Much has been said about the declining state of innovation in the United States. \u00a0\u00a0Despite increases in fundamental research and increased PhD degrees awarded, total factor productivity growth has not nearly kept pace[1].\u00a0 The causes are usually attributed to funding trends and changes in corporate R&D spending or how corporate R&D interfaces with academic research.\u00a0\u00a0 This may all be true.\u00a0 But my thesis goes to another cause not commonly identified.\u00a0 The reason why innovation is on the decline in this country is a result of how we source and curate the problems we solve with technology and R&D.<\/p>\n\n\n\n
The old industrial model of R&D\ninvolves big price tag spending towards R&D departments, staffing them with\nspecialized engineers, building high tech facilities, and buying high tech\nequipment. There have been extraordinary\nsuccesses to this approach. The tales of\nbastions of R&D such as Bell Laboratories are legendary for their\ninventions such as the transistor and the laser. <\/p>\n\n\n\n
However, we are moving into a new era where this old model is becoming less sustainable.\u00a0 As described in the book Frugal Innovation<\/em>,[2] there are several reasons for this:\u00a0 expense, resource constraints, and competition.\u00a0 One is that R&D is becoming very expensive as highly specialized equipment and engineering skill sets command greater and greater levels of investment.\u00a0\u00a0 At the same time, R&D spending is decreasing overall, budgets are getting squeezed, and executives are worried about meeting their goals.\u00a0 Second is constrained resources other than simply funds.\u00a0 Big industrial era R&D projects can lock in high demand engineers for years at a time on projects that may be high potential but also high risk.\u00a0 Big budgets also enable unexamined supply chains and materials selections. \u00a0In an age where natural resources (especially metals) are becoming harder to source and even harder to recycle, this can drive environmental impact up along with cost and supply chain risk.\u00a0 Finally, competition and the proliferation of alternatives has ramped up.\u00a0 As a friend of mine put it: \u2018when I was a kid, there was one type of ketchup. Now there are ten that I have to choose from\u2019.\u00a0 The traditional industrial R&D model equates number of features and complexity with greater value.\u00a0 However, that does not necessarily translate into better value for the customer. It is important to note that, especially for products that are new in class or category instead of iterative, oftentimes there may be less competition from other brands but more from alternatives.\u00a0 <\/p>\n\n\n\n The traditional approach to tech product\ndevelopment and R&D is to build something the company thinks is close\nenough to what the customer wants, launching it in the marketplace, and then\npushing out marketing messaging and whitepapers to convince potential customers\nof the benefits. This approach is\nrooted in the belief that customers do not know what they want (which is true\nin a way, but more on that later), and they have to be \u2018educated\u2019 about the\nsolution to their problem. This means generating\nmarketing communications that promote brand recognition, advertising the\nbenefits of a particular product (according to the company), and the belief\nthat increased marketing communications translates to more sales. <\/p>\n\n\n\n This is called \u2018push\u2019 product\ndevelopment. The focus of the\ndevelopment starts with beliefs and ideas formulated inside the company. There may be some engagement with customers\nbut this is done at arm\u2019s length or without true root cause analysis (as\ndescribed below). The \u2018push\u2019 product\ndevelopment can work fine when addressing a market and customers that the\ncompany understands well, has served in the past, and the offering is iterative\nrelative to past offerings. However, the\nmore disruptive a technology (i.e. innovative) or the newer the market\nsubsegment, the smaller the chance that this approach will result in good\nresonance with customers. <\/p>\n\n\n\n But innovation is not about the technology,\nit is about finding and curating the right customer problem to solve, also\nknown as the front end of the innovation process. Those carefully selected and well researched\nproblems will not fall into your lap. Instead,\nproduct development needs to reconfigure its thinking to a \u2018pull\u2019 model. This puts the onus on product engineers and\nmanagers and their companies to \u2018pull\u2019 customer insights from the target market\nsubsegment. This means engaging with\ncustomers to learn and understand what their driving issues are and fusing\nthose insights and focus as early as possible into the product development\nprocess. <\/p>\n\n\n\n All companies will aver that they do engage\nwith their customers. All the time. That is the full-time job of the sales and\nbusiness development people, right? That\nis why we hire them. <\/p>\n\n\n\n Yes, but we must go much further with our\nengagement. The usual business development\nactivities start with some market research. \nThis comes from secondary sources and is great for identifying macro\nfeatures, such as market size, technology trends, and market players. This type of information moves the company\nfrom the 30,000 foot level of understanding the customer landscape to the\n15,000 foot level. At this level you can\npush your solutions out, you can market test some solutions, and you can very\nlikely sell a few. But will you know why\nthey bought? Will you know what problem\nyou are solving? Do you have any reason\nto expect more sales?