Uncover Authentic Demand and Create Breakthrough Innovations

Authentic demand is the key to successful innovation, according to the authors of The Heart of Innovation. In this book, they reveal how to identify and satisfy the deep needs and desires of your customers, and how to apply a deliberate methodology to different types of innovation. Whether you are a startup founder, a corporate leader, a nonprofit manager, or an academic researcher, you will find valuable insights and practical tools to help you create innovations that matter.

If you want to learn more about the secret of uncovering authentic demand and building products, services, and businesses around it, read on for a summary and review of The Heart of Innovation.

Genres

Business, Innovation, Entrepreneurship, Marketing, Psychology, Sociology, Case Studies, Nonfiction, Self-Help, Education

The Heart of Innovation is a book that aims to concretely define what innovation is and how to create it. The authors, who are experts from the startup world, large enterprises, nonprofits, and academia, argue that many attempts at innovation fail because customers turn out to be indifferent. The key to success is to uncover unmet authentic demand, which is what customers cannot be indifferent to. Authentic demand arises when the customer considers the lack of a product to be a problem, almost as a violation of something important.

To find authentic demand, the authors suggest a field guide that consists of four steps: mapping the situation, identifying the problem, generating solutions, and testing and refining. They also explore the differences and challenges of the three types of innovation: incremental improvement, company transformation, and radical formative innovation. The book is filled with examples and stories of successful and failed innovations, from Airbnb to Kodak, from Netflix to Nokia, from Google to GE, and more.

Review

The Heart of Innovation is a well-written and engaging book that offers a fresh perspective on innovation and a useful framework for finding and meeting authentic demand. The authors draw from their rich and diverse experiences and backgrounds to provide a comprehensive and balanced view of innovation. They also use clear and simple language, diagrams, and exercises to explain their concepts and methods. The book is not only informative, but also inspiring and motivating. It challenges the reader to think deeply about their own innovation goals and processes, and to apply the lessons learned from the book to their own contexts and situations.

The book is suitable for anyone who is interested in innovation, whether they are beginners or experts, whether they work in startups or established organizations, whether they operate in the private or public sector, or whether they are involved in product development, service delivery, or social change. The book is a valuable resource and a must-read for anyone who wants to create innovations that matter.

Recommendation

In business, successful innovation doesn’t merely mean coming up with something new but something new that customers actually want. But how can innovators identify “authentic demand”? In this helpful guide, Matt Chanoff, Mark Wegman, Merrick Furst and Daniel Sabbah analyze the three main kinds of innovation and unveil practical strategies for finding and leveraging real customer needs. Their wide-ranging case studies and innovative techniques are invaluable resources for entrepreneurs, business leaders and anyone seeking to break new ground.

Take-Aways

• Innovators must discover “authentic demand.”
• Uncover customer needs through the “not not principle.”
• Each of the three main types of innovation comes with its own challenges and opportunities.
• Find authentic demand by understanding people’s biases and limitations.
• Foster an environment that nourishes innovation.
• Document “primary interactions” to discover customer priorities.

Summary

Innovators must discover “authentic demand.”

Innovators often encounter the unique challenge of stasis within a cycle of action. In an interview, songwriter Paul Simon discussed a creative block he faced while writing “Bridge over Troubled Water”: He pieced together the idea for the song but then became “stuck.” This block wasn’t due to a lack of effort or ideas. The problem was that every direction he tried to take led him to an outcome he didn’t like. Simon’s issue mirrors a common innovation scenario in which individuals or teams engage in seemingly productive activities but fail to progress toward the ultimate goal: a finished innovation.

Becoming unstuck requires discovering “authentic demand.” Authentic demand refers to more than finding out what potential customers want. People want many things that they don’t purchase. It involves offering the customer something to which they can’t feel indifferent – to ignore the innovation would seem like a violation of some core norm. In such situations, people find themselves using a product or service as a regular part of their daily lives. The shift to using that product or service isn’t passive, but after they have embraced it, going back to the way they operated before seems unthinkable – like returning to the dangers and discomforts of fording a river on foot after getting used to frequenting a newly built bridge.

“Without an understanding of authentic demand, product/market fit is indistinguishable from prior hopes or post hoc rationalizations.”

