Returning now to problem-solving for a new business idea, Incremental Innovation is about becoming more patient and more effective. “Doing things right”, Level 1, is about creatively finding new ways to do things that improve cost and reduce the time. “Doing the right things”, or Level 2, is about creatively setting the right priorities, doing what’s important first. Most individuals who use a CPSI creative problem-solving model easily can solve problems at this level. The CPSI model is shown in the “Creative Problem Solving Model” figure.
Problems at this level are generally considered to be “Tame Problems”. They can be solved by most people by understanding the problem, gathering information, analyzing information, generating solutions (as shown in the CPS model), assessing the solutions, implementing, testing, and modifying.
The first step in the CPS model is about finding what the real mess is and making sure that you’re really working on the right question. Are you really after making things nicer, or are you really after finding things that will be available sooner? It’s about understanding the cost and performance trade-offs in your product or service design. Having defined the problem appropriately, the next step is to understand the mess from many different perspectives. One can look at it like a chemist, as a mechanical engineer, as an architect, as an artist, as a musician, as an astrophysicist, as an anthropologist. Each perspective used will define the problem somewhat differently. Brainstorming from any of these starting-point perspectives will quickly generate ideas to solve the problem. Solutions derived from these ideas and the actions needed for implementation then follow a normal project management methodology.
This problem-solving methodology is very similar to that used by the McKinsey consulting group. The McKinsey approach can be divided into five major activities: 1. Framing the problem. 2. Designing the analysis. 3. Gathering the data. 4. Interpreting the results. 5. Presenting your ideas. A basic tenet of the McKinsey thought processes the concept of MECE, an acronym for Mutually Exclusive Collectively Exhaustive. What this means is separating your problem into distinct, non-overlapping issues while making sure that no issue relevant to your problem has been overlooked. The most common to tool used to break problems apart is a logic tree, starting with the 20,000-foot view and moving progressively downward. For example, if the problem is “how can we increase profits”, the decision tree might break that down to “where the company’s profits come from”. If the answer is from just three of the core business units you can then draw the first level of a logic tree for this problem. You can then split profits into the revenues and expenses. You continue drilling down to granular key points in the decision trees. You use the 80-20 rule to make sure that you’re following a branch that has high impact on the ultimate problem.
When coming up with solutions, it’s important to determine whether a proposed solution or hypothesis is valid from a business standpoint. Three questions to test this are 1. Will the proposed action reduced costs, 2. Can we implement the necessary changes? 3. If we implement this change can we maintain product quality? In answering these questions it’s important to remember that a few key facts can go a long way to making the right choice. The six key principles McKinsey’s consultants use to analyze data are 1. Apply the 80/20 rule, 2. Make a chart every day (captured in that chart should be the three most important things learned today), 3. Don’t make facts fit your situation, 4. Always ask the “so what” question, 5. Perform a sanity check, and 6. Recognize that there are limits to analysis (data without intuition is merely raw information, and intuition without data is just guesswork. Putting the two together gives you the basis for sound decision-making).
There are many practitioner guides for innovative thinking. One of the best was put out by L’Academie de la Banque de Montreal. Their ideation processes is similar to the CPS model but importantly their workbooks go into great detail for each tool outlined in “The Ideaction Process” figure. In particular, the process stresses the Issue Redefinition step. Creativity should be applied to the task of precisely defining an issue. Concentrate on finding the real issue and you will save valuable time. To do this you must: 1. Break down the issue. 2. Analyze all aspects of the issue, not only those that seem important at first glance. 3. Paint a portrait of the issue from different perspectives. 4. Put yourself in the shoes of those affected by the issue.
Most traditional market research also falls at this incremental level. For example, a typical Boston Consulting Group (BCG) methodology used with their clients is to segment the market by user, place and desired benefit. The approach is to collect a set of consumer data to identify, quantify, and prioritize opportunities. This is a structured approach similar to the CPS model above. The marketing results by such an approach are often presented graphically as a cube, see the “Cube Model” figure. Many authors speak loudly to the requirement that the customer’s needs, both articulated or not, have to be addressed if any innovation is to enjoy commercial success.
To gather the data for such market research the plan usually consists of multiple phases, as shown in the “Typical Market Research Plan” figure. In the graphic shown it is a retail product that is envisioned. The first phase involves an in-depth understanding of the consumer. The second phase then involves quantitative research to make sure that what we produce will also produce a profitable business. In the first phase, key user groups are usually interviewed to get a good understanding of the breadth of applications for a proposed product or service offering. Following up on the applications that are uncovered, deeper dives are undertaken to really understand what applications are used in each segment. Further research is done to understand the distribution system of a product or service as this can oftentimes influence the business profitability and growth rate. Interviewing throughout the distribution channels additionally provides insight into consumers’ purchase behavior as often times channel partners are asked questions or hear concerns of consumers as they select one product from another.
