How ‘Little Ideas’ Can Lead to Powerful Innovations
Wharton's
David Robertson discusses his new book on innovation.
When most people hear the
word innovation, they think about Uber, Airbnb and Amazon — disruptive
companies that upended entire industries with a radical new way to do business.
But Wharton operations, information and decisions practice professor David Robertson argues that this view is too narrow a definition of
innovation, and one that is not useful to most companies.
In his book, The Power of Little Ideas: A Low-Risk, High-Reward
Approach to Innovation, Robertson talks about a more practical way companies
can innovate: by focusing on complementary actions around a key product. He
teaches innovation and product development at Wharton and is the host of Innovation
Navigation, a Wharton Business Radio program. Robertson
recently spoke to Knowledge@Wharton about his book.
An edited transcript of the
conversation follows.
Knowledge@Wharton: The inspiration for this book actually came, in some
ways, from a can of paint. Why don’t you tell us about that?
David Robertson: My previous
book was about Lego, and that was a story
about a company that figured out that you didn’t want to innovate inside the
box — that wasn’t going to get them anywhere — and you didn’t want to innovate
outside the box because that almost put them out of business, but rather, around
the box.Complementary innovations around a core product — the brick for
Lego — was what really led them to their recent success.
I got my house painted a couple of summers
ago, and the contractor I hired put together a proposal. He helped me choose
colors and helped me decide what kind of paint, what things needed painting the
most, and how I’d manage on a limited budget. He put together a proposal, and
he picked Sherwin Williams paint.
I looked at my favorite consumer ratings
magazine, and Sherwin-Williams paint is good, but it’s twice as expensive as
another paint that’s equally good. So I talked to him, and I said, “Can’t we
use this other paint?” And he said, “Well, yes, we could, but it’s going to
raise your price.” I said, “I don’t understand, the other paint is half the
price.” And he said, “Yeah, but paint is only about 15% of the total cost of
your project. I have to think about all the supplies; I’ve got to line up the
labor; there’s the overhead of running a company, etc..”
He said, “What Sherwin-Williams does is help
me though the entire process of working with you, from helping you choose your
colors — there’s a Sherwin-Williams color consultant — to figuring out how much
paint is needed for the primer, and for the paint itself, brushes, tarps, all
the other supplies. Then, during the project, it is keeping me supplied — I can
return extra primer if I don’t need it. If I run out of something, that
Sherwin-Williams rep will be over at the site, delivering what I need. Then, at
the end, he helps me put together that next proposal. Because there’s always a
next proposal, as any homeowner knows.
I looked, and it turns out within a five or
10-minute drive of my house, there are more Sherwin-Williams stores than there
are Starbucks, and that’s because they realized who their customer is. It’s not
me. I’m the end consumer, of course, and I’m the one that has Sherwin-Williams
paint on the house. But it’s that small business, the painting contractor,
[that they focus on]. Sherwin-Williams, like Lego, realized it’s not so much
about the product — their product is a can of paint — it’s about their
innovations around the product that make that product more valuable.
I wanted to write a book for companies that
wanted to try this approach to innovation. I don’t argue that there’s one best
way to innovate, but it seems like it’s a tool that every innovation leader
should have in their tool belt.
Knowledge@Wharton: What isn’t being discussed when companies think about
innovation, or how they should strategize toward an innovation?
Robertson: I interview innovation thinkers, gurus, consultants,
executives who have done interesting innovative things, and I continually see
this binary view of innovation … — [develop] an incrementally better version of
your current product here … or something revolutionary and disruptive, be it
some kind of Blue
Ocean Strategy thing (creating an uncontested market)
or lean startup or disruptive technology, some kind of new and better version
of your business. In other words, leaving the old behind and venturing out into
new territories.
To see innovation in that binary way is
dangerous. Most people in most companies doing most of the innovation are
focused on that current product that needs to become more competitive. Maybe
it’s competitively challenged; maybe it has become a commodity, whatever. What
I liked about the approach of Lego and Sherwin-Williams was that it was focused
on that type of innovation: How do we take our existing product and make it
more compelling, make it more valuable for our customers?
Knowledge@Wharton: Your book is not saying that in using this ‘third way’ of
innovating, we have to throw out things. It’s more about finding the right
toolkit to use for whatever your problem happens to be, or to solve your market
issues. Are there ways, once you start using this third way, to keep your
employees on track?
Robertson: This book was a hard one to write, because the stuff in
the middle is really review. It’s the material at the beginning and the end
that’s different. What I lay out in the book is a four-step process. And the
first step — what you are asking about — is really the step of answering, “Who
are we as a company? What are our crown jewels? What are those things that we
did yesterday that we’re going to do today and that we are going to do
tomorrow? The things that made our company great, that our customers still
depend on us for? What’s our [Lego] brick?”
Some companies have many different bricks.
