related to customer value are made based on a wrong intuition/gut feeling and the decision is more likely to be taken by the political savvy and not the customer savvy. A little bit like a ship’s captain deciding on the wind direction based on the draft he feels on the ship’s bridge. This is why I dedicated Chapter 7 to our intuition and the important role of intuition in our decision making.

I was often challenged on my “listen to the customer” conviction by the famous quote of Mr. Henry Ford: “If I had asked the customers what they needed, they would have said faster horses”. I will set the record straight, hopefully for once and for all in Chapter 3.

This book is an efficient means to share my tacit knowledge with anyone who is interested in learning about the successful implementation of game-changing innovation. From a business school student to the CEO of a corporation, from a novice of the subject to a subject matter expert, from a high-tech company to a publishing house; all can enjoy the book and quickly put it into practice.

I truly believe there is much that we can do from an organizational, cultural and methodological point of view to increase the likelihood of successful product innovations!

This book is based on over more than 20 years of “hands on innovation” & “best practice”. It is personal and by no means academic.

I hope you read through the book as if it was a box of chocolates. That each page will be enjoyable. That each time you turn the page, you look forward to what’s coming next. That a sweet aftertaste remains once you have finished reading.

An inspiring quote to keep the book light is: “It is not the answer that enlightens but the question” by Eugène Ionesco.

Following this advice throughout the book I will share business questions that intrigued me over the years. Luckily there is never one single answer to a question and I would like to challenge the reader to search for their own answers.

TIP

If within 20 minutes into the book you feel bored or annoyed, I suggest you just stop reading it. It won’t get any better. Just give the book to someone you don’t like as a present. Comfort yourself with the thought that, for sure, other people make much worse investments than the one you made buying the book.

I want to thank the following people for their help and contribution with making this book.

The team at die Keure: Liesbeth, Maaike, Nele, Isabelle and Jonathan.

A special thank you to Milena Genova for her help and advice throughout the book. A warm hearted thank you for the comments and advice on the book to Hugo Vandamme, Romeo Baertsoen, Omar Mohout, Tine Demoor, Chris Van de Voorde, Andrew Wainhouse Davis, Linda Jacobson, Carine Lucas, Erwin Knuyt and last but not least Noam and Sara Nir.

Finally, as you will see I will sometimes make reference to Wikipedia. I will donate some of the earnings from this book to Wikipedia.

Enjoy.

Some inspiring examples

Throughout the book we will illustrate the different tactics and strategies with successful or failed product innovations. In total we highlight 42 products from 40 different brands. To warm up we will look at some well-known examples of different, game-changing designs of products and services.

Most of the Apple products in the new millennium were game changing. The iPod was a new digital music player making use of MPEG format. Nothing disruptive technology wise. There were many other mpeg music players from companies like Sony and Phillips. Downloading music was also not new. There were other sites where one could download music files. Apple did it differently and much better. They made their music player much easier to use, gave it a cool design, and made it much more convenient (and legal) to download the music onto the iPod. The iPhone is another great example. Nokia made years before the iPhone, the Nokia phone and organizer in one, with a keyboard and everything. Blackberry was the industry standard for the mobile businessman who stayed connected. The iPhone just offered a totally different way and in many respects a much better way of combining a phone with an organizer. And, it was much better suited to surfing the web due to the larger screen. These benefits were so strong that customers accepted the much shorter battery life and hence higher frequency of recharge. This created the phenomenon of the so called “wall huggers”. The power of the product was so great that it forced its way into the corporate world. For the first time IT managers had to surrender to their user community and allow people to exchange their Blackberries for iPhones, or, later on android phones.

To use a different industry as an example, Ryanair believed there was a way to make air travel cheaper and better. Ryanair found a much cheaper way to transport people by air. The smaller regional airports they used were already there for grabs. Boeing could have made the same type of practical, basic planes as anyone else.

