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The IKEA Effect is Creating Zombies. Here’s How to Fight Them.

The IKEA Effect is Creating Zombies. Here’s How to Fight Them.

by | Oct 26, 2020 | Innovation, Tips, Tricks, & Tools

When I was a senior in college, I took a pottery class. 

One of our assignments, before learning to throw on the wheel, was to create a functional piece using slabs of clay.  I designed an Alice in Wonderland-inspired vase and built something that somewhat resembled the design.

Obviously impressed by my innate talent, the instructor offered to teach me a special glazing technique that used highly toxic chemicals to create…well…I stopped listening as soon as I heard “toxic chemicals.”  It was dangerous, so I was in.

The result was a rather misshapen (not Alice in Wonderland-inspired) vase that looked like it was made out of chunks of rusted metal.

I loved it!

My roommate hated it.

She declared it the ugliest thing she ever saw and forbid me from placing it anywhere in the apartment where she might have the misfortune of laying eyes on it.

To this day, she swears it’s the ugliest thing she’s ever seen.

I display it proudly on the bookshelf in my office.

It would be easy to explain our different reactions to my work of art as simply the result of different aesthetic preferences.  And while there may be some truth in it, I suspect the better explanation is the IKEA Effect.

The IKEA Effect

First identified and named in 2011 by professors from Harvard Business School, Yale, and Duke, the IKEA effect is a cognitive bias in which people place a disproportionately high value on products they partially create. 

Think about it.  We all have that piece of furniture, art, craft project, or home improvement effort that we assembled, designed, crafted, installed, or built that we absolutely love and refuse to part with.

No one understands why we won’t let go of that broken, worn out, dust collecting, out of style, money pit but, we believe, it’s simply because they don’t understand or see what we do and that, once they do, they too will see it for the treasure it is.

The same behavior happens in innovation.  Teams invest months, even years, developing, testing, and launching new products and services, and yet, when the market doesn’t respond (i.e. there’s no demand, meaningful revenue, or potential profit), the product or service continues to be offered.

This is the IKEA Effect in action. 

And the result is Zombies.

IKEA Effect Zombies

As evidence mounts that the project will not achieve market success, innovation teams invest with urgency, believing that more marketing, more sales calls, and more discounts will attract the customers that are surely out there.  When the increased investment doesn’t produce the desired results, resources are slowly “reallocated,” the project is “deprioritized,” and a skeleton crew is left to make it work.  The project is a Zombie, the living dead incarnation of an innovation project.

Given the commonality of this behavior, you might think it would be easy to spot Zombies.  You would be wrong.

While the IKEA effect is believed to contribute to both the sunk cost effect and to “not invented here” syndrome, it is a far more fundamental effect, deeply rooted in people’s emotions and identity, and likely to manifest in “logical” arguments based on carefully selected data.

This makes spotting an IKEA Effect Zombie almost as hard as killing one. 

Which is why it’s important to know your Zombies:

HiPPOPs – Highest Paid Person’s Opinion Projects (HiPPOPs) are envisioned, developed, and driven by a senior executive.  When data counter to the executive’s opinion surfaces, the executive finds another piece of data to support their opinion. The project lurches on for years, fed by the executive, as people throughout the organization watch it slowly rot.

Perennial Pivoter – These projects are always just one pivot away from success.  Created by a team of eternal optimists, there’s no such thing as failure, there’s only learning what not to do and what to try next. 

Windfall Walker – When you hear “It’s a small investment and the upside could be huge,” a Walker is not far away.  Often the brainchild of a single individual, the promise of these projects is far greater than their return.  But they live on because everyone silently agrees that it’s easier to live with the Zombie than kill it. 

Hope Hunter – Perhaps the most dangerous and cruel of all the Zombies, these projects always offer a glimmer of hope that the hockey stick of success is just a quarter, a customer, or a PR moment away. Convinced that staying the course and investing just one more dollar, month, or customer call will bring the project back to life.

How to Deal with IKEA Effect Zombies

Just like all other adventure stories, the source of the problem is also the solution.  In this case, IKEA created the effect and their stores point to the solutions.

To Kill a Zombie, Stand Your Ground.

Zombies appear when you lose focus on creating and delivering something desirable (solves a customer’s problem), feasible (can be created), and attractive (meets or exceeds key strategic and financial targets).

