Посты с тэгом: corporate innovation method

Innovating to Drive Customer Lifetime Value

Published date: June 27, 2016 в 6:05 pm

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Imagine a hypothetical scenario where you’re forced to make a choice between innovating for Customer A or Customer B. Which one would you choose?
Well, it depends on how much they buy from you. If Customer A spends more money on your products than Customer B, you’d select that one. But wait a minute. What if Customer A costs you more in terms of selling and customer service. She may spend more, but you actually earn less on her than on the other customer. So then, you would switch because the net profit is higher.
But hold on. There’s one more factor you have to consider. You make less profit on Customer A, but what if you expect to retain her for a longer period of time than you retain Customer B? You make more profit on one sale from him, but if you can continue selling to this lady for the next ten years, then you’ll do much better.
The way you make this type of decision in reality is with a tool called Customer Lifetime Value, or CLV for short. CLV is a formula that helps an innovation manager arrive at the dollar value associated with the long-term relationship with any given customer. It tells you just how much a customer relationship is worth over a period of time.
There are various formulas to calculate CLV, and some are more complex than others. The simplest way to estimate lifetime value for a typical customer is the following equation:
(unit selling price – variable costs) X (number of repeat purchases per year) X (average retention time in years)
Let’s do an example. Imagine you’re selling men’s wallets. Your wallet sells for $89 and it costs you $29 to make a sell it. The typical customer buys a new wallet every three years, and you expect to retain him for an average of 20 years. The CLV formula gives us:
($89-$29) X (.333) X (20 years) = $400
So what? Well, calculating the CLV helps in several ways. First, it tells us that we wouldn’t want to spend more than $400 acquiring and retaining any one customer. Spending more than that and we start losing money. It also helps you decide which customers are more valuable to acquire and retain, like our example earlier.
CLV encourages innovators to focus on the long-term value of customers instead of investing resources in customers of lower value. And it makes you sensitive to how much you’re spending on acquiring and retaining customers and whether it’s effective.

Too Much of a Good Thing

Published date: February 25, 2013 в 3:00 am

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Can you innovate too much? After all, new ideas fuel organic growth.  One would think an organization would be happy to have as many ideas as possible.

But not always.  Here are scenarios where over-innovating might be considered too much of a good thing.

1.  When you are over-positioned:  Too many good ideas could lead you to an extreme position in the market where you stop earning at the middle and bottom ends of the market. Most companies crave the premium end of the market, but overdoing it can backfire.

Example: Cincinnati Children’s Hospital Medical Center has done such a great job at innovating in its domain that it’s considered in the top three U.S. children’s hospitals.  Therein lies the problem.  The local market may see Cincinnati’s Children’s as so advanced and innovative that parents are reluctant to take their kids there for routine health issues – bumps, bruises, fevers, and so on.  It becomes the place to go only when their child is sick with a deadly disease – cancer and the like. Fortunately, the hospital recognized the risk and took measures to stay competitive for routine visitations.

2.  When you are under capacity: Generating new ideas puts pressure on an organization.  New ideas must be evaluated, filtered, and developed.  This takes time and resources.  People are distracted from their regular day jobs and they feel overwhelmed. Too many ideas may exceed the organization’s capacity to make sense of it all. Idea fatigue sets in

Example:  A major player in aerospace wanted to create a new digital app solution for its customers.  The app was intended to retrieve sensor data from aircraft components and relay it into a useful smartphone application.  The team slowed to a near halt.  It had collected several hundred ideas from many different sources and consolidated them into a massive database.  The team couldn’t possible manage the abundance of ideas and it was unable to move forward.

Marketing Innovation: The Metaphor Tool Using the Division Pattern

Published date: February 11, 2013 в 3:00 am

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The Metaphor is the most commonly used tool in marketing communications because it is a great way to attach meaning to a newly-launched product or brand. The Metaphor Tool takes a well-recognized and accepted cultural symbol and manipulates it to connect to the product, brand, or message.

The tool is one of eight patterns embedded in most innovative commercials.  Jacob Goldenberg and his colleagues describe these simple, well-defined design structures in their book, "Cracking the Ad Code," and provide a step-by-step approach to using them.  The tools are:

   1. Unification
   2. Activation
   3. Metaphor
   4. Subtraction
   5. Extreme Consequence
   6. Absurd Alternative
   7. Inversion
   8. Extreme Effort

The trick is to attach a metaphor in a non-obvious, clever way.  The process is called fusion, and there are three versions:  Metaphor fused to Product/Brand, Metaphor fused to Message, and Metaphor fused to both the Product/Brand and Message.  Here is an example metaphor fused to the message:

What's clever about this commercial is
its use of the Division pattern, one of five that form the basis of the
product innovation method, Systematic Inventive Thinking. 
Division works by taking the product and/or one of its components and
dividing it physically, functionally, or in a way we call 'preserving'
where each portion maintains the characteristics of the whole.  By
dividing the news about her affair with her husband's best friend into
one word at a time, the wife softened the impact.  Banco Continental uses
this little story as a metaphor for breaking loan payments into smaller, more
manageable amounts.

