I've been inspired by Jeff Jarvis' post in the HBP Davos Diary about Journalism's Crisis to become a bigger pain in the butt.  In his post, he argues that journalists failed to be persistent enough to get people to pay attention to the issues that led to the economic crisis, whether through their own reporting, or through curating the questions the experts were posing all along in their blogs.  Whether or not you agree with his conclusion that this is a journalism issue, he makes a good point about not sitting on the sidelines when issues are known.

My post on measuring innovation highlights one of these issues.  The post generated some great comments and interesting off-line discussions, and I've come away with a few general conclusions. First, it seems that the majority of people are falling I've been talking to are falling into two camps.  There are those who feel that innovation can, and should be measured, and feel that the quantitative metrics currently at our disposal can be used to accomplish this.  Then there are those who feel that when something new is developed that has no current benchmark, then measurement is irrelevant and intuitive judgment is best. I don't fully agree with either, and think it is the responsibility of all of us who work in the field of innovation to help our clients to develop new metrics that appropriately blend the best of both perspectives.

I was happy to find a few people who agree with me, and who are also actively working to develop new ways to think about the value that is added to a company or market. David Hughes pointed to a resource from the UK that talks about measuring Value Added (VA) by businesses.  What I found interesting is that they are taking a fairly straightforward, overall measure of how well a company is doing as compared to the previous year.  To me, the point is that ultimately we should be looking for holistic business success, regardless of what we can or can't measure individually.

Some other interesting points also came up in discussions.  Can you quantitatively project the value of a human process or culture change, such as customer service focus, before you adopt that process?  While a dollar value may not be appropriate in that case, a different assessment of the value could be developed.  Was the value of the iPod and its associated services projected before they were launched?  Maybe not, but it could have been; if not against the new category that was not yet created, then qualitatively against how well it satisfied consumer needs.

My point is that we need to start rethinking our current mental models for how we measure value.  It's not all quantitative, and it's not all intuitive, and it's up to us to prototype new methods and iterate them until they can be generalized and widely adopted.  We can't get there if we reject the possibility that they exist.  Isn't that what innovation is all about?

Seth Godin had a post today about creativity.  In it he talks about how, for him, creativity is what happens at the edges of the normal routine.  As such, what is creative for one person, may be rote routine for another.

Seth's post is a good reminder that creativity can take any form, and is not dependent on the tools or skills used in the process.  It's easy to think of people with drawing skills as more creative than people with spreadsheet skills, but is that really true?  I would contend that a photo-realist painting may exhibit extraordinary skill, but it may require less creativity than developing a spreadsheet for a new business model that disrupts an industry.  And even then, the processes used to arrive at a finished product may require far more creativity than the uniqueness of the product may let on.

Every day, I see people making quick assumptions about creative ability based on initial observations.  This is a good reminder to really engage people and ask how they arrived at their conclusions, why they made the choices they made or used the tools they used.  I find that those answers usually change my initial perceptions, and I am able to find remarkable thinking in what superficially seemed mundane.

Yesterday I had two conversations about metrics for innovation; what should be measured, how do you measure it, and one question about whether it can or should be measured at all.  As my definition of innovation is doing something new that adds value to the business, I believe innovation should be measured in order to capture that value. So, in the macro sense innovation can, and should, be measured. 

However, I do understand the basis of the question of whether innovation can be measured at all. If you're dealing with a truly disruptive innovation, how can you measure when there are no existing benchmarks?  Ultimately, you may find that innovation cannot be measured by using existing metrics.  It then becomes necessary to develop new metrics as part of the innovation process.  Here are some of my thought processes for measuring whether a disruptive innovation with no existing benchmarks will be a success. I'm being careful to call them thought processes rather than methods because the resulting process is different based on each individual context.

Benchmarks  Typically, improvements to existing products or processes are measured against the existing offering.  A truly new process or product or process cannot be compared directly, and a different context needs to be developed.  I often use scenarios in this situation.  For example, I may show a scenario in which a consumer is engaged in a specific task. I then ask evaluators two questions.  "Describe what is going on in this scenario - what is the person trying to do?" and then "What does XYZ product need to do to help accomplish this task?" After they describe the attributes of a successful offering, I present the options (including the current and competitive offerings) and ask which one is most likely to achieve what they described.  What happens is that the benchmark shifts from a current embodiment to a goal to be achieved.

Consumer involvement  Never underestimate the consumer's bias toward what is familiar.  In the evaluation method described above, consumers are not asked their preference of one product over another.  When you are evaluating a truly disruptive innovation the offering may look so foreign or exotic, that consumers may not readily prefer it. It's necessary to create a context where they are evaluating based on how well a new offering will accomplish the intended criteria.  That said, the offering shouldn't be offensive, but keep in mind that successful innovations often fail initial preference tests.