Because Zombies are a sign that you’re lost, you need to do the same thing you do when you get lost in IKEA – stop, pull out the map, and re-orient yourself.

Go back to your original criteria for pursuing the project.  Does the project still meet the thresholds or has something, like the company’s strategy or the project’s results, changed? How does the change impact the project’s desirability, feasibility, and attractiveness?  What is the right thing to do for the business based on these changes?

Try to be objective as you re-orient yourself and avoid the urge to blame others or beat yourself up.  What matters most isn’t how you got here, it’s where you go from here.

To Avoid Zombies:

Focus on the Meatballs.  Let’s be honest, the best part of every IKEA trip is the meatballs (and lingonberry jam) in the café after you checkout.  Every distraction and double-back in the Showroom delays the gratification of eating meatballs (and lingonberry jam).

When you start an innovation project, set a clear, objective, and measurable goal at the beginning.  That’s your meatball.  At every project milestone, revisit the goal.  Is it still a desirable goal or has something in the business fundamentally shifted, requiring the goal to change?  Is it still reasonable to believe that the project will achieve that goal, or have you learned something that makes the goal improbably or even impossible?

Staying focused on the goal and objectively evaluating your odds of achieving it makes it easier to let kill a project that can’t get you to where you need to go.

Follow the Arrows.  IKEA Showroom maps are often as helpful as the assembly instructions that come with their furniture.  Not at all.  That’s why there are arrows on the floor and signs hanging from the ceiling to guide you through the shopping experience and, ultimately, to the meatballs.

A project process with clear governance is the innovation equivalent of floor arrows and ceiling signs.  Before starting an innovation project, identify the activities required, thresholds that must be met for additional resources, roles and responsibilities of team members, and decision-making criteria. 

As you do the work of innovation, you’ll refine the process and governance.  By your third project, it should be 80% set and by your fifth, it should be 90% set (you never want it to be 100% because innovation does need a bit of flexibility).

Creating and following a standard process and objective governance model helps to remove the emotion that drives the IKEA effect and creates Zombies.

A Zombie and IKEA Effect Free Innovation Zone

By acknowledging the Innovation Effect in your organization, identifying and killing the Zombies it creates and putting the goals, processes, and governance in place to prevent a Zombie recurrence you’re on your way to more efficient, effective, and successful innovation efforts.

I recommend celebrating with meatballs (and lingonberry jam)!

How to Get Corporate Executives to Walk Their Innovation Talk

How to Get Corporate Executives to Walk Their Innovation Talk

by | Oct 21, 2020 | Innovation, Tips, Tricks, & Tools

Things we know we should do because they’re good for us:

  1. Eat 5 servings of fruits and vegetables each day
  2. Floss twice a day
  3. Get 10,000 steps a day
  4. Buy insurance
  5. Consistently invest in innovation

Let’s be honest, the above list could also be titled, “Things we know we should do but don’t.”

Why?  Why do we choose not to do things that years of research prove are good for us and for which solutions are readily available?

Because they’re inconvenient, uncomfortable, expensive, and, most of all, because we have not yet been burned by not doing them.

Experience is a better motivator of change and driver of behavior than knowledge. We don’t floss until we’ve had one (or more) painful and bloody dentist appointments.  We don’t buy insurance until we have to deal with a break-in.  We don’t invest in innovation until we’re desperate for revenue, profit, or growth.

The good news is that, at least when it comes to innovation, we don’t have to wait to be desperate or to get burned before we do what we know we should.  We can create experiences that motivate change.

Borrow relevant experiences

Experiencing success, even if it’s vicariously, is key to getting people to do what they know they should.  One way to do this is to find proof that the change is possible and do-able.  To do this you need to find relevant and recent examples (i.e. not a field trip to Silicon Valley and not stories about Steve Jobs). 

Find a company in your industry (or a similar one) that has successfully achieved the goal you’ve set.  Tell their story to people within your organization.  Set-up a conversation between a current or former member of their team and a key stakeholder in your organization.  Buy their product and display it as evidence that success is possible.

Create experiences of success

Innovation takes time, especially if you’re working on something breakthrough.  But people lose interest and faith quickly, especially in organizations that are judged by quarterly numbers.  As a result, the worst thing you can do is to go into “stealth mode” and try to “fly under the radar” until you have a huge, earth-shattering success to announce.

