Facing a mismatch between internal processes and the things they had learned from their customers, health care products company Cardinal Health had to do just that. Looking at sales data, the company’s marketers realized that customers – seeking to dampen costs and not seeing the value in Cardinal Health’s complete offering – often purchased one element of what was intended to be an integrative solutions deal. Not good!

The company realized that the problem wasn’t with the customers, it was with them – while they had some insight into their customers, they weren’t baking it into key internal processes, like new product development. The result was that their solutions offers didn’t resonate with their intended targets.

To fix it, Marketing developed a cross-silo innovation framework, designed to do a few things:

1. Get consumer insights from around functional silos on one page. Marketing divided internal stakeholders into three teams, and asked them to get in the heads of their customers and think about deep-seated marketplace beliefs, Cardinal Health’s key areas of competency, and their customers’ desired outcomes.
2. Identify the best opportunities. The teams then meet together, and develop links between the beliefs, desired outcomes, and areas that Cardinal Health can help.
3. Define the business concept. The ideas from stage 3 are then advanced through successive levels of scrutiny.

Want to learn more about Cardinal Health’s process? MLC members can read the case here, or listen to a webinar where we talk through this solution, as well as another from IBM.

Just like Apple, automotive dealer software and services provider Reynolds and Reynolds has used more customer-focused insight generation to improve their new product development.  They realized that their marketing research practices had two major weaknesses: the current insights were anchored to existing products, and they were ambiguous and open to interpretation.  To get solve the problem of new ideas being limited by current offerings, Reynolds and Reynolds developed a better understanding of their customers’ true needs by identifying the results their customers are seeking to achieve (irrespective of existing products and services).  This reframing of insights from product- to job-based allowed Reynolds and Reynolds to figure out how it should best allocate its resources to meet their target’s needs; this new process increased the number of solutions-worthy insights seven-fold.  MLC members, learn more about how Reynolds and Reynolds shifted to this results-based insight generation and tackled the problem of ambiguous insights here.

Once the insights are generated, it remains important to engage consumers in the new product development process.  LEGO was able to do this by heavily involving its most engaged consumers (some of whom have blogs and books that share their creations) in its new product development.  Previously, LEGO’s NPD process had focused on meeting the needs of the average consumer, asking him to validate product features at the very end of the NPD cycle; unfortunately, this process failed to create consumer-relevant innovations, and it alienated LEGO’s core engaged consumer.  LEGO’s Mindstorms team (a branch of the company that creates robotics toolsets that allow consumers to build and program robots) started integrating the highly engaged, lead consumers early in the process by allowing them to provide open-ended feedback.

This in-depth consumer-NPD integration had many benefits.  First, they were able to develop a better product (one of the first product launches using this process had double the sales of launches in older campaigns) with several consumer-led innovations.  Second, LEGO got its core consumers involved – and engaged.  The consumers involved generated a lot of word of mouth for the product, showing these lead consumers were strong brand advocates once again.  MLC members, learn more about how LEGO integrated lead consumers into its NPD process here.

To me, what’s notable about Borders closing is that its another loss for the forces of “good” against the forces of “good enough”. Contrary to what a lot of people think, the essence of disruptive innovation isn’t necessarily whiz-bang technology. Rather, its about providing a product or service at a radically lower cost, without a serious – as defined by the preferences of the buying public – concomitant decline in quality. In practice, this means the creation of “good enough” products and experiences that provide a radically different value proposition to the consumer.

“Good enough” is one of the key insights Clayton Christensen uncovered in his seminal book, The Innovator’s Dilemma, and we’ve seen it play out across industries. Consider: the first automobiles were lovingly handcrafted machines made by craftsmen and artisans – works of art, really. But these cars were driven out of the market by a solution that was likely aesthetically and technically inferior, the Ford Model T, which was able to offer the automobile experience at a dramatically lower cost. The Model T wasn’t the best, but it was good enough, and as such was the first car to gain a foothold in the broader consumer market.

Let’s return to the example of bookstores. I think it’s clear to anyone who loves books that the experience of shopping in a bookstore is superior to the experience of shopping on Amazon. You can open the books, do the page 99 test, examine the covers, even read the first few chapters with a cup of coffee. You can talk to a human being that might recommend more books, or tell you what’s been popular in the neighborhood. Everything you buy, you can start reading immediately.  Entire days (I should know) can be spent at a brick-and-mortar bookstore.

Amazon, the principal “good enough” competitor to brick-and-mortar bookstores, isn’t capable of those things. Amazon Prime, a service which guarantees 2-day shipping on most of the company’s inventory, is close; Prime plus a great one-click mobile shopping experience comes even closer. Amazon’s recommendation engine is cool, but still not a great substitute for human recommendations. In short, the shopping experience is not as good as brick-and-mortar stores, but it’s good enough.

