A Kitchen Table Talk with F212 Founder & President Mark Payne and Head of Strategy & Private Equity Courtney Pace

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Innovating for a Recession Webinar

<h3>What should innovators do differently to win in the tougher climate ahead?</h3>
Join innovation strategy &amp; design firm Fahrenheit 212 for a presentation and kitchen table talk on Innovating for a Recession. Designed for senior business leaders and front-line innovators, this session will explore how the recession ahead will affect consumer response to the innovations in your pipeline, what to do about it, and how to address the new needs and mindsets the post-COVID recession will trigger.
Fahrenheit 212 Founder &amp; President Mark Payne and Head of Strategy &amp; Private Equity Courtney Pace share insights gleaned from the last Great Recession, and principles for how to win in the new one that’s been thrust upon us now.
As a firm best known for helping our clients solve mission critical innovation problems that have no playbook, Fahrenheit 212’s Innovating for a Recession shares ten tenets to guide companies on how to use innovation in a down cycle as a driver of growth today and into the future. Join us for the conversation!
This is part of a multi-part series about the world after COVID-19. The foundation article of the series, Innovating for a Recession, can be found <a href="https://www.frog.co/designmind/innovating-for-recession">here</a>.

Courtney Pace

Mark Payne

Author

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What goes up must come down. What should innovators do differently to win in a tougher climate?

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Innovating for a Recession

As we navigate the swift and profound impact of COVID-19 on our lives and businesses, and absorb a daily stream of tough news, we know that while it may get worse before it gets better, we’ll eventually come through it. A big part of coming through it will be adapting to the new economic realities left in the virus’ wake.
Many economists and business leaders believe the coronavirus has simply accelerated and amplified an economic downturn that was already in the cards.
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<h3>Back in the spring of 2019, in a survey by the Duke Fuqua School of Business, 84% of CFOs thought the economy would be in recession by the first quarter of 20211. Recent events and historically high unemployment filings have presumably pushed that probability toward 100%, and brought the timing forward.</h3>
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The pain has been brewing for a while. A pre-corona pan around the globe saw the UK economy contracting under the uncertainty of Brexit, Germany dragged off track by a skidding automotive sector, Italy and Japan in a low growth funk, China bracing for broad layoffs, and US manufacturing in a slump.
Whether the recession has already begun or will come on more gradually is fodder for debate, but if innovation is fundamental to your growth strategy or your job title, the timing doesn’t really matter. With development lead times being what they are, chances are high that the projects you’re working on right now will bump into recessionary realities.
Your teams will either power through these obstacles or get mired in them, compromising the vision that’s driving you forward. How you plan and act now may make all the difference to whether your innovations survive the crosswinds, or thrive in them.
To help you manage that, there’s a playbook you can use to position yourself for the best possible outcomes. But first, let’s look at how a recession can affect consumer response to the innovations in your pipeline.

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<h3>It&#8217;s not just the money, it&#8217;s the mood.</h3>
While it’s too early to predict the depth or duration of the downturn – will we see something akin to what we saw in 2007-9, something worse or a softer landing – there are behavioral themes and lessons from the Great Recession that we can draw on now.
Back then, the pulse-takers at Yankelovich described the new climate as a ‘Post-Abundance Society’.
<h3>The gist of it was that the terra firma in which consumers’ decision trees were planted was suddenly swept away in the flood of red ink.</h3>
As the recession took root, an unfortunate many had their day-to-day spending power and livelihoods profoundly affected, as may be the case this time. But even those who didn’t face dramatic loss of spending power revisited how they spend. Consumers approached it with new sets of emotions, needs, aspirations, filters and definitions of value, many of which reflected a hard swing of the pendulum away from the excesses that led up to the downturn.
Periods of relative abundance – like the one we just lived through – are characterized by certain dynamics:
<ul>
<li>An excessive expansion of choice, and a seemingly open-ended ability to act on it. (The dramatic growth of personalization over the past decade shows that even the absurd breadth of choice in most product categories isn’t enough to satiate our appetite for feeling special).</li>
<li>Products previously considered durables being recast as disposables. (Do we really need a replacement phone every 18 months?)</li>
<li>Utility getting blurred with indulgence, self-expression and badge value, to the point that they seem indistinguishable. (Are we taking those destination holidays because we actually want to go there or because we’ll post great selfies?)</li>
<li>Premiumization being underpinned by a mindset that something must be better simply because it’s more expensive. (How much more beautiful will that $300 Korean snail juice face mask make you look versus the $20 option at your corner pharmacy?)</li>
<li>Consumer and corporate debt soaring in the face of overcooked optimism and cheap money. (Don’t look now, but in late 2019, consumer debt surpassed the previous record set just before the meltdown in 2008.)</li>
</ul>