Instead, spend time learning about your decision-makers’ and stakeholders’ doubts at the same time you’re learning about your customers’ problems.  Then, when you prove those doubts wrong, celebrate the win…politely, and publicly.

Does your boss think Legal will never approve your idea?  Work with Legal, ask them what it would take to get an approval, and when you do that and get the Yes, tell your boss.  Does Finance think no one will ever pay the price for your solution?  Open a “lemonade stand” to sell the product and then take Finance out for drinks, using your first dollars of revenue to pay for the first round.

Small and steady wins give people experience with success and buy you the time, resources, and support you need to achieve the earth-shattering ones.

Immerse everyone in the experience

While borrowing and creating experiences can be powerful, nothing is as convincing or compelling as actively engaging people in achieving success.

Involve innovation leaders, decision-makers, and key stakeholders in the hard work of customer discovery, solution design, and business testing.  Make them listen in live to customer interviews, hand them the sharpie (or the mouse) during ideation sessions, and “hire” them to staff your “lemonade stand.”

By making people lean in, roll up their sleeves and do the work, they’ll experience how hard innovation is and why it takes longer than they think.  They’ll be invested in your work and your results.  They’ll feel the rush of the small successes.

Innovation is a Head, Heart, Guts endeavor

People decide what to do with their hearts, justify their decisions with their heads, but it takes guts to take action.  Knowledge feeds the head, but it takes experience to have guts. 

3 Things Leaders Must Do to Drive Innovation Success

3 Things Leaders Must Do to Drive Innovation Success

by | Oct 13, 2020 | Leadership

Dear Corporate Executive,

Congratulations! You’ve taken action to make innovation happen. You created an innovation team, you gave them all the Design Thinking, Lean Innovation, and Disruptive Innovation books and articles, and you left them alone to make sure that they aren’t infected by the corporate antibodies that plague those working on the day-to-day business.

But nothing is happening.

Or maybe something is happening but it’s not what you need or want.

You are frustrated.

Your team is frustrated.

This is not going well and if the team doesn’t turn things around, you’re shutting it all down. After all, you have a business that needs your attention and management and if you don’t keep your eye on that ball, there won’t be a future for the business.

I understand. I’ve been there. Lots of leaders have been there.

And you’re right, something does need to change.

YOU need to change.

As a leader in an organization, there are 3 thing YOU must do in order to have a chance at innovation success.

YOU need to do these things because only you have the organizational authority, influence, and power to make these decisions and support and defend the actions required to deliver on them.  Note that I use the word “chance.” Doing these 3 things is not a guarantee of success but, I promise you, NOT doing them does guarantee failure.

Talk about what Innovation will enable, not just why it’s important

Your innovation team knows that innovation is important, they desperately want to do it, and they’re working hard on it. But they need direction and the rest of the organization needs to know why the team is doing what it’s doing and why you’re giving them the resources.

Doing this requires that you go beyond explaining why innovation is important. We all know that innovation is essential to an organization’s long-term success. We also know that we should eat 5 servings of vegetables a day and floss twice daily. Knowing that something is important isn’t the same as doing something that is important.

Instead you need to set the vision for what things will look like in the future, after the innovation has taken hold. You need to show everyone how things will be better in the future because of the changes being made today. You need to give everyone something to believe in and work towards.

Man driving a floor scrubbing machine

Tennant T15 Floor Scrubber Operator Training

Consider Tennant, maker of the small bluish-green Zamboni like machines you see cleaning floors in office buildings and airports. They were founded in 1870 as a supplier of hardwood floors and invented floor scrubbers in the 1930s. For over 120 years, they worked to fulfill their mission “to become the preeminent company in residential floor maintenance equipment, floor coatings, and related products” and they enjoyed a nice steady business as a result.

Then, in 1999, Janet Dolan was named CEO, becoming the first non-family member to run the company. As a long-time member of the Board, Ms. Dolan knew the company well and she also knew that it was facing increasing competition and price pressure. So, with the support of the Board and her executive team, a year after she took the reigns, Ms. Dolan announced a new mission for Tennant: “To bring to market sustainable cleaning innovations that empower others to create a cleaner, safer, healthier world.”

That’s a pretty big change from floor maintenance, coatings, and related products.