Where Amazon provides value, of course, is pricing. Their purchasing power enables serious discounts to the consumer, and their affiliate used book program offers outlandish discounts to those willing to accept used books (I regularly buy excellent-condition used books for pennies on the dollar). And despite my love of bookstores, I’m perfectly willing to trade down to good enough in exchange for more discretionary income.

MLC members, wondering what to do to protect yourself from “good enough”? Check out our recent research on radical innovation; we explain a number of ways to orient your organization towards the creation of disruptive products and experiences.

We recently found that almost three-fourths of executives place radical innovation as a top priority. But, in the pursuit of such big ideas, where should employees even begin?

As we’ve found in our recent research on radical innovation, it’s critical for companies to hone in on high-potential areas of opportunity, and then clarify exactly what their goals are. Without defining an innovation strategy – one simple and understandable enough to get widespread buy-in – executives can’t gain company-wide support for the intended future destination of the business.

Recognizing this fact, Pfizer devised a system to map out the future by identifying potential innovation ideas, and then zeroing in on the steps needed to reach these goals. Their strategy is three-fold:

Ranking trends. To get a general, overhead view of issues affecting the company, Pfizer creates a vision map by generating and ranking important industry trends (in this case, pharma) by their greatest impact on the business. Based on the rankings, they then create distinct growth platforms upon which to organize adjacent growth ambitions. The resulting growth ideas not only represent new business opportunities—they also help gain companywide buy-in.

Using comparison screens. Next, managers use screens to compare potential innovation ideas. Screens include determining whether the idea is part of the core business, and analyzing the potential financial impact. Pfizer uses these scorecards to assess the ability of an opportunity to ascend the “staircase” to the next step toward reaching their end goal.

Creating a growth map. Once they’ve assessed prospective innovation ideas, Pfizer creates a growth map showing the original platforms, and the capabilities needed to move into the next adjacent market. The company kicks off pursuit of their innovation goals by dedicating their resources to projects that fall within the first steps of the staircase on their map.

MLC members, view our resources for a more detailed look at Pfizer’s innovation roadmapping strategy.

Facing a growth slowdown, Unilever realized that a key hindrance in creating brands and products that resonate with consumers was that there was no systematized, organized way of deriving consumer insight. Its “Path-to-Growth” strategy – adapted to combat the slowdown – comprised five steps; the first two were focused entirely on innovation driven by deeper consumer insight. At the same time, the company was paring down its brand portfolio – so finding great ideas for growth became even more important.

To overcome the challenge of developing consumer insights that break away from conventional wisdom, the company developed their Customer Insight Laboratory – a three-step process that separates the stages of insight generation, allowing marketers, researchers, and R&D staff time to develop breakthrough ideas.

Establishing key inputs. To push past conventional thinking on innovation and consumer needs, Unilever established a cross-functional team that draws upon diverse points of view. Before the team does any specific ideation, they decide on the scope or business challenge to be solved – and present their view of the problem to senior management. That way, the team activities are pre-blessed: radical ideas are less likely to be thrown out with the bathwater if teams have go-ahead on their definition of the business problem. After getting approval, the team gathers existing consumer information, identifies knowledge gaps, and fills them in with new research.

Generating insight. The Insight Workshop – phase two of the process – is perhaps the most important. After getting blessing on their view of the business problem, and assembling consumer information, the team embarks on a three-day process designed to generate new consumer understanding and test those understandings with consumers.

Day One focuses on building a deep and common foundation of knowledge within the team, through the presentation of new observations and facts about the consumer. This day is all about reporting knowledge and observations: no conclusions are permitted to be drawn or discussed – an element of the process that allows all insights a fair hearing and lengthens the consideration period.

On Day Two, the team is allowed to hypothesize and discuss new potential insights about the challenge at hand. Using facilitators and a variety of analytic tools, participants connect the dots between the observations discussed in Day One with insights big enough to meaningfully impact the challenge. Finally, on Day Three, the team tests those insights with consumers for relevance and resonance.

Unilever’s key process innovation was separating the observation/knowledge part of insight generation with the conclusion-drawing/connection part. This avoided the association exercise that insight generation can sometimes become, keeping discussion on track and allowing more time for the accumulation of consumer knowledge.

Translating insights to business ideas. After establishing inputs into the insight-generation process, and generating high-caliber insights that are resonant with and relevant to consumers, the team then takes those insights and turns them into commercially-viable business ideas using a structured development process that goes from idea generation to commercialization.

Using this rough outline, Unilever was able to restore growth rates, get closer to the consumer, and realize more innovations from a smaller pool of brands.

MLC members, you can read the whole case here, or check out our other resources on customer understanding and insight generation.

Given signs like these of increasing customer demand, it’s no wonder why folks are jumping in. But it seems like there’s a lot of wisdom to tap into in the membership, here – so we’re asking: what do companies see as the upside of embracing mobile payments in a broader way? We’re asking this question on our Digital Media Discussions forum, and we’d love your input.