Even when businesses successfully manage technical, marketing, financial and leadership challenges, identifying authentic demand often remains a sticking point – particularly as innovators often confuse authentic demand with solving the issues customers say they have. When you learn to dig deeper and find the root of what your customers find meaningful, you can transform your effort and ideas into lasting success.

Uncover customer needs through the “not not principle.”

Innovation often fails. Microsoft’s Bob and Google Glass offer two high-profile examples of how badly businesses can misjudge market demand, but they’re far from alone. Fully 90% to 95% of new product launches and start-ups fail, mainly due to a lack of customer interest.

“The cause of all this innovation failure isn’t a mystery. It’s the customers.”

Consider Jim Balkcom’s company, Humminbird Fish Finder. The company grew to $6 million in annual revenue thanks to its innovative sonar device for recreational fishermen, but, at that point, it stagnated. Despite offering multiple product upgrades, sales stayed flat.

Balkcom’s breakthrough came when an unexpected interaction with a customer revealed – and further market research then confirmed – that his customers were not only fishermen but their families, along for the boat ride and seeking entertainment. Balkcom simplified his product and made it available at Walmart to target a broader market. Humminbird also became the first in the world to put modern LCD screens into a commercial product. Sales increased to a peak of $120 million annually.

The insight that led Balkcom to innovate came by chance. Still, his response to it shows the value of identifying customers’ “not nots”: the actions people are almost certain not not to take – or, put another way, will almost always take. People will, naturally, avoid actions or outcomes that are abnormal or undesirable for their circumstances. For example, on a recreational fishing trip, a family will almost always (or, not not) check their boat for leaks before launching and will likely (not not) focus on keeping their children entertained while on the water.

The same thinking applies when it comes to features or where to sell a product: Since most families shop at Walmart, Balkcom could not not sell there. Since you have to be able to see what’s on a screen to find it entertaining, the fish finder could not not have a screen that was easy to see in bright sunlight. Not nots help innovators focus on designing and marketing their products and services in ways that align with customer needs and behaviors.

Each of the three main types of innovation comes with its own challenges and opportunities.

Innovation comes in three primary forms:

1. “Informative innovation” – This sort of innovation involves making incremental improvements within an existing framework, such as a railroad company upgrading its engines or cars. The change doesn’t alter how railroads function; it enhances what already exists.
2. “Transformative innovation” – This kind of innovation shifts fundamental assumptions and behaviors, significantly changing how companies or customers operate. For example, a railroad company might expand into different modes of transportation, such as shipping or air freight.
3. “Formative innovation” – This type of innovation creates entirely new situations or markets, as occurred when IBM (originally the Computing-Tabulating-Recording Company) innovated large-scale data management.

“Deliberate Innovation involves considering and choosing a type of innovation to focus on, understanding the challenges that come with the territory, and using the right tools for the job.”

Each innovation type comes with its own challenges and requires specific approaches and tools. The primary challenges in the informative innovation realm lie with maturity and sustainability. At a certain point, as an industry matures, returns diminish. Businesses focused on their current moneymakers will also often overlook long-term market dynamics. To address this problem, balance your focus between current sales and awareness of broader trends and developments. This ensures that your business adapts and stays relevant in changing markets.

The main challenge of transformative innovation is overcoming people’s psychological resistance to change, which often manifests as subtle opposition to alterations in their roles or ways of thinking. To address this, transformative leaders must understand and mitigate the psychological barriers that keep people from adapting to and embracing change.

With formative innovation, innovators often struggle to make audiences see and hear their new concepts. To address this, identify and tap into the underlying “nonindifference” in the market – which often masquerades as indifference – by discerning needs and desires no one has addressed or recognized. Understand where hidden opportunities lie and how to identify and leverage them.

Find authentic demand by understanding people’s biases and limitations.

In the early 20th century, a zoologist coined the term “umwelt” to refer to the part of the environment a person or animal can experience via their senses. For example, your dog can smell more things than you, while you can see more colors than the dog. Your umwelt also has a conceptual component: You may hear someone who is speaking a language you don’t know, but you can’t make sense of what they’re saying.

“For people the umwelt isn’t just a sensory issue; it’s also a conceptual one.”

Thus, how people understand the world hinges on the commingling of their senses and their “culture, knowledge and situation.” For example, consider the people at Humminbird, who initially focused solely on improving their product’s ability to find fish, not realizing that their customers also valued the finder as a form of entertainment. Understanding umwelt uncovers authentic demand because it helps you see beyond your biases and cognitive limitations, revealing the needs and desires of others.