And way more inspiring.

So what happened?

Revenue decreased from 2000 to 2001. Then it plateaued from 2001 to 2002. So far not so good, right?

In 2002, Tennant launched 2 new products — one that cleaned floors with 70% less water and 90% less detergent but resulted in significantly lower labor costs, and a carpet cleaning scrubber that used less water and detergent but which decreased drying time from 18 hours to 30 minutes.

Neither of these innovation would have been possible under the old mission because it defined Tennant as a company that made (and sold) “floor coatings, and related products.” But both were spot-on with the new one mission, one that defined the company as an enabler of a “cleaner, safer, healthier world.”

The result? A steady upward climb in revenue from approximately $400M in 2002 to $701M in 2008

Yes, Tennant did many other things (restructuring, altering their manufacturing process and supply chain) during that time period that also contributed to their growth. But you can’t cut your way to a nearly 10% CAGR. You innovate your way there. And Tennant’s new mission made that possible.*

Quantify what Innovation must deliver

“Money talks, bullsh*t walks.”

– Some guy in my 12th grade French class (I have no idea why this was said in the context of a French class but I do remember it better than most of the French I learned).

Yes, innovation is fun. But innovation for the purpose of having fun is a hobby. You’re innovating because you need to grow your business. So treat innovation like a business and give it a target.

Mind The Gap written in LEGO on the floor

LEGO Shop: “Mind the Gap” from TripAdvisor

That target is known as the Growth Gap.

The Growth Gap is a concept which, as far as I can tell, was introduced in Robert B. Tucker’s 2002 book Driving Growth Through Innovation: How leading firms are transforming their future and is one of the most important and simple innovation tools I’ve seen used.

In fact, you’ve probably already calculated your Growth Gap. You just do’t know it. Yet.

Start with your future revenue goal (you probably set this during your annual strategic planning process as the goal for 3–5 years from now). Now subtract your current revenue. Then, subtract the expected revenue of everything else in your pipeline. What’s left is your Growth Gap, aka the amount of revenue that innovation (i.e. stuff you don’t yet have funded or in the pipeline) needs to deliver.

NOTE: there are far more precise and complicated ways to calculate the Growth Gap but this was is quick and will get you to an answer that is more right than wrong.

Several years ago, I worked with a global athletic company that was already well known for its innovations but which was trying to become more systematic in their efforts and more diligent about investing in Breakthrough and Disruptive innovation. The team and its C-Suite sponsors knew that additional investment was required to fund Breakthrough and Disruptive innovation but senior leaders were hesitant to allocate the cash.

So we calculated the growth gap.**

At the time, the company had $25B in revenue and the stated goal of growing to $50B in revenue in 7 years. According to their strategic plan, they had line of sight to an additional $15B in net revenue (new revenue from new launches less revenue losses from declining and discontinued products) resulting in an estimated $40B revenue in 7 years. From there, the math is pretty easy $50B promised minus $40B predicted equals $10B Growth Gap.

This means that management had to believe that they could create and scale 2 new Facebooks (based on Facebook’s revenue at the time) in the next 7 years.

With the need for innovation quantified, the coffers opened and innovation investment, activity, and results sky-rocketed.

Get involved in the work

Yes, you have a lot on your plate. No, that does not give you the right to delegate innovation.

If you have set a vision for what the business looks like as a result of innovation and you’ve quantified what innovation needs to deliver for your business then your innovation team IS a business and you need to be involved

But you do have a lot on your plate.

And you’re probably already involved in innovation governance processes like sitting on an Innovation Council, reviewing learnings from innovation projects, making small investments to get to the next learning stage, asking different questions in innovation meetings than you do in your regular business review meetings, and celebrating “failures” instead of brushing them under the rug.

Good for you! (no really, I mean that).

But are you getting your hands dirty? Are you leaving the office to see innovation at work? Are you going into the market to talk to the people you want to serve?

How much of your time are you spending on innovation? If, like the executives in the above example, you expect 26% of your future revenue to come from innovation, are you spending 25% of your time with the innovation team? 10% (i.e. 4 hours per week or 2 days per month?) 2.5% (1 hour per week or a half-day a month)?