<\/p>\n\n\n\n There are still many questions to research\nbefore you can answer these \u2018why\u2019 questions, and these \u2018why\u2019 questions are the\n\u2018money\u2019 questions. But you cannot do it\nfrom 15,000 feet. You simply cannot get\nenough specifics, and the true insights come from the specifics. It is the way to understand your market\nenough to sub-segment, and the power comes from that sub-segment\ndefinition. Furthermore, the customer\ndefinitely is not going to fly up and meet you at 15,000 feet, not in the\nnumbers you need to close a business model. \nThe customers already have solutions or alternatives to solving the\nproblem that they live with right now. \nNot ideal or efficient, but they exist. \n<\/p>\n\n\n\n To do the work to uncover true customer insights, you must come down from 15,000 feet and land your plane.\u00a0 Pick a spot and start your exploration of customer problems. \u00a0\u00a0As Steve Blank famously says[3] \u2018the answers are never inside the office\u2019, one must get outside the building and go and engage with customers directly.\u00a0 Lots of them.\u00a0 Find out what gets them worked up and what makes them barely raise an eyebrow.\u00a0 Don\u2019t talk.\u00a0 Listen and observe.\u00a0\u00a0 Meet not just with the CTO or CEO of a company, but talk to those who experience the problem first-hand.\u00a0 The more first-hand you can get the better.\u00a0\u00a0 Why?\u00a0 Because to answer the \u2018money\u2019 questions (the \u2018why\u2019 questions), you must get at the root cause of the problem.\u00a0 <\/p>\n\n\n\n There is a concept in science and\nengineering called \u2018root cause\u2019. It\nbasically means that if there is a problem you are trying to figure out, you\nwant to research and understand the source of the problem. The source of the problem explains\n\u2018why\u2019. Without knowing this, the best\nyou can do is address a symptom of the problem and your \u2018solution\u2019 is just a\nband-aid. <\/p>\n\n\n\n Customers are notorious for not knowing\nwhat they want. The famous quote by\nHenry Ford is that if he had asked the customer what they wanted, they would\nhave said a faster horse. Customers do not know what to ask for when trying to\nsolve their problem because they do not know what is possible. They do not know the solution space. <\/p>\n\n\n\n What they do know a whole lot about is\ntheir problem. They know what the\nproblem looks like, how often it pops up, in what setting, who it affects, who\nit does not affect, what the ramifications are and the magnitude of those\nramifications. They know how acute that\nproblem is, how disruptive it is, and what gymnastics people do now to try and\nsolve the problem, or at least avoid it. \nThey know all of this qualitatively, and more importantly,\nquantitatively. They know the number of\ntimes a day a problem surfaces, how much money it costs them to address it, how\nmany man-hours it takes to address the problem. \n<\/p>\n\n\n\n This is a level of engagement that usually\nfalls outside the purview of the traditional sales and Business Development\nfolks. And more traditional marketing\nactivities such as pushing out communications or messaging, or even market\ntesting the solution set do not further the understanding of the root cause of\nthe customer problem. But why do we want to do this work at all? Because the most innovative products that\ndeliver the most value to the customer maximize their signal to noise. <\/p>\n\n\n\n In engineering, there is a concept called Signal-to-Noise\nratio. Signal is desirable, and noise\nis not. You can get an idea of how this\nworks when tuning your car radio to find your favorite station. If you can dial in to the peak of the station\nsignal, the desired music comes in crisp and clear. If there is any noise or\nstatic, it is at a low enough level you do not notice. However, if you dial off the peak by a bit,\nyou may still be able to pick out the songs on the station (signal), but there remains\na lot of static or sounds from neighboring stations you don\u2019t want (noise). When you are not on the peak and instead are somewhat\noff to the side, the noise gets distracting or intolerable and you may decide\nit isn\u2019t worth it and turn the radio off. \n<\/p>\n\n\n\n Frugal product design comes from finding\nthe maximum signal with the minimum noise. \nThat will keep the customer tuned in and coming back again and again\neach time they turn on their radio. As\nstated above, you cannot sort out signal from noise from the 15,000 ft\nlevel. You must land your plane and\nexplore. Starting with first-hand interviews with customers is the way to find\nthe signal (passionate emotion while describing the issue) from the noise\n(barely the eyebrow lifting, or even complete indifference). <\/p>\n\n\n\n Figuring out what is a clear signal and what is distracting noise may sound like a mysterious art, but it is not.