As a manager, you are always looking for ways to improve performance – for example, by making your products and services more attractive or by increasing internal efficiency. Many of the tools we discussed in previous chapters help you do this – they are ways of generating continuous improvements within an established framework. But sometimes you need or have an opportunity to move into uncharted territory – to innovate. This might mean creating a new product or service that hasn't been seen before, or it might mean trying out radically different ways of working.

This chapter introduces a range of tools that help you with creativity and innovation. For many managers, this is uncomfortable territory because, by definition, innovation means trying something new and accepting the risk that it may not work out. And there is often a feeling that innovation is someone else's job – the R&D department or the business development team.

Our view is that all managers can be creative and innovative and that they need to encourage people in their teams to be so as well. But we know this isn't easy. You need to develop strong social and political skills to sell your innovative ideas to others in the organization, a topic we address in Chapters 16 and 17. And you need frameworks and stimuli to help you think outside of the box – to come up with creative ideas that you can then explore in detail. That is what this chapter is all about.

The first two techniques we look at are about trying to see the world through the eyes of your customers rather than assuming you already know what they need. Design thinking (#44) is a very popular way of coming up with business ideas from a user's perspective and developing them through a process of rapid prototyping. Ethnography (#45) is a very specific technique, often used as part of design thinking, for tapping into the unarticulated needs of prospective customers.

In addition to gaining inspiration from customers, it is also useful to gain inspiration from the future, and that is where scenario planning (#46) comes in. We also suggest two other techniques – Doblin's 10 types of innovation (#47), which helps you think broadly about the different forms of innovation open to you, and brainstorming (#48), which is a tried-and-tested way of generating ideas around a particular theme through a group process.

44. Develop New Ideas by Understanding User Needs (Design Thinking)

Traditionally, many companies approach product development through technological innovation – they work on what is technically feasible in an R&D laboratory, and they get designers and marketers involved in the latter stages of the process to help make the product more visually appealing, or to position it in an attractive way.

Although this approach isn't wrong, it has significant limitations. It is very common for R&D people to work on technologically interesting problems, regardless of whether they have any value in the marketplace; this technology-centered approach often results in over-engineered or ill-conceived products. Famous examples include the Segway, Nokia's N-Gage, and the Apple Newton.

In today's competitive markets, a more thoughtful approach to innovation is required. Clearly, there are many industries where technological development is important, but more than that, it is vital to have a deep understanding of user needs.

In most business-to-consumer (B2C) markets, customers search out end-user ratings and product reviews online and use them to choose between the many options available to them. In these cases, underlying technologies are often relatively unimportant because many organizations can master them and integrate them well. What really matters is how the product meets a customer's practical and emotional needs. For this to happen, the development process needs to be driven by a deep understanding of customer needs right from the start.

This is where an approach called design thinking is useful. Pioneered as early as 1969, and more recently championed by the California design agency IDEO, the design thinking process can be simplified to the key steps shown in Figure 8.1.

The high-level steps in this process are:

1. Understand the business problem and constraints. Here, you need to develop a clear understanding of the problem you're trying to solve. This isn't always as obvious as it seems. For example, if you work for a university and you are getting feedback that the lectures are poor, you might conclude that the problem is either poor-quality lecturers who need training or lecture rooms that are badly designed and need a refit. However, a design-led approach to this problem would be to look at the bigger picture and ask what the purpose of the lectures is in the first place. This might reorient the analysis toward providing students with a high-quality education. At this stage, you also need to consider the resources you have available and the constraints you're operating under. This defines the context of the rest of the process.
2. Empathize with users' problem and experience. Next, you need to talk to and understand your target customers, appreciate how they see the world, empathize with their life situation and experience, and understand what they want, like, and engage with. (We look at this in more depth in #45.)
3. Understand what the organization can do – technologies and capabilities. This involves exploring what the organization is capable of doing well and what it won't be able to do.
4. Brainstorm ideas and evaluate. Having understood the context, brainstorm ideas (#48). Then evaluate them and select the most promising ones.
5. Test ideas and user journeys out on paper. For promising ideas, draft them on paper and put yourself into the mind of your users. Think about what their experience will be, both with the product you're thinking of and with competing products.
6. Prototype, test, refine, and repeat with internal and external users. Take the best ideas forward and build prototypes of them. Test these with users, and go through repeated cycles of refinement until you are confident they would buy them.
7. Implement and deliver. Now take your best-received prototype through to production.