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<h3>The net of all this? Forget the economic stats; focus on the mental static.</h3>
All of this sets up the risk of a downturn not just pushing consumers to ease off the gas – doing and buying the same things, just a bit less – but the potential of a more jarring reappraisal of how we live and spend. One that’s driven less by the wallet than the psyche.
<h3>We can’t be sure of the magnitude of behavior change the next recession will bring – there’s no Moore’s Law for human behavior.</h3>
But there are some wildcards in play this time around that may point to a bigger behavior shift than GDP trends alone would predict. In the US, while about 7 million people are statistically considered the ‘working poor2, working at least 27 weeks of the year but living below the poverty line, many more are functionally poor – living above the poverty line, but forced to supplement wages with government assistance to make ends meet. A 2019 Federal Reserve report found that roughly 4-in-10 US households couldn’t afford an unexpected $400 expense3. Working up the economic pyramid, many professional millennials who entered the workforce during the Great Recession are carrying record high student debt, and unable to buy real estate at the same point in life as their parents4, depriving them of the solid asset base that prior generations could lean on in tough times. Even in the face of historically low unemployment rates, a record number of Americans were 90+ days delinquent on their auto loans in 2019.5 All these realities point to the possibility that even a minor GDP dip might cause a disproportionate impact on consumers’ lives, mindsets and behavior.
For all of these unknowns, what we can say for sure as innovators is that if we wait to see how it all plays out, it will be too late to act on it. Acting now to fortify your innovations to win amidst recessionary realities will help set up your programs for long term impact.
Before we go deep on ways to win through this impending shift, let’s tackle the more fundamental question of what innovation’s role should be in your business at this moment in time.

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<h3>The role of innovation in a recession</h3>
Economic turbulence naturally puts Chief Execs in a somewhat dyspeptic state. Adjusting earnings forecasts and tightening belts are thankless acts.
But there’s an interesting human subplot to it. As one Fortune 500 leader told me&#8230;
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<h3>‘To me, the most frustrating thing about recessions isn’t resetting expectations, it’s the erosion of control. Suddenly, external forces can uncouple the performance of our business and share price from the smart strategies and programs we’ve built to drive the business.’  </h3>
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Longitudinal research by Bain &amp; Company has shown the power of going on offense in tough times: Of 700 companies tracked through recessionary cycles, 25% made the leap from bottom quartile sales and margin growth to top quartile, while another 20% fell from top quartile to the bottom.6
In this context, innovation stands out as something that a business leader can more fully control and use to shape the movements of the market, rather than be dented and reshaped by them. Doubling down on innovation in downcycles can be a strong catalyst for long-term growth. So the rule of the down cycle is simple: move or be moved. The best part for the movers is that the benefits of moving on the downs actually transcend the economic cycle.
<h3>Of the firms that made big leaps in revenue or profit during those downcycles, over 70% sustained those gains through the next boom cycle. </h3>

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<h3>Fast Forward</h3>
So how can we create innovations that are both right for the looming downturn and built to stand the test of time? This is the crux of Innovating For A Recession. The language here is deliberate. Innovating in a recession is just a weather report. Innovating  for a recession is a matter of intentionality, choice and opportunity. It’s about chasing new openings, many of which could only have been born in this moment.
It’s about asking yourself…
<h3>‘What if this recession were the luckiest thing that ever happened to my business?’</h3>
‘What new opportunities will I see if I look at the world that way?’ 
‘And how can the things in my pipeline be honed to leapfrog competition in a recessionary climate?’

