21. Predicting

21. Predicting

An idea is innovative when it is what the customer wants and it is profitably delivered. Profitable is not just financial for the person selling it. It must better satisfy one or more Outcomes while satisfying all other Outcomes at least as well as existing products. Giving up satisfaction is a cost that makes a product non-profitable to users. This is often a problem with new technology.

Even if a product would otherwise be desired it can fail to innovate because it is too soon or too late.

Too Soon

Too Late

What is
wanted
  • Required Components not available
  • Cost too much
  • Existing products satisfy current desires
  • Other options available
How to
make it
  • Technology not advanced
  • Poor quality
  • Profit margin too low

Timing is difficult since it depends on actions of human beings. Predictive Innovation does not claim to predict dates. Predictive Innovation predicts sequences of innovations. The invention of the wheel, fire, and steel must happen before the automobile. Additionally, if customers are not using the existing products to the full potential they will not see value in something that is better. People who live on a small self-sufficient island don’t need automobiles. The advantage of speed is not worth the investment or costs. If there isn’t a source of fuel an automobile would be worthless.

So there is a sequence of innovations. These sequences can be predicted and the signs recognized. Since all innovations are moving towards the ideal there is a natural progression. This progression can be seen in the 15-Alternatives.

Alternatives Progression

Innovations tend to start as Single Direct Alternatives then move towards a Continuous Stable Alternative. Innovations can progress towards any of the 3-Stable Alternatives to become ideal.

The ideal product always has the desired State. This would suggest the natural progression is from Return to Stable, to Make Stable, and finally Keep Stable. At the very last step in the ideal progression this is likely to be true but during the many steps towards the ideal the progression of Stable Alternatives may follow a different order. Different technological advancements at the point when a Stable Alternative is the next step can change which type of Stable is next on the path but the tendency is towards one of the Stable Alternatives and always towards a Continuous Alternative.

Predicting Process

The process for predicting innovations has four steps

  1. Diagram the Outcomes
  2. List the Ideal State for each Outcome
  3. Divide the range of improvements into Functional Distinctions
  4. Map the steps covering the idea space

Predicting ProcessDrawing 6: Predicting Process

1. Diagram Outcomes

The first step is to diagram the Outcomes. Start with the user core Outcomes then diagram the Functions and breakdown each Function into its Outcomes. Since innovations may change the steps required to achieve the Outcomes you may need to make several versions of the Function diagrams to cover the entire range from the current product to the ideal.

2. Ideal States

The second step is to list the Ideal State for each Outcome. Each Outcome has an Ideal State and each Function for achieving the Outcome has a set of Outcomes, each with Ideal States for performing the Function. These are the goals to guide all the innovations.

Using the 5 directions of the Alternatives we find the different ways to achieve an Ideal State.

+

=

~

Maximize

Minimize

Match

Minimize amount of difference

Minimize frequency of difference

Avoid

Maximize difference of amount

Maximize frequency of difference

Maximizing a State increases it to the most possible or the most with a Functional Distinction.

Minimizing a State makes it as close to zero or not happening as possible. Under some situations a negative amount might be possible. For example: instead of just reducing waste to zero you sell the waste for a profit. If you have used the indirect to turn a negative into a positive it is best to redraw the Outcome diagram so that the negative-indirect is the positive-direct and maximize that State. This will also reveal a new set of stable options.

Matching is a form of stable. Matching minimizes the difference from the ideal either in frequency or amount.

Avoiding is the indirect form of stable. Avoiding maximizes the difference from the ideal either in frequency or amount.

Each step on each of the innovation paths is a Functional Distinction of what and how. Since these branch from an existing product they have similarities and in this way considered adjacent in a multidimensional idea space.

3. Functionally Distinct Steps

The third step is to break the range of improvements into Functional Distinctions. Its usually not possible to jump to the end Ideal State so you must break down the path between what is available now and the ideal into steps of what can be delivered and will be accepted. Each functionally distinct desired step is an innovation closer to the ideal.

