Business leaders under pressure to grow the top line face three options: cut costs, pursue acquisitions or innovate and drive growth through their core offering. As optimisation will only get you so far and mergers and acquisitions are increasingly expensive, and come with a high failure rate, when done properly innovation can become a crucial growth driver.
Over the last decade, we’ve noticed a paradigm shift. It’s becoming increasingly challenging for business leaders and private equity firms to navigate the rapidly changing market, and to identify the right opportunities for innovation.
Some 80 per cent of leaders think their current business model is at risk of disruption. Because of this, design is becoming part of the C-suite agenda and a key piece in the innovation value chain. Despite this, most models for how design is employed in innovation strategies are inadequate with 19 out of 20 product innovations failing.
An undervalued approach to achieving growth and navigating changing markets is to utilise human-centric design to innovate your core offering and align it closer to the needs of your customers. Leaders who embrace this approach are much more likely to be able to drive their business to the top of its industry, while improving profitability and creating jobs.
Our experience demonstrates that innovation often fails due to three common problems.
Firstly, taking a tech-first approach to uncover innovation opportunities. By favouring a technology or a solution-first approach, companies often misunderstand the real human issues they need to solve to deliver value in the market; tech-first companies consistently underperform compared to those driven by consumer insights.
Secondly, silos across the business inhibit holistic value propositions and customer solutions across physical, digital and service touchpoints. Separating customer experience from the core business will block innovation returns, stifle value creation, and consistently result in innovation underperformance.
Thirdly, over-indexing on performance and technical innovation metrics alone, such as time-to-market or process efficiency, often creates gaps between the innovation intent and the final market solution. This approach will typically underperform in relation to one that doubles down on discovery and best-in-class delivery.
We believe that the current tendency to move design up the value chain certainly is valuable. But innovation processes that fail to address these points are not reliable enough to base credible strategic bets on. Using design without addressing these issues rarely unlocks fundamental growth and, moreover, can lead to product innovation being one of the 19 out of 20 failures.
Getting innovation right
For more than 20 years, we have helped some of the world’s leading companies reverse drops in market share, and radically increase shareholder value, by turning emerging shifts in culture into tangible results. We’ve done this by basing growth strategies on deep human and cultural insights, and by working with design as a holistic process integrated within businesses. This approach aligns organisations to their customers and unlocks breakthrough innovations with consistent quality and speed to market.
Three things are essential for design to derisk innovation and deliver tangible results.
1. Deep empathy and insights
Design and innovation are about how technologies are combined with a new understanding of what creates human and cultural value. Making design decisions based on hard, empirical evidence, uncovered through solid social scientific methods, instead of relying on intuition and guesswork, means strategic bets can be placed with less risk. This unlocks long-term growth opportunities that have proven traction.
Case study: A major French telco wanted to increase its valuation as it looked for future acquisition scenarios. Instead of looking to competitors, the company started with deep ethnographic research into the world of their customers. This helped them see how bigger cultural shifts were reshaping people’s relationships to technology in the home. Based on these insights we created and built a future strategy that united all the various business divisions around a new proposition and increased the valuation of the company by more than €1 billion.
2. Holistic and integrated approach
At it’s best, design is able to bridge aesthetics and engineering, R&D, technical performance and human culture. But this requires an organisation that is set up for integrating these different perspectives in a continuous process. A network of teams in a human-centred corporate culture can operate in rapid-learning and fast-decision cycles that are enabled by talent and a common purpose. This delivers value for all stakeholders including, most critically, the end-customers.
Case study: Faced with a changing market, a new type of customer, autonomy and electrification, a major automotive manufacturer faced difficulty identifying a way forward. Taking a holistic approach to innovation and design, allowed us to work across the business, seamlessly integrating physical, digital and service design to build a breathtaking user-focused vehicle, and a new service opportunity for the business to rally around. This approach created a range of new revenue platforms within the passenger experience.
3. Quality from insight to solution
The gap between ideas and execution is a threat to any company. Concepts are powerless without becoming real. So your innovation strategy should first be designed as an actionable execution framework, not just to tell you where you need to go. Second, you need to get a real product to market without sacrificing the original human insight that enabled you to identify the market opportunity. This means getting comfortable with categories such as aesthetics, beauty, attention to detail and quality of execution. Marketing frameworks can be replicated, but craft and sensorial attributes are unique. This is the most overlooked factor, but the one that separates Hermès from Zara, and was a core driver for turning Apple into the success it is today.
Case study: A medical device manufacturer was struggling to deliver within its market. Spending time with end users, we helped the company discover how they could unlock growth by shifting from manufacturing functional, but stigmatizing ‘medical’ products, to providing aspirational lifestyle solutions. This insight led to an overhaul of the entire product portfolio without increasing costs, a shareholder value increase by 500 per cent, outselling competitors four to one, and being recognised among the most innovative global companies.
Native is a human-centric innovation and design company, based in London and San Fransisco.
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