In 2001 Peter Drucker wrote that “businesspeople stand on the threshold of the knowledge society”. In such a society, a company’s competitive advantage derives from a long under-developed asset: the capability to generate and apply insights and qualitative judgments to innovation. Consider Apple which has been built thanks to insights rather than analytics. Steve Jobs’ resistance to quantitative research is well known.
The trouble is that most companies use a number-driven approach to innovation. Companies invest heavily in developing analytical skills and big data. Innovation processes have been over-engineered, with stage-gate processes equipped with financial evaluation tools to support the go/no go decisions. The result is that qualitative perceptions don’t get an airing. Strategy and innovation should be a process in which the analysis serves insights rather than the other way round.
Six rules to improve qualitative judgment But sound qualitative judgment is behind most marketbeating innovations. What you can do to support that? The solution is to embrace a view of qualitative judgment as a core capability and invest to build it throughout the organisation. I have researched six rules to improve the qualitative judgment of innovation:
Democratise insight generation
Companies believe that innovation insight generation is the responsibility of a few, highly-qualified professional people. There is a widespread autocratic view, which conceives that only “the elected” ones are entitled come up with ideas. Interestingly, companies embracing the same credo of Lean Six Sigma are the successful ones. In the Lean Six Sigma world everybody is responsible for the search of ideas to improve operational performance; responsibility is pushed down to the widest and lowest possible level.
Best practices demonstrate how powerful it is to unleash the innovation insight-generation power of all your workforce. Facebook organises Hackathons, all night work events. The goal is to dream up potentially innovative ideas. Even Facebook interns can present their ideas directly to Mark Zuckerberg and top managers who decide in a few minutes which one should go forward.
Train the masses
All people have innate creative thinking abilities, but it is up to managers to reignite them. The best companies deliver training programmes to their staff - no one excluded - to develop a fully democratic and popular skill.
Under the leadership of AG Lafley, in the early 2000s P&G's started an innovation transofmration. Driven by a democratic approach, P&G widened the responsibility for the generation of strategic insights to the mass of the organization thanks to a significant investment in training. P&G created an internal "Innovation College". Over the years, thousands of people went through training.
Explore in the first person
Most companies rely on market research professionals to carry out customer’s explorations. The results are poor -- 80-90% of new products fail every year. A better approach – one used by many successful innovative entrepreneurs - is to explore the needs of the marketplace for yourself. Neuroscience studies demonstrate how insight generation is the result of four factors: motivation, creative thinking ability, skills and knowledge. The latter is essential. So, if you are looking for innovation insights who else should run customer's explorations and other insight generation activities other than you and your staff?
Routinise insight practices
Often, failure is rooted in a common mistake: companies generate insights through sporadic projects. Successful business stories have demonstrated that insight generation need to become a habit. By making it a mandatory routine, the system cannot reverse back after the “strategic innovation or insight generation” project of the year.
Intuit is a great example on how to do it. To fully embed customer’s explorations in the organization, Intuit has routinised the practice in the company’s operating system, and incorporated it in the job descriptions of both executives and employees.
Embed qualitative judgment in processes
Promising insights don’t turn into successful businesses on their own. The organisation must be able to leverage all these insights in their innovation processes. Let’s take the example of Corning, the world leader in specialty glass and ceramics, and its stage gate innovation process. The first ideation stage is when insights progress to concept. To advance to the second stage most companies require a number-driven business case. But, at Corning the progress is based on seven qualitative questions. NPV, DCF and so on are not part of the seven question list. Only at a later stage does the spreadsheet makes its entrance at Corning. This is a compelling example of how quantitative tools should serve and follow qualitative judgment rather than the other way around.
Hothouse homeless insights
Frequently, it is an individual who takes the lead in developing an insight. Unfortunately, in the majority of cases, the strong identification of the idea with its owner makes it politically vulnerable; few people have a stake in it and there are no clear processes on how to fund and advance it.
Individual-born qualitative insights have no natural organisational protection and direction. Consequently they tend to die on the vine. Companies should create an organisational hot-house for insights, in particular for those entering the risky front-end phase.
For example, Samsung Electronics has taken such an approach. It has established a Value Innovation Programme (VIP) Centre dedicated to discontinuous innovation ideas in the fuzzy front-end phase. Anyone with an insight can pitch it to the VIP Centre. If selected, the VIP plays a pivotal role in assembling an innovation team composed of engineers, designers and marketers from the divisions.
They are supported part-time by the Centre's specialists, who are experts in the tools of strategic innovation and customer research. When proof of concept is completed, the project progresses to the standard product development process.
Moving forward
Building a qualitative judgment capability requires a significant shift for most companies, which are deeply ingrained in numberdriven innovation. For many companies, to develop such a capability will remain a source of frustration. For the best ones, however, it will represent an exciting journey and the ultimate competitive advantage in today’s knowledge society. Why wait?
(The author is the founder and CEO of the European Centre for Strategic Innovation (ECSI) and ECSI Consulting. You can follow him on Twitter @alexdifiore or send a mail adifiore@ ecsi-consulting.com)