The numbers  When evaluating a truly disruptive innovation, it's important to quantify the value provided before defining the cost structure.  This is especially helpful when developing an offering that has no existing benchmarks.  In the example above, a second step would be to refine different iterations of the embodiment that performed the best.  An evaluation could then be performed to figure out the perceived value of the new offering. (These evaluations can get very involved, so I won't try to define it in detail here. If people are interested I can show an example in another post.) Once the value is determined, a new cost structure can be defined as part of the development process.

Overall success At the end of the day, we need to know whether our efforts have been successful.  It is a fairly straightforward exercise to measure the holistic success after the new offering has been in the market.  I've often been asked about the success of a specific component, such as the pricing, marketing campaigns, or internal processes.  At this point, I have not found a good (reliable) way to measure the success of any specific component of the process.  I'm hoping that if we can start working with the ideas above with greater frequency and rigor, then the value of specific components will start to emerge.  I did do one project where we were able to quantify some of the consumer perceived elements of the design, so I know it can be done.  It was a fairly involved process, but if the stakes are high in terms of investment or brand equity it is well worth the effort.

I'm interested to know how others view innovation metrics, and whether there are other ways to look at the areas I've mentioned.

A friend was recently discussing her experiences in having to exercise her Power of Attorney authority over her mother's affairs. In the US, Power of Attorney "is an authorization to act on someone else's behalf in a legal or business matter." Many parents grant this authority to their adult children, to be exercised in the event that they are unable to mentally or physically act on their own behalf.

When she first took on this role, my friend imagined she would be merely assisting her mother to execute the plans that had originally been set forth. She soon realized that financial and legal guidelines and associated paperwork changed much too quickly for her mother to keep up with. For example, a simple request for assistance with an investment account would result in a discussion with the accountant to understand new tax implications of what her mother was trying to do, adjusting the initial request as necessary.

My friend described how the experience was changing the way she interpreted her mother's requests. In order to give her mother what she needed, she had to learn to look beyond what her mother asked for. And in order to preserve her mother's dignity, my friend needed to learn to discuss issues with her mother, listen to her direct requests, understand what she was trying to achieve with each request, and then translate those requests into the current procedures required today.

Sound familiar? All companies act on behalf of their consumers as they strive to produce products and services that are of value to them. In essence, they exercize Power of Attorney authority in every product development decision they make. How many people involved in the development process take their roles as seriously as my friend does when they are making those decisions? Hopefully, the answer is that they all do.

After several months going back and forth with the great people at Alltop.com, it was decided that this blog, Foresight 20/20 should be categorized in their innovation section.  The category can be found here.  We landed on the innovation category because, clearly, this blog is certainly about innovation.  Thank you to everyone who reads and comments here.  I've learned more than I ever expected, and met some great people along the way.

An idea we were kicking around with the Alltop people was whether they would want to use this site to create a new category for Consumer Insight.  Blogs can be listed in multiple categories, so I'd love to know what you think.  Would it be useful to you if they created a category for Consumer Insight?

Today I was reading a blog post by Chris Brogan in which he was making a distinction between blogger relations and sponsorships as ways companies can connect to their consumers.  Chris was given some product by Panasonic, and they sponsored his trip to the Consumer Electronics Show.  He was writing about marketing and sponsorships and whether/how they differ in new media venues from traditional venues. (There is a great discussion about this topic in the comments by the way.)

His perspective was interesting as it made me think about the other side of being a lead user.  I seek out lead users to understand their motivations to help my clients to innovate.  Lead users are often aspirational role models.  However, this post made me think more about the expectations of the people who follow the lead users. 

From a company perspective, lead users are a wealth of information about the values, motivations and decision processes of people in the target market.  Understanding what makes them tick often yields great insight for the purpose of innovation.  Likewise, understanding why the laggard is the laggard can yield equally valuable insight.  But how do these groups view each other?  Does it have an impact on your business? 

From an individual perspective, think about your activities and hobbies.  Who would you say are the lead users in these activities?  What are your expectations of them?  Would you seek them out for advice, or do you look to them as experts?  If they were talking about products would you be more likely to try them?  Likewise, how do you perceive the laggards?  Where would you place yourself?

I have no answers here, but am intrigued by the idea of learning how consumer groups perceive each other.  My hypothesis is that it depends on the category.  In some, people are very aware of who's who and why, and in others it may not matter.  I'm going to start probing these ideas in the next sets of consumer interviews I do, and will test my hypothesis.  If you have any insights into the topic, I'd love to discuss them.

Certainty is the holy grail today.  Everyone is looking for that spot of safe ground that won't fall away from underneath.  Yet everyone also knows that the old, certain ways of doing business will no longer work.  Innovation is imperative, and many companies are trying to embrace the challenge.  I applaud this effort and will offer one important caution.  Beware of the Dunning-Kruger effect.

