Outside-In Innovation

February 18, 2011

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Last week, I blogged about the results of the recent PricewaterhouseCoopers' Global CEO Survey. Essentially, the study found that CEOs are confident of growth in 2011 because they're placing a higher premium on innovation.

This post sparked an interesting Twitter conversation with http://twitter.com/#!/rundblad about who leads innovation efforts in business. Ultimately, Rundblad, a user experience and social technology strategist at UCLA, sent me a must-read Forbes.com blog post about one of the biggest trends in innovation these days: Outside-in innovation.

The post, by innovation, business narrative, leadership and radical management expert Steve Denning, describes the business shift from an “inside-out perspective (‘You take what we make') to an outside-in perspective (‘We seek to understand your problems and will surprise you by solving them').”

Denning calls this “the alternative to top-down control,” in which the managers control the work of employees rather than enabling them to truly interact with the customer.

Outside-in innovation is about more than enhanced customer service. “It means orienting everyone and everything in the firm on providing more value to customers sooner.”

This is in line with the results of the PwC survey, which said CEOs see new product/service development as a topic innovation focus in 2011. And the study found that “CEOs are approaching innovation with an emphasis on putting customers first.¦

“Many companies are bringing their innovation activities closer to their customers by giving consumers a say in the design of offerings, or opening innovation up to more partners.¦

“You can't get closer to consumers than involving them directly in product and service development, a trend that many CEOs see coming. That doesn't mean shoppers are putting on lab coats and entering clean rooms. More frequently, it involves having consumers test new offerings before they're launched.”

Denning suggests moving from a hierarchical bureaucracy to a method called “dynamic linking,” in which “work is done in short cycles and measured not by managers as against a plan, but rather by direct feedback from clients as to whether they are delighted.”

Clearly, corporate innovation is moving in this direction.

But, companies should take caution.

In a post on Fast Company's Co Design blog, innovation and design consultants Jens Martin Skibsted and Rasmus Bech Hansen said “companies must become user-centric. But there's a problem: It doesn't work. Here's the truth: Great brands lead users, not the other way around.”

In other words, companies should be user-centric but only to an extent.

“The best brands are all guided by a clear vision for the world, a unique set of values and a culture that makes them truly unique and that no user insights could ever change.”

Relying too much on user insights, Skibsted and Hansen said, hold companies back because:

  • Insights can't predict the future.
  • Too much user knowledge can make designers feel limited.
  • Users don't know what they want if it doesn't exist yet. (As Henry Ford said, “If I had asked my customers what they wanted, they would have said a faster horse.”)
  • Most companies have similar insight on users – meaning they might develop similar, rather than differentiating, products and services.

However, that doesn't mean that companies shouldn't listen to their customers at all. Rather, as Denning said in a blog on Forbes.com about Skibsted and Hansen's post, “they need to have a deep understanding of users, an understanding that goes beyond what the users themselves can say, because it combines an understanding of the hopes, dreams, irritations and fears of the users with what the designers can contribute to promote those hopes and dreams or avert those irritations and fears.”

Kathie

What do you think about the outside-in model of innovation? Is it the wave of the future or a barrier to creativity?