Oh My! Why Innovation Fails

by Dan Blank on July 16, 2009

Publishing is changing. Audience & customer behavior is changing. The options available to potential advertisers and business partners is changing. Information creation and consumption is changing.

Because of this, publishers and media companies are looking for innovative ideas to reignite their businesses. And yet, those efforts often fail. Today, I want to take a look at why.

Innovation Needs to Help Customers
Should publishers and media companies be looking for the next big thing? Should they be rethinking how their business works, how they serve customers and develop products? A few weeks back, I looked at some of these questions in a post titled "Minimize the Risk of innovation."

In my personal life, I am very conscious to analyze my interactions with businesses and brands – each purchase becomes a case study. It is incredibly difficult to create a successful business, and that’s why I can never figure out why customers are treated so poorly, so often.

Perhaps a lack of customer focus can be due to the search for explosive growth, not on customer satisfaction. That a new customer is somehow more valuable than an existing customer is a common trend here, and each is seen as either "on" or "off," not a more graded level of satisfaction. Bringing this example from retail to media: a magazine might have 20,000 subscribers, but are their needs really being met? Are they truly satisfied, or are they just happy enough with the product to not bother canceling the subscription.

Every employee is a customer service employee. This is a key insight into brand experiences that are meaningful vs experiences where you realize no one really cares about your specific needs and problems, because it is someone else’s job to do that.

Maybe customers are treated poorly due to rationalizations of broader strategies. When only very specific metrics are valued (such as metrics of quantity, not quality), and they are attached to very specific programs that take into account company goals (eg: sell 20% more frappuccinos today), and not customer goals (eg: get my coffee fast and correct because I am late for an appointment.), it can create a divide between brands and those they serve.

Innovation Is About Delivering Real Benefits, Not Trends
When brands look to innovate, they may look too far away from the only thing that matters: the needs of customers. A focus on internal business processes, mission statements, employee outings, catchy sayings and new webby things is just silly if it doesn’t have a positive affect on the lives of customers.

Increasing revenue should not come from shoving more products down the throats of customers, but by working to better understand and solve their needs. Oftentimes, innovation can be about taking something away, not adding another product to an already crowded mix.

There are lots of stats out there on the value of an existing customer compared to trying to obtain new ones:

  • Acquiring a new customer costs 5 to 10 times more than retaining one.
  • A 5 percent increase in retention yields profit increases of 25 to 100 percent.
  • Repeat customers spend, on average, 67 percent more.
  • Twenty percent of customers account for 80 percent of total revenues.

Another barrier to real innovation is described by Seth Godin, who gives a good explanation of the danger of convenience in business strategy:

"Warren Buffet and Benjamin Graham invested in Circles of Competence. The idea is to buy what you know."

"Too often, organizations confuse this with circles of convenience. They stick to the tactics, products, people and channels that they are comfortable with, instead of rethinking what the market demands."

"Convenience is hugely attractive in organizations because it is easy to defend and easy to approve. You don’t need to call a meeting to try something new, because the convenient option has already been approved. The problem is that convenient approaches rarely break through or generate extraordinary returns."

Tips for Finding Innovation and Growing Your Business
Here are some ideas for how to approach the innovation process. For many of them, I can think of good counterarguments as well, so take all of this with a grain of salt!

  • Innovative Ideas Should Bubble Up

    Don’t always assume that you need charts and graphs and fancy business strategies with high-level employees to identify innovative ideas. Innovation often starts in the most mundane of places, with customers and those employees who interact closely with them on a day-to-day basis. It is there that you can find behavior patterns, unmet needs and broken systems. You may also find innovative solutions that employees in the field have fashioned out of virtual duct-tape to make a system better or to deliver on a customer’s expectations. Those odd solutions can often lead to a breakthrough that can be expanded company-wide.

  • Leadership Needs to Support Change

    Company leadership is the essential driving force to creating a culture that looks for solutions in odd places, that creates open communication channels that can spread these ideas, and can explore new processes and projects even if they are not easy to do.