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The past decade has delivered steady growth with only minor disruptions along the way. As consumers, we’ve acquired a new taste for creature comforts, quality, design, discovery, self-expression and experiences that transcend mere function. What lies ahead is not the undoing of all this, but a fundamental re-weighting. Innovators need to rediscover a fascination with the foundations of value, rather than the crowning touches.
New offerings need to more overtly deliver a difference, a better day and a better life in ways that play to the real currencies of this moment:
<ul>
<li>Helping people be heroes when they may feel financially inadequate</li>
<li>Helping them feel in control in a world gone awry</li>
<li>Helping them find solace in the face of external stresses</li>
<li>Helping them find simplicity in the face of hyper-stimulation</li>
<li>Helping them manage scarce time and elevating their quality of life with the family, friends and communities that matter more than money</li>
</ul>
Through it all, the value proposition needs to ring true with renewed clarity. It is a myth that all consumers will now rush to buy on the cheap and swear off great quality and complete experiences.
Great value has never been synonymous with value pricing and it won’t be in the next recession. But we will undeniably have to work harder at earning premiums in a world that will no longer think something’s valuable merely because it’s expensive.

The value proposition has always mattered. Now it just matters more.

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Many organizations treat growth and cost cutting like church and state – wholly separate endeavors led by different people with separate agendas, skills and KPIs, with no cross-fertilization. It’s well-documented that profitable growth is often the result of finding new uses for existing assets, rather than starting with a blank slate. Yet cost cutting often lops off assets or capabilities that could potentially be catalysts to the conception, implementation, speed-to-market and ROI of growth efforts. Forging a collaborative connection between cost cutting and innovation efforts allows three big things to happen: First, it ensures that the innovation team vets assets on the chopping block, forcing the conversation about whether that bird in hand could be deployed in powerful new ways. Second, it requires the innovation team to ensure a proper balance between leveraging existing assets and pushing beyond them. Third, it allows savings from the cost side to be aligned with specific, mission-critical growth efforts, rather than dropping everything to the bottom line and leaving growth efforts withering on the vine.

Stop treating cost cutting and growth efforts as disconnected things.  

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In flush times or in tough times, innovation’s real unseen enemy is inertia – consumers feeling set in their ways, habits, and brands – reluctant to move, even to things that sound great. Turmoil is the opposite of inertia. A moment of reassessment means products and services that seem solidly tucked into people’s lives can suddenly be nudged out if the right alternative comes along. So you may not have to work so hard to create doubt about the status quo; it’s already there. A great innovation may be pushing on an open door.

A climate of reassessment can be the innovator’s best friend.

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Take a page from the carbon-offset playbook. Find ways to justify the extra dollar you want consumers to throw your way via a dollar they don’t give someone else – inside or, better yet, outside your category. Look at the way realtors now tout the AirBnB potential of homes that may be beyond a homebuyer’s price range. A work-saving innovation can be framed as freeing up more time for your side hustle. Premium healthy foods are ways to avoid spending unproductive days in bed. There are potential offsets in any category if you look hard enough.

Now more than ever, frame the incremental dollar as an offset.

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Consumers have increasingly been splurging on themselves. It’s a safe bet that a recession will push the pendulum back the other way, making us more hesitant to treat ourselves without justification. Extending value props beyond personal benefit can be that justification. Whether it’s about a healthier planet, a happier family or a tighter social network, benefits beyond the individual will matter more and more. The paradigm is not ‘just for them’, it’s ‘me and them’. Know in the background that self-interest isn’t dead – now, as ever, it remains capitalism’s primary catalyst. But guilt will be the new rust on the door hinge. External permission is WD-40.

Define the benefit beyond the individual. 

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We can’t be naïve about the added pressure that a recession will put on innovation budgets. The reason is obvious. External uncertainty can magnify the inherent unknowns of any innovation effort at a time when risk tolerance is low. Containing risk across the portfolio of innovation programs matters more than it used to and partnering is a potent way to get there. Partnering is risk management’s new best friend: whether that’s by bringing together siloed teams or pulling in external partners that augment capabilities and shoulder a portion of the risk.
What you’re after in the end, of course, is pinching risk from both sides by simultaneously driving up the odds of an initiative succeeding and driving down the cost of those that don’t. Partnering can help both of those things happen.

A risk shared is a risk halved.

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There’s a new paradigm here grounded in three converging truths: First, in a recession, there’s a better chance of buying high potential businesses on the cheap. Second, skeptical internal stakeholders may have an easier time seeing the immediate value of an acquisition candidate that has already demonstrated its potential versus less tangible internal innovation. Third, acquisitions and innovation should have been joined at the hip all along, so they might as well be now.
Call this new model M&amp;A&amp;I, where innovation teams scour the market for buyable ways to accelerate their vision. Within this paradigm, before you buy a business, you’ve already assessed it as an innovation platform, gotten a head start on the pipeline, and perhaps even quantified the upside. The net is that you’re buying something bigger than what the team across the table is selling.