Lego was easy. Sherwin-Williams was easy. But there are other companies where
it’s more difficult [to find the key product]. But starting small, choosing
something important, and then trying to understand what customers are getting
from the product is the first step. That is a different step. It’s almost where
you’re not going to innovate. What’s going to stay the same? I
think that’s a much more stable base to build innovation efforts from. Then,
once you’ve done that, it’s understanding what the value is to the customer,
what I call “the promise,” that’s the second step.
Then you come to the third step, which is the
creative idea generation, and there’s lots of different ways to do it. Then,
going into some of the prototyping and experimentation to understand whether
you have the right ideas, that’s all pretty well-trod territory. I put in some
things that are unique to this approach to innovation in the book. But then,
it’s the fourth step, and you have to read all the way to Chapter 7.
If you’re a company that’s good at product
development, developing a better version of your product or service, then you
have probably set up roles and responsibilities, and structured processes,
metrics, reward systems, that make you very good at that. But that actually
prevents this approach to innovation. You have to change some of that,
otherwise, you are setting your team up for failure. That last part, about how
you change your organization to give your team the chance to be successful,
that’s what makes this so hard.
Knowledge@Wharton: You also have to organize your company that way, because
if it’s organized toward disruption, you can’t do this.
Robertson: That’s right, and it’s why I suggest starting
small. Get a team organized around some product, and give them the freedom to
really think more broadly than just about the product or service. Rather, give
the team the mandate to start thinking about other services, partners, channels
to market, whatever, that will really help your customers get more value from
the product. That’s something that can be really difficult to overcome in a
company. But if you start small, you can show that it’s valuable, and then
build up from there.
Knowledge@Wharton: Now you also point out — using Kodak as an example — that
this is not the answer for every company, for every problem. For example, Kodak
probably couldn’t have used the third way to survive the advent of digital
photography.
Robertson: That’s right. I think of it as another tool in the tool
belt that I don’t see people talking about.
Knowledge@Wharton: One of the things you talk about in the book is that Lego
— back when their fortunes had declined, and they were looking for a way back
to growth — first turned to incremental innovation. Then they turned to
disruption, and then they turned to this [third way of
innovating around the box].
Robertson: I saw that pattern being repeated again and again. I saw
it with Apple; I saw it with Gatorade. One of the first things that companies
tend to do is … maybe they’ve grown because they came out with a great product.
So they do more of that product, and they expand it to new geographies, and the
company grows and everything’s wonderful. Then, all of a sudden, that’s not
enough. That avenue for growth hits its inevitable end. Then what often happens
— what happened at Lego, Apple, Gatorade, etc. — is they keep putting out more
versions of the product.
Every new variant that they spin off makes
less money, but has just as much cost. So profits go down, sales don’t go up,
and the whole thing — if you keep doing it — will result in a problem. What
happened at Lego — as also happened at Apple, and that happened at other
companies — is that they begin to ask this: How can we reinvent the future? How
can we reinvent the future of play for Lego or computing for Apple or whatever?
And they come out with all kinds of revolutionary disruptive products. And
that’s really dangerous. It’s expensive, it’s difficult, it fails a lot.
It doesn’t mean you don’t want to try. You
absolutely want to try. You have to have somebody looking out there to see
what’s happening with technologies, and with competitors, and new low-end,
high-tech solutions that could disrupt you if you’re not really paying
attention to it. You’ve got to be focused on that.
But it’s tough to bet the company on it. It
was only when those companies went back to the core product and started
innovating around it that they began to have the success that they had.
Knowledge@Wharton: A lot of times, when people talk about innovation at
Apple, what they talk about is disruption. You argue that it’s the third way
that actually came first.
Robertson: Yes, and I get a lot of heat for that second chapter
about Apple, because I’m arguing that [its late cofounder and visionary CEO]
Steve Jobs was not a disruptor. He was disruptive, but not a disruptor. That
may sound like academic nitpicking, but I think it’s really important, because
it says something about where innovation leaders should look for ideas. Let me
go into that in a little bit of depth.
Apple, when it came out with the iPod and
iTunes in 2001, made major changes in the music industry. Of course, in 2003,
when they opened up the iTunes Store, that was a big change. And it opened up
the first major digital market.
If you’re a music company or if you’re a
company making MP3 players, that feels like a disruption. But the point that I
try to make in the chapter is that Steve Jobs was not looking to disrupt.
You’ve got to go back to 2001 to see that Apple was a company that had focused
on the PC market, and had steadily been losing share. I think they had a peak
of about 15% in the mid-1990s … and hit a low of 4% market share. Things were
really bad at Apple in 2001. Of course, it was the tech crash, so there was
less demand, but things were not going well.