Spotify found a much better way to allow people to enjoy music. Apple made a big step forward making it much simpler for users to buy music and allowing people to buy it by the song. Yet, there was still a much better way to do it. Instead of a CAPEX model of buying one song or album at a time, go for an OPEX model and just get continuous access to all songs. If you do not find it on Spotify, chances are small you can buy it somewhere else in a digital format, online.

P&G spent years coming up with a potato chip (kind-of a potato chip; it is only 42 % potato) to address the consumer complaints about the industry standard of broken, greasy and stale chips, as well as air in the bags. Research started in 1956. In order to address the problems of the regular potato chip, a new chip had to be invented. The first Pringles were sold in 1967.

James Dyson was tired with his vacuum cleaner losing suction power as the bag got full. He wanted to have a vacuum cleaner that keeps its suction power over time. In order to achieve that he had to come up with a different design. A design without a bag was the means to make a vacuum cleaner that did not lose suction power. A vacuum cleaner without a bag was the means to do it, not the goal by itself. This is fundamental!

All of these examples found different and game-changing ways of making a product, service or business model.

Apple was a significant better experience and actually more expensive.

Spotify is certainly a better experience than single songs or album purchases.

Ryanair made the significant difference as the cheaper operator and in some aspects they even provide a better service. For example, they were paving the way for the convenience of online bookings and they are leading on the time departure and arrival track.

Another interesting common element is that they were all newcomers to the industry.

Apple was a new entrant in the mobile phone business and redefined the smart phone.

Spotify was new to the music streaming business.

Ryanair was a young entrant in airlines.

Dyson was new to the vacuum cleaner market.

TIP

Being a new entrant in a market makes it easier to create the support platform for different and game-changing design and innovation.

This statement begs the question why? The answer is given in Chapter 4 where we investigate why it is so difficult for corporations to be game-changing innovators.

1Source Wikipedia

The term lean originates from Toyota’s Lean manufacturing method.

Lean manufacturing is a systematic method for waste minimization within a manufacturing system without sacrificing productivity.

In lean innovation we are working from the perspective of the client who consumes a product or service. “Value” is any action, process or function that a client would be willing to pay for and waste is everything else which doesn’t add value for the client.

The goal is to keep or add value and eliminate waste.

2 PWC state in the 2010 Global Innovation 1000 study (then Booz & Company) that “there is no statistically significant relationship between financial performance and innovation spending, in terms of either total R&D dollars or R&D as % of revenue.”

PWC states in the 2014 Proven Paths to Innovation Success report by Barry Jaruzelski, Volker Staack and Brad Goehle: “There is no statistically significant relationship between sustained financial performance and R&D spending.” We further read: “R&D spending has no apparent impact on Sales growth, gross profit, enterprise profit, market capitalization, shareholder return.” The only exception is when “R&D spending is into the bottom decile compared to peers”.

“Knowledge is of no value unless you put it into practice”

Anton Chekhov

Key questions of this chapter

What are the key concepts from lean innovation and lexan startup?What tools should one know and understand?How to do customer validation?What is a pivot and how to pivot?What is design thinking?

2.1 Basic concepts from lean innovation and lean startup

a) Problem/solution fit and product/market fit

The first concept is that of the problem solution fit and product/market fit.

TIP

The book Running Lean by Ash Maurya is a must read.

The lean innovation terminology ‘problem/solution fit’ and ‘product/market fit’ are fundamental and the reader should be able to play with these concepts3. One can compare their importance to that of the measuring of blood pressure and listening to the body with a stethoscope at the doctor’s office. Every patient analysis starts with these two measurements.

TIP

Understanding the basic concept of problem/solution fit and product/market fit is vital!

Not understanding the basic concept of problem/solution fit and product/market fit is like trying to do a triathlon without knowing how to swim and how to ride a bicycle. It’s like trying to be a soccer referee without understanding the concept of offside.

There is a consensus that in order to have a successful product, one needs to first identify a problem worth solving. A problem for which the potential customers are prepared to pay money to get solved. Ash Maurya calls it the problem/solution fit3. This is an indispensable and unconditional requirement to come up with successful products. The market solution fit is making sure that the solution you are making is what the customers want. That they are willing and able to buy it at the price you foresee. That its form, fit and function are in line with their requirements. We refer to it as the product/market fit.

