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How Nike’s Innovation Kitchen Made It Fast Company’s Most Innovative Company in 2013

April 1, 2013

            In March, Fast Company magazine announced “2013’s 50 Most Innovative Companies”.  Number one on this list wasn’t one of the hot new start-ups on the block like Pinterest or Square, it was Nike. Started as a humble sneaker company over forty years ago, Nike has established itself as a $24 billion dollar global brand. It’s tag line: “Inspiration and Innovation for Every Athlete in the World.”

This year Nike launched not one, but two new products that many are calling revolutionary. The first product, the FuelBand, is an electronic bracelet that measures your daily movements. The second is the Flyknit Racer – feather light, environmentally friendly shoes that Nike says will “turn the shoe industry on its head”.

To launch one new groundbreaking product in a year is a feat; two is extraordinary. But Nike is a highly successful growth company because it lives and breathes what every company must learn to survive: that innovation must be an integral part of your business operations and corporate culture.

So how do they do it?

According to Amy Martin, author of Renegades Write the Rules, the secret sauce is in Nike’s Innovation Kitchen.  Here are a few of the ingredients:

  • Swoosh scientists are obsessed with “What if…?” questions.
  • Nike has an innovation process never ends, and there is no finish line.
  • Nike athletes and consumers are a part of the process via clever social media channels.  Check out Nike+ Basketball in this video.

Nike designer Michael Shea, one of Nike’s 125 Kitchen-mates says, “You’re paid to question things.”  He describes the essential qualities of new Innovation Kitchen hires: has initiative, is a self-starter, can take direction, can take it to another plane, and is socially open and fun.

                       

Innovation is Not a Fire Drill

Every growth company needs an innovation process.  It’s the bridge between today’s core business and the new business that will drive future growth, as I show in my S-Curve diagram.

Screen Shot 2013-02-16 at 1.29.06 PM

Like many successful growth companies, Nike has built their innovation process into the rhythm of their operations – balancing investments in new business development with the demands of their core business. It remains to be seen whether some of the much younger companies on Fast Company’s 50 Most Innovative will have the staying power of Nike. The sooner they understand that innovation is not a fire drill but an inherent part of their overall business, the more likely they will be on a path to long term growth and success.

Follow Dave on Twitter: @WDavidPower

Strategic Management of Growth Companies – An Update

October 29, 2012

I created a course for the Harvard Extension School that I’ve been teaching for several years called Strategic Management of Growth Companies.  The course seems to have hit a sweet spot with entrepreneurial executives who want to know how to sustain growth:  whether in a startup that’s achieved initial success, or in an established company whose current business model faces maturity.  The course provides a 360 degree view of what it takes sustain success in a growth company, as I describe in this video:

Most of the participants have represented countries outside the US — including every continent except Antarctica. And why not?  As Yogi Berra once said, “It’s an international world.”  To reach an even broader audience, I’ll be teaching the course via live web conference starting in January 2013.

For busy executives there is also an intensive two-day version — or  Professional Development Program — offered several times a year.  Again, most executives have come from outside the US.

At a time when every economy is searching for growth and new jobs, growth companies are more important than ever.

Follow Dave on Twitter: @WDavidPower

Have Your Customers Inspire Innovation

October 8, 2012

In the middle ages, theologians debated the number of angels that could dance on the head of a pin. In the modern era, entrepreneurs debate whether innovation comes from technology breakthroughs or customer needs. In both cases, it’s the wrong argument.

Those who argue that technology drives innovation will cite Henry Ford or Steve Jobs – two guys with a lot of credibility. Ford once said, “If I asked customers what they wanted they’d have said faster horses.” And Steve Jobs was famous for saying, “It isn’t the customer’s job to know what they want.”

UNDERSTANDING THE PROBLEM

The middle ground—which too many companies miss—is the enormous advantage of understanding what problem the customer needs to solve. In fact, Henry Ford made a big bet that customers wanted an automobile—the problem was that few could afford one. Steve Jobs believed that music fans wanted to bring their music with them, but none of the available options were attractive. Watch the public launch of the iPod and you’ll see Steve Jobs going through great pains to describe what consumers were lacking in the available choices: CD player, MP3 player, and flash drive.

