Practicing Continuous Innovation, IDEO Style

Tim Brown, the CEO of design firm IDEO, has a new book called “Change By Design.” It talks about how large organizations can infuse “design thinking” into the company’s DNA. Who can practice design thinking? Everyone. According to Brown

The design thinkers I have described here are not minimalist, esoteric members of an elite priesthood, and they do not wear black turtlenecks. They are creative innovators who can bridge the chasm between thinking and doing because they are passionately committed to the goal of a better life and a better world around them.

One of the examples that Brown uses is Kaiser Permanente. Guided by IDEO’s support, a Kaiser team redesign the nursing staff shift change at hospitals. The internal group followed a design process, including videotaping, brainstorming, role playing, and prototyping. The redesigned shift change process enabled nurses to visit with patients twice as fast and raised satisfaction rates for both nurses and patients.

My take: I agree with Brown’s focus on infusing the elements of design into an organization’s DNA. One of the 6 New Management Imperatives that I’ve defined is: Turn innovation into a continuous process. Innovation shouldn’t be left to a handful of people or focus only on big-bang events.

There’s a strong overlap with these concepts and customer experience as well. A correctly implemented Voice Of The Customer program represents a form of continuous “Design Thinking.”

The bottom line: Either innovate continuously or fall behind consistently.

PNC Bank Breaks Through Gen Y Blindspot

Last year I proclaimed that Banks Have A Gen Y Blind Spot. Well, that’s no longer true for all banks. It turns out that PNC enlisted IDEO to help engage Gen Y and created a new offering: VirtualWallet. According to a recent BusinessWeek article, PNC has signed up more than 20,000 customers (70% from Gen Y) and is on track to break even in two years.

Here’s how VirtualWallet is described on the IDEO Website:

[It is] a family of banking products that provide customers with seamless access to their finances and intuitive, tangible, and direct control of their money. Centered on electronic transactional banking, it is designed to both promote and optimize banking activities with features and visualizations that support the mental models and lifestyles of its Gen Y customers

My take: I really like VirtualWallet. It shows what you can do when you explicitly focus on Gen Y. The long-term success will require ongoing nurturing by PNC, but the initial approach makes a lot of sense because:

  • It applies a strategy called online infusion. While it’s a financial offering, online features like a money slide bar to graphically indicate available funds, a “Savings Engine” that helps customers establish rules around spending, and a playful instant transfer feature named “Punch the Pig” are core to the value proposition.
  • The online experience implements many components of the four strategies we’ve defined for engaging Gen Y: 1) Immediacy, 2) Gen Y literacy, 3) Individualism, and 4) Social Interactivity.
  • There’s a mobile component. While this wouldn’t make sense for many banking applications based on overall mobile usage, it’s almost a requirement if you want to target Gen Y; many of whom view their cell phone as their primary digital device.
  • The approach starts with customer needs. While this is not novel for projects that involve IDEO, many companies aren’t diligent enough in starting with a solid process for uncovering the true needs of specific customer segments. By understanding Gen Y behaviors, the bank can actually charge fees for anything more than 3 checks per month.

The bottom line: Gen Y will be getting a lot more attention from banks.

IDEO’S CEO Discusses Innovation

Tim Brown, CEO of IDEO, was recently interviewed in the The McKinsey Quarterly. IDEO is the gold standard in providing design solutions and creating brealthrough innovations for companies. So it was great to hear what Brown has to say about innovation. In many ways, Brown reinforces the new management imperative that I call “Turn Innovation Into A Continuous Process.”

Here are some quotes from Brown that I found to be particularly interesting:

If you don’t have a process for choosing projects, starting projects, doing projects, and ending projects, you will never get very good at innovation.

My take: Formalized processes provide innovation with the appropriate visibility, funding, and allotment of time and attention.

You really notice a difference in organizations where the senior leadership immerses itself in innovation… by, for example, playing an active role in reviewing the innovation that’s going on at various levels in the organization in order to give people permission to take risks.

My take: Most ideas don’t work out; if you want to cultivate great ideas, you need to embrace some failures.

The antibodies that organizations naturally have to fight new ideas win out. It’s often the role of senior leadership to defend new ideas until they’re actually out in the marketplace…

My take: It’s easy for people to keep doing what they’ve always been doing, so there’s often a strong constituency for the status-quo.

The biggest barrier is needing to know the answer before you get started… Wanting to know whether you’ve got the right idea—or the assumption that you’ve got to have a business case—before beginning to explore something kills a lot of innovation.

My take: Early stage ideas often need to be cultivated until they’re understood enough to develop a realistic business plan.

It’s better to have a bigger ecosystem for innovation than a smaller one. You’re going to get more ideas and increase the likelihood of better ideas. The more people, all other things being equal, the better for innovation.

My take: Innovation can’t just “live” in an R&D organization.

In the end, all businesses exist to serve some kind of human purpose. If you can’t somehow frame what you do in terms of having an impact on the world, I don’t see how you can have a very effective business… People want to work on things they believe in.

My take: A key theme in my discussions about leadership is that executives need to create a strong sense of purpose. That’s why one of my 6 New Management Imperatives is to “Provide a clear and compelling purpose.”

The bottom line: Innovation takes strong leadership

Recession Strategies From IDEO And Potatoes

I ran across an interesting article on the IDEO Website called Reframing Recession: Lessons from the potato (.pdf). The article discusses how potatoes became a popular food item in the 1790’s amidst the turmoil of a devastating grain market and repeated crop failures. The potato’s rise to the family table was driven by consumers’ innovation in trying to fill an overarching goal — feeding their families.

The article does a nice job of using this story to frame the reality of poor economic times: There’s still opportunities for growth. Here’s a very interesting observation from the article:

When the economy is down, people look to different product categories to solve persistent needs, making trade-offs that reflect both conscious and unconscious decisions. In the last recession we called this “The Lipstick Effect” – as budgets tightened, women still sought out ways to address their need to flaunt a little and sales of cosmetics went up. Just as in 2002, Estée Lauder’s makeup sales have recently felt an uptick – 11% in the third quarter of 2007.

The article ends up by making the following five recommendations:

  1. Hang out with your customers. Since customers will be looking to fill their needs in  different, cheaper ways, you need to spend time understanding their core needs. This is pretty much the 1st principle of Experience-Based Differentiation: Obsess about customer needs, not product features.
  2. Watch out for a new breed of unlikely competitors. Just like the potato replaced grain in the 1790s, consumers may turn to new categories of products as substitutes for your offerings.
  3. Be inspired by extreme value. Look for models to copy, across any industry, where people are getting more value for less.
  4. Go elephant hunting with a slingshot. Go find opportunities where you can provide a cheaper, simpler solution to replace expensive, complex ones. I like this one a lot. As a matter of fact it’s very close to one of the five disruptive customer experience strategies that I’ve called Ultrasimplicity.
  5. Don’t be afraid to prototype. Get some changes out in the field and be willing to learn, even through small-scale failures. The article provides this good advice: “Tougher times are exactly when you should give those managers who are closest to your customers the freedom to act on their insight and to experiment.” In the post Keep Customer Experience Momentum In A Recession, I also discuss the importance of innovation in a downturn.

The bottom line: Don’t react to a recession by clamping down on innovation.

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