Spending time outside of meetings and inside the work of innovation can make all the difference. In one case, it made a nearly $1B+ difference

Welcome to Cedar Rapids Iowa sign

Liz Martin/ The Gazette

I started my career at P&G working on a product code-named DD-1.

In my first year at P&G, we launched DD-1 into test markets in Cedar Rapids, Iowa and Pittsfield, Massachusetts. And those test markets went extremely well. So well in fact, that we experienced product shortages and the emergence of a strange gray-market of DD-1 products.

At the same time, we were working with IRI to run DD-1 through a BASES test, a standard modeling exercise that sought to forecast initial and on-going revenue for new products and a standard step in the process for securing launch approval.

Since the test markets were going so well, we were confident that the BASES results would be equally strong and moved forward with putting together a launch recommendation for the new brand. We even scheduled a meeting with the CEO and COO to get their signatures on the launch approval document

Then the BASES results came back. And they were bad. Historically bad. Perhaps the worst results in the history of P&G.

But we were not deterred. We had the real-world results from our test markets and we confidently and optimistically plowed ahead.

DD-1’s leadership team presented the launch reco, including BASES results, to the CEO and COO. They explained that we did not believe that the BASES results were accurate because they used the re-purchase cycle of canned aerosol dusting sprays as an analog to the re-purchase cycle of DD-1 cloths and data from the test market (real world data! real usage data!) told a very different story. They asked for approval to launch.

The CEO said no.

The CEO believed the BASES results. BASES had always been accurate for all previous launches (keep in mind 99% of previous launches were incremental improvements to existing brands). The launch was cancelled.

Then, the COO spoke up. He believed the test market results and agreed that there was a flaw in the BASES methodology. He believed DD-1 should launch. He would take responsibility for its launch and its results.

The CEO acquiesced.

Swiffer was launched in 1999

Today, it is closing in on the coveted $1B Brand status.

Why, when presented with the same launch recommendation, did the CEO and COO make two different decisions? The COO spent a few hours one day in Cedar Rapids Iowa. He saw the test market results playing out live, he spoke to the people who drove from store to store to find refill cloths. He experienced the innovation instead of just reading about it.

So, my corporate executive friend, do not give up. Step up and lead (yes, even more than you have). Paint the picture of how innovation will shape your business’ future. Quantify what it must deliver so that you can make informed (and realistic) investment decisions. Get your hands dirty because even a few hours of working in innovation, alongside your team, can make all the difference.

Success is possible. You must lead the way.

*This story is based on two case studies by HBS professor, Lynda Applegate: Tennant Company (February 2010, revised January 2014) and Tennant Company: Innovating Within and Beyond the Core (June 2010, revised August 2011)

** Numbers have been changed to preserve confidentiality

The 5 Gifts of Uncertainty

The 5 Gifts of Uncertainty

by | Sep 30, 2020 | Innovation, Leadership, Stories & Examples

“How are you doing?  How are you handling all this?”

It seems like 90% of conversations these days start with those two sentences.  We ask out of genuine concern and also out of a need to commiserate, to share our experiences, and to find someone that understands.

The connection these questions create is just one of the Gifts of Uncertainty that have been given to us by the pandemic.

Yes, I know that the idea of uncertainty, especially in big things like our lives and businesses, being a gift is bizarre.  When one of my friends first suggested the idea, I rolled my eyes pretty hard and then checked to make sure I was talk to my smart sarcastic fellow business owner and not the Dali Lama.

But as I thought about it more, started looking for “gifts” in the news and listening for them in conversations with friends and clients, I realized how wise my friend truly was.

Faced with levels of uncertainty we’ve never before experienced, people and businesses are doing things they’ve never imagined having to do and, as a result, are discovering skills and abilities they never knew they had.  These are the Gifts of Uncertainty

