Is there any question that companies who are successful over the long term rely on new products to help drive revenue and earnings growth? Innovation is important to all companies, whether they manufacture a product, provide services, or both. In addition, a balanced portfolio of new product projects including lower risk incremental products, some products that might be new to the company from a technology standpoint but exist in the market, and a few higher-risk, new-to-the-world innovations is important (1).
The purpose of this article is to define what I mean by “looking beyond your four walls” and explore how that helps companies be more innovative. Second, a case is made for why this is important based on some data from a recent survey. Finally, some specific, cost effective ideas are proposed for how to implement the concept for small to mid-sized companies in particular.
I believe that many companies over time, especially those who have been financially successful in the past, fall into a trap: they believe that they have all the knowledge in-house necessary to innovate and become too internally focused. I refer to this as a resistance to “looking beyond your four walls”. It manifests itself throughout the organization, with the responsibility falling on the senior manager responsible for the overall business performance to set the expectation that not all good ideas come from within the company and there is merit in looking outside the organization.
In the engineering department, it might drive the “not invented here” syndrome, where ideas not originated internally are rejected out-of-hand. Senior management, Product Managers and the marketing organization may believe they know intuitively what customers want in new products. The service organization may not consider service models used in other industries for providing customer support, and respond to new ideas with the age-old rejoinder: “that is how we have always done it”. It really gets back to thinking about the mental models that the company relies on to innovate and questioning those assumptions periodically.
A recent survey by the Product Development Management Association (PDMA) provides some data as to why having effective external communications is so important (2). One of the questions concerned factors considered important by companies for establishing a culture supportive of innovation. An effective external orientation ranked fourth among eight factors. In addition, those companies considered “best” ranked this significantly higher in importance compared to the “rest” (3).
Before discussing some specific ideas on how to incorporate external ideas into a company’s innovation management system, I would like to make two comments. First, soliciting input from existing customers and suppliers is of course important but my focus here is to expand the scope beyond your specific industry and existing users. Second, the concept of “looking beyond your four walls” is not really new, as many of you surely know. The open innovation movement popularized by Henry Chesbrough’s 2006 book Open Innovation (4) makes the case for using external resources to help augment internal development capabilities. Notable examples of companies who have embraced this concept to help drive innovation include Procter & Gamble and Unilever. Many of the concepts used by large multi-billion dollar organizations are indeed valuable, but not necessarily practical for small to mid-sized organizations. I want to concentrate on ideas that are practical for small to mid-sized companies. Having said that, the ideas below are perfectly applicable to any sized organization.
So let’s consider some practical ways to “look beyond your four walls”.
Pay Attention to Innovation in Unrelated Industries
In a recent article (5) I made the case that it is valuable to consider innovations in seemingly unrelated industries and how that might apply to your industry. The article focused on how innovations in retail clothing industries, entertainment, trucking and other consumer companies might apply to a B2B manufacturing business. Examples included for instance how the use of QR codes are used by retail clothing stores to make is easier for customers to access the correct sizes. How the concept of “gamification” was used by Nike Mexico to engage customers. A trucking company example illustrated how rapid learning techniques were used to iterate a new internet-based concept to manage freight operations. A new Disney video game exemplified how important it is to question long-held assumptions and mental models on how your business creates value. And finally, Amazon’s purchase of Kiva, an innovative warehouse automation company, provided an excellent example of understanding what business you are really in.
The point is, we tend to only consider what our direct competitors are doing, and disregard what might be happening in seemingly unrelated industries. I believe this is especially a problem for many B2B industrial product manufacturers. While many of the innovations in consumer markets might not make sense for an industrial product, maybe some will and can be applied to provide competitive advantage. More importantly, looking at what is happening in other industries can reinforce concepts such as questioning your assumptions, remembering what business you are really in, and the use of rapid learning techniques. Consumer markets tend to be extremely dynamic, with technology and the competitive landscape changing rapidly. The markets for many industrial B2B products are typically less subject to these rapid changes, but monitoring what is happening in more dynamic markets could provide important insight on how to innovate in your market space.
Monitor Changes in Technology
An important activity for any company that relies on existing technology to innovate are changes taking place in a wide range of technologies that a company might currently rely on, or technologies that might be new to the firm and could be used to create innovative new products. Many small to mid-sized companies do not perform fundamental research, but rely on innovations occurring in universities or at suppliers. In many companies multiple engineers may be involved with this activity, but there should typically be a senior-level “gate keeper” who is well connected to the external environment and charged with monitoring the external technology environment.
In the PDMA survey previously cited, technology monitoring is strongly related to firm success, especially as related to break-through, new-to-the-world innovations. The “best” companies are twice as likely to regularly monitor changes in technology compared to the “rest”.