To use the Metaphor Tool, start by
defining the message. Then create a list of symbols (objects, images, or
concepts) that are directly related to the message (a metaphor). Next
make a list of the product's components or components near the product
(Closed World). Finally, choose a symbol and a component and fuse them
together. Create various combinations of metaphoric symbols and
components to find candidates that have that element of surprise or
cleverness.

Innovation Sighting: Apple’s Smart Shoe

Published date: January 28, 2013 в 3:00 am

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A tell-tale sign of the Attribute Dependency Technique is the word “smart” in any product description. Apple’s new patent for ‘smart shoes’ is a case in point.  As reported by PSFK:

Apple has patented ‘smart shoes’ that would come with embedded sensors
to track your activity and tell you when you needed a new pair. Instead
of wearing an additional sensor, people would just have to wear the
shoes, where the technology would be less visible and be a more seamless
part of your lifestyle than an external tracker.

Apple’s shoe wear-out sensor would either feature as a thin built-in
layer or be located in the heel. It would include a processor configured
to measure the use of the shoes and determine whether they were worn
out, and an alarm that informed the wearer when they were no longer
providing adequate protection for their feet.

As first reported by AppleInsider, the patent described three main
components: a detector for sensing how worn-out the shoe becomes, a
processor to measure the shoe’s use, and an alarm to inform the owner
when the shoe’s time is up. The chosen sensor could be anything from an
accelerometer or pressure sensor to a pedometer or piezoelectric flexing
sensor.

Attribute Dependency is one of five techniques of the corporate innovation method called SIT (Systematic Inventive Thinking).  It differs from the other techniques in that it uses attributes (variables) of the situation rather than components. Start with an attribute list, then construct a matrix of these, pairing each against the others. Each cell represents a potential dependency (or potential break in an existing dependency) that forms a Virtual Product. Using Function Follows Form, we work backwards and envision a potential benefit or problem that this hypothetical solution solves.

This isn’t Apple’s first (or last) use of this powerful technique.  Apple earned a patent described as an “apparatus and methods for enforcement of policies upon a wireless device.”   It reveals a way to change aspects of a mobile device based on certain events or surroundings.  Given this pattern of using Attribute Dependency, it would appear Apple makes regular use of this technique and perhaps the full suite of SIT tools.

Innovation in Practice: Five Year Anniversary

Published date: December 21, 2012 в 8:46 am

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This month marks the five year anniversary for Innovation in Practice,
and I want to thank my readers and supporters who follow it.  Blogging is rewarding, but challenging.  Most bloggers quit within two years for a variety of reasons: lack of motivation, lack of strategy, no one is reading, nothing to write about, or not enough time.  Fortunately, I have yet to be hit by any of these except perhaps the last one – time constraints – which will never go away.

My goal is to make this blog different from other innovation blogs and websites.  Instead of focusing on why innovation is important, I focus on how innovation happens.  My sense is corporate leaders realize already the importance of innovation, but they struggle with how to put it motion.  Calling a consultant is not the answer.  Learning the skill of innovation to be self sufficient is the answer.

The themes of this blog are:

  • Innovation can be learned like any other skill such as marketing, leadership, or playing the guitar.  To be an innovator, learn a method.  Teach it to others.
  • Innovation must be linked to strategy.  Innovation for innovation’s sake
    doesn’t matter.  Innovation that is guided by strategy or helps guide
    strategy yields the most opportunity for corporate growth.
  • Innovation is a two-way phenomena.  We can start with a problem and innovate solutions.  Or we can generate hypothetical solutions and explore problems that they solve.  To be a great innovator, you need to be a two-way innovator.
  • The corporate perspective, where innovation is practiced day-to-day, is what must be understood and kept at the center of attention.  This is where truth is separated from hype.

2012 was a special year for me.  My co-author, Jacob Goldenberg, and I completed our first book together (Simon & Schuster, June 2013), and we have two more in progress.  I am more engaged in innovation research and technology at the University of Cincinnati, and I continue to teach the SIT method there.  I am fortunate to continue working with various multi-nationals on their innovation programs.