People have been experiencing the Dunning-Kruger effect forever, but the name has only begun to gain mainstream traction in the past year or so.  The crux of the Dunning-Kruger effect is this:  "Ignorance more frequently begets confidence than knowledge."  Why?  Because the more you know, the more you realize what you don't know.  When you realize what you don't know, it's more difficult to project confidence about being a master of a topic.  That's why the masters of a profession usually exhibit the most humility and see all new projects as a challenge. 

In fields that are rooted in certainty, people can often see through confidence that is the result of inexperience.  In fields that are rooted in uncertainty, such as innovation, organizational development, some types of scenario planning, and others, there are no traditional benchmarks by which to judge the true level of mastery.  The result is that the ones who sound confident can be incorrectly perceived as more competent.  The people and organizations who will thrive in the future will be the ones who can embrace the uncertain challenges that lie ahead.  Most organizations will need help with this, and here are a few points you should consider when evaluating potential partners.

When reviewing a presentation of work, understand that the end result is often obvious in hindsight, and the presentation will show the logical, linear path toward the answer.  When probed with follow-up questions, the true master should be able to talk how the answer became obvious.  The master should be able to describe the other potential outcomes and why they were not chosen.  The creative tension that the team needed to wrestle with should become apparent, as well as how it was resolved.  Paths that were subsequently abandoned, and the changes that were needed along the way may be discussed (as long is it does not violate confidentiality). 

On the other hand, the poser will stick to the linear story.  It will be neatly tied up in a bow.  It will seem as if the work was obvious and tension free throughout the process.  The hard work will be described more in terms of the volume of work rather than the intellectual challenge within it.  The poser may tell you with absolute certainty what your answer may look like even before you start the project, or may want to skip the beginning of the project to evaluate some "clearly obvious" solutions from the get-go. 

Think about how your organization chooses partners to take on these types of challenges. The most important thing to remember is that you are looking to work with people who exhibit competence in dealing with uncertainty.  You are not looking for people who talk about uncertain challenges with certainty, regardless of how comforting it may feel in the moment.  Don't succumb to the Dunning-Kruger effect.

I have to thank JD for keeping me honest in my last post about consumer behavior in this economy.  I was discussing several media reports that consumers were not spending as much during the holiday season, citing a choice to save rather than spend.  My experiences pointed to the fact that there was little inventory to buy, and that this consumer behavior was less a matter of choice, and more a matter of circumstance.

My main point is that it is easy to look at a consumer's action and jump to the conclusion that it is the result of a choice.  Very often, this is only partially true.  I'm sure that there are many consumers who are choosing to spend less.  But there are also many consumers who would have bought more at retail if the items had been in stock.  Likewise, as JD pointed out, there are multiple reasons why inventory levels were low; some retailers are trying to reduce carrying costs, and others are having trouble getting inventory due to the credit crunch.

Why is this important?  Because it leads us to an important consideration when thinking about market segmentation.  Instead of segmenting the market based on demographic or psychographic characteristics, it may serve us well to segment based on the circumstances that are influencing consumer decisions.  In the example mentioned above, the consumers who are choosing to spend less will have different needs than the consumers who found that the items they wanted to buy were out of stock.

When setting innovation goals, it's important to understand the context in which your consumers are basing their decisions.  Segmenting the market by the consumer problems that need to be solved will lead to offerings you may never have thought of otherwise.  That's the key to valuable innovation.

We've all been inundated with media reports about the current (sad) state of the economy.  One that stood out in particular for me was the report that said people were out in malls, but not really buying much in the stores.  It then went on to say that people were spending more online.  The conclusion drawn was that consumers were not spending by choice.  I however, had a very different experience.

Due to a lack of planning on my part, I joined the crowds just before Christmas.  I had to buy two fairly common items - a pair of boots and a pair of slippers, which I decided to buy at the retail store so I wouldn't have to wait for shipping.  Silly me.  Neither item was in stock.  The sales person told me that he would help me to order them online.  He then went on to tell me that he felt badly because they were actually out of stock on most of the commonly purchased items.  When I looked around, most of the sales people were actually just helping people to place online orders.  At the end of the day, I found some great boots at an independent retailer, who actually had products in stock and could sell them to me.  I decided to order the slippers online and wait for the shipping.

I also noticed that Amazon had sold out of the Kindle.  Hmmm...  More people wanting to buy things that are not available, and yet we are told that the consumer is not spending by choice.  My observations are pointing to a very different conclusion.  The consumer is not spending because there are fewer things available for them to buy.

I know that companies are trying their best to avoid a glut of inventory.  I know that everyone is carefully considering their purchases, and companies are carefully considering how they run their businesses.  But I worry that too many business decisions are being made out of the fear of what might happen, rather than the reality of what is happening.  Economics is certainly a field where self-fulfilling prophecies are the rule more then the exception.  We modify our behavior based on what we think will happen.  No matter how prudent it seems to reduce inventory levels, companies cannot post sales on products that are not offered for sale. 

The current weak economy will pass.  The timing will depend on when we can shake our fears and create the economy everyone is waiting for.