Several issues can impede understanding of consumers’ umwelt:

1. “The curse of knowledge” – Innovators are often overconfident in their understanding of customer needs. For example, Jim Balkcom wasted time and money doubling down on features his customers didn’t care about because he believed he knew his customers’ reasons for buying fish finders.
2. “The lure of features” – Imagine a child who makes a mud pie for her mother. While the finished product may evoke a positive emotional response – the mother showing pride in her daughter – that doesn’t mean there’s a market demand for mud pies in the neighborhood at large. When innovators get swept up in their products’ features and people’s positive responses to them, it can keep them from seeing a lack of genuine demand: A newly designed cup handle might make it easier to grasp, but are people really asking for an easier-to-grasp handle?
3. “Fundamental attribution bias” – People often attribute others’ actions to personality while excusing their own behavior as situational: The person driving the car that cuts you off is a “jerk,” but if you commit the same offense, it’s justified because you’re “in a hurry.” This bias leads innovators to incorrectly predict customer behavior according to perceived personality types or demographics.
4. “Confirmation bias” – You succumb to this bias when you favor information or interpretations that support your existing beliefs or hypotheses and disregard contradictory evidence. This leads innovators to prioritize information that confirms their preconceptions, such as an entrepreneur who focuses on positive feedback from a small portion of his audience while ignoring the majority who expressed no interest.

Foster an environment that nourishes innovation.

Develop a culture of competency around innovation. Competent innovators maintain focus on worthwhile goals and avoid traps like the curse of knowledge by pursuing collaboration and community.

“While we were developing our understanding of the biases and cognitive illusions that posed problems for innovators, we were also working on creating an environment for taming them.”

Certain principles and practices can help create the kinds of environments where collaboration and innovation flourish:

• Holding your collaborators in “unconditional positive regard” means supporting and accepting them regardless of whether you agree with their words or choices. This practice allows innovators to acknowledge and learn from their mistakes without fear.
• Commitment to “radical candor” allows people to communicate clearly and point out one another’s blind spots without worrying others will see them as rude.
• Maintaining a consistent work “cadence” – a weekly schedule of events like a planning session every Monday, a presentation every Tuesday and a debrief each Wednesday – helps keep teams moving forward in the right general direction, even when the exact goal is unknown.
• “Paying attention to indifference” and “attending to the process” – how you arrived at the idea, rather than outcomes – reveal ideas’ strengths and weaknesses, thus helping innovators overcome cognitive biases.

Document “primary interactions” to discover customer priorities.

A “Documented Primary Interaction” (DPI) is an exchange between a prospective innovator or other stakeholder and a potential customer. It aims to measure the customer’s response to an innovation. You document these interactions for consistency and analysis.

DPIs help innovators get a clear view of the indifferences and nonindifferences in a given situation. For example, a fisherman might be indifferent to wearing a sweater on his boat but nonindifferent to being asked to don formal wear.

“In the beginning, regardless of whatever bold ideas, cool technologies, experience, and confidence they might have, the innovator and their innovation are outside the situation and are matters of indifference to the people inside.”

DPIs also give innovators a better understanding of how a customer views a situation by allowing them to see how a customer uses – or fails to use – an offering. The innovator steps inside the customer’s world and, thus, gains insight into what is meaningful in that context.

Mary Lynn Realff, an engineering professor, used DPIs to transform how she pitched her “effective team dynamics” (ETD) training. Though the need for the service seemed apparent – nearly everyone she spoke with agreed that students struggled with teamwork – Realff faced indifference from both students and faculty when she offered ETD training.

After conducting hundreds of DPIs, Realff noticed two important things: First, if something appeared on a professor’s syllabus, students learned it; second, professors wanted their students to know they cared about their success. So, Realff began suggesting professors add her training to their course schedules, framing it as a way to avoid appearing uncaring of students’ struggles to work well in teams. This new approach led to increased demand for Realff’s services – demand that spread from her department to other university departments and beyond.

About the Authors

Matt Chanoff is a San Francisco-based angel investor. Mark Wegman is an IBM, ACM and IEEE fellow. Daniel Sabbah was the CTO and general manager for Next Generation Platform at IBM. Merrick Furst is a Distinguished Professor and the director of the Center for Deliberate Innovation at Georgia Tech.