"The pandemic represents a rare but narrow window of opportunity to reflect, reimagine, and reset our world."
- Professor Klaus Schwab, Founder and Executive Chairman, World Economic Forum
Why innovation is more important than ever
The changed global environment has created demand for new products, services and business models – as well as opportunities to use existing resources in new ways and for new customers.
For businesses, this presents an opportunity to leverage innovation and transform in line with changing customer expectations. According to Cameron Turner, innovation expert and Entrepreneur in Residence at UQ Business School, the rate of disruption is getting faster and faster.
“Where the lifespan of S&P 500 companies in the 1970s was 35 years, it's expected to hit 15 years this decade and is accelerating downwards quickly with every new multibillion IPO,” he says.
But innovation is also vital to address the significant problems being faced by our global community.
“We have an extra 2 billion people, and we need to feed these extra 2 billion people with less water, less land and less carbon,” says Cameron.
“At the same time, we've got climate change happening, ocean levels are increasing, and digital technology is disrupting almost every industry, especially healthcare, retail, entertainment and how humans socialise.”
Customer-centric innovation will increasingly become an essential tool to help public and private organisations develop sustainable and scalable solutions to address the rapidly emerging consumer, business, environmental and societal challenges. However, with the failure rate of startups sitting at 92%, according to the Startup Genome report, it’s clear we need to get better at converting ideas into game-changing innovations.
Why do most startups fail?
There are 2 common reasons so many innovations and startups fail, and it’s not because the idea or innovation doesn’t work. According to Cameron, they usually fail because:
they solve the wrong problem
no one cares (no customers or users).
How to focus on solving the right problem
Cameron says a common reason innovations fail is that we think we know what the problem is, so we spend most of our time coming up with solutions to that problem. But most of the time, we're solving the wrong problem.
“If you create something that doesn’t solve a problem faster, better or cheaper than the status quo (your competitors), it will fail, because there will be a lack of customers,” says Cameron.
“For example, the Australian and New Zealand governments spent tens of millions of dollars over a decade trying to increase vegetable consumption by creating vegetables that were extra nutritious. They thought that if they made vegetables extra healthy, people would eat them more often and pay more for them.
“The project was successful, technically, with the creation of a range of extra nutritious vegetables. But what they failed to realise was that people weren't eating vegetables not because they weren't healthy enough. This was an incorrect assumption. People weren’t eating enough vegetables because of their taste, lack of convenience, or a total lack of excitement. So, ultimately, they solved the wrong problem. The problem they should have focused on was if consumers aren’t cooking as much anymore, what different products, services and business models could be developed to get vegetables into consumers’ diets?"
“On the flip side, when an HR executive in the US was sick of eating gluten-free pizza bases that tasted disgusting, she created a cauliflower-based pizza,” says Cameron.
“The first issue launched $45 million worth of sales and the company is now worth $500 million. The difference is that she solved a problem that people really cared about better than anyone else.”
“Her reward? A spot on Forbes’ seventh annual ranking of America’s Richest Self-Made Women with a net worth of $245 million. Solving the right problem pays.”
How to focus on innovations people will care about
Cameron believes the secret to ensuring your innovation strategy solves problems people really care about is through ethnography: observing complexity and nuance in human behaviour to identify problems where people are dissatisfied with the current solutions.
“It’s not enough to ask people what they want,” he says.
“Because people don’t know what they want. But if we spend enough time listening, observing and trying to work out what’s important to them, their “why”, one can identify their hopes, fears and aspirations and, more importantly, what’s getting in the way of them achieving or eliminating them. Life is so uncertain and busy these days; most people yearn for less complexity and stress and more time with the people they love.”
“To work out how to achieve this, we need to conduct anthropological expeditions into people's world to understand the problems or pains to solve and the benefits or gains they would love to achieve.”
Cameron suggests observing customers and asking them these questions:
What’s keeping you awake at night?
What’s the most frustrating thing about (the area you’re trying to innovate in)?
If I could give you back one day a week, how would you spend it?
What do you really love about (the product or service you think you can disrupt)?
Tell me about a time when you were trying to get a job done and you were really dissatisfied with the options you had available.
“Most high-value problems that motivate consumers to invest in a new solution usually are rooted in solving emotional or social problems rather than functional ones,” he says.
“This is because getting humans to try something new is really hard, as we’re asking them to take a risk on something they have no confidence in. Humans have learned to only take risks (change their behaviour) when the advantage or “gain” offered exceeds the pain of staying with the status quo.
“This is why most new companies and products fail. Because they can’t convince enough consumers it’s worth changing, or the change is too big. Clever companies take an intimate understanding of existing human behaviour (rituals) and slip their innovation seamlessly into a format that consumers are familiar with. No risk!”
“This phenomenon is perhaps why the biggest employers of design anthropologists (people who study human behaviour) are the largest tech companies like FANG (Facebook, Apple, Netflix and Google). These companies are experts in human behaviour, which is why they are the largest companies on the planet today.”
How businesses can leverage change and not get overrun by it