Three Strategies for Expanding a Service

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Although it is discussed less frequently, services are subject to the same laws of competition and commoditization as manufactured products. They therefore equally need innovation in order to maintain competitiveness and support growth. One additional goal of service innovation which is less prominent for manufactured products is to increase customer loyalty and to intensify customer relationships.

Three useful strategies for innovating an existing service are to increase its Breadth, Quality or Depth.

Breadth

  • Meaning: Increase the scope of the service to include new offers. This could mean bidding for a service that the customer currently buys elsewhere or taking over a process that the customer currently carries out themselves.
  • Questions: What are our customer’s secondary processes? What are our customer’s needs before, during or after our service?
  • Example: A Logistics company adds storage and insurance to their basic service of transporting goods.

Quality

  • Meaning: Increase the value of the existing service by improving the attributes of the service that are critical for the customer. These could, for example, be reliability, speed or flexibility.
  • Questions: What attributes of our service are most important to our customer? How can we improve these attributes in a way that adds value for our customer?
  • Example: A Logistics company introduces guaranteed overnight deliveries or online tracking of a package.

Depth

  • Meaning: Extend the service downstream in the value chain. This means taking over an activity that the customer currently executes themselves. This activity is typically viewed by the customer as having to be in-house, but in fact does not constitute one of their core competencies.
  • Questions: How does our customer use our service as part of their own offer? What are our customer’s core competencies? How could we extend our service to take over activities in its value chain thus allowing our customer to concentrate on their core competencies?
  • Example: A Logistics company provides a complete fulfilment service for proprietors of online stores, including storing of goods, order fulfilment and handling returns and enquires.

As always, the success of these approaches in an innovation workshop is execution-dependent; the choice and formulation of the questions used determine the ease and effectiveness of the idea generation.

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Post Scriptum

Our blog Impulse für Innovation is generally written in the German language. We do this for the benefit of our clients, partners and local media. However, on occasions, we will write a piece in English for the benefit of an international audience.

Unseren Kunden, Partnern und den lokalen Medien zuliebe enthält unser Blog Impulse für Innovation normalerweise deutschsprachige Beiträge. Allerdings schreiben wir gelegentlich auch auf englisch, um auch ein internationales Publikum zu erreichen.

10 Rules for Idea Evaluation

The evaluation of ideas is the final phase of the front end of innovation. The ideas that emerge from this phase turn into development projects and ultimately may become new products or services.

As part of our Idea Engineering research we are developing rules for the design of the idea evaluation phase. Here is a „Top 10“ list compiled from our experience.

  1. Start with clearly presented, concrete innovation goals. Many evaluation errors and tedious discussions stem from the lack of clearly stated goals. Are you looking for incremental, radical, platform, process, business model or new market innovations?
  2. Divide the process into phases. Idea Evaluation needs a stage-gate-type process in order to be efficient. Simple ideas may only need two phases, complex ideas will need up to four.
  3. Idea Evaluation consists of three tasks: Refinement, Evaluation and Selection. Refinement means adding information and comments to ideas in order to make them better understandable and evaluable (see Rule #5). Evaluation means assigning a judgement to an idea. This might vary from a simple „yes/no/maybe“ to a comprehensive system of scores. Selection means keeping some ideas and removing others from the process.
  4. Formulate refinement questions and evaluation criteria that serve the innovation goal. Every item of work that is invested in an idea should be geared towards answering the question „Will this idea help us meet our innovation goals?“ Too often, superficial criteria (such the PMI method) are used. This Rule presupposes that Rule #1 has been implemented.
  5. Selection must always be preceded by Evaluation and Evaluation must always be preceded by Refinement. It is inadvisable to remove or promote an idea without having first assigned some estimate of value to it, and it is dangerous to evaluate an idea before it has been described sufficiently thoroughly.
  6. Never process an idea expensively that could have been eliminated cheaply. This follows from the need for efficiency.
  7. The amount of time spent on an idea should be inversely proportional to the number of ideas under consideration. This also follows fairly obviously from the need for efficiency.
  8. Never compare apples and oranges. Different types of idea (in particular ideas that serve different goals, see Rule #1) must be treated differently. They are subject to different evaluation criteria and serve different goals. Ideally, each class of idea would have its own evaluation process.
  9. Never let anyone single-handedly kill or promote an idea who has a vested interest in it. Many participants in idea evaluation have a large degree of self-interest and may often try to kill or promote an idea based on how it affects them personally rather than on its benefit to the organisation.
  10. Know the psychology of idea evaluation. There are several effects which can affect the evaluation of ideas that have been studied by psychologists (one of them is described in Rule #9). Others are Evaluation Apprehension, Groupthink and Social Loafing. Design your evaluation workshop accordingly.

 

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Have Ideas Become Commodities?

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Forbes.com published a piece this week by Jez Frampton titled Crowdsourcing: Is There Wisdom in a Mob?. In the article, Frampton discusses the crowdsourcing of ideas as part of a business model. In particular, he postulates that …

„From the perspective of the brand owner, ideas, in their broadest terms, are becoming a commodity.“

This is an interesting perspective on ideas which I had not heard before. However, I believe the perspective is flawed, as I explained in the comment that I posted:

There is certainly no wisdom to be found in crowds! Shakespeare showed that in Julius Caesar back in 1599. The claim that ideas are a commodity is provocative, but does no hold up. After all, the definition of a commodity is that different offers are indistinguishable from each other (that is why you can buy them at a commodities exchange.) I do not believe that one idea is indistinguishable from another in the way that one ton of pork bellies is indistinguishable from another. I think it would be more accurate to say that ideas can be mass-produced, which was not the case before the internet. As with anything else in life, you get what you pay for, and if you are not paying much for ideas, you shouldn’t be surprised at the quality of the ideas you receive. Just take a look at „top“ results at any of the idea platforms out there and you will see what I mean.