What does a successful mobile payment platform look like? What advantages does it confer relative to the status quo, a mix of cash and plastic? Six hypotheses we’ve thought of:

The “arms race” scenario. Are banks and retailers moving into the mobile space simply because their competitors are doing it? If this is the case, what are the signs you’re seeing of growing demand on the consumer side?

A data play. Does mobile offer significant advantages in customer understanding, relative to plastic? Do typical mobile payments user agreements allow processors and retailers to access information in other parts of the phone?

Increased brand awareness. Do payments give retailers license to push ads to the phone? Does the mere act of using a branded payment platform, whether provided by financial institutions (like Mastercard) or retailers (like Starbucks) reinforce brand connections in a way not previously available?

Savings on interchange fees. Particularly for mobile apps like Starbucks’, which are tied to loyalty program accounts, is there a significant savings on interchange to be had? We imagine that a single large transaction (loading the loyalty card) is more advantageous than multiple small transactions from a retailer’s perspective.

Decreased friction at the point of sale. Do mobile platforms (particularly those based on near-field communications) offer significant advantages in terms of friction and willingness to buy? Is buying with mobile less mentally demanding, from a consumer point of view, than plastic or cash? Do you project labor or equipment savings as a result of shorter checkout lines?

Better shopper marketing. As mentioned in this week’s Wall Street Journal article, are mobile payment systems providing a hook for shopper marketing-focused tech throughout the rest of the store? If you’re a retailer, and do in-store mobile coupons, are you seeing higher conversion rates compared to other coupon provisioning systems?

What do you think? Let us know on the discussions forum, or in comments here. We’ll take your responses and compile them into a subsequent Wide Angle post.

(updated 5/24: added additional hypothesis)

Then comes the dreaded question: what’s the projected ROI? And instantly, all the air gets sucked out of the room or e-mail thread – and the great idea is never to be heard from again. Because for any idea that’s even remotely risky or disruptive, guessing the projected ROI is largely a fantasy, right up there with unicorns, leprechauns and a working office printer. (IT folks – I keed, I keed)

So when Phillips’ Oral Healthcare, makers of the Sonicare electric toothbrush line, faced a mandate to double their rate of growth, they knew they had to find a way to neutralize the ROI question from the beginning. The result was the company’s Segment-Focused Innovation Roadmap, part of our revamped Product Management topic center.

Instead of focusing innovation on which idea would generate the highest ROI, the Roadmap focuses innovations around segment needs first, then sends ideas through a number of filters to determine which would move ahead in the development process. Marketing creates a rough estimate of the relative size of each segment need and the odds of success Philips has in addressing that need. It is against these segment-specific needs – not relative ROI – that Philips places bets. The process elevates ROI measures from project-specific granular projections to informed valuations of the opportunity size and likelihood of winning specific consumer needs – in other words, from a metric, to a concept.

Marketing then filters ideas through a four-step funnel that tests for the following:

1. Team enthusiasm. Recognizing that internal buy-in is the most crucial element of any innovation effort, Philips throws out potential innovations that are not broadly supported by the team.
2. Intensity of customer dilemma. If the innovation is a “nice to have” for customers, as opposed to a “need to have” or “would really like to have”, ideation stops here.
3. Effect on brand equity. Is the innovation consistent with the brand? Philips places this towards the end of the funnel, recognizing that if the opportunity is big enough, it may warrant reappraisal of the brand.
4. Alignment with business strategy. Is the innovation consistent with short and long-term objectives? Again, this is placed last for a reason – a truly disruptive opportunity may warrant a reappraisal of business strategy.

The hard-nosed realists out there are shaking their heads. “Why make a move in the market, if you can’t even make an educated guess about ROI?” Fair question – but the problem with this reasoning is that good ROI models project returns based on products that are already in the market. If the offering is really is disruptive and innovative, ROI exercises will likely be nothing but conjecture – a waste of time at best, and actively misleading at worst. The ROI filter also has a pernicious side – it ensures that nothing gets through the internal vetting process except safe, incremental innovations – a sure recipe for slow growth.

In this case, we’re talking about product innovation, but ROI is an awfully restrictive metric in any situation that involves extensive speculation. In the social media space, we’ve advised against using ROI as a determining factor in investment decisions and in marcomm planning, we’ve observed that higher-level metrics do a better job of allocating resources than ROI.

MLC members, for more on the Roadmap, including steps for getting executive and cross-functional buy-in, please check out the full case.

For those who were not able to attend, here are some of the key takeaways from the meeting:

Avoid generating lots of ideas and product launches: While many organizations try to create large numbers of ideas and lots of product launches, innovation leaders actually require half as many ideas for each successful new product launch. Also, leaders realize too much emphasis on launch volume leads to incremental innovation and lowers chances of big wins. Meeting attendees agreed that fewer ideas and fewer product launches are the better strategy.