Now simply put, one can state that the solution is the product.

1. Problem/solution fit: Do I have a problem worth solving? (customer discovery)

2. Product/market fit: Does the market want my solution? (customer validation)

We can also state that both conditions are to be met in order to be successful.

Result in problem/(solution=product)/market fit, that is problem/solution/market fit. We chose to keep the word ‘solution’ and not ‘product’ because we shouldn’t limit our thinking to one product.

Successful products have a strong: problem/solution/market fit

CASE

What problem do Hertz, Avis and most car rental companies solve? The availability of a car when you fly into a city and do not have your private car with you. The solution to the problem is car rental. Typically, you rent it for a limited time, a few days to a few weeks. The product/market fit is the way Hertz and the others fine-tuned their service to meet the market requirement for car rental. Most times if you get to a new city and you do not have your car with you, you travel by air. For your convenience, there is a rental car service in every airport. Throughout many cities there are also a few locations where you can pick up or bring back the car. Typically, the rental rates are by the day which is in line with the common need. The product/market fit is good.

What problem does Zipcar solve? The high cost/benefit ratio of owning a car in a big city like Manhattan or Brooklyn or Paris etc… People working in large cities typically will use public transportation to get to work and move around the city: train, subway, taxi and even bicycles. The car is only used on occasion, for a few hours, to go shopping at IKEA or the shopping mall or visit friends and family outside the city. The solution to that problem is renting a car. But the typical product/ service from rental companies was not convenient enough. It was too complicated to rent the car; the rental cars were not close by like you are used to at an airport. The rates were not by the hour but by the day. In short, the product/market fit was not good for the habitants of metropole cities. Zipcar defined a new rental model that fit the requirement of the urban commuter. It distributed many cars around the city. Car booking is done online where you can choose an available car within walking distance. You open the car door with your Zipcard. The keys and a fuel card are in the car. The rates are by the hour and a few plans are available to accommodate the rare to the frequent user. Its product/market fit was spot on to solve this problem. Avis bought Zipcar for approximately 500 million dollars in 2013.

b) Customer development

“Hoping for successful and sustainable business without customer development is like hoping for a Michelin star restaurant with a cook who has no sense of taste or smell.”

Yoav Nir

The second concept is that of customer development4 from the book “The Four Steps to the Epiphany” by Steve Blank).

The high importance of customer development is well recognized in running lean and lean startups. Customer development is indispensable, I repeat ‘indispensable’ in making sure that one identifies a problem worth solving and that there is a good product/market fit.

Customer development4

“Customer development is like the constant search for food of a nomadic tribe: hard, fulfilling and essential for survival.”

Yoav Nir

I had a few times the misfortune to eat at such restaurants (in the UK and the US to confirm the cliché) but they didn’t have a Michelin star which confirms my point.

Customer development is so important that it should be done at all levels of the organization up to the CEO.

Customer discovery is not about finding new customers. Customer discovery is about continuously digging deeply into the life of the customer and understanding their pains or problems, their gains and the job they try to get done.

TIP

The five whys are for example one technique in customer discovery. The concept is simple, in order to understand the core problem, you should ask five times “why”. This doesn’t mean five times in a single question: “why, why, why, why, why” which will be followed by a single answer, but asking five different questions: question one: “Why ….”, answer one: “Because….”, question two “Why…” answer two “Because…” etc…

Customer validation is about validating ‘stuff’ with the customer. Typically, it is about validating the perceived value of our solution and what else is required for the customer to buy our solution (price, function, form, purchase process, quantities, market size…)

Often it seems that companies fully develop a product and manufacture it prior to validation. This is a very expensive way of learning that the market doesn’t really like your offering and is a waste of people’s time and energy. This is not lean!

In lean innovation we see a very cost-effective way of doing the customer validation with the use of cheap pretotypes and fast validated learning loops. The term pretotyping was introduced by Alberto Savoia5. It is described as follows on the pretotype blogspot: “Simply put, pretotyping