Example: Wagon wheel

A wagon wheel starts as a simple wooden circle with an axle. The solid wooden wheel is uncomfortable, heavy, and tends to fling mud on a passenger. This limits how fast the wagon can travel.

Adding a fender to the wagon prevents mud from being flung onto the passengers. This allows the wagon to travel a little faster but it is too uncomfortable and hard to control to meaningfully increase the speed.

The wheel can be made lighter by using spokes instead of the solid wooden circle. The spokes would tend to fling more mud but the fender prevents the mud from hitting the passenger so at this point the change is an innovation where it would not be before the fender. The lighter wheels make the wagon easier to control allowing it to move faster. This also would tend to fling more mud but the fender prevents it from hitting the passenger. A faster moving wagon is more uncomfortable so the speed is still limited.

The next innovation is springs but this requires a new technology of steel to make the springs. Adding springs would make the wagon heavier and harder to control but the spoked wheels are lighter and make up for the difference and springs make it more comfortable at faster speeds. Since the driver is not shaken as much the wagon is also more controllable. Steel is much stronger than wood so stronger wheels that weigh less can be made improving control and speed.

Finally tires are added increasing control, speed, and comfort. Tires are not possible until vulcanized rubber is developed.

The tire could have been added to the solid wooden wheel but the slow speed and general rough ride would not make the benefit of the tire noticeable.

The spring is a separate Component from the wheel and the fender. The spring would improve comfort but add weight making the wagon harder to control. It would allow the wagon to move faster but that would fling more mud on the passenger. The benefits of the spring are not appreciated without the improvements of the fender and spoked wheel.

The changes improved three different Outcomes by changing one Component twice and adding two new Components. Two enabling technologies were required to make the improvements.

Wheel Stages of InnovationDrawing 7: Wheel stages of innovation

All of these incremental improvements lead to the conditions needed for the “what” and “how” of an automobile.

4. Map Steps Covering the Idea Space

The fourth step is to map the steps covering the idea space. There isn’t just one path to the ideal product. There are many profitable innovations covering the idea space. Your goal as an innovator is to deliver as many of those innovations as you can while progressing toward the ideal.

Future Map

Future MapThe combination of all the steps towards the ideal forms a map of a family of products and services. The region extending out from the existing products are covered by the emerging expectations. A product will fail to innovate if it is attempted too soon so you should focus on a range of 5-6 product generations. These will be connected like the example of the wagon wheel. Each improvement makes other improvements possible. This becomes like bowling pins. The first pin knocks down those behind it, which in turn knock down more causing a cascade knocking all of them down. When you properly arrange the sequence of connections between innovations your profits increase and the effort decreases.

Creating future maps is covered in detail in Strategist training.

Under-served Outcomes

Innovations satisfy the currently under-served Outcomes. Each new innovation increases the level of satisfaction for one or more Outcomes. Customers become accustomed to this new level and begin to expect the new level as the minimum. New innovations must do more or better for the same users in the same scenario.

Outcome Satisfaction LevelsSatisfaction levels for Outcomes can be measured by surveying users with a 5-point scale. This is not the typical marketing measurement. The survey is measuring the level the Outcome is satisfied and not how much they like a feature. It is also important to whenever possible use objective units to measure satisfaction such as meters, dollars, or numbers of occurrence of an event.

How satisfied are you with your ability to…?

Not
satisfied
1

Somewhat
satisfied
2


Satisfied
3

Very
satisfied
4

Extremely
satisfied
5

Outcome XYZ

An example of objective 5-point scale could be applied to price. Free is the ideal price for a product that is not purchased solely for status. If the current price is $100 you could break down the range between $0 and $100 into a 5-point scale.

Which price are you willing to pay to be able to …?