Focus on producing bigger ideas that meet bigger customer needs: Winning companies generate bigger ideas by surfacing and solving higher-order emotional needs or business outcomes. They use the following techniques:

• Knowing what they’re looking for: Leading companies establish guardrails to define acceptable types of innovation to guide their employees. Even a simple vision statement can help explain what’s in and what’s out.

• Solving higher order needs: Leading companies use techniques like high-level need dissection, lead user analysis, and jobs-and-outcomes approaches to identify and address higher-order, emotional needs.

Protect innovations by systematically applying switching costs: The most admired innovations (think IPod, Netflix, Swiffer) sustain large profits because they protect themselves against copycats. While many companies believe they consider switching costs when designing new products, few do so systematically. As you consider switching costs, remember the following:

• Technology is making switching costs easier to create than ever before. Consider the ease of building virtual communities and capitalizing on network effects, personalizing offerings with customer data capture, and turning products into services through mobile tracking technology.

• The trick is to build creative “lobster traps” – creating barriers to customer switching (leaving) without erecting barriers to customer adoption (entry). Leaders apply the following approaches:

1. Use interconnectivity as a launching point. Here you want to exploit data and online networks to provide unique offerings. Examples include online communities that meet a customer need (Texas Instruments’ E2E community), information capture for personalization (Netflix recommendations), and product-service transformation that makes your product indispensible (GE aircraft engines).
2. Create switching costs that add value to the customer. The trick is to increase your ties to customers without frustrating them. Examples include designing unique replacement parts for products (Nespresso coffee pods) and making customer re-ordering easier (Amazon subscribe and save).

Use crowd-sourcing to build credibility and demonstrate quick wins: While internal crowd-sourcing is not effective at generating radical innovation, companies can use it to build acceptance of incremental change as a pathway towards more radical innovation. Meeting attendees expressed great interest in crowd-sourcing but few utilize it systematically. Many expressed concern that a lack of employee involvement would doom crowd-sourcing efforts. Research shows the keys to effective crowd-sourcing and employee engagement in the efforts include: 1) collaboration-focused technology, 2) incentives for collaboration, and 3) collaboration metrics and thresholds.

With all the great discussion at these meetings, we are certain innovation will continue to be a hot topic. MLC would like to thank all the companies who participated in our research and all who attended our innovation meetings.

MLC members, review the full meeting material here, and for help with VOC and ideation, check out some of our prior work.

Jeffrey Phillips at Ovo Innovation recently built a typology of open innovation, based on different approaches to idea collection (who is asked and what they are asked). Jeffrey describes 4 key types of innovation, each with its own strengths and weaknesses:

1. Suggestive/Participative: Anyone can suggest any idea (e.g., MyStarbucksIdea).

• Strengths: Everyone gets a say, the most common complaints are highlighted, the organization is introduced to a vast range of new ideas.
• Weaknesses: Idea quality, feasibility, and relevance will vary greatly and the majority of ideas will be incremental.
• Best for: Boosting engagement and taking the pulse of the crowd.
• Biggest Challenge: Categorizing/evaluating ideas and giving feedback (time-consuming due to the breadth and number of ideas).

2. Suggestive/Invitational: A pre-screened group of experts can suggest any idea on a very broad topic (e.g., IBM’s Idea Jam on sustainability).

• Strengths: Qualified participants are more likely to submit higher-quality, feasible ideas and it’s easier to protect IP.
• Weaknesses: Ideas may not be relevant, experts may be captive to their existing knowledge and not think sufficiently outside the box.
• Best for: Getting both educated opinions and diverse perspectives.
• Biggest Challenge: Identifying a diverse, qualified, creative group of participants.

3. Directive/Participative: Anyone can answer a specific question (e.g., P&G’s Connect & Develop).

• Strengths: Focus increases the relevance of ideas, bringing together people with passion for a topic increases collaboration and depth of thought.
• Weaknesses: Idea quality and feasibility will vary.
• Best for: Getting diverse perspectives on a widely understood challenge.
• Biggest Challenge: Picking urgent, actionable, easily explainable issues that enough people will care about and be able to solve.

4. Directive/Invitational: A pre-screened group of experts partners closely with the organization to solve a well-defined problem (e.g., Innocentive).

• Strengths: Easy to protect IP, allows you to give more direction, helps build relationships and foster stronger collaboration between participants, which increases the depth of thought and quality of ideas.
• Weaknesses: Time-consuming to build relationships, risk of participants adopting the biases and assumptions of the organization.
• Best for: Solving complex challenges that demand a high level of expertise, creating intellectual property.
• Biggest Challenge: Building relationships and trust between participants.