\u00a0 It is not \u2018founder intuition\u2019. It is not guesswork.\u00a0 It is a science rooted in robust, well-developed methods and tools currently available that can guide us through steps to validate our assumptions with customers.\u00a0 With a relatively small investment in time, these methods can give us reasonable indications of what will resonate and what will not, both in understanding the problem and obtaining feedback on potential solutions.\u00a0 All before product launch.\u00a0 The further upstream we engage the customer with new technology, the more likely it is we get it right at launch time[4]<\/a>.\u00a0 <\/p>\n\n\n\n For example, Steve Blank is famous for launching the Lean Startup Revolution and the step-by-step customer discovery process co-authored with Bob Dorf in the Startup Owner\u2019s Manual[5].\u00a0 This is a process that involves extensive customer engagement to first uncover unmet needs and problems, then to get feedback on potential solutions, and finally to validate the economics around the solution and determine its business viability. Although his customer discovery process is tailored for a startup company, the customer engagement he lays out is more overarching than that.\u00a0 It is fundamental and applicable to any sized company searching for new product ideas in new markets.\u00a0 <\/p>\n\n\n\n The minimization of noise and the\nsimultaneous maximization of desired signal is a frugality of innovation and\nimparts a beautiful simplicity on a product offering. But there are important benefits that transcend\nthe aesthetic. <\/p>\n\n\n\n From a cost of goods sold standpoint,\nminimizing noise means fewer features and less complexity. This in turn means less time to develop which\ndecreases R&D costs and manufacturing costs. It also makes maintenance easier and less\ncostly. Simpler, good enough designs\nmean you are faster to market and impacts can be felt at a more rapid pace. When savings are passed along to the customer\nin the form of a lower price point, accessibility to impactful technology goes\nup. <\/p>\n\n\n\n Maximum signal with minimum noise means a\ngreater resonance with the customer. \nAdoption of the product increases because usage goes up, and a happy\ncustomer becomes a greater promoter of the product, which has a chain\neffect. This level of adoption is\ndifficult to achieve, but it is crucial especially for new and disruptive\ntechnologies. <\/p>\n\n\n\n In a bigger picture, however, the capability\nto understand problems at the root cause level, engage with customers, and map\na technology to the problem to produce a great product is the definition of\ninnovation. The ability to deliver high signal-to-noise\ninnovation to market in reasonable time scales and reasonable cost points is\nthe way the country regains its innovation prowess and stays ahead of the\ncompetition. [1] Arora, A., Belenzon, S., Patacconi, A. and Suh, J., 2019. Why the US innovation ecosystem is slowing down.\u00a0Harvard Business Review<\/em>.<\/p>\n\n\n\n [2] Radjou, N., & Prabhu, J. C. (2016).\u00a0Frugal innovation: How to do more with less<\/em>. London: Profile Books.<\/p>\n\n\n\n [3] Blank, S. G., & Dorf, B. (2020).\u00a0The startup owner’s manual: The step-by-step guide for building a great company<\/em>. Hoboken, NJ: John Wiley & Sons.<\/p>\n\n\n\n [4] Yohn, D.L. (2019). Marketing matters now more than ever.\u00a0Forbes<\/em>.<\/p>\n\n\n\n [5] Blank, S. G., & Dorf, B. (2020).\u00a0The startup owner’s manual: The step-by-step guide for building a great company<\/em>. Hoboken, NJ: John Wiley & Sons.<\/p>\n","protected":false},"excerpt":{"rendered":" Much has been said about the declining state of innovation in the United States. \u00a0\u00a0Despite increases in fundamental research and increased PhD degrees awarded, total factor productivity growth has not nearly kept pace[1].\u00a0 The causes are usually attributed to funding trends and changes in corporate R&D spending or how corporate R&D interfaces with academic research.\u00a0\u00a0 […]<\/p>\n","protected":false},"author":1,"featured_media":898,"comment_status":"open","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[115],"tags":[],"class_list":["post-878","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-innovation-models","entry"],"_links":{"self":[{"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=\/wp\/v2\/posts\/878"}],"collection":[{"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=878"}],"version-history":[{"count":18,"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=\/wp\/v2\/posts\/878\/revisions"}],"predecessor-version":[{"id":929,"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=\/wp\/v2\/posts\/878\/revisions\/929"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=\/wp\/v2\/media\/898"}],"wp:attachment":[{"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=878"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=878"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stage.ignitingthought.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=878"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Push Versus Pull<\/h2>\n\n\n\n
The 15,000 Foot Customer Approach <\/h2>\n\n\n\n
Root Cause Analysis<\/h2>\n\n\n\n
Signal-to-Noise<\/h2>\n\n\n\n
High Signal-to-Noise Innovation<\/h2>\n\n\n\n
<\/p>\n\n\n\n
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