Crowdsourcing is the latest fad in the innovation industry, and many companies are setting up internet portals for collecting ideas from the public. This is often, but erroneously, referred to as Open Innovation. As one commenter on the Forbes.com site pointed out, crowdsourcing generates the new problem of finding the needle (the good idea) in a haystack. Unfortunately, while everyone knows what a needle looks like, it is far less clear how to quickly recognise a good idea when it is surrounded by hundreds of other ideas.

Key Innovation Lessons in 2009

Crossing 2009 and writing 2010 on a blackboard.

Every year, Chuck Frey at innovationtools.com invites innovation authors and experts to submit their Key Innovation Lessons from the past twelve months. He then publishes the compilation on the website.

Here is my submission for 2009:

In 2009 I realised the extent to which innovation is dependent on cycles and fashion.

Cycles: For most of the year, while the financial crisis was on everyone’s minds, innovation activity dropped dramatically, and then suddenly in the fourth quarter, when companies started to believe that the crisis was essentially over, activity exploded. It seems that innovation is still widely perceived as a luxury, rather than a necessary and continuous investment.

Fashion: Both the innovation market (clients and consultants) and the media (journalists and bloggers) are slaves to fashion. An innovation fashion is something that (a) has actually been around for a long time, (b) is widely misunderstood, (c) is marketed as a silver bullet by media and consultants alike. In 2009, the reigning fashion was Disruptive Innovation, and the new challenger was Open Innovation.

Outside the world of fashion, my key learning experience in 2009 has been that many companies have a pressing need to dramatically extend and improve their service offers. This is what I call „Radical Service Innovation“. This type of innovation was virtually invisible in the media in 2009.

Why Brainstorming Doesn’t Work

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Brainstorming is probably the most widely used method for generating ideas in the world today. However, almost always, it is either very inefficient or doesn’t yield any useful results at all. The success rate (the proportion of ideas produced that are classified as „good“) of brainstorming sessions is variously quoted as being between 0.1% and 1%. In one article which appeared in the German magazine Brand Eins, an ideation workshop yielded only one or two good ideas out of a total of 1500! Not surprisingly, Brainstorming has developed a bad reputation, and the announcement of a corporate „creative workshop“ is often met with scepticism and resistance.

So why don’t Brainstorming and its many variants work? The reason is simple: because they don’t provide the participants with any means to overcome their mental obstacles to generating new ideas. Without such help, participants can only (re)produce the ideas that they already had in their heads anyway before they entered the room.

To understand these mental obstacles, we need to know that our minds store concepts in a network similar to a network of friends and acquaintances. Concepts which have meaningful relationships are connected to each other by a link, whereas concepts that are not related can only be accessed by traversing the sequence of intermediate concepts like in the game „Six Degrees of Kevin Bacon“.

There are two mental obstacles to creating ideas: Cognitive Immobility and Occupational Blindness.

Cognitive Immobility essentially means that as soon as you form a concept of your ideation task, the only concepts you can directly access are those to which to which it is directly linked. These will, however, not yield new ideas. In fact, good ideas are to be found by unexpected combinations of the given situation with distant concepts. For example, the parking assistant to be found in many cars was invented by imitating how bats use ultrasound to navigate at night. „Bats“ are almost certainly a long way away from „automobiles“ in everybody’s cognitive networks.

Occupational blindness means that we are so used to the relationships between concepts, that we are unable to conceive of „alternative worlds“ in which these relationships do not hold. However, innovative ideas are often obtained by breaking assumptions about familiar things and being able to see them in a new way. For example, leasing could only be invented by breaking free from the assumption that having the use of expensive equipment is necessarily preceded by a lump-sum purchase.

The key to overcoming Cognitive Immobility and Occupational Blindness is to introduce changes of perspective into the ideation process. Changes of perspective provide the workshop participants with new associations or ways of looking at the problem. A change of perspective might be as simple as a random word or image, or as subtle as a targeted removal of a deep-seated assumption or belief about the current situation. Devising effective changes of perspective is the most demanding aspect of ideation workshop design and – in our experience – a very rare ability.

For this reason, no ideation workshop should use brainstorming (except perhaps as a warming-up exercise to get existing ideas out of people’s heads.) Professional providers of high-quality ideation services will delve deeply into the problem to be solved and devise a set of questions that are designed to overcome Cognitive Immobility and Occupational Blindness. One result of this intensive preparation is a vastly improved success rate with the ideas obtained: In our experience, the quotient of good ideas is always at least 10%, which is a factor of 10 to 100 better than using Brainstorming! The corresponding savings in time and effort are significant – not to mention the indirect benefits obtained from the feelings of achievement and contribution experienced by participants.

 

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How To Launch A Bird And Not An Egg

ECCI XI

Yesterday I attended the 11th European Conference on Creativity and Innovation in Brussels. The Conference focused on „how you can make innovations work“. I gave a Workshop on the Conference. In the Workshop I presented five thesis which enable you to improve the front end of innovation. You can find my presentation on Prezi: How To Launch A Bird And Not An Egg

P.S. Edward de Bono gave also a speech on the Conference. He is the creativity guru. It was very impressive to see how he thinks and works. Thank you.