For applications with the highest expected commercial value, quantitative research is then done in a second phase. The purpose is to understand exactly which opportunities will be pursued, for which market segment users, and for which of their applications. This structured approach to creative problem solving is geared to identifying the right problem to work on. For ease of communication and organization the results are often graphically displayed as shown in the “Summary of Research Results by Attractiveness of Individual Market Segment” figure.
Each of the individual segment characteristics is summarized in a box and the boxes put in a matrix as shown in the “Matrix of Market Segment Results” figure. Such quantitative results allow an organization to see where to focus. In this example, Government management analysts represent a large segment size, high usage level of the product, and are willing to pay a high price. Using such structured methods of innovation and invention allow individuals and companies to quickly create products and services at the first and second Levels of creative endeavor. Conducting marketing surveys, obtaining marketing reports from outside groups, doing conjoint analysis, quality function deployment (QFD), and Kano analysis are all techniques that are usually used.
When coming up with ideas or solutions to the problems that have been identified at Level 1 and Level 2, using linear techniques for idea generation is a fast and efficient way to do so. These techniques are summarized by William Miller and consist of: matrix analysis, morphological analysis, nature of the business, reframing questions, Force Field analysis, attribute listing, scamper, alternative scenarios, forced or direct association, and design tree. Intuitive techniques for idea generation at these levels include imagery, brainstorming, analogy, dreams, drawing, and meditation.
Another technique for mess finding in this level is to use intellectual property databases. Patents in particular are unique because they require the description of a technical invention along with its business or commercial use. When the business community finds an area in which they believe they can earn a good return on their investment, those areas grow in patenting activity. Patents are a trailing indicator of how companies and governments have invested money in areas they believe represent future growth and opportunity. Tracking patent growth in different areas thus gives an indication of where the near-term opportunity lies. The European patent office by way of IPC tracks such growth and decline. They have over 120 main groups in their IPC. These are gathered together in what they called joint clusters. Over the past several decade’s computers, telecommunications, biotechnology, audio, and video media have all enjoyed rapid growth. On the other hand, growing more slowly are polymers, industrial chemistry, handling, and processing. The “Growing Joint Clusters” and “Declining Joint Clusters” figures show these trends.
Embedded in these joint clusters are individual technical and use domains. Their growth rates range from everything from -40% to well over 600% over the same time periods. Looking at the individual domains shows that even in some of the overall declining joint clusters there remains individual areas of growth activity. Examples are solid waste and reclamation of contaminated soil, musical instruments, acoustics, headwear, and lighting. Studying areas of growth and decline serve as a supplement to market research as a way to identify new opportunities for businesses to pursue.
So far we’ve been focused on product and service creativity. There is also the creativity that’s important to people who work in operations environments. Factories, distribution centers, customer support, all have their own need for creative processes. The methodologies are quite similar; however, there are some that are unique to process improvement. These are shown schematically in the “Process Improvement Creativity Methodology” figure. Creativity for process improvement usually starts with a gap analysis identifying opportunities. Teams typically consist of engineers or shop floor personnel analyzing the process flow for bottlenecks and constraints. Other methods include benchmarking other organizations having similar responsibility, or Pareto analysis of their own process flows. Once a gap is identified, the next step is to form a team and scope out the project. Important here is to make sure that the customer and the end requirements are understood so that the process improvement stays within the boundaries established by the end-user. Tree diagrams and quality functional deployment (QFD) are useful tools here. Many specific techniques are outlined in books by Edward Demming.
Some industries obtain more value from process innovation than others. This is shown in the “Relationship Between Product and Process Innovation” figure. Looking at it from an R&D Games model standpoint, industries which are based on understanding basic engineering principles are the most reliant on new processes. More mature industries of the R&D Game type that do not need scientific or engineering principles to be discovered for implementation, do not benefit much from process innovation (past that needed to focus on cost reduction).
The next step is to understand if the current process is in statistical control or not. Much work was done in the 1950s, 1960s and 1970s around quality improvement programs, all aimed at obtaining controlled processes. Deming is perhaps the most widely known person working in this field. The actual problem-solving techniques include brainstorming, why-why diagrams, process redesign, cause and effect diagrams, triggered Trico analysis, nominal group technique, failure mode, and effects analysis, (MDMA) decision trees, and process benchmarking.
To assess process creativity results, improvement requires the ability to measure that the changed progress is statistically different, and sustainable over time. This assessment is done with trend charts and process capability charts. Also, unique to process improvement, is that the journey never ends. It’s a constant loop of observing, improving, measuring, acknowledging, and repeating.