By Dave Farber
Since the early 1990s, Bain has conducted a regular survey of thousands of managers to determine what tools and frameworks they are using to manage their businesses.
Despite the constant introduction of new innovation tools and frameworks, the number of tools managers use today is less than half of what we were seeing 20 years ago. And it’s not just fringe theories that have fallen out of favor. Since 2000, strategic planning went from being used by 76% of managers down to 48%, while the use of benchmarking went from 69% to 46% during the same period. In today’s environment, with massive uncertainty about how the future will unfold, scenario planning — the very tool that allows you to plan for the unknown — is only used by 19% of managers.
When you stop to think about it, this drop in the use of proven strategy and innovation tools makes sense. I can’t count the number of meetings I’ve been in where someone has introduced a framework that they didn’t know a lot about, only to have the results of that session forever disappear into the ether. Why bother trying that framework again? Another common issue is that companies overwhelm their teams with new tools and methodologies, ultimately leaving managers confused about when they should use one tool versus another, or how any can be used in tandem. Finally, tools have fallen by the wayside as teams have been asked to focus on the newest buzzwordy trends. I’m looking at you, Agile.
One promising trend I saw in Bain’s most recent survey is that nearly 80% of today’s leaders believe that it’s their job to trust and empower their reports rather than commanding and controlling them. In the spirit of empowerment, I wanted to create a compendium of strategy and innovation tools so that managers would have just-in-time access to the right tools for solving common challenges. In this article, I outline ten common challenges and the best tools to address them. I’ve also built an interactive tool to help teams quickly find resources about the tools they’re looking for.
Ten common challenges for innovators
1.Setting a path — Even in the absence of a pandemic, we often don’t know how an industry will evolve or how customers will respond to new offerings. But “let’s wait and see” isn’t a strategy. Companies need a clear strategic vision for how to move forward that will guide teams on what their priorities should be.
Scenario planning is a great tool for mitigating the risks related to uncertainty. Scenario planning forces you to identify the most impactful unknowns and evaluate the consequences of pursuing a strategy in different contexts. From there, you can decide whether it’s worth charting a course that works across multiple scenarios, add pivot points to guide you in the right direction as the future unfolds, and implement safeguards in case some of those unknowns don’t unfold as you had hoped.
2. Finding focus — A common challenge I see at large companies is that they spread themselves across too many initiatives. Many projects will end up under-resourced while others will trudge on — despite only having a tenuous link to the organization’s current strategy — because of the resources that have already been invested. Part of the key to developing a strategy is deciding on a portfolio plan to align your initiatives and having the discipline to say “no” to projects that don’t fit the plan.
Portfolio planning helps teams prioritize their time and resources by focusing them on projects that help achieve the company’s strategic vision. Because portfolio planning forces you to balance a number of different factors — risk, size of investment, timeline for returns, proximity to core operations, etc. — across a small number of initiatives, it necessarily forces you to reject projects that sound interesting but don’t fit a core need.
3. Staying ahead — As competitors continue to improve and industry upstarts change the nature of the business, companies need to keep a pulse on what’s happening in the industry, understand where they should build, buy, or partner, and undertake initiatives to compete along the dimensions that will matter most to customers.
Benchmarking may be fading in usage by managers, but it’s a tried and true way to understand where competitors are out-performing you. By identifying some key metrics and gathering data about how your organization stacks up, you can quickly learn why competitors are able to do things better, less expensively, or more quickly. You can also take the next step and engage in information-sharing with non-competitive leaders in the space to improve your performance.
Scouting is another way to learn about how others may be doing things differently. By exploring the startup landscape, you can see what new technologies are emerging, identify needs that startups believe are under-satisfied, and explore opportunities for inorganic growth (e.g., mergers, acquisitions, partnerships).
SWOT Analysis, while fairly rudimentary, can also be a starting point for thinking about future opportunities for innovation. At the very least, it can help you identify assets that you can leverage as you pursue new opportunities (an often overlooked step) or identify areas where you are falling behind the competition.
4. Understanding customers — While companies generally have tons of data about their customers, they don’t always have the right data. Often, companies have information about what people bought, but they don’t fully understand why people bought what they did. Or they only understand a piece of the puzzle. For example, maybe they understand the jobs customers are trying to get done, but they don’t understand the criteria by which customers will determine that a new solution is a good fit, the path customers will take to purchase, or the obstacles that will keep customers from adopting a new solution. For companies who have a good understanding of their core customers, the need is often to understand new markets or customer types or to refresh their insights in light of new trends or developments.
The Jobs Atlas is a useful way for teams to organize what they know about their customers and dig into the important elements of customer decision-making that they may not have fully explored. While a range of qualitative and quantitative research methods can be deployed depending on the context, the Jobs Atlas identifies the most critical elements to dig into with that research.
5. Improving offerings — Once companies understand the needs of the customers they’re looking to serve, the challenge often shifts to improving the customer experience and increasing customer retention or loyalty. That involves understanding where customers experience pain points or fall out of the buying process.