Starting right now, make acquisitions fundamental to your innovation, and innovation fundamental to your acquisitions.

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Peak performing companies use innovation to turn assets they’ve had for years into new revenue and big ROI. Bain and Company research shows a staggering 9 out of every 10 companies that successfully renewed themselves found the solution in mining hidden assets.7 Most companies walk by the Rembrandts in the attic without seeing what they’ve got. This is the moment to get great at spotting hidden value and innovating to monetize it. Fresh eyes can help.

Unlock new value from hidden assets.

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Treat that shift as a growth opportunity or it will become a problem.  We instinctively think recessions change what we by, and how much of it. But they can trigger equally profound shifts in where we buy. The risk is that the product portfolio you honed for a certain channel mix becomes a lot less right overnight. Look at your products and services portfolio through a new lens. Are my offerings set up to effectively compete, win and grow share in the channels that stand to grow? Will they get noticed the way they do in legacy channels? Will they seem like great value in this new context? Can they sell themselves in channels with less sales staff? How will they win in digital channels? Do I need to create new offerings from a blank page, purpose-built to win in the channels that are poised for growth?

Recessions drive channel shifting.

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Take all the insights you’ve gleaned from years of mining the gray matter, hopes, needs and behavior of your customers, shove them in a proverbial file, and start over. In many organizations, that body of accrued customer understanding and the consensus built around it can become a set of blinders, letting you overlook meaningful changes and opportunities rooted in the newly emergent mindsets, needs and pain points. Those legacy insights may be timeless for the core of your category, but what new themes are emerging at the edges where most growth happens? Charter a consumer discovery team with no vested interest in the old view, ensuring you get an unfettered take on the new reality.

You don’t know your customer anymore. 

To advance the pursuit, here are ten tenets to guide the new approach that this new reality demands. 

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<h3>Onward and Upward</h3>
After a long run of economic growth, a recession is either already upon us or approaching quickly. So how should business leaders and front line innovators adapt what they’re doing to thrive in the tougher climate ahead?
Don’t stress about it. Just get busy.     
Move or be moved. 
Want to learn more? Please <a href="https://www.frog.co/contact">contact us</a> to continue the discussion.

What's the secret sauce for transformational innovation? The right questions.

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6 Ways to Ignite Revenue-Generating Transformation