If you understand the customer problem you dramatically improve your odds of successful innovation. Clayton Christensen, author of The Innovator’s Dilemma, underscores this point when he encourages innovators to understand the jobs customers need to get doneWhen Apple launched its ill-fated Newton device, no one understood what problem it was supposed to solve. Later, when Apple launched the iPhone we all understood that this was the way to carry one digital device instead of a separate phone, music player, and organizer.

WHAT’S MISSING

Companies don’t spend enough time understanding the changing needs of their customers. They spend too much time on product development and not enough time on what Steve Blank calls customer development. Ask any executive how many customers they talked with last month—not including sales situations and service problems. You may be surprised at the answer. One of the first things Lou Gerstner did when he joined IBM was to require his top executives to visit a certain number of customers per week and send him a write-up by end of day Friday. Most people got the message.

How did Amazon get into the cloud computing business? Someone in the company observed that Amazon’s retail customers, the thousands of small businesses that use Amazon’s eCommerce platform, were not sophisticated enough to take advantage of cheap computing and storage in the cloud. This Amazon renegade pitched Jeff Bezos on the idea of creating a new business that would make it easy for small retailers to lower their IT costs using a simple cloud computing service from Amazon. Today Amazon is the market leader in cloud computing – bigger than IBM, HP, Google, Microsoft, and other tech giants.

If innovation is your goal, by all means look to technology for opportunities to disrupt the current playing field. But if business success is also your goal, make sure your innovation lines up with a critical customer problem that no one has solved. And if you’re wondering what that problem is, ask your customers.

This blog first appeared in The Language of Business.    

Follow Dave on Twitter: @WDavidPower

Why Innovation Needs Design Thinkers

May 29, 2012

Instagram created a better way for people to share photographs.  Their innovation was worth $1B to Facebook (even without revenue).  Why couldn’t Facebook develop their own photo sharing solution — for less than $1B.  And why didn’t Kodak or Polaroid come up with this idea first?

Instagram is more about user experience than technology.  Its 13-person team created a new way to enhance and share photographs by understanding users, testing new features, and implementing continuous improvements … until their user community exploded.   Instagram is a classic example of design thinking – the missing ingredient in most innovation processes.

Managers are trained as decision thinkers.  When faced with a problem they define objectives, review options, analyze data and calculate ROI in order to make the best decision.  Design thinkers take a different approach; they believe that if you uncover the right option, the decision will become obvious.  Design thinkers ask questions such as:

“How do we know these are the best options?” 

“What if anything were possible?”

To get the raw material they need to create new options, design thinkers spend time observing, talking to, and ‘standing in the shoes’ of customers.  According to Suzanne Howard, Design Director at IDEO:

“Design thinkers gather information that helps us understand customer experiences. Once we understand their needs, desires, problems and aspirations—we can identify relevant business opportunities … As we prototype, we learn from people by observing, gathering feedback, and refining our approach. This iterative cycle of learning—trying out new business possibilities, gathering feedback and refining the ideas—is what makes design thinking unique.”                                                American Express OPEN Forum

Design thinkers offer new tools for business strategists, such as the customer experience map – for discovering new market opportunities – and the business model canvas – for finding new ways to make money.  These tools enable cross-functional teams to generate a broader array of outside-the-box options for new products, services and business models.

The most valuable tool in the discovery phase is the customer experience map, also know as a customer journey map or customer empathy map.  The experience map below examines what customers are doing, thinking, feeling and experiencing during every stage of the shopping, purchasing and consumption process – in order to make Rail Europe a better customer experience (click on this map to open a high resolution PDF).

To design better business models, many design thinkers start with the Business Model Canvas developed by Alexander Osterwalder.

The best practice of growth companies is to incorporate these tools into a four-step innovation process:

1.  Observe customers to uncover new problems (customer mapping)

2.  Create new solutions (ideation, business model canvas)

3.  Prototype and learn in the market (lean development)

4.  Implement the best ideas (get to market and keep learning)

However, what most businesses gloss over is the first step:  observing customers to uncover new problems or pain pointsI’m amazed at the number of companies with great customer franchises who never talk to their customers outside of sales situations.

Unfortunately the design thinking of visionary founders like Edwin Land can get lost as their companies mature, leaving the door open to innovators such Instagram:

In the early days of Polaroid, Mr. Land said photography should “go beyond amusement and record-making to become a continuous partner of most human beings.” His goal was to build a business that would allow any one to feel an emotional connection to photography.

                                                                                                                              The New York Times, April 16, 2012

Learn how to apply design thinking to your business at Innovation and Strategy, my new Professional Development Program at Harvard Extension offered on June 21 and 22.