  1. Necessity of offering a vision – When we’re facing or doing something new, we don’t have all the answers. But we don’t need all the answers to take action.  The people emerging as leaders, in both the political and business realms, are the ones acknowledging this reality by sharing what they do know, offering a vision for the future, laying out a process to achieve it, and admitting the unknowns and the variables that will affect both the plan and the outcome.
  2. Freedom to experiment – As governments ordered businesses like restaurants to close and social distancing made it nearly impossible for other businesses to continue operating, business owners were suddenly faced with a tough choice – stop operations completely or find new ways to continue to serve. Restaurants began to offer carry out and delivery.  Bookstores, like Powell’s in Portland OR and Northshire Bookstore in Manchester VT, also got into curbside pick-up and delivery game.  Even dentists and orthodontists began to offer virtual visits through services like Wally Health and Orthodontic Screening Kit, respectively.
  3. Ability to change – Businesses are discovering that they can move quickly, change rapidly, and use existing capabilities to produce entirely new products. Nike and HP are producing face shields. Zara and Prada are producing face masks. Fanatics, makers of MLB uniforms, and Ford are producing gowns.  GM and Dyson are gearing up to produce ventilators. And seemingly every alcohol company is making hand sanitizer.  Months ago, all of these companies were in very different businesses and likely never imagined that they could or would pivot to producing products for the healthcare sector.  But they did pivot.
  4. Power of Relationships – Social distancing and self-isolation are bringing into sharp relief the importance of human connection and the power of relationships. The shift to virtual meetups like happy hours, coffees, and lunches is causing us to be thoughtful about who we spend time with rather than defaulting to whoever is nearby.  We are shifting to seeking connection with others rather than simply racking up as many LinkedIn Connections, Facebook friends, or Instagram followers as possible.  Even companies are realizing the powerful difference between relationships and subscribers as people unsubscribed en mass to the “How we’re dealing with COVID-19 emails” they received from every company with which they had ever provided their information.
  5. Business benefit of doing the right thing – In a perfect world, businesses that consistently operate ethically, fairly, and with the best interests of ALL their stakeholders (not just shareholders) in mind, would be rewarded. We are certainly not in a perfect world, but some businesses are doing the “right thing” and rea being rewarded.  Companies like Target are offering high-risk employees like seniors pregnant women, and those with compromised immune systems 30-days of paid leave.  CVS and Comcast are paying store employees extra in the form of one-time bonuses or percent increases on hourly wages.  Sweetgreen and AllBirds are donating food and shoes, respectively, to healthcare workers.  On the other hand, businesses that try to leverage the pandemic to boost their bottom lines are being taken to task.  Rothy’s, the popular shoe brand, announced on April 13 that they would shift one-third of their production capacity to making “disposable, non-medical masks to workers on the front line” and would donate five face masks for every item purchased.  Less than 12 hours later, they issued an apology for their “mis-step,” withdrew their purchase-to-donate program, and announced a bulk donation of 100,000 non-medical masks.

Before the pandemic, many of these things seemed impossibly hard, even theoretical.  In the midst of uncertainty, though, these each of these things became practical, even necessary.  As a result, in a few short weeks, we’ve proven to ourselves that we can do what we spent years saying we could not.

These are gifts to be cherished, remembered and used when the uncertainty, inevitably, fades.

Originally published on Mat 19, 2020 on Forbes.com

Why “Innovation” is Killing Innovation (Hint: it involves peanut butter and cats)

Why “Innovation” is Killing Innovation (Hint: it involves peanut butter and cats)

by | Sep 24, 2020 | Innovation, Tips, Tricks, & Tools

Innovation is not peanut butter.

You can’t smear it all over something and enjoy the deliciousness.

In other words, “Innovation” is not a one-sized-fits-all term.  If you apply it to everything new and different that you’re doing, you’ll be confused, frustrated, and ultimately left with very little to show for your efforts.

In a previous post, I defined Innovation as something different that creates value.  For companies to increase their odds of creating value, however, they need to develop a language and discipline around at least three different types of innovation.

Why do I need different types of innovation?

Imagine if we used the word “Cat” to describe every feline from a house-cat to a lion.  If you proudly proclaim that you just got a new cat, people might wonder whether that purchase was truly legal.  If you yell, “There’s a cat behind you!” people might not react with the level of urgency required.

Specificity enables rapid understanding which leads to better decision making.

Labeling everything new and different with the term “innovation” can result in dramatically under-resourcing some efforts and prematurely canceling others.  After all, launching an entirely new business model takes far more time, money, people, and patience than launching an improved version of an existing product.  You need a language that reflects that.  

Why do I need at least three types of innovation?

Because, after decades of research and application, academics and practitioners alike seem to agree that two is too few and, since three comes after two and three seems to work, you need at least three.  (Doblin said 10 but that feels like too many to remember).

Which three should I use?

The three that best reflect your company’s strategies, priorities, and culture.

