Value-Driven Innovation - Paths to Performance Excellence
The driving question of innovation-based businesses worldwide is this: How will we turn ideas into profits in highly competitive environments, year after year after year.
Creativity starts the process; ideation develops possibilities. Invention proves concepts; productization or “business-ization” enables practical use. Commercialization impacts markets and delivers ROI. Costs grow dramatically with each step.
Uncertainty kills momentum. Occasional success is not enough. Investment must focus efforts on best opportunities and rewards. Our potential depends on what we know. On our paradigms. Our systems of beliefs about innovation.
Seven core principles in context of two axioms can guide businesses from global corporations to single projects. Adapt these if you must, yet don’t lose the focus they offer.
Axiom
No one ever buys a product.
They always buy
what they think the product will do for them.1
No one ever buys a compass. They buy a sense of direction. Not drill bits, but round holes. Not loudspeakers, but sound. Not mousetraps but fewer mice. You know this is true, yet in the rush to market you might forget.
Customers don’t buy products; they buy the value of products – the sum of benefits that products deliver. The same is true everywhere in business and in life. Not venture investment, but returns on investment. Not project funding, but new possibilities. Not license fees for technologies, but competitive advantage. Not salaries for tasks done, but for progress made.
Exchanges in business are always about perceived value. Each side decides what value is sufficient to drive the relationship – what benefits will drive purchase; what returns will drive investment, and so on.
Innovation depends on this context of value exchanges over and over on its journey from raw idea to market maturity. Impact depends on the multi-faceted value offered in exchange for “payment.” Consistent delivery of value, as perceived by stakeholders, creates durable relationships and the trust necessary to sustain those essential relationships.
Axiom
We have no inherent value
as suppliers of products and services.
We are all strategies.
Loyalty is tenuous. From customer perspectives, we are sources of valuable products, not the value itself (no matter what “product” we deliver). Though they may not think in this language, customers and investors see us as strategies – ways to get desired results. If they can find a distinctly better way (strategy), they’ll convert to that alternative.
We risk everything when we see ourselves as central or core to our business relationships. A more useful perspective sees ourselves as faithful resources driven to deliver high value by meeting customer and stakeholder needs over time. Resulting loyalty delivers precious returns far in excess of mere sales.
Principle of Value
Consciously structure, lead, and manage
to consistently increase the win-win value
of relationships with customers
and other stakeholders.
Our job is never to manage businesses or create and sell products. It is always to develop and sustain durable, value-driven, win-win relationships. Everything else is support. Everything! Products for payment. Salary for performance. Investment for profits. Everywhere we look, we see win-win relationships as the core of durable success. If we lose those relationships, we eventually lose everything.
Implementing the Principle of Value requires leadership and management with particular, conscious focus and intent. The remaining six principles guide implementation of the Principle of Value.
Principle of Focus
Make conscious, informed, proactive choices about
who we want to be,
where we want to go,
how we intend to get there,
what we value, and
how we intend to behave.
Clarity of focus delivers efficiency of processes and competitiveness in markets. “Who” is about business identity. “Where” about goals and objectives. “How” about strategies. “Value” about internal value systems. “Behavior” about internal culture. All are keys to effective leadership.
To make these decisions, define, ask, and answer questions designed to stimulate powerful brainstorming. Synthesize results to produce answers as foundations of durable, detailed, marketable visions at levels of businesses, business functions, projects, products, services, technologies, and even embryonic ideas. Used well, focus can drive every aspect of business.
Effective focus can be expressed as carefully worded promises to stakeholders. Building loyalty requires making those promises both audible and visible, then honoring those promises with performance over time. (That is branding.)
Focus accelerates planning accelerates performance accelerates profits. Planning is far easier when core decisions have already been approved. Performance then gets a head start, and clarity of operation enables practical decisions in the ranks. Time to market is just one of many benefits of a well focused business.
