Tony thinks about innovation in a very simple way: « it’s a process of coming up with solutions that satisfy customer needs. »
There are two ways to address the innovation process
- 1/ come up with solutions and see if they address needs
- 2/ come up with needs and then create a solution that addresses needs
I/ Most people come up with solutions and then they see if they address needs
And if their solutions don’t address needs, then they change their solution to fit them into a need. But in the end, they produce products that really don’t address customer needs, simply because they never understood customer needs to begin with.
99% of people have ideas. It’s not hard to have ideas. But very few people know what customer needs really are. Therefore, very few people have relevant ideas, provided customer needs. For example, in your careers, have you ever worked in a project where you knew customer needs ? Tony asks his clients this all the time. And, only a small portion of his clients know what clients needs are.
II/ So, we invent excuses to bypass customer need definition
The notion of « latent needs », whereby customers don’t even know their needs, offers a great excuse to bypass customer need definition. But, « latent needs are a myth », according to Tony. If you believe that customers have latent needs, then you get to the conclusion that it’s impossible for innovators to know customer needs. Therefore, innovators don’t even need to try defining customers needs. Therefore, they might as well come up with solutions and test it with customers and see how it goes. And that’s what almost every company does. They head down that path and just come up with ideas and find out later if they succeed or not.
III/ Latent needs is a myth that kills innovation.
If you believe that customers have latent needs, then you’re justified in coming up with solutions and pushing them into broad and vague need categories. In large companies, according to an MIT paper, there’s no agreement on what a need really is. This is a study Tony led at Strategyn. There’s no agreement on :
- what the words « customer needs » mean
- what the structure of a customer need is (syntaxe, format)
IV/ The concept of a « need » is not defined
It’s really no surprise that every day, despite thousands of clients interactions during meetings, research, customer focus groups, despite all this client input that’s coming in every day, not one person in the company knows all customer needs. This is not only the result of a poor understanding of customers ; it’s also the result a fundamental misunderstanding of what the concept of a « customer need » might refer to. In fact, no one has taken the time to define the kind of input that:
- defines what a need is
- is needed to execute the innovation process
V/ Companies fail at innovation because their innovation process is flawed
Think about that about any process : if you don’t have the right input, obvisouly, you won’t be able to execute it effectively. The fact is that customers know their needs. They are shouting them all the time. But companies are not listening ; companies are listening to solutions and product ideas ; they are not listening to customers needs. So as a result, companies hope to launch products which, somehow, will address a need. And, they fail.
Today, companies come up with ideas. And then they ask a set of questions, including:
- is the market big enough for this idea ?
- is the market for this idea underserved ?
- how big is the most attractive market segment in this market ?
- does it address unmet needs ?
- does it address a lot of unmet needs significantly ?
- how many people pay for this idea ?
This is what typically happens and a lot of these questions are not answered before the project is launched.
VI/ A successful innovation process starts by understanding needs
The innovation process to be executed must answer all of these questions before generating ideas. So, companies must pick a market that:
- is big enough
- is underserved
- has a large segment of people who are willing to pay more for something better
- will generate revenue
And if, all these things are true, then let’s spend the time and effort to come up with the idea that will address all of this. In other words, idea generation comes after market selection. Collecting ideas is not performed at the beginning of the innovation process, but rather at the end of the innovation process. Now, doing it this way requires more discipline, because the innovation process is flipped around. We’re not going ideas first, we’re going needs first.
Understanding customer needs before we even start to come up with ideas is critical to succeeding at innovation.
This summarizes part of my discussion with Tony.
Further Readings:
- For another take on the definition of innovation and its differences with creativity and invention, please refer Paul Sloan’s blog post, here
- For an introduction to Tony’s Job-To-Be-Done innovation process, please refer to Strategyn’s blog, here