Running an innovation process – Part 6: Build around propositions

Think of 10 ideas.

Done?

Odds are that’ll take you about 5 minutes, especially if the types of ideas you want are closely defined.

Now write a paragraph explaining each idea.

That’s a bit more time-consuming. It’s stopped feeling like a game and started feeling a little bit like work.

Keep up the momentum by quickly producing increasingly well-developed versions of the proposition. Bear in mind that in each iteration you are not just focusing your lens on an already complete thought, but rather developing the idea. It might feel as if you are merely rearranging words, but what you are actually doing is changing the meaning of the proposition in each turn, hopefully improving it, but certainly moving it along so that it can be improved at some stage.

 

Creating a value hypothesis

We ask that each idea be turned into the simplest of propositions, a ‘value hypothesis’ or ‘why would anyone want it’?

  1. Who are the customers we are creating this for? Is it 30-year-old mums in the English home counties? 50-year-old single men in France? Kids with an interest in technology? The product has to have an audience.
  2. What problem do the customers have that we are trying to solve? Note, they may not know it’s a problem now, even though they might one day be unable to live without your product. Think iPod, dishwasher, smartphone and so on – in these kinds of instances, you might choose to position this as an opportunity rather than solving a problem. The smartphone, doesn’t ‘solve a problem’ but it does exploit an opportunity “to enhance people’s access to information, and content on the move”.
  3. The very pithiest description of your answer to their problem: for example, ‘store entire music collection in your pocket’. Wiring diagrams are not required in proposition statements. We don’t need to know if storage is on magnetic disc or solid state. We just need to know what it does for the consumer.
  4. Are there any alternatives currently available? Or what do consumers do today to solve the problem?
  5. Why is your solution better than the alternatives?
  6. Commercial opportunity: How will you make money out of solving the customer’s problem?

A small group can typically create a draft proposition statement for an idea in just a few minutes. Yet – believe it or not – big businesses have been built on less understanding than you will gain if you can get these simple proposition statements right.

You may also find yourself suddenly blocked by something which hadn’t previously seemed important. For example, do you really understand what the competitive landscape is like, or how rival firms solve the customer problem?

If ideas are the input to this process, the key outputs – in addition to the beginnings of a defined proposition – are assumptions and therefore questions.

  • Is the problem you have identified genuinely worrisome for the customer?
  • How successful are the alternatives, what are the attitudes to them in reality?
  • Are there enough people in the world who really match your customer profile?
  • Is your potential customer really willing to pay what you think they will pay?

Stand back from your proposition and ask yourself:

  • How realistic is this picture?
  • Have I invented the Segway[1], or something like it?

Now, and not after all the money stuff, is the time to get to grips with the proposition.

 

Reviewing value hypotheses

Let’s look at a product that could have benefited from this initial review, Microsoft Zune.

  1. Customers: Music fans.
  2. Problem: Not being able to take their music collection with them when they are not at home.
  3. Solution: It allows their whole collection to be stored on a small portable device.
  4. Alternatives: Apple iPod.
  5. Advantages: None – it is less well known, has a less vibrant ecosystem and is otherwise undifferentiated.
  6. Commercial opportunity: Significantly less than the Apple iPod which already has a big chunk of the market.

And a product that is successful, Google adWords.

  1. Customers: Existing advertisers, and companies who hadn’t previously advertised because it was too expensive.
  2. Problem: Expensive media is often not seen by those interested in buying products.
  3. Solution: Ability to target those specifically searching for a product or solution.
  4. Alternatives: Media spend across specialist websites or print titles.
  5. Advantages: It is more immediate and precise, it can be bought in smaller units.
  6. Commercial opportunity: The value of the entire traditional media industry, and more!

From just this simple analysis, we can focus our attention on who matters most to our business. This may seem obvious in retrospect, but can be confusing at first.

Note that we haven’t even mentioned consumers as part of the Google adWords case. In fact, when you’re trying to understand a platform (and many models have platform elements), you will need to think separately about the two sides of the platform: advertisers and in Google’s case – searchers.

 

The next steps…

In six questions, we have started to think about who our most important audience is, why we matter to them, who our competitors are, and how much we might be able to charge for our product (clue: often this is zero).

By starting to create a simple model of how large an audience is, and how much they might be willing to pay, we are half-way to creating our revenue case. Now an initial estimate of costs will give us a first indication whether we have a viable business on our hands.

But what if we don’t?

First, don’t panic. In the rollercoaster of idea development, this can be a low point. But many successful business owners will tell you that this was the revelation which led them to their real breakthroughs, it was this adversity which in fact set them on the road to discovering the true meaning of their idea. Like so much of what we will discuss, the drafting of a plan, using Excel, using the business model canvas[2], using the back of a cigarette packet or whatever – it is an experiment. And experiments produce learning, and not money.

If the first draft doesn’t work, focus on what will need to change to make the idea successful.

  • Do we need to rethink the customers, the problem, the differentiation, or how we will charge?

Of course, not all businesses are viable. Even if they would have a potentially huge demand. That free ice-cream stand on Bondi Beach would have huge uptake but make no money! Think about:

  • What do we need to introduce to make a profit? Membership, sponsorship, a price for an ice cream?
  • Make sure you account for how your business model has really changed. Is sponsorship your model? Well the beach-goers of Sydney are no longer your customers (some would say they are now your product); instead, sponsors are.
  • What’s their problem? It’s probably got nothing to do with ice cream. And so on. Same idea, different propositions.

Checklist for moving on to the next stage:

  • A proposition which you and the team believe in, even after you’ve been forced to fill in the blanks.
  • A clear list of the assumptions you will need to validate to know whether your proposition really will be a consumer success.

 

To make sure you don’t miss out on the next installation of our Running an Innovation Process series, sign up to our Future Architects of Innovation Monthly Bulletin.

If the wait is too much, you can find out more here. Our book, ‘Unthinkable’ is available for download today.

 

Missed part 1-5? Check them out here…

  1. Running an Innovation Process – Part 1: How to set up the project right internally
  2. Running an Innovation Process – Part 2: Strategy and context: Where do you start?
  3. Running an Innovation Process – Part 3: Building belief 
  4. Running an Innovation Process – Part 4: Create valuable ideas
  5. Running an Innovation Process – Part 5: Manage a portfolio of ideas, good and bad

 

[1] http://hbr.org/2011/04/why-most-product-launches-fail/ar/1

[2] See http://www.businessmodelgeneration.com/canvas