To make the kinds of changes that can really push a business forward, leaders need to ask themselves a series of transformational questions. Only then, will growth-driving innovation take place.
Innovation is a white-hot topic these days—particularly the big, transformational variety of innovation that’s capable of igniting new markets and new businesses, rather than simply riffing on what’s already out there. So I’m often asked what the secret sauce is that allows us, or anyone else for that matter, to consistently get to the big answers—those disruptive, market-making innovation ideas that others couldn’t see.
The answer I offer is that they’re asking the wrong question.
The fundamental truth about the pursuit of growth-driving transformational innovation is that the likelihood of an innovation project landing on transformational answers pivots almost entirely on whether it starts with transformational questions.
Transformation questions are the innovator’s killer app. They can re-frame the way we think about and engage the marketplace, change the way we view the lives and challenges of our customers, and open new strategic innovation vectors that our competitors—still focusing on the same old questions everyone in the category has been asking for years—will neither see nor act on.
Here are six ways to get to transformational questions on your own innovation initiatives, and to the bigger answers they will open up.
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<h3>1. Assume transformation is necessary.</h3>
The only way to get to transformational questions is to purposefully chase them, and this starts with assuming that transformation is necessary rather than an option. This shift changes the conversation in the team from &#8220;Should we transform something?&#8221; to &#8220;What will we transform?&#8221;
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<h3>2. Cultivate a healthy disrespect for present reality.</h3>
Consciously try to identify things in your category, consumer experience, products, and business that just are the way they are without needing to really be that way. In most businesses, you’ll find a long list of them, and hidden inside you’ll discover relevant transformational questions. Some examples: In an age of personalization, when there is such tremendous breadth in consumers’ financial means and trajectories, why do mortgages come in only 15- and 30-year increments? And when less than 15 percent of the population finds full-strength spirits palatable, why is 98 percent of the category sold in a way that requires compensatory behavior? For inspiration, just look how far architect Frank Gehry was propelled by simply questioning the need for walls and rooflines to be straight.
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<h3>3. Temporarily forget what you know.</h3>
Knowledge is a potent form of competitive advantage. But there is often a razor-thin line between a knowledge base and the entrenched paradigms that have been attached to it over time. Understand that knowledge is power in certain moments in the journey, but kryptonite in others if not properly harnessed.
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<h3>4. Ask yourself how likely it is that your competitors aren’t working on the same questions you are.</h3>
Literally picture yourself sitting in the room with a similarly chartered project team at your key competitor’s office. If you can readily imagine them working around similar questions, you probably haven’t cracked the transformational questions you’ll need to get to transformational answers. The point is not to second-guess what your rivals are up to, but simply to gauge your own conviction that you’ve uncovered big new questions. Big thinkers find big questions exciting. So if you don’t viscerally feel that you’ve broken new ground, you probably haven’t.
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<h3>5. Move the camera around the room.</h3>
Finding big transformational questions usually happens by distancing ourselves from the prevailing category context we live in every day and approaching it from a fresh angle. This doesn’t just work metaphorically, it works literally too. Looking at your ice-cream business not through the eyes of the consumer seeking indulgence, but from the perspective of the product behind the frosted freezer glass watching consumers go by, like an orphan hoping for adoption, may open a powerful new set of questions to ignite transformational innovation. If that doesn’t work, deconstruct the life cycle of an ice crystal born in the churn at the factory, or ask what the spoon would say as it’s bent in the act of scooping.
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<h3>6. Learn to hear the thundering sound of the thing that isn&#8217;t being said.</h3>
Paradigm-creep isn’t just a company phenomenon. It happens to consumers too. They often become so accustomed to embedded characteristics and compromises that they don’t even think or talk about them. (When was the last time you got to work and said &#8220;Boy, how about that gravity today?&#8221;) The great innovator needs to ask at every touchpoint—what didn&#8217;t we hear that was interesting. In the pursuit of transformational questions, the unsaid is often the most telling thing.
In the end, if you crack transformational questions, those transformational answers and the new competitive advantages they create will come into view a lot more quickly a lot more often.
Asking why your walls need to be straight may be just the thing to steepen your growth curve. And that&#8217;s unquestionably a great thing.
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Design Thinking isn’t wrong. It just isn’t enough