What Steve Jobs was doing with the iPod and
iTunes was he came out — and I urge anybody to go back and listen to his
Macworld presentation from 2001, where he shows a picture of a Mac in the
middle, and he shows around it a VCR and a digital camera and a CD player and a
Palm Pilot — and he said, “Your life is becoming digital. Your pictures are
digital, your movies are digital, both the ones you watch and the ones you
take. And your music is digital. And in no place is this experience worse than
with music. So, we’re going to help you manage your digital life.” And then, he
introduces the iPod and iTunes.
And iTunes, actually, was a product called
SoundJam that he’d acquired the year before and improved slightly, but it was
introduced as iTunes. And of course, the iPod was, at that time, an MP3 player.
And Steve Jobs, if you go back and read Walter Isaacson’s biography, fought
like crazy resisting taking iTunes to the IBM platform, which of course, was
necessary. I mean, the customers just demanded it, so he had to. But the
purpose of the iPod and iTunes was not to disrupt the music industry, it was to
complement the Mac. It was to sell more Macs and to make the Mac more valuable.
It was to make it the hub of your digital life.
Again, if you’re in the music industry, those
feel very disruptive. But Steve Jobs was not looking to disrupt. He was saying,
“What is our brick? What’s that center of who we are? It’s the Mac. How can we
sell more Macs? Well, by making it more valuable. Well, what do people want?
They want to manage their digital life.” And in 2001, that was becoming a real
thing. Let’s do that for one area — music — and let’s see whether that can’t
sell some more Macs. It really was, I think, a misunderstood case. That is not
a case of disruption, not from the standpoint of what was going through Steve
Jobs’ mind in 2001.
Knowledge@Wharton: What do you think is Apple’s brick today? Would it be the
Mac or the iPhone?
Robertson: They followed where their customers led them. That iPod,
of course, became the iPod Touch, and then it became the iPhone in 2007. Then
the App Store opens up in 2008, and there’s this whole system of complementary
innovations around the iPhone. Now, of course, they make a lot more money from
the small screen than from the big screen. The iPhone has become its own center
of a system of complementary innovations. One of those, of course, is the
Watch. We will see whether the Apple Watch becomes a third center. It doesn’t
look like it is. It looks like Apple is not quite able to execute. One of the
things that Steve Jobs was able to do, he had that force of personality that
demanded everybody in the company work together to make an insanely great
customer experience.
Well, as the company has grown, and as Steve
Jobs is gone, it may be getting harder within Apple to bring together all the
different parts of the company to really make that seamless experience. To make
it not around one center, but around two or even three, if you count the Watch.
I end the book with a story of Disney. Disney
is both a great example because they were the first to do this — back in 1937,
they were doing this with the first animated feature, Snow White and
the Seven Dwarfs. They also had records, so you could sing along. They had
bath salts, so you could smell like Snow White. They had events at the movie
theater. The Mickey Mouse Club, at its peak, was bigger than the Girl Scouts
and Boy Scouts combined. All those things made the movie more valuable and the
whole experience better. But as Disney grew, and — especially during the [CEO
Michael] Eisner years, this has been well documented — all those different things
became their own business units.
So there was the theme park business unit,
the movie business unit, the stores business unit, and the TV shows. All those
things kind of went in their own direction. And the one that was let go, that
lost some of its luster, was movies and telling stories. A lot of the
characters in the stories were the things that drew people to Disney World, and
to the merchandise in the stores and so forth. And Bob Iger, when he took over
for Eisner, realized that. He said, “I had this eye-opening trip in Tokyo,
where I looked around, and all the characters that kids were really excited by
or interested in were either very old Disney characters, like Mickey Mouse or
Donald Duck and Goofy, or the new ones from Pixar.”
All the other movies that they had been
making — The Princess and the Frog, Bolt — were
just a lot of very ho-hum movies that Disney put out. They’d lost that art. So
Iger purchased Pixar, and used the management of Pixar to help revive the
fortunes of the Disney innovation. Of course, that led to Frozen and
some of the other great Disney animated features that we’ve seen, and a revival
of the whole system of innovations around it.
Knowledge@Wharton: How do you find those ah-ha moments, like when Gatorade
realized that athletes were its core audience?
Robertson: It starts with that question, ‘What are our crown
jewels?’ Lego asked the question, ‘What would the world miss if we were gone?’
And what they found was that people would miss the brick, the plastic brick. …
The toys that didn’t have bricks in them were the toys that failed. People felt
that if there was no brick, they had no reason to do business with Lego. They’d
rather go to Fisher-Price or Mattel or Hasbro. Just asking that question, ‘What
are our crown jewels?’ And then, for each of them, what would the world miss if
it was gone? Then, going out and talking to those customers and watching them
use the product. Watching kids play, or watching a contractor paint a house:
That’s what you have to do to understand where other innovations might make
that crown jewel more valuable to a customer
http://knowledge.wharton.upenn.edu/article/power-little-ideas/?utm_source=kw_newsletter&utm_medium=email&utm_campaign=2017-06-01
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