|Book Review: Innovation|
Innovation: The Five Disciplines for Creating What Customers Want
Written by: Curtis R. Carlson and William W. Wilmont. New York: Crown Business, 2006. 356+x pages.
Experienced new product development professionals will find little that is new in this book, but they will enjoy discovering how SRI International has applied innovation best practices to achieve what the authors term exponential improvement (p. 26). You might also want to pass a copy along to your senior management, who will find in this well-written book a strongly presented case for a disciplined, enterprise-wide, innovation process.
Curtis Carlson is the chief executive officer of SRI International, and William Wilmot is the director of the Collaboration Institute, a group specializing in workplace collaboration and communication. Fittingly, their first chapter is titled, “Why Listen to Us?” and they answer their own question in compelling terms. SRI is one of the world's premier research organizations, and Carlson has used their innovation process to drive significant growth while introducing novel solutions for important needs.
They have grouped innovation best practices into five disciplines: (1) important needs; (2) value creation; (3) innovation champions; (4) innovation teams; and (5) organizational alignment. Perhaps their most important insight is that the contribution of these disciplines to success is multiplicative. If an organization is weak or ineffective in any one discipline, the overall chance of success plummets.
The first discipline is to work on important needs. If an innovation project is not directed toward important needs, it will have only a small chance of commercial success. But understanding what needs are important to the customer is not always easy. This leads the authors into a discussion of how to create and measure customer value, because important needs can be identified by their high value. They point out that benefits and costs are not necessarily quantitative, especially in consumer products where benefits like status and switching costs, such as learning a new computer operating system, can be significant. They use a needs hierarchy developed by Michael Markowitz to help identify customer needs that go beyond product features and include product functions, emotions, and deeper meaning (p. 76).
The second discipline develops the concept of value introduced in the first discipline and uses value creation tools to create customer value quickly. Since value creation is so important to successful innovation, the authors devote the most space—71 pages—to this subject. The core of this discipline is understanding and writing down the value proposition. At SRI, value propositions are crafted with the formula NABC: The value proposition states the customer need, the approach SRI will use to meet this need, the benefits and costs involved in meeting the need, and the competition.
Value propositions are never perfect at the start, so SRI uses an iterative process of mutual critique involving members of several different project teams. They call this process the watering hole and encourage continual evaluation of value propositions using it.
One interesting tool used by SRI is the value factor. This is calculated by dividing benefits by costs. The authors feel that this is a better measure than the standard value definition of benefits minus costs, because it emphasizes the order of magnitude of the value, clearly differentiating a minor improvement of, say, 10% from a major one of 100% or more. In chapter 4, and in more detail in an Appendix, they also give a detailed method for quantifying qualitative benefits and costs. Benefits are assigned scores on a five-point scale for both the importance of an attribute to the customer and the product's ability to satisfy the customer's need for that attribute. The benefit scores are multiplied and then summed over all the attributes. A similar approach is applied to costs, including nonfinancial costs, and then the ratio of benefits to costs is calculated. This is done for both the proposed new product and the competition, and the scores are compared.
The third discipline is the requirement for a project champion to drive the value creation process. The champion can be at any level in the organization. The champion is the one who gets the project going and keeps it going in spite of any roadblocks that may appear. Champions need partners to support them and must be organizationally responsible. The authors contend that no project can be a success without a strong champion.
The fourth discipline is the use of multidisciplinary teams in the innovation process. The authors devote four chapters to a summary of team creation, management, and dynamics. Much of this material has been covered in more detail by many other authors, including Cobb (2006). The discussion of the topic here shows how teams are used at SRI, including the role of the team leader, the management of change, and team norms.
The fifth discipline is to achieve organizational alignment between the team and the enterprise. This requires that the project team understand the enterprise goals and strategy. The authors point out that, though the five disciplines can be used successfully by a single team, they will be much more effective if used across the entire organization. In addressing this issue, the authors make a case for a process called continuous value creation (CVC), analogous to total quality management. The objective is to dedicate every function of the enterprise to “creating the highest customer value in the shortest possible time” (p. 251). They provide an outline road map for developing a CVC process in any organization.
Finally, the authors apply their own teachings to create a value proposition for the five disciplines. They discuss the need for improving innovation, their approach to doing this, the benefits and costs of doing it, and the competition and alternatives to using best practices. They show how their ideas might be applied across a broad spectrum of institutions, including government and education.
This is a very readable book, filled with examples that clearly illustrate the points being made, including many of SRI's own projects. The authors do not hesitate to cite failures as well as success in making their points. There are extensive footnotes, but the book would have benefited from a bibliography to provide further reading on some of the subjects that the authors do not fully explore. Some of the jargon, such as watering holes, golden nuggets, and jungle guides, detracts from the overall readability of the book, but in general it provides a good summary of innovation best practices and describes their successful application in a major innovation leader.