This blog first appeared in The Language of Business

Follow Dave on Twitter: @WDavidPower

Four Keys to Innovation and Growth

March 11, 2012

What can we learn about innovation and growth from the most successful growth companies?

Global competition and a weak economy have made growth more challenging than ever. Yet some organizations such as Apple, Amazon, and Starbucks seem to defy the laws of economic gravity.

The most successful growth companies adopt at least four best practices:

  • Find the next S-curve
  • Lean on customers
  • Think like a designer
  • Lead the way
1. Find the next S-curve

Nothing grows forever. The best products, markets, and business models go through a predictable cycle of growth and maturity, often depicted as an S-curve.

Diminishing returns set in as the most attractive customers are reached, price competition emerges, the current product loses its luster, customer support challenges emerge, new operating skills are required, and so on.

The S-curve illustrates cycles of growth for companies

Unfortunately, growth company leaders are often blinded-sided by this predictable speed bump. Once the reality of the S-curve becomes apparent, it may be too late to design the next growth strategy.

The time to innovate—the innovation window—is when the first growth curve hits an inflection point. How do you know when you’re hitting the inflection point? You never know. So the best companies are forever paranoid and make innovation a continuous process.

Steve Jobs understood this when he returned to Apple. In 2002, he challenged his company to break out of the mature computer industry where Apple had never garnered much more than 10 percent market share. He told Time Magazine in 2002, “I would rather compete with Sony than … Microsoft.”

Eight years later, after introducing the iPod, iPhone, iPad, and a game-changing retail channel, Jobs claimed victory and Apple Computer became Apple Inc. While introducing the iPod, Jobs said, “Apple is the largest mobile devices company in the world. Larger than the mobile devices businesses of Sony, Samsung, and Nokia.”

2. Lean on customers

Successful growth companies have a deep understanding of their customers’ problems. Many are embracing tools such as the customer empathy map to uncover new opportunities to create value. This customer insight is the foundation for their lean approach to product innovation: rapid prototyping, design partnerships with lead users, and pivoting to improve their product and business model.

I’m constantly amazed at how few companies invest the time to get out of the office and interact with customers (outside of sales situations). During the turnaround of IBM, Lou Gerstner launched Operation Bear Hug to get the company back in touch with its customers. IBM’s top 50 executives had to visit five customers per week and deliver a write-up to Gerstner.

3. Think like a designer

Managers are trained to make choices, but they don’t always have good options. Innovation involves creating new options. This is where designers excel. Apple’s exceptional user experiences were largely the creation of Jonathan Ive, a professional designer and Jobs’ righthand man.

Design thinking requires a different set of tools. Growth company strategists have abandoned Porter’s Five Forces Analysis because it assumes that markets have well-defined boundaries and competitors must fight for market share. Instead they search for uncontested market space and make competition irrelevant using Blue Ocean Strategy and the Business Model Canvas.

4. Lead the way

Unless the CEO makes innovation a priority, it won’t happen. Innovation requires a level of risk-taking and failure that’s impossible without executive air cover. The best growth companies create a culture of innovation:

  • Howard Schultz decided Starbucks had lost its way. He flew in every store manager from around the world to help redesign its café experience.
  • Google encourages employees to spend a day per week on new ideas.
  • P&G tracks the percentage of revenues from new products and services.
  • Gray Advertising gives a Heroic Failure Award to the riskiest ideas … that fail!

More important are innovative leaders as role models. Amazon founder Jeff Bezos has told both employees and shareholders that he cares less about profitability and more about planting seeds that are likely to pay off in five to seven years. He’s so driven by vision that he’s investing over $40 million of his own money in a product designed to last for 10,000 years.

To launch his successful Think Different campaign, Steve Jobs commissioned The Crazy Ones, a video that featured Einstein, Edison, Gandhi, Muhammad Ali, Hitchcock, Richard Branson, and other “trouble-makers” who changed the world. Every employee understood the CEO’s views on risk-taking and innovation.

Adopting these four best practices can help any company drive innovation and growth.

This blog first appeared in The Language of Business.