Just as idea collection methods vary, different evaluation and selection methods also serve distinct purposes. Spigit’s VP Products, Hutch Carpenter, recently described four approaches to selection:

• “You Vote, We Decide”: Participants provide feedback, but the organization makes the final decision.  This is the most common model since it allows the organization to take financial/technical/legal constraints into account.
• “Crowd Decision”: The crowd votes and decides.  Good for audience engagement, but not for strategic decisions.
• “We Vote, You Decide” (“American Idol”): The organization selects a shortlist of ideas for participants to choose between.  Good for engaging the crowd without the risk of unfeasible selections.
• “Expert Decision:” The organization votes and decides. Good for highly specialized decisions that require expert knowledge.

Organizations are not limited to one version of open innovation. In fact, leading organizations often use a combination of open innovation tools to help meet a range of objectives.  Additionally, many innovation software vendors now provide the flexibility to vary the degree of ‘openness’ from project to project. As such, it is easier than ever to pick the right open innovation tool for your needs.

MLC members, for more information on how to manage open innovation with pre-screen experts, please see this case on LEGO’s Customer-Led Innovation Teams.

Or will we? We know that consumers are eager to have some way to make person-to-person payments that doesn’t involve paper checks (still the single largest form of non-cash P2P payment), but the banking industry in its collective foot-dragging hasn’t yet built a global standard for mobile payments — though there are plenty of PayPal wannabes trying to get a piece of the mobile action.

Now it looks as if the financial services industry is finally coming on board with technological innovations like mobile banking and payments that promise to take consumers’ love affair with the mobile phone — especially smart phones like the iPhone and Droid — to new heights. Iconoculture looked closely at the convergence of financial services and Web 2.0 technology in a June 2010 trend we call Geeks Storm the Bank!

Marketers need to understand that consumer rage toward “too big to fail” banks and Wall Street may make them skeptical to marketing messages, but in no way mitigates consumer interest in technology that makes spending, saving, investing, and budgeting safer and more convenient than cash or plastic.

• Transitional technologies are already here. Some banks and credit unions are already accepting virtual deposits of paper checks — allowing customers with a cell phone camera to photograph a check and email it for deposit.
• It’s an app, app world where anyone with a smartphone can open up a bar tab, order refills, and pay off the bill with a few taps of the virtual keyboard in their palm.
• Remember the dudes who started Facebook? One of them has now created FaceCash, a mobile app that  produces an onscreen barcode that anyone can scan to make an electronic transfer of funds — complete with your own face where Ben Franklin’s normally is.
• Another possible solution just waiting for more consumer love: Text-messaging money, via POPmoney.

Jeff Lavers, 3M’s VP of Marketing, Sales and Communication, shared some lessons that all of us would probably be wise to consider as we pursue innovation within our own organizations:

Put Customer Problems Front and Center: 3M believes in studying customer needs very closely. It uses ethnography to understand not so much what customers say as what they do.  As one example, Jeff described how 3M’s “Huge Opportunity Teams” (HOT) spent six weeks observing cars in a body shop and realized painters were the highest paid technicians and spent 40% of their time cleaning paint guns. To eliminate the need to clean the paint guns, 3M came up with a unique disposable bottle. The result was a huge time and resource saving for owners of body shops and people wanting their cars re-painted.

Give Employees Time to Explore: One of 3M’s early leaders, William McKnight, encouraged his managers to allow employees to experiment and to define the best way to do a job. He institutionalized this philosophy by allowing employees to spend up to 15% of their work time pursuing projects about which they were personally passionate. Still alive today, this approach is considered fundamental to 3M’s innovative culture.

Encourage Employees to Make “Uncommon Connections”: 3M is blessed with six diverse business lines, ranging from consumer products to industrial technology. Realizing the tremendous power that springs from connecting diverse ideas, 3M encourages informal employee networking every day. “Tech Forums” are interest groups where engineers share their new technologies and connect with other employees who may be able to help move ideas along.  3M provides some structure through formal leadership and small budgets to encourage communication but relies on passionate employees to get involved. It’s clear all employees live the ideals of connectivity and collaboration; in fact, 3M likes to say everyone at the company is only two phone calls away from finding the expert on any topic.

Balance Technology Push with Customer Pull: 3M uses a simple equation to think about innovation:  1+1 = 3 or Right Technology + Right Customer Insight = Big Innovation Returns. If 3M is struggling to meet its ambitious innovation goals (believe it or not, it sometimes does), it’s likely one of these inputs is underperforming or out of balance. R&D may be inventing a lot of technologies that Marketing cannot sell. Likewise, Marketing may be over-testing prototypes with customers or making too many demands of R&D. Keeping these opposing forces in balance is key to making the machine run smoothly.

MLC members, for more information on innovation, please visit our NPD and Innovation topic center.

As anyone who keeps track of these things knows, a strongly disproportionate number of these memes emanate from the bowels of an online community called 4chan (NSFW). 4chan distinguishes itself from other web forums and social platforms by allowing its users total anonymity – no real names, screen names, or other identifying details necessary. The result is about what you’d expect – a whole lot of nonsense, offensiveness, and even illegality; but sometimes, the chaos of 4chan results in cultural phenomena like rickrolling or lolcats.