Journey maps can help you understand the customer’s buying process, their experience using your offering, and what happens once they’ve used your product or service. Consider more than just the pain points you uncover along the journey. Identify the jobs that customers are trying to get done, and use tools such as a Jobs Resume to ideate around how you can improve the customer experience by helping customers better accomplish those jobs.
6. Growing share — The other piece of the puzzle — beyond improving the experience — is about expansion by considering new products, new customer segments, or new geographies. Companies need to understand which customers they’re well-equipped to serve profitably.
Customer segmentation is an essential first step for thinking about growth. Even if you’re launching new solutions for the customers you already target, it’s helpful to consider how that group’s needs differs from the needs of other segments. As you consider new customer segments, remember to make sure that those customers are identifiable, reachable, and profitable to serve.
The 10 Domains of Innovation framework is another great tool for expanding your thinking. While most innovation teams think first about the product, research has shown that the most successful innovations often focus on changes to the profit model or the customer experience. Think broadly about the different opportunities for innovation.
7. Testing concepts — Once companies have reached the point where they have ideas they want to commercialize, it’s important to collect customer feedback, use those learnings to iterate the offering as needed, and re-test the new idea to further refine the solution and better understand how to market it.
Iterative concept testing allows you to get precise about exactly what risks and hypotheses you are testing so that you do not endlessly research without ever getting to commercialization. Be clear about which risks need to be resolved early and what you plan to do with the learnings from your tests. When testing customer reactions to a prototype, remember to ask not just about their likes and dislikes, but also about their questions and general feedback.
8. Building a case — Customers seeing value in an offering is a good start, but it’s also important for companies to understand whether they can turn an idea into a successful business or product line. Senior leaders will want to see the data to justify moving ahead with an initiative.
DFV Design Thinking is a human-centered approach to innovation popularized by IDEO. While there is an entire toolkit for researching, designing, and prototyping, one of the most important factors stressed in this flavor of design thinking is the need to innovate at the intersection of desirability (whether customers want it), feasibility (whether you can build it), and viability (whether it can turn into a financially viable business). No business case is complete unless it addresses all three parts.
Business case modeling generally addresses a broader set of questions that the business cares about. In addition to considering whether people want your solution and whether your organization should be the one to deliver it, it’s useful to lay out different forms that the solution might take, assess the required investment and potential returns from moving forward, and lay out a clear path to commercialization (including risks and unknowns that need to be addressed).
Reverse income statements can be another useful tool for fuzzier innovation initiatives. For truly new-to-the-world ideas, you’re not going to have clear benchmarks around each element of your P&L. Rather than attempting to build a detailed financial plan laden with false precision, it can be useful to build financial models in reverse. In this case, you identify what would need to be true — and whether those assumptions are believable — in order to generate the kinds of returns you’re looking for.
9. Crafting a strategy — Once a business decides to commercialize an idea, it will need a clear go-to-market strategy. Beyond the basics of what you hope to achieve, this is where you get precise on how you actually bring your idea to market.
A.G. Lafley’s strategy waterfall approach is a good starting point for laying out your winning aspiration (including both what’s desirable and what’s out of bounds), defining the playing field, and determining how you will bring about that desired result.
The business model canvas is useful for fleshing out more of the details around how you create, capture, and deliver value for your customers. It requires you to think about partnerships, cost drivers, channel strategies, target customer segments, and a number of other elements that will be critical to creating a focused go-to-market strategy.
10. Mitigating risks — One of the last key elements to developing a strong go-to-market strategy is identifying the risks and uncertainties that could impede your path to commercial success. Beyond that, you can determine the tests you can run to resolve unknowns and the preemptive actions you can take to mitigate known risks.
War gaming can be a valuable tool for thinking through uncertainties. In particular, war games allow you to predict unintended consequences of actions you’re considering. They let you think through how competitors might respond to market changes or your moves. Be sure to invite the right people. I often find that sales reps have a great view of what competitors are doing, and they can be a great asset during both the planning and participation stages.
Risk planning should be a well-considered process. While there are many frameworks out there for categorizing risks, it’s most important to understand the order in which you need to address risks. Those frameworks may help you brainstorm risks by thinking holistically about the business, but the key is to identify the risks that have the greatest potential to derail your idea or force you down an expensive path.
Strategy and innovation tools don’t magically make all business challenges go away, nor do they provide some sort of silver bullet for the stickiest situations. Nevertheless, they can offer you a structured way of looking at a problem, and they can be great assets to teams that are overwhelmed by the enormity of a larger problem. While great new tools and processes are being introduced every day, I recommend that teams keep some of these tried and true approaches in their toolkit.
Dave Farber is a strategy and innovation consultant at New Markets Advisors. He helps companies understand customer needs, build innovation capabilities, and develop plans for growth. He is a co-author of the award-winning book Jobs to be Done: A Roadmap for Customer-Centered Innovation.