  • Embrace the Small

    Look for small ideas that deliver real results – not just big strategies that feel exciting. You don’t need to identify huge sexy ideas – often those are the most dangerous. The simple things can be ideas that are sustainable and deliver on immediate customer needs.

  • Innovation is an Iterative Process

    While brainstorming can take place anywhere, executing on those ideas should not be locked down with too many parameters. The cartoon at the top of this article is a good example of how many approach innovation – they box it in so much that the only thing that will deliver on the expectation is doing the same thing the same way.

    Sometimes, new ideas need time to play themselves out and go through iterative rounds of tweaking before you will really know if they are solid or not. An innovation like the iPod is a good example. It arrived late to a game that was already over – yet still found new ways to reinvent the way we buy and experience music.

    You can’t innovate if you impose limits on what you can change, and how much you can change.

  • Allow Anyone to Innovate

    Don’t exclude people from the innovation process based on their level of authority or because they are somehow different from what you think you are looking for. .

    Innovation can’t be a privilege given to a select few in a certain role or level of stature. Sometimes, that can even be the opposite way to innovate – they could be folks who are so entrenched in the company culture that they can only think of "innovations" that are just slightly different ways of doing the same things, or that employ common practices, or that benefit specific parts of the business and not others.

    People must be able to break out of their roles. You might be amazed at the ideas an art director has for a technical problem or vice versa.

  • Don’t Always Focus on New Customers

    It can cost a lot more money to try to find new customers as it does to keep an existing customer and sell them more products. Don’t take these customers for granted in the pursuit of higher quantity metrics that don’t really matter that much as quality metics. There are tons of highly profitable businesses that stay small. And for the others, it will be difficult to grow until they fully understand how to not just sell to people, but satisfy those people’s expectations and fully solve their needs.

    Need ideas for innovation? Call your existing customers and ask them what their problems are. Then ask yourself, how are you working to solve those problems.

  • Don’t Spread Yourself Too Thin

    A colleague of mine, Josh Hale, recently shared this quote via Twitter:

    "We believe in saying no to thousands of projects so that we can focus on the few that are meaningful to us."
    – Tim Cook, Apple

    It only takes one experience with an Apple product to realize that a focus such as this creates something truly remarkable. Why would B2B publishing be any different?

  • Focus Out, Not In

    Here is a recent quote from Kathy Sierra:

    "Rather than focus on our *own* brand, what if we imagine our job is to realize/improve on the "brand" of our users?"

    Mistaking internal goals for those of customers can lead companies down the wrong path. Don’t get too wrapped up in things that don’t have an immediate and positive affect on the lives of your customers.

  • Avoid Groupthink

    Your ideas are not always the best. Get away from groupthink; don’t shout down or punish those who share seemingly off the wall ideas, or ideas that go against existing strategies. Innovation is not an exercise to prove that you were right all along.

    Likewise, sometimes a good idea needs to be appreciated, but then looked at with scrutiny, and perhaps set aside because it is good, but not great. Perhaps George Patton said it best:

    “If everyone is thinking alike, then somebody isn’t thinking.”

  • Focus on Solving Customer Needs

    Designing and developing products is hard – REALLY hard. It is not uncommon to see companies get bogged down in the process, and see a great idea turned into a compromise that aligns to "what they could do," not "what they should do."

    Likewise, many well established companies fear pillaging existing revenue streams, so they "innovate" very selectively, in ways that offer no threat to existing products and those that create and support them. Newspapers tried to do this – innovate in ways that didn’t endanger their core products. The problem is that, instead of evolving to serve the needs of their customers, they evolved to serve the needs of internal brand managers. And in the meantime, new competitors cropped up who saw opportunities that newspapers wouldn’t act on. Hoping that no one will act on these opportunities is the downfall of the music industry, in a transfer of power from large music corporations to a wider network of players.

  • Don’t. Be. Afraid.

    Don’t judge too quickly, or resist change out of hand, or consider how a change makes you more or less valuable. Innovation is like holding a mirror up to yourself and the asking everyone around you to comment. But in doing so, you are seeking the truth, and as a company, you are seeking to find value that will make your customer’s lives better.

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