After years of anonymity, 4chan’s founder and administrator Christopher Poole has emerged to give his take on why his community has been as dynamic and innovative as it has. He credits the site’s insistence on an option for total anonymity in giving space for his users to make mistakes. In this case, “making mistakes” usually means “failing to be funny” – but the point stands. From the Technology Review piece:

Consider, Poole explains, how the fixed identities in other online communities can stifle creativity: where usernames are required (whether real or pseudonymous), a new user who posts a few failed attempts at humor will soon find other users associating that name with failure. “Even if you’re posting gold by day eight,” says Poole, “they’ll be like, ‘Oh, this guy sucks.’ ” Names, in other words, make failure costly, thus discouraging even the attempt to succeed.

It’s a key insight: freedom to fail is an essential element of innovation. The best way to bring new value to your customers is experimentation and acceptance of failure.

4chan’s innovation model – to the extent they can be said to have one – is simple. Allow open – fully open, not corporate “open” – dialogue, remove or mitigate the fear of failure, and add in enough critical mass to keep the ideas flowing.

This is one half of a big dilemma for marketers. To promote innovation, do you embrace an open, sometimes chaotic process? Or do you pick a great team, focus it on narrow goals, and guide the process step-by-step until you have an innovative output?

For a lot of reasons, most importantly because online communication has allowed chaotic discussions to scale to the point where they can produce concrete results, I tend to side with the open model. But opinions – and experiences – abound. For those that have led innovation efforts within your organization – what approach worked best for you?

MLC members, for more on how to keep the fresh ideas flowing at your organization, please consider attending one of our upcoming innovation breakfasts. On September 22, we’ll be in St. Paul, MN, touring 3M’s innovation center; on December 2, we’ll be visiting Microsoft’s innovation center in Seattle, WA.

Iconoculture recently reported on an unsettling trend in consumer travel—as airline innovation fails to keep pace with consumer demands, consumers are either rewarding smaller players like Suite Arrival (who delivers TSA-friendly personal items from popular brands directly to travelers’ hotel room) or inventing their own “DIY” approaches to make travel less frustrating.

The news isn’t all bad—Iconoculture spotted a few noteworthy exceptions as big brands made progress in the long march to improve travel.  Noteworthy innovators winning travelers’ endorsements include:

• Southwest Airlines “Bags Fly Free” Policy: takes one painful and expensive worry out of travel, and translates into clear, benefit-driven marketing messages.
• JetBlue’s Customer Bill of Rights: reimburses customers for the most aggravating travel missteps, including vouchers and refunds when flights are cancelled and delayed.
• Clear: the growing fly-through-security service enjoys over 75% favorability in online mentions.

For more winners—and a few losers—MLC members can check out Iconoculture’s full trend analysis.

That changed recently when I spent time visiting with marketers at Ingersoll-Rand, makers of Hussmann refrigerated cases.  In this day and age, I couldn’t imagine there was a lot of innovation in the design of refrigerated cases.  Their job is pretty simple – keep stuff cold while maximizing shelf space and minimizing energy use – and people have been building them for decades.  I mean really, what’s left to do with commercial refrigerators?!?  Apparently a ton.

As I talk to marketers across industries and categories, most would do cartwheels to have the right insights that result in a handful of commercially-viable innovations.  Yet filling the top of the innovation funnel and then knowing how to filter those ideas is proving far more difficult.

Working with Strategyn and using one of the Council’s favorite frameworks, jobs and outcomes, Hussman identified fistfuls of under-served customer opportunities for their products.  In other words, among the dozens and dozens of potential innovation plays, Hussman found more than enough actionable opportunities where the customer has low satisfaction for a highly important job. 

Members, if you’d like to learn more about Ingersoll-Rand’s approach, consider joining Manlio Valdes, Vice President of Global Product Management for the Industrial Technologies Division at Ingersoll-Rand at our next Innovation Summit on July 22.  The session is hosted by W.L. Gore and includes a tour of their world-class Innovation Center.

Whether co-opting outsiders into helping you innovate as NASA does or getting creative with your ethnographic research as Moen did, we are seeing more and more members reaching out to their customers – and even their non-customers – for innovation help.  Already NASA’s Centennial Challenge Program has resulted in technological breakthroughs orchestrated by a “regular guy” from Maine working alone in his dining room as well as a group led by an undergraduate student at Worcester Polytechnic Institute.

Of course, just opening your doors to the outside world isn’t going to be a panacea that cures your innovation ills.  While we are seeing lots of companies succeeding via social media platforms that engage customers in idea sourcing (see examples from Starbucks and Dell), the best marketers are leveraging their “specialist users” over their “mass customers” to drive real breakthrough thinking.  From automotive companies to commercial paint manufacturers, we’re hearing more and more about the pursuit of customers with a unique skill set or unique need state that open more doors to innovative thinking that traditional research approaches – even one company that has successfully recruited “haters” of their products.