Principal of Strategy
View every action as a strategy to achieve goals,
then carefully choose the best strategies.
Businesses of every type and size need strategic direction. Goals are durable, desired long term results. Objectives are desired measurable, achievable, and assignable near term results that may change with plan period. Strategies are methods for reaching objectives.
Strategies structure businesses. R&D, manufacturing, marketing, finance, outsourcing, etc. are all strategies for reaching goals by achieving objectives. Choice of (e.g.) marketing strategies then structures the marketing department, and choice of PR strategies structures media relations, and so on. Choice of strategies must always be balanced against resource limitations, including at least time, expertise, facilities, funding, and stakeholder support.
Significant objectives require clusters of strategies. Integrating strategies increases the odds of success and may even reduce resource requirements Integrating strategies enables integrated time lines and budgets.
R&D, for instance, is a hugely complex integrated strategy that must be managed as a complete business. Projects can be managed as temporary businesses defined by an integrated strategy.
Implementation obviously takes both sufficient resources, leadership, and management. If resources are a problem, add a strategy for gaining new funding, facilities, etc.
Effective leaders and strategists start with their highest goals, then choose strategies carefully. Tacticians may start with actions, spending resources on efforts that don’t help reach goals. Indeed, a tactical approach generally leads to waste, inefficiency, and poor image.
Principle of Need Satisfaction
Conceive, develop, and deliver value to customers
better, faster, and more profitably
than any competition.
Stakeholder needs drive everything in business. Without customer need, there is no justification for products, businesses developing products, companies supporting businesses, or entire industries. Amazing features manufactured with ultimate quality have no value if they meet no needs. Without investor need, there is no justification for funding of businesses, new strategies, or projects of any kind.
Reliable need satisfaction delivers durable win-win relationships. This is the heart of branding. Business focus sets the stage; innovation honors needs; and consistent performance of products and services prove the ongoing value of those relationships.
Once made, a value-based decision to buy is driven by comparison of features. That is, no one ever buys features. Instead, features influence choices among available options. Both businesses and products can be designed around features that deliver greater and more preferred value by meeting specific needs better than alternatives do.
Intangibles such as reputation, customer referrals, brands, and buzz also influence value-based decisions to buy. Today, terms like clean, green, and sustainable give products and companies special value. Reputation for high-tech isn’t as important as usability and relevance.
Persuading recognition of need requires marketing strategies rather than product strategies. Whole industries now conform to intangible qualities required for selling products, and those standards evolve constantly
Broadly understood, need satisfaction defines excellence in products and businesses. Getting there means knowing customer and stakeholder needs and wants better than they do. It means being able to conceive of and deliver products that will delight customers, just as soon as they realize that such a thing is possible.3
Principle of Perception Management
Manage everything done and said
to consistently reinforce
desired marketplace perceptions.
We can develop perfect focus and need satisfaction, yet foul it all up with weak communications. Every message both conveys information and creates perceptions. Perceptions change with every new interaction. Our audiences can’t stop developing their opinions and biases, so we apply strategies to clarify our relationships.
● Positioning moves market perceptions from current to desired perceptions.
● Branding persuades market acceptance of specific value promises
● Communication excellence requires proactive choice of desired perceptions and brand concepts so that our words match our actions and vice versa.
To walk our talk, we must first apply the focus principle to know our business. Then we must treat communications as both highly strategic and central to development of durable win-win relationships with a wide range of stakeholders.
This is NOT about words, but about corporate success. Brand equity is the only truly durable source of corporate wealth. Products, markets, technologies, facilities, customers, investors, and competitors all change. Only the bond of stakeholder trust survives through time.2
Brand equity is a source of greater cash flow, faster cash flow, more reliable cash flow, lower cost of sales, lower cost of capital, higher share value, and durable corporate wealth. Powerful brands produce easier sales, repeat purchases, upselling and cross-selling, barriers to competition, more productive alliances, easier market expansion, and competitive platforms for higher market impact.2
Every business action is a strategy for reinforcing desired perception. Trust is the core of relationships. Communications must not be afterthoughts, but vocalizations of carefully made decisions about how we want our business and products to be perceived.