Follow Dave on Twitter: @WDavidPower

CEO Advice on Growth Barriers: The FreeThink@Harvard Panel

December 17, 2011

One of the highlights of 2011 for me was a panel I ran at Harvard called  “Growth Companies: Succeeding Beyond the Start-up Phase” featuring Brian Halligan, CEO of Hubspot, and Diane Hessan, CEO of Communispace.  In addition to having some fun we were all surprised at how much ground we covered on this important topic in about 40 minutes.  Thanks to Freethink@Harvard you can see a complete videotape of the panel via this link.

 Dave Power, Diane Hessan, Brian Halligan at FreeThink@Harvard

After a brief review of why growth companies stop growing  Diane and Brian zeroed in on how everything changes as you evolve from startup to growth company:

FROM

TO

Being an entrepreneur

Being a CEO

Managing cash flow

Managing a P&L

One product in one market

Many products in many markets

Knowing all of your employees, customer, problems

Knowing “none of that”

A team of utility players

A team of specialists

“Survival”

“Growing profitably”

Selling all the time

Building a scalable culture

Fundraising all the time

Managing a board

(adult day care?)

There was also some practical advice on:

– Defining company values with the help of employees,

– Not ‘shooting’ the founder

– Leaving the ‘weekend voice mail’

– Whether to be like Steve Jobs

– Knowing yourself as a leader

But don’t let me give it all away – watch this panel to learn from two of Boston’s most successful growth company leaders.

Follow Dave on Twitter: @WDavidPower

If you build it, will they come?

December 4, 2011

One of the most memorable lines in film history comes from “Field of Dreams.”  Shoeless Joe Jackson, a baseball legend from the early 1900’s, convinces an Iowa farm owner named Ray Kinsella to build a baseball field in his cornfields, telling him:  “If you build it, he will come.”  Kinsella builds the field and, soon after, members of the 1919 Chicago Black Sox show up to play.

While building it first worked for Ray Kinsella, does this happen when it comes to launching new products and services ?

Many growth companies make the mistake of launching new offers before they understand the market. (see Why Growth Companies Stop Growing)  They believe the value of their new offer will be so obvious to customers that all they need is a great engineering team and a predatory sales force and they can race their idea to market.  This build it and they will come approach to product development is also known as technology in search of a market.  It’s the business equivalent of oil well wildcatting — the high stakes search for oil in unchartered territory.  As a business model, it’s terribly capital inefficient.

Innovators often confuse new technologies with new markets.   Location-based services (LBS) for tracking mobile users, near-field communications (NFC) for secure mobile payments, and infrastructure-as-a-service (IaaS) for cloud computing are all important technologies, but may never become the foundation for building great companies.   The VC firm Kleiner Perkins created a Java Fund to invest in Java startups; what they learned was that Java wasn’t a company category — it simply became part of the fabric of software development.   Open source software is only valuable if it solves a business problem better and cheaper than commercial software; once promising open source alternatives from SugarCRM,Alfresco and Pentaho have yet to gain real traction.

There are two arguments for building a product before validating a market.

  • First-mover advantage“If we don’t launch it now, someone else will emerge as the category leader.”   This worked for Facebook but not for ESPN’s Mobile Phone, HP ‘s tablet computer, Solyndra’s solar panels, and countless other half-baked new offers.  Furthermore, being the first mover guarantee does not guarantee success: consider Altair (first PC), Netscape (first browser), Wordstar (first word processor) and Excite (first search engine).
  • Customers don’t know:  Steve Jobs made clear, “We do no market research.  Our goal is to design, develop and bring to market good products … we trust as a consequence that people will like them.”  Similarly, Henry Ford once said, “If I’d asked customers what they wanted, they would have said ‘a faster horse’ ”.  Every century we get a genius or two like Ford and Jobs.  Unfortunately, most innovators are not as gifted, and there are many more examples of technology in search of a market that fail like the Segway transporter, Window Vista and HD Radio.

Technology in search of a market is an expensive risk that businesses can avoid by answering two simple but enlightening questions:

1)    Who is the customer?

2)    What business problem do we solve?

If a company cannot answer these questions, it may have a technology but not a market.  The best use of seed funding is not to build and launch a first release, but instead to prototype with enough customers and ‘pivot’ until you find a big, unaddressed business problem.  (see How Growth Companies Can Stay ‘Lean’).

One lesson growth companies can learn from baseball is that every team of 9 needs a manager to focus on the big picture.  Similarly, every ‘new offer’ team needs at least one customer champion for every 9 developers to be sure to find their field of dreams.

Follow Dave on Twitter: @WDavidPower