MLC members, are you curious about how the best companies identify and co-opt their specialist-user customers to jump start real innovation? Join us for more on this topic by attending one of our half-day Innovation Summits.  The next session, on July 22, is being hosted by W.L. Gore, makers of GORE-TEX, and will include a tour of their world-class innovation center (40 minutes outside of Philadelphia).  Curious about how your innovation efforts stack up against your peers?  Take our innovation diagnostic and find out.

Click to Enlarge | Domino’s Pizza (NYSE: DPZ) Share Price vs. S&P 500, Dow, and Pizza Sector (PZZA) August 21, 2009 – April 13, 2010 (Red line denotes launch of new crust)

(This is a guest post by Andrew Kent of the Sales Executive Council, our sister program for sales leaders.)

Domino’s Pizza’s new crust has been making the company a lot of dough.  The pizza delivery chain announced a new and improved crust on December 16, and has been blitzing the airwaves with ads ever since—ads which you’ve no doubt seen many times by now.  Over that time, the firm’s share price has leapt by 84%, trouncing the S&P 500, Dow, and pizza sector.

That’s a meteoric improvement—and no doubt a relief to Dominos’ marketers, who spent “tons of time — about 18 months — and millions of dollars” experimenting with various recipes and testing them with customers, according to CMO Russell Weiner.

Those marketing dollars certainly translated into a mouthwatering share price, but what about the pizza?  Did the crust really improve by that much?

Well, I’ve tasted it.  Several times.  The verdict?  It’s a welcome improvement, but not a nearly-double-your-market-cap-in-three-months kind of improvement.  Essentially, it tastes like they took the old crust and rubbed some garlic butter on it.

So here’s the question: How did a firm spend millions of marketing dollars improving a product, settle on some pretty incremental changes, and translate that into an 84% leap in stock price?

Simple: it’s not what you sell—it’s how you sell.

Now, my point is not that Dominos’ marketing dollars didn’t result in an improved product—they almost certainly did.  But an improved product wasn’t the whole point.  The real reason the company spent millions of marketing dollars was… to say that it had spent millions of marketing dollars.  Why?  Because the message those marketing dollars convey is not only that Domino’s had perfected (or at least improved) its pizza, but also “we listened to you.”

It’s a perfect example of not selling on product features and benefits alone.  Weiner explains:

“I spent a lot of time thinking about how to change the perception of people who didn’t buy Domino’s. We talked to them, and read their blogs, and this is what they were saying. And I knew that, other than my mom, no one would care about “new and improved.” So if we just said, “Hey, this is a new and improved pizza,” we would not have gotten the doubters to try it.”

In other words, Domino’s isn’t saying, “buy our pizza because it has a garlic crust that intoxicates taste buds and stimulates serotonin production.”  Rather, they’re creating an experience around doing business with the company: “you told us our pizza tasted like cardboard, we took time to listen and made changes, so give us a try again!”

What was their secret?  Building platforms and content around customer needs – not their own product launch. 

National Instruments had a large base of enthusiastic customers, but realized these customers needed both the means and motivation to connect with each other.  Analysis of customers’ networking patterns revealed two core motivations: 1) building credibility with peers and 2) finding technical resources.  These key insights shaped the entire campaign’s choice of channel and message, both on and offline. 

Conferences for leading engineers offered opportunities for networking, training seminars kept customers up-to-date with cutting-edge technologies, and social media platforms enabled customers to collaborate and promote their professional successes.  National Instruments also generated extra chatter by bridging social media networks with real-world communities.  At the start of the campaign, keynote speakers at conferences educated attendees on ways to stay connected online; later, key online contributors received recognition at offline “Breakfast of Champions” events.

By designing networking tools to help customers achieve their own professional goals, National Instruments successfully boosted word of mouth, which increased awareness and sales.

MLC Members, check out our recent webinar discussion with  Deirdre Walsh, National Instruments’ Social Media lead, to learn more about National Instruments’ social media strategy and successes.

Very rarely does one member conversation spark a complex web of issues, but one yesterday with a senior marketer at a consumer firm in a mature industry did just that.

The firm has reconfigured its entire new product development process, from stage gates, to resource allocation, to organizational structure and ultimately, the locus of innovation – a conscious shift from incremental to disruptive.  Simultaneously, the company placed brand management among its top priorities for the year.  Our dialogue quickly turned to the intersection of the two and which was actually driving the bus.

The mixture of brand and innovation creates multiple thorny dilemmas:

1. If a company needs innovation to survive coming out of the recession, how does it reconcile a brand image that may be out of sync with the new technologies it develops?

2. How far can you push the envelope on brand positioning in advance of worthy innovations that demand a tweaked or entirely new value proposition?

3. Where does the customer fit? For B2C indirect firms like this one, innovation must satisfy end-consumer needs while also enabling retail success – a retailer not entirely focused on your one category.

