If you don’t work on important problems, you won’t achieve important results.
Do you work in a customer-focused enterprise? Does everyone understand the fundamentals of value creation – a core responsibility of all professionals?
You can easily test whether this is true when you visit an organization. As you walk around ask middle-level managers to describe their value-creation methods. You ask them because they are responsible for implementing these practices. Also, ask them for the definitions for innovation, customer value, and the value proposition? If you don’t get consistent and reasonable answers from those most responsible, that enterprise doesn’t have an effective value creation process.
After working with senior executives from hundreds of enterprises, including many Top-50 companies, we have never received consistent, coherent answers to these questions. In our workshops we often ask the CEO and management team to write down on sticky notes the answers to those questions and then post them on the wall. What do they see? There has never been, even remotely, agreement.
At a minimum this proves that the enterprise's value creation methodology is less efficient than it could be. If managers and employees do not share a common understanding for the most basic value creation concepts, they can’t be customer focused or work efficiently.
Major Performance Improvements
How much improvement could most enterprise's make? In our workshops, we typically find that around 25% of the initiatives presented have significant value. This finding comes from working with over 500 teams in major global companies, start-ups, national laboratories, and universities. In one Top-10 company nothing they were working on had any value. This poor performance is not just our conclusion. It comes from the teams after participating in our 2-to-3-day workshop.
We conclude that by simply eliminating projects without value, most basic R&D investments could be effectively doubled. But, as you would expect, the upside is much greater. It is often over ten times as employees learn how to focus on more important initiatives.
In past postings, I described the NABC value proposition we use to start all initiatives (i.e., Need, Approach, Benefits/costs, and Competition). It captures the most critical concepts that always have to be answered at first. About 95% of the time the mistake teams make is what we call a "Big A." The teams are completely focused on their approach and have not yet identified an important unmet need.
The lack of an important unmet customer and market need is the source of most failures. Teams have a sense of a problem but have not identified a specific, quantifiable customer or end-user need. For example, when Nokia asked their customers what they wanted to allow better search on phones with tiny keys, their customers said, “More keys.” That was wrong. Nokia had identified a problem, but the actual need was for a reconfigurable display that allowed for infinite “keys.” Seven years later Steve Jobs had put Nokia out of business.
Important: Not Just Interesting
Given all this, the goal is to work on IMPORTANT unmet customer and market needs and not ones that are INTERESTING just to you. For sure, you always want to be passionately interested in your work. But the good news is that important problems are almost always interesting. Just consider what Musk is doing with Tesla, SpaceX, and Neuralink. These are all fascinating, exciting initiatives.
Of course, what is "important" depends on your enterprise. A significant improvement in solar cell efficiency of 1% a year over ten years might be game-changing. But if you are making computer chips, you might have to improve performance by 100% every 18 months to survive.
In addition, every organization must innovate across the different elements of the business. Typically, enterprises have ongoing operations, where incremental improvements are critical. At the same time, to beat the competition, more disruptive innovations can be regularly required, like in communications as we go from 4G to 5G to 6G.
One measure of significance is how many people are impacted by an innovation. For example, when we created HDTV, the potential customer base was first the population of America and then the world.
Here are some additional guidelines:
- The unmet opportunity is aligned with the enterprise’s strategic vision, goals, and metrics.
- It is a potentially big, growing opportunity in the "white space" with relatively little competition at first.
- There is a "beach-head" of early adopters to get started fast.
- The customer cares. It is of high priority — urgent.
- The solution is 2-10X better than the competition and all other alternatives.
- There is a defensible solution with a viable business model.
- All the parts and resources can be assembled, including the team.
- And you and your enterprise care passionately about bringing the innovation to life.
When I was CEO of SRI International in Silicon Valley, we always had a portfolio of significant innovations under development that started with a compelling, quantitative NABC value proposition. Every year we created one or two new innovations and on a regular basis we developed ones that became major innovations, such as HDTV and Siri, which Steve Jobs bought for the iPhone and that added over $50 billion to Apple's market valuation.
At the same time, we had performance and innovative metrics for ongoing operations. Because, when I was CEO, all value creation activities at SRI started with NABC value propositions, SRI became a customer-focused enterprise. Initiatives in all functions, whether R&D, finance, or HR, began with the customer's unmet need. When everyone performs this way, it is transformational.
Our experience proves that individuals, teams, and enterprises can systematically generate new value for their customers, and reap the rewards for doing so, when they rigorously adhere to three fundamental principles:
- Identify important unmet customer and market needs — to make an impact.
- Use shared value-creation concepts like NABC value propositions — for effective team collaboration focused on the customer.
- Embrace team feedback in recurring Value Creation Forums — to learn and improve faster than the competition.
Unfortunately, very few enterprises satisfy all three of these criteria. But don’t let that stop you. You and your teams can start today to work in this profoundly more meaningful and productive way.
Carlson was the President and CEO of SRI International in Silicon Valley from 1998 to 2014. During this time SRI's revenue tripled and SRI became recognized as one of the world's most productive innovation enterprises, having helped create Siri, HDTV, Intuitive Surgical, and many other world-changing innovations. Curt started his career at RCA and then GE before joining SRI. He has formed a management consulting group, The Practice of Innovation (PoI), to share with companies, governments, and universities what he’s learnt about innovation, education, and economic development.
With William Wilmot Curt wrote the book "Innovation: The Five Disciplines for Creating what Customers Want," which was selected by BusinessWeek as a Top-10 Business Book. It describes the innovation principles learned over my career that have proven to significantly improve innovative output. A new book called "Creating Abundance" will be published in 2015. It builds on the previous work and describes in detail how the fundamental concepts from "Innovation" can be applied to established companies, startups, government R&D, education, and economic policy.
Carlson has helped create over two dozen new companies, his teams have won two Emmys (one for HDTV), He is a member of the National Academy of Inventors, and has advised ministers and prime ministers around the world on innovation practices and innovation policy. Carlson himself is a member of President Obama's National Advisory Council on Innovation and Entrepreneurship, and is currently a member of the scientific advisory boards of the government's of Singapore and Taiwan.