2013 will be a year of change.  I plan to take this blog to the next level with a number of initiatives.  I plan to offer more resources for readers so they can learn the SIT method.  I hope to have resources for teachers and professors who want to include the SIT method in their creativity courses.  I plan to highlight and recognize the practitioners who put SIT to work in their organizations.

I want to thank Jacob Goldenberg, Amnon Levav, Yoni Stern, and the entire team at S.I.T..  Also, Christie Nordhielm and Marta Dapena-Baron at Big Picture Partners, Bob Cialdini at Influence at Work, Yury Boshyk at Global Executive Learning Network, the Washington Speakers Bureau, and my fellow faculty at the UC Lindner College of Business.

A special thanks to my family.

Innovation Sighting: Music That Morphs Using Attribute Dependency

Published date: November 26, 2012 в 8:33 am

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The Attribute Dependency Technique tends to produce innovations that are smart.  They seemingly know when to adjust or change in response to a change in something else.  It is one of five techniques of the SIT innovation method, and it accounts for a majority of new product innovations.  Attribute Dependency differs from the other techniques in that it uses attributes (variables) of the situation rather than components. Start with an attribute list, then construct a matrix of these, pairing each against the others. Each cell represents a potential dependency (or potential break in an existing dependency) that forms a Virtual Product. Using Function Follows Form, we work backwards and envision a potential benefit or problem that this hypothetical solution solves.

Consider this unique example of Attribute Dependency: music that changes in relation to another variable.  As reported by Springwise:

Since the advent of digital music we’ve seen a number of artists trying to offer something different to their fans.  UK musician Gwilym Gold’s Tender Metal is a downloadable piece that mutates each time the listener plays it.  The album is being released solely for the iPhone, iPad and iPod Touch.  When using the app, the components of the tracks of Tender Metal are seamlessly and subtly reconfigured each time they are played, meaning that each listening experience is different from the last. Users can choose to loop tracks in order to hear it constantly shift, or shake the phone to ‘regenerate’ the piece from its current permutation.  The innovation allows for endless reinterpretations of the music without it being performed live, ultimately offering a more immersive experience for fans.

Smartphones and tablets have become an important platform for these types of innovations because of their ability to track two important variables: location and time.  For example, the musical band, Bluebrain, created an album called National Mall that responds to the listener’s location as they journey down the Mall in Washington DC. “As users approach tagged locations, the audio content of the album will alter to interact with the environment, thus creating a unique listening experience every time the album is played en-route.”  According to Springwise:

For Bluebrain, this album is simply the start, with plans to release similar location-aware works for Prospect Park in Brooklyn, New York in the summer, followed by an album to be experienced whilst journeying along California’s Highway 1. Location-based technology is increasingly incorporated into products and services far and wide. If you haven’t already, this is one to try for yourself!

The combinations of time-based or location-based linkages to a smartphone are endless.  To get you started creating your own versions of these innovations, following the instructions located here.

Photo from http://www.lucreid.com

Rebooting Your Innovation Effort

Published date: September 24, 2012 в 3:00 am

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Imagine you just completed an innovation program, but things went terribly wrong.  So wrong, in fact, that the boss won’t allow anyone to use the term “innovation” in any context. You and your colleagues spent a lot of time, money, and effort only to realize that you did not get what was promised. What do you now?  How do you reboot your innovation program?

Here are some tips:

1.  Conduct a Post Mortem:  Despite the pain, you should thoroughly examine the “dead body” to understand what happened.  How did we get here?  What stimulated the initiative?  What were our assumptions going in?  What changed?  How did we identify potential consultants to work with?  How did we vett them?  How did we select one to work with?  Did we have the right team in place?  Were we using the right method?

2.  Take Stock in the Positives:  No effort is a total waste no matter how miserable.  You should take the time to identify the positives.  What did we gain out of the effort?  What did we learn?  What were we hoping to gain and didn’t?  Is that gap still relevant?  What did we take away that we can leverage?  Did we get anything that can be leveraged in another part of the company?

3.  Refresh the Palate:  Members of your team paid dearly to be a part of their program.  They suffered the opportunity cost of being away from their work.  In return, give them a rest.  Let them recharge and catch up. People need to flush the bad experience out of their system before considering the next one.

4.  Create the Burning Platform: What is happening in your business over the next 12 to 18 months?  Is it growing?  Contracting?  What changes do you anticipate in your competitive position?  No industry is completely calm and stable, though some are more turbulent than others.  You need to spot an inflection point in your business where technology, regulatory or other forces are looming.  Then, you need to sound the alarm, create the burning platform, and gain alignment from your leaders to anticipate the problem with a new innovation initiative.