$76 – $100

$51 – $75

$26 – $50

$1 – $25

$0.00

Outcome XYZ

Measuring Satisfaction Levels is not enough. Even though the satisfaction level for an Outcome might be far from the ideal the customer might not consider it important at this time. Additionally, people might rank one Outcome more important than another. The combination or satisfaction and importance determine what customers will want next. It is possible to over-satisfy an Outcome. This creates the potential for disruptive innovation. A lesser but lower cost option would be acceptable to potential customers.

You must also measure Importance Level. This can be done with a 5-point scale. When combined with the Satisfaction Level you can assess the amount and urgency for improving an Outcome.

How important is it for you to be able to…?

Not
important
1

Somewhat
important
2


Important
3

Very
important
4

Extremely
important
5

Outcome XYZ

Plotting Satisfaction Level and Importance Level on a graph makes an Opportunity Landscape. This is a concise graphical representation of the innovation potential of a product or market. Opportunity Landscape

Illustration 56: Opportunity Landscape

There are four regions of the Opportunity Landscape. You can determine how to focus your innovation activities based on the region the majority of Outcomes appear.

New Market

Opportunity Landscape: New MarketThe lower right hand section of the chart show Outcomes that currently satisfied less than desired and customers view as important. These under-served Outcomes represent opportunities for improvement. New markets have many Outcomes in the under-served region.

Disruption Risk

Opportunity Landscape: Disruption RiskThe upper left hand region is Outcomes that current products exceed the level customers view as needed. If a product has many Outcomes in this region it is at risk for disruption. There are likely many potential customers who have been priced out of the market or who would gladly accept a lesser product if it satisfied a different Outcome or cost less.

Limited Potential

Opportunity Landscape: Limited PotentialThe upper right hand corner is the Limited Potential region. Outcomes in the Limited Potential region are currently satisfied but are extremely important. You can’t increase the satisfaction but if you reduce the level of satisfaction customers will be upset. As markets mature Outcomes tend towards this region. Products with the majority of Outcomes in this region tend to suffer from commodity pricing since there is little potential for improvement in other ways. You need to find other markets before your products end up in the Limited Potential region.

Find Other Markets

Opportunity Landscape: Find Other MarketsThe center band extending from the lower left to the upper right is the Properly Served region. Your goal as an innovator is to keep all the Outcomes in the Properly Served region. When you have all the Outcomes in this region you should explore new markets.

To maximize profits you should keep the Outcomes in the Properly Served and have another market developed before the Outcomes move into the Limited Potential region.

The difference between the Satisfaction Level and the Importance for an Outcome is the Opportunity Score.

 Opportunity Score FormulaFormula 1: Opportunity Score

The greater the difference the more opportunity for innovation. This can either be done by increasing the Satisfaction Level for under-served Outcomes or delivering a trimmed down version for products with over-served Outcomes. Opportunity Score GraphIllustration 57: Opportunity Score

When comparing different markets or products, sum the Opportunity Scores for all the Outcomes to find an Overall Opportunity Score. Markets or products with a higher Overall Opportunity Score offer great potential for innovation. Overall Opportunity Score Formula

Formula 2: Overall Opportunity Score

The Opportunities Score shows you how far the Outcomes are from the Properly Served region.

Breakthrough vs. Incremental Innovation

Many people put a great deal of emphasis on trying to create breakthrough innovations. This stems from the misplaced belief that innovations are difficult to find. Predictive Innovation reveals the entire idea space so you can reliably find collections of highly profitable innovations when needed.

You can profit from either breakthrough or incremental innovations. Neither is inherently better. The proper strategy is to ideally time the innovations to maximize profit margins.

There is a time for harvesting incremental innovations and a time for sowing a new field with a breakthrough.

Incremental Innovations

Breakthrough Innovations

  • Better or cheaper
  • More of the same
  • Do something previously not possible
  • Functionally different

Remember that the definition of innovation is:

Profitably satisfy unmet desires

As long as you are better satisfying desires you are innovating. Financial profits and customer satisfaction profits can be achieved either way.

Since breakthroughs are functionally different that means they use a different Alternative or satisfy a previously ignored Outcome.

Chapter 20 Chapter 22

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