Principle of Leveraged Strengths
Discover and leverage
the full nature and power of
every key entity and process in our business.
People, teams, and processes of all sizes, in all functions, are strategies for performance. All can be focused on value, strategy, need satisfaction, and perception management.
Beyond that, we can discover strengths we may not have recognized. A product, for instance, can be completely described by its features, yet customers buy value, not features. We can also describe products in terms of capabilities (what one can do with it), benefits (the value of using it), and intangibles (the reputation and image it carries). Innovation focused only on features will miss ways to deliver value and persuade purchase.
Then there are underlying systems. The most obvious is win-win, product for payment. So long as both sides are satisfied, the system will continue. The business itself is a system that can be diagrammed to explicitly show internal loops for focus, need satisfaction, perception management, and ongoing change. Each of those loops contains elements (processes) that are subsystems. Systems theory is a rich source of tools for leveraging strengths for performance excellence.
Well designed businesses discover and use the full range of potential strengths of its entities and processes, thus enabling powerful advantage.
Principle of Change
The only way to stay in control of our business
is to proactively lead into change.
Innovation is an engine of change. Innovators are agents of change. New tools and systems enable design and manufacturing of products not possible just a few years ago. Worldwide, change in civilization will never, ever again be as slow as it is today.
Changes in perceived value forces changes everywhere else in business. Efficiency is essential, yet not enough. Quality is now a given, not an advantage. Focusing (above) becomes an ongoing, dynamic rather than a firm foundation.
Change is no longer a choice. Nowhere is stable. Market leadership requires knowledge of changes in customers, business performance, and the impact of a variety of competition and other market forces. Basic research, market research, design, engineering, and knowledge management become primary strategies for survival.
Our responses to global market changes are, in themselves, changes. Indeed, the only way to manage change is with change. The only way to maintain leadership is with change leadership.
And the only way to lead into change is to work from a foundation of durable basic principles that enable consistent progress in making and keeping satisfied stakeholders, at a profit, over time, in a highly competitive environment.
Performance Excellence
Market impact requires nothing less than consistent increase in the win-win value of relationships with customers and other stakeholders. Seven principles guide leadership and management at every level of business.
· Value: Relationships first
· Focus: Integrated vision
· Strategy: Goals-driven operations
· Need Satisfaction: Value-driven products
· Perception Management: Brand-driven communications
· Strengths: Powerful people, processes, and systems
· Change: Ongoing business evolution
Value-driven innovation is rare. Few businesses set their sights as high as customer loyalty in highly competitive markets. Every other measure changes. Only relationships survive change, and only if we pay close attention. Only durable relationships deliver brand equity.
Invest in visionary focus for your company and its many businesses, functions, and products. Ask and answer questions from perspectives of evolving customers. Learn to see the future through changing customer paradigms. Then put those decisions to work.
The time for change is now, and it always will be.
1 Miller, Robert B. and Stephen E. Heiman, Conceptual Selling, Warner Books, 1987
2 Don Schultz, Northwestern University, University of Denver presentation, 2002
3.Hamel, Gary, and C. K. Prahalad, Competing for the Future, Harvard Business School Press, 1994
Gary Lundquist helps innovation teams to optimize their opportunities. He advises management on initiatives and processes that increase return on investment in business and product innovation. His Strategic Innovation ToolKits have been proven in both business innovation (start-up to Fortune 50) and product innovation (priced from one hundred to half a billion dollars).
Trademarks: Innovators Edge™, Strategic Pre-Planning™, and InnoSearch™ are trademarks of Market Engineering®, Inc.
Copyright 2009 – Market Engineering® Inc., 12006 N. Antelope Trail, Parker, CO, 80138. 303-840-9929 | 