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Rethinking Design Thinking

<h3>Design Thinking, the widely celebrated innovation model built on observation and prototyping, seems overdue to be assessed with the same scrutiny and iterative spirit it asks us to aim at everything else.</h3>
Time now to say, ok, we’ve used Design Thinking and prototyped this thing… what have we learned about creating new products, new services and new businesses? What’s working in our innovation and what’s not? What should the next model do that this one can’t?
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<h3>Back to the future</h3>
Design Thinking is relatively new as an ink magnet, an academic pursuit, and a business paradigm, but its principles have, in various guises, been around for ages.
Tackling innovation challenges by applying lateral thinking in an intuitively-led problem-solving process of observation, interrogation, creation, and iteration has a pedigree stretching back from de Bono to da Vinci. Working on the front lines of transformational innovation — doing not the close-in line extensions, but the bigger, harder plays that create and grow new markets and businesses — I’m a fan of all but two aspects of Design Thinking. The first is just semantic. The power of empathetic creativity in innovation is immense and to attach it to that subset of creativity we call design is akin to saying life is synonymous with breathing. Design is to creatively-fueled innovation as breathing is to life — powerful and fundamental, but part of a bigger whole.
The meatier issue that is the impetus and focus of this paper is that Design Thinking is overdue to have its own tenets pointed in upon itself. By now, it’s been sufficiently road-tested for us to interrogate it with the same rigor it asks us to aim at everything else. It’s been prototyped. What have we learned? And in those lessons, is there a path to a more powerful model? The answer is yes.
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<h3>Let’s kickstart the prototype appraisal with a simple provocation. If, on its way to work tomorrow, Design Thinking tragically stepped in front of a bus, what would be its legacy?</h3>
“Design Thinking taught forward looking businesses the value of bringing creative inventiveness (aka, abductive thinking) to the center of modern innovation practice.”
Or maybe, “Design Thinking taught modern institutions that human life should be the primary springboard of 21st century innovation.”
Any combination of the above would be a great tribute. There’s just one problem. The big companies eagerly embracing Design Thinking are not doing so out of mere curiosity, trendiness or a footloose desire to unlace their wing tips. They’re grabbing at it because transformational innovation has simultaneously become more important to long-term growth and more difficult to pull off.
In the end, what these companies crave is not a way to make innovation more creative for creativity’s sake, more humanistic for humanity’s sake, or simply to elevate the quality of the products moving through the pipeline. What they’re after is a way to make innovation a more powerful, impactful and reliable growth engine. Simply put, they need innovation to work better.
Design Thinking, as applied to the creation of business-building transformational innovation, is undeniably a giant leap forward from the linear models that preceded it. But in the realm of business tools, being better-than-what-came-before has a short shelf life as a measure of success. Just ask your Palm Pilot.
The reality is that across sectors and companies, the innovation imperative is going up, but hit rates and ROI are going sideways or down. It’s time to shift the conversation around Design Thinking from the rear view mirror to the road ahead — from better-than-the-old-way, to what growth-minded businesses need moving forward in a competitive environment that grows more intense by the day.
As the first well-structured model for injecting empathetic, humanistic creativity into innovation, is Design Thinking the end game? Or is it like the first mobile phone? Paving the way, then giving way to the smart phone that built on what was right, but was far more useful and valuable.
Following Design Thinking’s own playbook, let’s say that this prototyping exercise, conducted across a broad array of companies and industries over a number of years, is doing no more and no less than what every other prototype is supposed to do. It’s showing us the gaps between what the model in hand does and what a subsequent model should do to better serve the needs of the marketplace.
The things limiting Design Thinking’s impact — not on the innovation process, the zeitgeist or the academic world, but on its tangible outputs, hit rate and returns to the shareholders bankrolling its use — are becoming clearer the longer it’s in play and the more companies it touches. 
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<h3>The gap lies not with what Design Thinking is or does, but with what it’s missing.</h3>
It has gone to market as an incomplete answer to what companies need to successfully monetize high-impact transformational innovations in the climate they now face. In the past two decades, the business world has become far more complex. The low hanging fruit has already been plucked. Markets are saturated. Retailers are flexing their muscle. Competition is global, local and nimble. The half life of competitive advantage continues to shrink. Resources are tighter. Big bets need bigger justification.
When the consumer solution is the only big issue on the table, Design Thinking can deliver in spades. But those cases are increasingly rare. Innovation is now, in nearly every case, a two-problem game. The increasingly complex needs of the business need equal attention in the form of disruptive growth strategies, new business models, and new ways to profitably redeploy existing commercial assets. Big issues that Design Thinking wasn’t designed to address — like where to play, how to win, how to create new competitive advantage and how to make money—are increasingly fundamental to the innovation process, and asserting themselves on what makes it into the pipeline and the P&amp;L.
Most CEOs will tell you that in today’s climate, exciting a consumer with a new possibility is far easier than getting a company to do things it doesn’t know how to do, or have the asset base to deliver against. Design Thinking, or any other one-sided model, comes with a built-in structural bias toward delivering ideas that would be great for consumers, but will never reach them because they’re commercially unattractive, strategically peripheral, naïve of capital requirements or operationally impossible to commercialize.
As design researcher Dr. Sam Ladner put it, “There is no shortage of creative solutions to unmet needs, only a shortage of profitable ways to provide them.” The next leap is obvious. We need a model that solves both sides of the two-problem game.
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<h3>The two-sided coin</h3>
Obvious as it sounds, these lines are blurred in innovation practice with surprising frequency, and big consequences for shareholders bankrolling a given initiative. Each has a pivotal role in transformational innovation, but none is sufficient on its own.