5.  Propose a Pilot Program:  Reduce the risk of a new innovation program by testing it first. A short, pilot program that addresses a specific product or service line helps you understand whether a new method is right for your company.  Pilot programs help keep your costs in line, and they help you reduce resistance to adopting new methods.

6.  Syndicate!:  Initiate the next program with the support of other departments.  Enroll other divisions to share the risks…and rewards…from the pilot.  Ask peers to chip in part of the expense, even if it is a small amount.  By “syndicating” support of the pilot program, you broaden the exposure to a successful outcome.

7.  Emphasize Skill Building: To stay competitive, companies must include innovation in their competency models. A competency is a persistent pattern of behavior resulting from a cluster of knowledge, skills, abilities, and motivations.  Competency models formalize that behavior and make it persistent.  Use the pilot program as an opportunity to partner with your Human Resources colleagues to create an innovation competency model.

8.  Create Lasting Support Systems:  Not only must you reboot the innovation culture at your company,  you must also create the support systems to make it stick.  Can we continue to use a method without  consultants going forward?  Are there training aids and tools to help teach others?  Can the pilot program be extended to a general training program?  What is the retention rate one month out?  Six months out?  How many people could be trained within your current budget cycle?  How do you continue to build innovation muscle?

Cartoon courtesy of Doug Savage at www.savagechickens.com

Innovation Sighting: S.I.T. Patterns in Refrigerators

Published date: August 13, 2012 в 3:00 am

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This month’s Innovation Sighting comes to us from Dr. Steven Palter.  Dr. Palter is a  gynecologic fertility specialist and a true innovator in the medical field.  He learned the S.I.T. method recently, so he knows how to spot the five innovation patterns of S.I.T. in everyday products and services.

This one is a new refrigerator launched by LG at the 2012 Consumer Electronics Show in Las Vegas.  It is the LGLFX31945ST French Door Refrigerator with Door-in-Door.  The new Door-in-Door is a classic example of the Multiplication Technique.  To use Multiplication, make a list of the components of the product, select a component and copy it, then change the copied component along some variable such as size, location, or other attribute.  Once you create this Virtual Product, try to identify new benefits or markets served by this configuration.

In this example, the door was copied then changed to be located just inside the existing one.  It creates a whole new area for storing food.  This increases the storage capacity of the refrigerator without increasing the overall exterior size.  Take a look:

LG didn’t stop there. They also launched a new innovation in refrigerators called the LG Blast Chiller. It allows you to vary the temperature delivered to an item depending on the type of food or beverage. Does that pattern sound familiar?  If you have studied the S.I.T. method, you would recognize the Attribute Dependency pattern. Take a look:

Very cool! I like using refrigerators in my S.I.T. training sessions because there are so many ways to apply the five techniques to yield new-to-the-world innovations.  Most people find it surprising that you can innovate a concept that dates back the ancient Egyptians.

The LAB: Innovating Toilet Paper with Attribute Dependency (July 2012)

Published date: July 30, 2012 в 9:18 am

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Lab_2
When Joseph Gayetty invented commercially available toilet paper in 1857, he called it “The greatest necessity of the age!”  Of course, he wasn’t exaggerating.  The use of paper for toileting dates back to the 6th century AD.  Gayetty’s Medicated Paper was sold in packages of flat sheets, watermarked with the inventor’s name. Since then, many companies have tried to innovate this product.  Many innovations are simple gag gifts while others are quite useful.

For this month’s LAB, let’s apply the corporate innovation method, S.I.T., to create new concepts for toilet paper.  S.I.T. is a collection of thinking tools, principles, facilitation methods, and organizational structures to help companies innovate products, processes, and services.  We will use the Attribute Dependency Technique, one of five in S.I.T..

Attribute Dependency differs from the templates in that it uses attributes (variables) of the situation rather than components.  Start with an attribute list, then construct a matrix of these, pairing each against the others.  Each cell represents a potential dependency (or potential break in an existing dependency) that forms a Virtual Product.  Using Function Follows Form, we work backwards and envision a potential benefit or problem that this hypothetical solution solves.

We start with a list of attributes: internal (those related to the product) and external (those related to the environment immediately around the product – not within the manufacturer’s control).

Internal:

  1. number of plys
  2. coarseness of ply
  3. shape of ply
  4. size of ply
  5. number sheets per roll
  6. color
  7. temperature
  8. moisture content

External:

  1. age of user
  2. medical condition of user
  3. mood of user
  4. frequency of user

Here are some concepts that might emerge from these attributes.

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