“There is nothing as useless as doing efficiently something that which should not be done at all.”
- Peter Drucker
It may be hard to believe, but customers have only recently entered the innovation center stage. Until 30 years ago innovations were largely developed in laboratories and skunk works then pushed onto the market. [Inside-out value proposition development.] As global competition intensified firms sought new means to differentiate themselves. Businesses wisely turned to the people who gave them money for the goods and services they provided: their customers. As Ranjay Gulati notes, firms shifted their focus from, “You take what we make,” to “We seek to understand your problems and will surprise you by solving them.” (1) [Outside-in value proposition development.] This was a logical evolutionary step. With industries full of efficiently produced goods and services of acceptable quality and price, the only way to increase value would be through consumer needs.
Without a doubt the shift to listening to customers has driven innovation, created new markets and made our lives demonstrably better. Unfortunately, customer-centric value proposition development has, without fanfare, become unexceptional best practice. Its once sparkling competitive advantage has been wrung dry. We have become too close to our customers and expect too much from them. Worryingly more and more firms are looking to their customers to create the next blockbuster product, service or business model. Yet no matter how hard we try, through observation or interrogation, customers will very rarely be the source of explosive insights. In our rush from the arrogant heights of the supply side to the spirited lure of the demand side, we have overreached and lost perspective.
An over-reliance on customer input has created a stifling co-dependent relationship between suppliers and consumers. Existing offerings are rarely questioned in a world of optimization over innovation and validation over creation. Tweaking along the edges defines the complexion of most “innovation initiatives.” As a result value proposition design has become a numbers game: launch as many products as possible and hope something sticks. Consider the global innovation machine today. Out of the 250,000+ new consumer products launched every year at least 212,500 will fail in the first twelve months.(2) Cash rich but idea poor. When quantity doesn’t tick our innovation boxes, firms add choice. Consider that there are 6,291,456 different meal combinations available at Chipotle, an American Tex-Mex fast food chain. You could eat a different burrito every day from Chipotle for over 2,870 years.(3) Yet five items make up 80% of Chipotle’s sales. You have over 87,000 varieties of coffee at Starbucks; three types of coffee drinks make up 75% of their sales.(4) You can find over 4,000 air freshener options on Amazon; most households need one. There are on average 33,055 SKUs in the average American supermarket; most families use 180 per year.(5) The average household has four or more remote controls with more than 239 buttons to control their home entertainment options; on average, five buttons are used every day.(6)
Innovation strategy has been reduced to spray and pray. And here lies a deeper problem. There is an unspoken acceptance of failure… as long as we fail like everyone else. This is what I call un-dumb failure. “If we’re as mediocre as everyone else, we must be doing something right!” This creates tremendous churn of un-dumb products and services that fail to capture consumer’s interest and wallets. Un-dumb innovation is a result of the first rule of management: Do no Harm. “At least we didn’t create the Microsoft Kin or the ‘adult baby food.’” First at coming in third. Hardly an exemplary level of accomplishment. Say a prayer for the once vibrant, bright and creative managers who are now conditioned into launching one un-dumb offering after another. It is little wonder that 85% of employees are actively disengaged at work.(7)
Few guardrails and fewer guidelines to value creation make un-dumb failure the default position. We are better than this. Yet without tools and methodologies to protect us from making bold but dumb mistakes, we will continue to push the same widgets out (with variant changes in color and packaging) in unseen orders of magnitude. The “customer is always right” has been a comforting teddy bear for too long.
Creating a breakthrough value proposition is the ultimate objective of every growth oriented business. 71 percent of CEOs believe organic growth is key to leading the future.(8) Yet time and again firms fail to deliver. In another survey, 80 percent of CEOs believe their brands deliver an exceptional customer experience; only 8 percent of customers agree with them.(9) Strategy and design consultancies have stepped in to help. Yet, while they are very helpful with post hoc tales of creating blockbuster strategies, there are very few proven and practical tools and methodologies to guide value proposition design. As a result, many firms quietly loose interest in value creation and settle into complacent value extraction and limp attempts at innovation — un-dumb anodyne duds.
Firms must shift their focus from giving customers what they want, to giving them something better. To suggest that there is a formulaic path to creating “breakthrough value” is harebrained. But to propose that we can create an approach that turns value proposition design into more of a puzzle than a mystery is a very real one. Admittedly most business writers are good diagnosticians but terrible clinicians. In this series I will strive to turn this corner based on over 20 years of experience working with companies and governments to create breakthrough solutions.
In the next post I will explore the first step to innovative value proposition design: “We must first obey the forces we want to command.” (10)
© 2020 JASON HUNTER. F&W STRATEGY | INNOVATION.
Coming up: Weights and Measures | Power of Noncustomers | Canned Creativity | Six Paths Revisited | Oceans in Practice | The Desk is Dangerous
(1) Ranjay Gulati, Reorganize for Resilience: Putting Customers at the Center of Your Organization. (Boston: Harvard Business Press, 2009).
(2)Elaine Wong, “The Most Memorable Product Launches Of 2010,” Forbes, Dec 3, 2010. http://www.forbes.com/2010/12/03/most-memorable-products-leadership-cmo-network.html. McKinsey & Company, “Growth & Innovation” https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/how-we-help-clients/growth-and-innovation
(3) SaberSmart, “Counting Chipotle Combinations — 2017 Edition” http://www.sabersmartblog.com/blog/counting-chipotle-combinations-2017-edition.
(4) Huffington Post, “There Are 80,000 Ways To Drink A Starbucks Beverage” March 4 2014. https://www.huffpost.com/entry/starbucks_n_4890735.
(5) Food Marketing Institute, “Supermarket Facts” 2018. https://www.fmi.org/our-research/supermarket-facts
(6) Logitech, “Logitech Study Shows Multiple Remote Controls Hindering Entertainment Experiences Around the Globe” 2010. https://www.logitech.com/en-us/press/press-releases/7748
(7) Jim Harter, “Dismal Employee Engagement Is a Sign of Global Mismanagement” Gallup. 2017. https://www.gallup.com/workplace/231668/dismal-employee-engagement-sign-global-mismanagement.aspx
(8) James Allen, Frederick F. Reichheld, Barney Hamilton and Rob Markey, “Closing the delivery gap” Bain & Company. 2005. http://www2.bain.com/bainweb/pdfs/cms/hotTopics/closingdeliverygap.pdf
(9) PricewaterhouseCoopers, “22nd Annual Global CEO Survey” 2019. https://www.pwc.com/mu/pwc-22nd-annual-global-ceo-survey-mu.pdf
(10) Francis Bacon, Novum Organum. 1620.