Today’s guest blog post comes from Todd Dunn, Vice President of Innovation at Advocate Health. Below, Todd shares his three-step process, grounded in Christensen’s theories, on how to shift innovation from a vague buzzword to a clear way to make progress. In Improve or Transform, our “how-to” guide for health care executives seeking to effectively change their business models, we help leaders identify the business model that is right for them. Here, Dunn adds perspective to the roadmap we provide and calls out three steps leaders can take to seed future success. Read on to learn from how this innovator in action is leveraging theory for progress.
In early 2011, during my first dialog with Clayton Christensen, I asked him, “Who is the most innovative company in the world, and what causes you to say that?” He immediately answered Intuit. He said this was because they had an innovation system focused on the consumer’s desired progress, which they could deploy across the entire company, then measure and refine over time. In hearing this answer, which clearly defined why an innovation is, in fact, innovative via its components and value proposition, I’ve worked to move innovation from being just a vague, mystical descriptor to a more tangible mechanism of progress.
This shift starts with understanding people and their contexts. High-performing companies like Intuit design for what is valuable to consumers and customers. They have a process to intentionally learn from people, and then those lessons inform how they design their business model to deliver value. This relentless focus on what consumers and customers value allows them to remove the barnacles of old thinking that are often inflicted by industry boundaries.
In order to deliver consumer delight, the unit of analysis and competition needs to move from a product or service to a business model. Business models that delight are not defined by industry boundaries and traditional corporate structures. Instead, these models are built around clear value propositions, and they succeed in delivering value in a way that is measurable and meaningful to consumers. Often, industry boundaries become invisible, and companies who are restricted by the “old way” of thinking cannot compete.
Consumer-driven business model design is not a skill set in most organizations. Instead, incumbents seem to continue adhering to the old model of surveys, spreadsheets, and business plans. This results in plans riddled with untested assumptions about what consumers value. It often results in what Bob Moesta, research fellow at the Christensen Institute and the CEO & Founder of The Re-Wired Group, calls “supply-side innovation”—innovating around our capabilities versus what would most delight customers. Much like Scott Cook, co-founder of Intuit, did when he began Intuit’s Design for Delight program in 2007, organizations that want to be innovative must commit to a system that delivers measurable consumer delight.
To support organizations in achieving this goal, Steve Blank, entrepreneur, offers a system that he calls Customer Development, which uses a rigorous learning process to design a business model that is desirable, feasible, and viable. Rather than a business plan doomed for failure, this work results in evidence-based business plans. So many new ideas fail, not because they don’t have bright people working on them, but because organizations haven’t adopted a better model to develop them.
Three ways organizations can create more impact and enable more progress with innovation
1. Adopt a more robust framework for understanding customers and consumers. I propose the Jobs to Be Done theory developed by Clayton Christensen et al as this framework. The Jobs to Be Done lens articulates consumer progress on three dimensions: emotional, social and functional. Great brands deliver more than just functional progress. They also satisfy emotional and social dimensions of progress that consumers seek. Without a systematic approach to understanding consumers’ desired progress, organizations fail to design valuable solutions consumers will choose to buy now or in the future.
2. Develop and invest in the skill of business modeling. I often ask colleagues, “If I asked 100 people to write the definition of ‘business model’ down, how many distinct definitions would I get?” The answer is always “100!” Then I ask, “How often do you think those people hear or say, ‘business model?’” and the most common answer is, “every day.” To create business models grounded in what consumers value, organizations need shared tools, language, and skills. This foundation enables a company to deploy a methodical approach for business model iteration. They must be willing to go through the process of iteration, or business modeling, before deciding on the model. And much of that modeling must be informed by what they learn from their customers and consumers. Tools, such as Alex Osterwalder’s suite of business model design tools from Strategyzer, can help guide teams through evidence-based business model design.
3. Empower leaders to ask hard questions about their business model portfolio. To do so, leaders must embrace a new mindset of intentional business model portfolio management. This requires scrutinizing an organizations’ existing offerings to ensure fit with what consumers and customers desire. It also requires them to ask questions such as, “What evidence do we have that the consumer will hire what we are offering to make the desired progress?”, “What assumptions in the business model must be tested before we take the next step?”, and “What information made us choose this design over something else?”
To make meaningful progress with innovation efforts, organizations must commit to systems that center their customers and consumers, reward business modeling efforts, and manage a business model portfolio.