4. With customers having more control over the brand and product experience through social media, how can companies bring external sources to bear on innovation without undermining the brand essence?

As we hear more from members that innovation is re-emerging from its two-year recession hibernation, there is an unfortunate pull toward playing product catch-up.  ‘We need to find the next great product,’ or so the story goes (unfortunately, Apple’s iPad may fit here).  Not so fast.  Progressive firms seem to be taking a holistic approach to innovation that anchors all efforts in the brand and consumer.  The brand leads, innovation quickly follows.

This is not to say your brand is a roadblock to blue-sky thinking; it does mean that the strategic focus of the brand has to be incredibly precise and internalized by all those that touch innovation.  In both B2B and B2C, pushing the brand to an emotional level – be it through a shared value or unique benefit – opens far more innovation doors than brands that stand for functional features that may be obsolete by the time you blink.

MLC Members, check out these case studies that can help manage this brand/innovation dichotomy:

• Philips Oral Healthcare uses a segment-focused roadmap to enable long-term consumer-centric innovation
• Lego harnesses the enthusiasm of consumers to improve NPD
• Wrigley’s creates a separate innovation process to ensure non-standard sources of insight lead to potentially disruptive innovations

On the one hand, you have P&G launching the latest, feature rich, premium-seeking version of its Fusion razor.  Blade edges so fine you need a microscope to see them.  Anti-hydroplane technology.  And an even more ergonomic grip. 

(Wait.  Backup.  My razor blade can hydroplane? On my face?  Scary… Does my auto insurance cover that?)

In contrast, the neighboring article details GE’s plans to launch a handheld ultrasound device.  Price point: under US$10,000.  Compare that to $25-50k for laptop-based machines, or $250k for a cart-based ultrasound.  Of course, the handhelds won’t have the functionality of the others, but for many situations, they don’t need to.  Cutting out features in favor of portability and low price actually opens up new markets.  That’s smart, “good enough” innovation in a tough economic environment.

Needless to say, perhaps, but the feature enhancing variety of innovation is a tough row to hoe in a recession.  With all great respect due to the Gillette brand—for decades an innovator and real enricher of daily shaving activity, including my own—at some point, consumers will declare the emperor naked. 

You can purchase 13 Schick QuattroPro cartridges (a four-bladed monster) for $19.99.  That’s more than enough shaving chops for me.  Compare that to 14 Gillette Fusion Power, five-bladed cartridges for $41.49.  Is the Fusion Power shave a better one?  Perhaps.  But not detectably so for me, and I’m guessing most consumers would say the same, if pressed to break out of their purchasing habits.

Surely, social media will accelerate this emperor de-shrouding.  How long before some clever razor blade upstart equips its socially active advocates to lay bare the math, and make the quadblade the sharp choice on a tight budget?

If you haven’t put your innovation strategy under the microscope to spot the keen edges, its worth doing.  Are you cutting against the economic grain, or shaving with it?

MLC Members, join us for breakfast on May 13^th in San Francisco.  Schwab will host a morning roundtable for MLC members to discuss innovation.  Email Kelly Shattuck if you’d like to pre-register (kshattuck@executiveboard.com).

Also, see some of our favorite innovation case studies:

• How Motorola does 360-degree customer needs mapping
• How BT fosters employee participation in innovation
• How Eli Lilly fosters a common employee understanding of what great insight looks like

• The recession has fundamentally recast customers’ hierarchy of needs, priorities and in some cases core values, giving rise to the “New Normal” customer
• The “Good Enough Revolution” (an important read) has demonstrated that, in many categories, the returns curve on adding new features has flattened or even inverted
• The increasing participation of our target audiences in digital and social media has presented an opportunity to dramatically reduce innovation cycle time
• The source of consumption growth is shifting to BRIC countries, which is putting more pressure on innovation processes to produce discontinuous innovation for those markets

In 2010, we will research these forces and more importantly, the best practice approaches that marketing leaders can use to retool their innovation engine for this new environment.  We anticipate delivering insights and best practices to the membership this summer.  Interested in shaping our research inquiry? Please email me (pspenner@executiveboard.com).

For those of you who need help now, here are MLC innovation resources that should help to see you through:

• Ground Yourself in Macroeconomic Forces: Join us for three upcoming webinars on the business barometers in the US, EU, and China with Dr. Roman Cech, PhD as our guide
• Understand How Your Customer Has Changed: start by attending the MLC’s upcoming webinar, Lessons to Remember: Recession-Era Insights Most Managers Will Forget, January 28^th, 11:00 EST
• Re-Examine Unmet Customer Needs: apply a customer jobs/outcomes approach to understand your New Normal Customer’s needs—see the Customer Outcomes Surfacing Process Tutorial
• Organize Innovation Around Key Segments: your customer segmentation may have changed—apply these World Class Segment Innovation Solutions to boost your innovation productivity

Or, if you’re starting from square one, visit MLC’s NPD and Innovation Topic Center.