I know that’s a bit vague, but the truth is that there is no one right answer.  The only “right answer” I’ve ever seen is the one that sticks, that advances key corporate strategies, and that enables thoughtful decision making.

Start Here

When one of my clients is at the very beginning of building their innovation capability, we start simple

  1. Core Innovation is improvements to what they currently do
  2. Adjacent refers to innovations which combine existing and new elements (e.g. selling an existing offering to a new customer, selling a new offering to an existing customer, or monetizing an existing offering in a new way)
  3. Breakthrough innovations change everything (e.g. new offerings to new customers, monetized and delivered in new ways)

We then develop a high-level innovation process that can apply to all three (this helps with communication across the company and reinforces that everyone can participate in innovation). From there, we create more detailed structures, processes, tools, trainings, and timelines for each type of innovation to ensure that we have a balanced innovation portfolio, allocate appropriate levels of resources, and set realistic expectations with regards to timelines and ROI.

But what about (fill in the framework here)?

Again, the two most important things about innovation types are that (1) you define them and (2) they are practical, actionable, memorable, and enable progress against your strategic priorities.

That said, there are other Innovation Type frameworks from which you can draw inspiration.  Here are three of the most popular

McKinsey’s 3 Horizons Making its debut in the 1998 book The Alchemy of Growth, McKinsey’s 3 Horizons frameworks remains a favorite amongst consultants and executives (but not Steve Blank, who thinks it no longer applies).

The book argued that for companies to kick-start growth or continue to grow rapidly, they need to simultaneously focus on three “horizons of growth:”

  1. Horizon 1 ideas drive continuous improvements in existing offerings, business models, and capabilities
  2. Horizon 2 ideas extend the core to new customers or markets
  3. Horizon 3 ideas create new capabilities or businesses in response to disruptive opportunities or threats

Clayton Christensen

In his 2014 Harvard Business Review article, “The Capitalist’s Dilemma,” Professor Christensen wrote that the terms he famously coined, “disruptive” and “sustaining” innovation, are not types of innovation, rather they describe “the process by which innovations become dominant in established markets and the new entrants challenge incumbents.” Innovation types, however, should describe the outcome of the innovation.  The three he identified are:

  1. Performance-improving innovations that replace old products with new better models
  2. Efficiency innovations that enable companies to sell existing products to existing customers at lower prices
  3. Market-creating innovations that combine an enabling technology that rapidly reduces costs with a new business model to reach new customers, resulting in the creation of (as the name implies) entirely new markets.

P&G

From 2000 through 2012, P&G, under the leadership of CEO AG Lafley,  improved its innovation success rate from 15% to 50% and doubled the average size of successful initiatives.

One of the first steps in achieving these dramatic results was to define 4 types of innovation.

  1. Commercial innovations that increase trial and use of existing products
  2. Sustaining innovations that make existing products better, faster, cheaper, or easier to use
  3. Transformational innovations that deliver a step-change improvement in a product’s performance, ultimately setting new performance expectations for a category
  4. Disruptive innovations (new brands or business models) that “win through simplicity or affordability”

 

OK, I’m on-board.  How do I start?

My clients and I follow these four steps:

  1. Put a stake in the ground and name 3 types of innovation. Don’t overthink it.  Just pick three types and go on to step 2
  2. Share the types (names and definitions) with people and see how they react. Do they immediately understand?  Do they look confused?  Do they recoil in horror?  Get curious about their reactions and ask for feedback.  Refine your types and their definitions until a majority of people immediately understand (note: you’re not going for 100% agreement because that never happens, you’re going for “good enough with no one violently disagreeing)
  3. Map your innovation initiatives to each type.
    • Are there types with no initiatives? Is that type critical to achieving a strategic priority or key metric?
      • If yes, you have a gap in your portfolio.
      • If no, get rid of the type.
    • Are there initiatives with no types? Is that initiative critical to achieving a strategic priority or key metric?
      • If yes, create a type to describe that (and hopefully other) initiatives.
      • If no, get rid of the initiative.
  4. Share your innovation portfolio with key decision-makers and start developing your innovation strategy.

 

Congrats, you have a working draft of your Innovation Types!  You’ve taken a crucial first step in your journey getting real results from innovation.  Reward yourself with some peanut butter!