Thought Leaders
Innovation: Connecting What's Needed With What's Possible

Larry HustonSuccessful innovators can neither ignore the consumer nor expect the consumer to lead them to the next great idea. Innovation occurs at the intersection of deep consumer insights and company innovation. "You need to connect what's needed with what's possible," said Larry Huston, former vice president for innovation and knowledge at Procter & Gamble and a faculty member in Full-Spectrum Innovation: Driving Organic Growth. "What's needed comes from the consumers. What's possible comes from internal company invention. How do you utilize the world to bring solutions to the consumer?"

Sometimes innovation tends to focus only on understanding consumers or only on the possibilities in the lab. "It is important to recognize that there are two actors in this process," Huston said. "How do you make sure you have a high-fidelity transfer of consumer experience to the empathetic mind of a researcher to design solutions?"

What Is Needed: Develop Deep Consumer Insights

Consumers do not wake up in the morning and ask for a Swiffer mop or a SpinBrush, but once these innovations appear, they are snatched off the shelves. "A common layman's belief is that consumers can invent," said Huston. "Even actively involved consumers are not very good at it." Many of the studies that show the importance of lead users and consumer invention are in technology industries where this is more common.

This doesn't mean that consumers should be ignored. In fact, Huston argues that companies should look deeper into the hearts and minds of consumers to develop what he calls "deep consumer insights." One of his core principles of innovation is that "all success begins with deep consumer insights as a necessary condition."

Deep consumer insights mean knowing more about consumers than they know about themselves. Many companies use ethnographic approaches to observe consumers in their natural habitats, in hopes of gaining insights that will lead to new products. But Huston has developed a deeper approach, a knowledge map "that links together in a highly disciplined, detailed way, emotion, logic, and sensorial experience with mind, body, soul, and task." He has focused on gaining deep insights into "the unconscious thoughts and feelings below the conscious level."  Ethnography will not get to that level.

Consumers describe problems and dreams. It is up to the innovator to translate these problems and dreams into solutions. This requires that researchers be able to hear both articulated and unarticulated needs and transform these consumer insights into business model insights. "Most researchers fail miserably as listeners," Huston said.

What Is Possible: Connect & Develop

To understand what is possible, companies need to look beyond their own labs. Huston pioneered the Connect & Develop (C&D) strategy at Procter & Gamble. In contrast to traditional internal innovation (R&D), the C&D strategy focuses on connecting with innovators around the world. When Procter & Gamble was looking for a way to print images on its Pringles chips, this network allowed it to identify a small bakery in Italy that had already created a process that could be adapted for this purpose. "Not invented here" was once the kiss of death for ideas in organizations that focused on internal innovation. Now it is a rallying cry for growth.

This C&D strategy meant that instead of only tapping the creativity of the 9,000 researchers and support staff inside the company's labs, P&G could tap into the estimated 1.8 million researchers outside. By 2006, more than 40 percent of the company's products on the market contained elements that originated outside the firm. The company is well on the way to achieving the goal set by CEO A.G. Lafley that 50 percent of innovations come from outside the company. In 2004, P&G was ranked by Fortune as the number-one global innovator and by Forbes as the number-one brand company.

Beyond Incremental Thinking

In addition to linking needs and possibilities to create innovations, companies must also push for discontinuous change. Breakthrough innovation doesn't come from tweaking the status quo. "We must rid ourselves of incremental, rote thinking and recognize that innovation comes from developing new mental models," Huston said. "Discontinuous goals free us."

To encourage this kind of thinking, Huston has developed a process called Consumer Discovery Studio. The process pushes executives to challenge themselves. How do you develop a half-billion-dollar business? Managers cannot create a half-billion-dollar business by doing more of the same.

Creating a strong "brand dream" can also propel the process of innovation forward and help to market it once it is launched. Toyota's hybrid Prius became a success because of the environmental commitment of consumers. These consumers would talk up the car to other potential buyers. "If you want to build the brand, design in benefits for creating awareness and advocacy," Huston said. For Prius, the benefit to consumers could be the identity with a certain set of values. Other products might offers benefits such as recognition or rewards.

The Innovation Imperative

Why has innovation attracted so much attention recently? Wall Street values top-line growth, Huston said, and there are two primary ways to achieve this growth: acquisitions and innovation.  Investors reward innovation more highly than acquisitions, and the opportunities to grow through acquisition are diminishing.

Huston said the CEO of a major financial services firm recently said that the company used to draw 75 percent of its growth from acquisitions and 25 percent from innovation. It now relies upon innovation for 75 percent of its growth. "Companies cannot achieve the growth they need without innovation," he said

Creating New Growth Platforms

Huston is now looking beyond the development of specific products to a broader issue: What are the growth platforms of the future?  We have already seen how industries such as computing, telecommunications, and entertainment are converging. What new combinations could be the platforms for the future?

For example, the combination of a consumer goods company, a software firm, and cell phone maker might allow the consumer goods company to use the cell phone as an effective marketing tool and could be designed in a way that benefits the other partners. "Collaboration across companies with new business models allows them to create innovations that were not possible before," Huston said. "It is looking at the next S-curve and how to develop the business models of the future."

About the Program

Full-Spectrum Innovation will help you capitalize on the sweet spot between emerging trends, organizational capabilities, and unmet market needs. The program will feature a panel called "Innovation in Cyberspace: Mining the Value of Blogs, Search Engines, and Insights From Front-Line Innovators" that will feature a discussion among bloggers, search engine optimization experts, and industry innovators.            

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