Outcome-Driven Innovation

Tony Ulwick
CEO
Strategyn

Companies have wavered in their endeavor to bring the customer into the process of developing corporate strategy, primarily because the results are often mixed. Over the years the pendulum has swung full circle from having customers actively provide input to strategy to excluding them altogether. The reason the approach has not successfully worked in the past is that companies often engage their customers in a way that can actually be detrimental to the formulation of a strong strategy.

In the years of analyzing the customer-driven approach to innovation, I have discovered one factor that stands out more than all others in derailing the customer-driven approach and in introducing process variability. Ironically, it is the inputs that come from customers-that's right, the customer's requirements. When companies gather customer requirements they do not know what types of inputs they need to obtain from customers. Neither do their customers. Consequently, customers offer their requirements in a language that is convenient to them-but unfortunately that language is not particularly convenient for the creation of breakthrough products.

I have spent years defining just what inputs companies must capture from customers in order to innovate successfully. Along the way, I've created a more effective approach to innovation-we call it the outcome-driven method. It is a new way to think about the innovation process. Three key tenets define this approach:

Customers buy products and services to help them get functional and emotional jobs done. When at home, a job may be to pay bills (for which you could use Quicken), stay in shape (possibly at Curves), or whiten your teeth (Crest Whitestripes).

When executing a job, customers have a set of metrics embedded in their subconscious that define to them just what it means to get that job done efficiently and achieve the desired result. If a specific product satisfies all of these metrics, they will have the ability to get the job done perfectly. For example, a product designed to whiten teeth should minimize the length of the application, increase the degree of whiteness that is achieved, minimize the likelihood of tooth sensitivity and minimize the frequency with which the whitener must be applied. For any job, there may be 50 to 150 of these metrics which we call the customers' desired outcomes.

Once these outcomes are known, companies are able to more effectively identify opportunities, segment markets, conduct competitive analysis and brainstorm and evaluate ideas for new products and services. This approach is what we call outcome-driven innovation. By knowing how customers measure value we are able to create it with precision.

Applying a systematic approach to deciphering the voice of the customer allows companies to consistently innovate to both the current and future customer needs. This approach also allows organizations to prioritize their initiatives in light of the customers' top priorities and ensure the organization's value proposition is aligned with these priorities.

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