Using Outside Resources for Ideation
Many small to mid-sized companies resist using outside resources for ideation, the process of creating ideas for new products. This is especially true, I believe, for companies who have been successful in the past and believe they know exactly what their customers want. I also think that companies naturally over time become more risk averse, and might tend to focus too heavily on incremental projects (6).
Fortunately, there are excellent university-based programs that can help and are affordable for small to mid-sized companies. These programs are being utilized more widely by large multi-national companies as well. A good example is a program at Philadelphia University called the Innovation Nexus Program (7). This unique program provides a multi-disciplinary team of students that work with a company for an extended period of time to help create ideas for new products.
I recently attended a local PDMA chapter meeting with a panel discussion that included representatives from a large multi-national consumer products company and a mid-sized manufacturing company. In all cases, the results they achieved, including the raw quantity and quality of the ideas well exceeded their expectations. The other benefit described was that getting students involved who had very little legacy knowledge about the business was extremely beneficial, as they were able to look at the market and the products in a very different way.
Read, Read, Read
One of the most inexpensive, but most effective ways to consider what is happening beyond “your four walls” is to read. You may just discover, for instance, that the problems you have managing innovation are shared by many others, along with ideas and solutions that can help. There are of course many excellent books on all manner of topics related to innovation management from the “fuzzy front end” to market introduction (8). Some of my favorite periodicals include the Journal of Product Innovation Management (9), Harvard Business Review, and Fast Company. Of course there are many others, and it is helpful to read a wide variety of periodicals to be exposed to a variety of industries and ideas.
Can reading really help? A good example relates to an article I happened to come across while scanning internet sites. The article described an innovation in the education system called “flipped schools” (10). This started in Detroit and the concept is that school children are required to watch pre-recorded lectures during the evening when they would normally do homework, and then the next day during school they work on “home-work” and get help with the content when they encounter the problem. The results have been impressive.
How could this be applied to your business? For many service or manufacturing companies, customer training is a significant part of the value proposition. Perhaps there is a training “product” that includes a web-link for a pre-recorded presentation that the customer watches at his/her leisure, then a scheduled live group web-based session where specific applications of the material is reviewed and questions answered. By reading and thinking about how to leverage what others are doing might just provide an insight to a new product or service that can provide competitive advantage.
This example helps illustrate another important point. For manufacturing companies, especially in the B2B world, there is a tendency to “fall in love with the product”. We forget sometimes why customers buy the product. Service, support, and how the product is distributed are all part of the value proposition and might provide opportunities to differentiate your offering vs. competitors. Reading and paying attention to new business models and how others are innovating can be extremely valuable in this regard.
The Growing Importance of Social Media
Social media provides another option for expanding your normal network for gaining insight into customer needs and problems that you can solve with your products. In the PDMA survey previously cited, results show that companies are using social media more extensively to gather external ideas as more companies adopt open innovation concepts. It is changing the way products are developed and managed, according to the authors. The “best” firms use a variety of social media more significantly than the “rest”.
In summary, it is not uncommon for successful companies to become closed-minded and believe their organization and existing personnel have all the answers. Looking “beyond your four walls” is really more an attitude and costs very little, but can pay significant dividends in new products and services. It can help expand your definition of your product and generate ideas to provide competitive advantage. That, after all, is a key goal of new product development and innovation in general.
How does your company use external networks? Do you use some of the ideas reviewed in this article? Are there other ways you consider external ideas and networks? Have you used outside resources for ideation, and how did it work? How is your company using social media and do you believe it is valuable?
(1) See this article on a balanced portfolio: The Importance of a Balanced Project Portfolio
(2) For a review of this survey, see: Markham, Stephen K. and Lee, Hyunjung. 2013. Product Development and Management Association’s 2012 Comparative Performance Assessment Study. Journal of Product Innovation Management 30(3):408-429
(3) The “best” were defined as the most successful or in the top third in their industry for new product development (NPD) success, being above the mean for their new product program success, and being above the mean for sales and profit success from NPD.
(4) Henry Chesbrough, Open Innovation. (Boston, MA: Harvard Business School Publishing, 2006)
(5) See this article for more information: What You Can Learn About Innovation From Unrelated Industries
(6) See this article on why companies are becoming more risk averse: Are Companies Becoming More Risk Averse in New Product Development (NPD) Decisions?
(7) For more information, see this e-book: http://www.philau.edu/industrypartners/ebook/#/1/
(8) If you would like a list of my favorite books on NPD and innovation management, email me at email@example.com.
(9) The JPIM is published on behalf of the Product Development Management Association (PDMA).
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