Clearly, this is a longer, more time-consuming way of developing a new product than the traditional approach, but it is one that is much more likely to deliver a solution that customers love.

45. Innovate by Studying People's Day-to-Day Use of Products and Services in Depth (Ethnographic Research)

The second step in design thinking (#44) is about understanding users' experience, and this is where ethnographic research is particularly useful. Rather than asking your customers what they think of your product, ethnographic research is about observing how they use it in order to pick up hints about how you might improve your offering. It is about tapping into unarticulated needs.

Ethnography started off as a branch of anthropology, focusing on studying people as they live their everyday lives. In recent decades, it has been used in business. Companies like Intel® have conducted ethnographic studies to understand long-term trends in the use and application of technology, whereas others like Procter & Gamble have used this method to understand people's day-to-day living habits. For example, the best-selling Swiffer, which uses a disposable cloth rather than a wet mop to clean floors, emerged from a lengthy ethnographic study of home-cleaning behavior.

There are a variety of ways that you can conduct ethnographic research to improve the way you serve customers. One is to shadow the consumers you're studying – watch how they behave, talk to them about what they're thinking, and learn from this. This can involve just watching them in a specific location, or it can even mean moving in with them for a short period of time to watch their lives and fully understand their thoughts and behaviors.

Other approaches involve incentivizing customers to track their experience of situations or brands with journals or smartphone apps. Or it could be getting them to conduct short “missions” you give them and record what they're thinking as they complete them. Meanwhile, there are many website plugins you can use to record how people interact with online services and many user testing services that allow paid testers to record their thoughts.

Ethnographic research can be prone to biases, such as customers thinking more about their decisions than they normally would or changing their behavior to please you. It is also very time-consuming, so you need to commit a significant amount of time and resources to get the best from this type of research. But as a way of gaining new insights into the unstated needs of your customers, it is well worth the effort.

46. Innovate by Making Sense of How the Business World Is Changing (Scenario Planning)

Design thinking and ethnographic research are great techniques for innovating around the needs of users, as those needs exist today. A very different approach to innovation is to look at how the world is changing and to position your business accordingly. As ice hockey legend Wayne Gretzky said, “I don't skate to where the puck is – I skate to where the puck is going to be.”

How do you develop the right products and services for a fast-changing business world? This is where scenario planning, as shown in Figure 8.2, is useful. It is a method of thinking in a structured way about how the future might look so that you can create a small number of scenarios that reflect the most likely and significant outcomes. You can then design products and services that best fit these new circumstances. Use the following steps:

1. Define the scope of your analysis, particularly the time horizon that you want to consider, and the business areas you want to focus on.
2. Bring together a team of people with insight into the future. These might be experts in your industry or in key technology areas, customers or people affected by your work, people who have developed economic forecasts covering the period, and so on.
3. Gather data, and brainstorm trends, issues, risks, and opportunities. Concentrate on exploring and listing as many of these as you can, perhaps using a framework such as PESTLIED (political–economic–sociocultural–technological–legal–international–environmental–demographic) analysis (#82) to help.
4. Identify key certainties and uncertainties. Separate out things that are very likely to happen from things that will matter a lot to you that you cannot predict one way or another. For example, if you work for an insurance company, an aging population is a certainty, whereas future crime rates or the rollout of driverless automobiles are uncertainties. Group these together into closely related themes, and then rank the certainties and uncertainties separately, in order of their importance to you and their likeliness to come about.
5. Construct rich scenarios of the future. Using the certainties and uncertainties you've identified, construct a small number of detailed scenarios of how the future will look over the time horizon you've identified. The certainties you've identified will apply to all of these, while the scenarios should explore the most likely possible outcomes of the most important uncertainties.
6. Think about how your organization can thrive in each of these scenarios. For each one, think about how your organization will need to change to flourish in it and what products and services you will need to offer to manage risk and be successful.

The opportunities for innovation exist in the final stage: You need to think about how these scenarios might affect demand for your products and services, or how entirely new offerings might emerge if these scenarios come to pass. Depending on what you come up with, you might need to do some additional research or development work to develop your ideas further.

47. Innovate in All Areas of Your Business, Not Just with Products and Services (Doblin's 10 Types of Innovation)

When we think about fostering creativity and innovation, it's very easy to focus on product or service innovation only – after all, this is what our customers see. However, organizations can innovate in all sorts of ways, and some of the less obvious forms of innovation are actually the most powerful.

