Relying on mergers and acquisitions for growth sends a signal that you don't know how to innovate or how to manage it. M&A has other problems, too. Companies tend to overpay which actually destroys shareholder value. At best, firms end up paying full value, neither better or worse off financially. The firm grows in size, not value, and pays in the form of distraction. What if you could use the tools and processes of innovation in mergers and acquisitions? How could it help? Would you select acquisition targets better? Could it help understand the valuation
better so you get a better deal? Might it help you implement better? I believe innovation techniques could be applied to all three. Here is one example: targeting - deciding who to buy.
Do systematic methods of innovation work on services and processes? This may be the most common question from corporate executives who want to learn innovation methods. This month's LAB will focus on a familiar corporate process: employee recruiting. The tool we'll use is Subtraction.
To use Subtraction, we make a list of the components. With a process or service, the components are simply the steps to deliver the process or service. We remove a step one at a time to create the Virtual Product/Process. Working backwards with Function Follows Form, we innovate what the potential value or benefits would be without the component. What would the new process do? Who would use it? Why would they use it?
Here are two CPG products from this week's Best New Product Awards. I tried them at home and noticed a pattern. That pattern suggests a different way to use the Subtraction Template of the innovation method, S.I.T.. The question is whether that pattern can be replicated on other products to create line extensions and new categories.
The first product is the Bounce® Dryer Bar from Procter & Gamble. The second is the Scrubbing Bubbles® Toilet Cleaning Gel from SC Johnson. See if you can spot the pattern in each:
Over 2 million couples marry every year in the U.S.. This fuels the $50 billion dollar wedding industry. In an industry that prides itself in tradition, companies must innovate new products and services within those traditions if they want to grow and prosper. For this month's LAB, we will use the corporate innovation method, S.I.T. to create new-to-the-world ideas for wedding invitations.
Here are five unique ideas from graduate students* at the University of Cincinnati taking the course, "Systematic Innovation Tools." They constructed a hypothetical "Dream Catalog" of these ideas for a local start-up design company. Listed with each innovation is the specific innovation template the team used to create the idea. You can download this and the other Dream Catalogs here.
Here is an example of two innovation templates in one product. The Double Down sandwich from KFC removes the traditional bread slice (demonstrating the template, Subtraction), and it assigns the additional job of "sandwiching" to the two slices of fried chicken (demonstrating the template, Task Unification).
A common question about structured innovation is can it be used on services. The answer is yes. A service is the same as a product in many ways, and the approach to using an innovation method like S.I.T. is the same. Let's consider a service example for this month's LAB. Imagine your company was a leading uniform and apparel rental service. You own a fleet of trucks and drivers as well as uniform design and fitting services. Your company delivers custom fitted uniforms to the client's location, picks up worn uniforms for cleaning, inspection, and repair, and returns them on schedule. In this highly competitive industry, the key to survival is to exceed customer expectations. The key to growth, on the other hand, is innovation. Let's use the Subtraction tool on this service to create new opportunities.
Companies that struggle with innovation often make up for it by adding features to existing products. They succumb to "feature creep" - the gradual and continuous addition of features and functions though nothing is truly new. While it may look improved, the added features make your product more complex, difficult to use, and more costly to produce. Over time, your core customers abandon you.
Here is an example - the Numi toilet by Kohler. At $6400, it is promoted as the top-of-the-line toilet with lots of high-tech bells and whistles:
New research suggests that you are more likely to be creative when you imagine the problem is someone else's instead of your own. Evan Polman and Kyle Emich describe their studies in their April 2011 article that support this conclusion.
In one study, 262 participants were instructed to draw an alien for a story that they would write, or alternatively for a story that someone else would write. As expected, drawing an alien for someone else produced a more creative alien. In another study, 137 students were instructed to picture either themselves or a stranger stuck in a tower and to think of a way to escape using only a rope that did not reach the ground. Of the students who imagined a stranger in the tower, 66 percent found the solution—divide the rope lengthwise and tie the pieces together—compared with 48 percent of those who pictured themselves in the tower.
Perhaps harder than branding is re-branding. Once the market associates your brand with a specific promise, it is difficult to get people to shift over to a newer or more updated meaning. This is especially true for brands that have been around a long time. Take the brand of Canada, for example. It adopted the instantly-recognizable Maple Leaf as its national flag in 1965 over contending choices such the one shown here. Now Canada is re-positioning the brand to update its global image. The new campaign, "Know Canada," makes clever use of the S.I.T. advertising tool called Subtraction.
The tool is one of eight patterns embedded in most innovative commercials. Jacob Goldenberg and his colleagues describe these simple, well-defined design structures in their book, "Cracking the Ad Code," and provide a step-by-step approach to using them.
The Subtraction tool works by removing elements generally considered essential to the situation. The tool can be used in any marketing communications medium (television, print, and so on). The tool works by drwawing your attention to the missing component. As a result, the ad is more memorable.
Subtraction is one of eight patterns embedded in most innovative commercials. Jacob Goldenberg and his colleagues describe these simple, well-defined design structures in their book, "Cracking the Ad Code," and provide a step-by-step approach to using them.