The consulting group Doblin categorized these different types of innovation in its 2013 book Ten Types of Innovation: The Discipline of Building Breakthroughs. This list provides a handy way of thinking about the types of innovation that can help you build competitive advantage:

1. Profit model innovation – This focuses on how you generate a profit margin from your products and services – for example, using different pricing models for different customer segments, charging on a per-use basis, offering products on subscriptions, bundling services with products, etc.
2. Network innovation – This looks at how your business deals with its suppliers and business partners. It may involve developing highly efficient, low-cost, or resilient supply chains; building high-value strategic alliances; or bringing in specialized suppliers with specific expertise.
3. Structure innovation – This focuses on the structure of the organization and how its assets help create value – for example, it includes innovations that help you get the best from your people or that enable teams to work faster and more flexibly.
4. Process innovation – This emphasizes how you deliver products and services in an efficient, high-quality way. Six Sigma and kaizen are examples of methodologies for managing process innovation.
5. Product performance innovation – This is what people usually think about when you talk about innovation – improvements that make your products more appealing to your customers.
6. Product system innovation – This looks at the “offer” that goes with your product – for example, how you bundle it, package it, or customize it to sell it at a premium.
7. Service innovation – There are many ways to provide value-added services on top of physical products (for example, the warranties, insurance, and financing sold when you purchase an auto), and these are often more profitable than the underlying product.
8. Channel innovation – This focuses on expanding the routes to market – for example, selling to customers directly or online rather than through a retailer.
9. Brand innovation – This involves looking for ways to enhance customer perception of your brand – for example, by communicating the value of your product or service in a novel way.
10. Customer experience innovation – This is all about improving the experience that customers have when they interact with you and the way that they think or feel about you and your offering as they do so.

The value of this list is that it helps you to think more systematically about your options. Some of these approaches will be dead ends, but others may provide the spark of insight that helps you do something really creative.

Source: Adapted from Keeley et al. 2013.

48. Generate Many Ideas Using Free Association (Brainstorming)

So far, we've looked at large-scale approaches to innovation, and these have an important place in how organizations innovate. However, teams also innovate on a smaller scale, and much of this is done through brainstorming.

Managed well, brainstorming is a highly effective tool for generating and developing ideas as a team. It can deliver exciting ideas individuals are unlikely to come up with on their own, and at the same time, it helps the team bond and move forward with everyone feeling like they've played a part.

But when run poorly, brainstorming sessions are unhappy affairs that sow division and fail to achieve any worthwhile outputs. You need to set them up with care and manage them in a way that eliminates the problems that come with poor group dynamics (#37).

It is important to understand the difference between individual brainstorming and group brainstorming. Individuals brainstorming on their own often produce a wider range of ideas than groups, whereas groups often develop ideas in a richer way. You usually get the best results by combining the two. Here is a step-by-step guide:

1. Bring together a team with diverse but relevant experience. You want a wide range of knowledge and experience to draw on during the brainstorming session. And you need open-minded people who are willing contributors.
2. Present the problem, and define the ground rules. Define the problem you want to solve, and explain the format of the meeting. In particular, make it clear that there should be no criticism of ideas, “wild” ideas will be welcomed, and everyone is expected to contribute.
3. Give people time to come up with ideas on their own. This ensures a good level of diversity in terms of “raw” ideas and helps people develop confidence in them. If you leap straight to group discussion, you risk getting “stuck in a rut” by fixating on a small set of ideas.
4. Get everyone to share their ideas, and then start the discussion. Encourage people to share ideas generously. Pay careful attention to what others are saying, and get people to build on one another's ideas by using their personal knowledge and experiences.
5. Guide the meeting to develop plenty of ideas. Spend long enough on each idea to develop it; then quickly move on to the next. As you're doing this, keep an eye out for any problems of poor group dynamics – these can seriously undermine a healthy brainstorming process.
6. Bring ideas together at the end of the session. You can use affinity diagrams (see the link below) to organize ideas into common themes. Then bring judgment back into the process, and use appropriate decision-making techniques to choose between them. (You may want to do this in a separate session to preserve the upbeat mood of a successful brainstorming session.)

Other Techniques for Fostering Creativity and Innovation

There are two important innovation processes that didn't make the cut in our survey: The Stage-Gate® idea-to-launch process and Eric Ries's build-measure-learn process. It's important to know about these; you can find out more at http://mnd.tools/c8c.