A great idea points the way to a two-problem solution by defining a strategically attractive gap in a market, and a market in the gap. A great business requires, among other things, intelligent use of assets, sustainable competitive advantage and a path to long term growth.
A great product experience — Design Thinking’s sweet spot — is highly valuable when it embodies a big strategic idea and works within a profitable business system, but merely interesting when it doesn’t.
Deconstructing some well known hits and misses helps illustrate the distinction, and set up a framework for the shift to a two-problem model. 
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<h3>2 out of 3 ain&#8217;t bad</h3>
Let’s start with some that nailed the two that too often get the most attention — the idea and the product—but missed wildly on the third.
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Sirius XM
Great idea, great product, bad business
Satellite radio was a brilliant idea, and another great product. Doing to radio what cable had done to
TV was genius. The product is tremendous—bringing hundreds of channels, superior sound quality and a vast array of commercial free offerings to an increasingly car-bound consumer. The business, however, has been nothing short of a disaster. The cost structure attached to delivering ubiquitous satellite coverage and top on-air talent pushed sirius and XM toward bankruptcy.
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LeapFrog
Great idea, great product, bad business
LeapFrog was another great idea and product. Turning electronic games into an educational tool (or education into games) represented a big win for parents who could get their kids to willingly do something educational, and for kids whose parents were suddenly handing them electronic games. No begging required. Its products were well accepted. The problem was that it went to market via the toy business, which carries famously tight margins that eventually got the best of LeapFrog. Its market cap is now less than 10% of its peak.
What these examples highlight is that solving for a consumer need is critical but not sufficient to the creation of a commercially successful piece of transformational innovation. What also becomes clear is that treating the human product experience as the thing that matters above all else is akin to building a one-legged stool, raising the odds of falling over. Now to what happens when you nail all three in equal measure.
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Vitamin Water
Great idea, great product, great business
The idea was brilliant—transforming water from a pure ancient thing to a modern carrier of nutrients and flavor turned the source-obsessed water world on its head, and gave consumers a new lifestyle tool. Brought to life with an iconic bottle that tells its own story, delicious liquids in vivid colors that break through the clutter at retail, and a premium price point, the business sold for over $4 billion, and is purpose-built to innovate on a dime to address emerging need states and tastes in the years ahead.
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American Idol
Great idea, great product, great business
It was a radical idea. Taking the music business’s greatest point of risk and pain — the A&amp;R game of placing big bets on artists ahead of knowing whether they’ll be popular, and turning it on its head by making the public into the A&amp;R department. In the process spawn a hit TV show with a 10-year run, a string of hit records, and a vertically integrated business, monetizing the show, the albums of its pre-promoted stars, tours, and even the votes. It should be considered among the most complete 360º innovations of the past decade. 
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<h3>A better way forward</h3>
What the business world needs is a model that obsesses over winning the two-problem game, serving the needs of both the consumer and the company by nailing a great idea that opens a new strategic market space, a great product offering, and a great business.
That is a powerful and important contribution that should be leveraged and pushed further in the years to come. But it’s gapped in the other areas, for no other reason than it wasn’t built to go there.
To unlock the full power of creativity in igniting successful innovation outcomes, human-centered creativity has to become a supporting part of a bigger, more complete, and more strategically astute whole.
Let’s call this bigger new thing Money + Magic, an approach that leverages all that’s powerful and right about Design Thinking’s core strengths, but builds in the missing link that separates the merely clever from the successful, lucrative and strategically valuable.
Money + Magic is about pairing up human-centric creativity with its catalytic complimentary opposite capability — the commercial acumen needed to dissect the strategic, operational and financial needs of a business.
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<h3>Money + Magic</h3>
Rather than start with a one-problem orientation—focused solely on finding a human problem to be solved with a new product experience—Money &amp; Magic works from beginning to end with the assumption that there are two discrete sets of problems to be interrogated, defined and solved concurrently—the needs of the consumer and those of the business out to serve her.
It says that success lies not in first solving for consumers then hoping the commercial, financial and strategic value will eventually get figured out, but in consciously pursuing new intersections between consumer needs and business needs, and only advancing ideas where that sightline to intersection is evident.
Rather than assume a robust set of strategic and commercial choices will precede the innovation process or be made independent of it, Money + Magic makes the questions of where to play, how to win, and how to build and leverage competitive advantage integral to the innovation process, bringing as much interrogation and lateral perspective to the needs of the business as to the things that touch the consumer’s life. 
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<h3>There are two killer &#8220;apps&#8221; in the Money + Magic approach</h3>
The first killer app to the is the identification of an array of insights defining pain points and opportunities in the consumer’s life, and a parallel array of pain points and opportunities for the business that’s out to serve her.
The nature of those consumer insights — identified through observation and empathy — is quite familiar to the Design Thinking conversation. The commercial analogs are not. Those commercial insights may come from spotting a costly new piece of infrastructure under utilized in the current business, an underdeveloped consumer segment that represents a long term business risk, a portfolio gap in a high-growth adjacency, an emerging technology with no defined value to consumers’ lives, or a situation where a higher margin technology platform is stuck in a niche part of the business rather than its core.
The consumer insights are doorways to relevance and value in the marketplace. The commercial insights are doorways to strategic, financial and operational wins for the company. Where inventive thinking has always been described as a process of pattern recognition and connecting dots no one has connected before, Money + Magic presents that process with two sets of dots, and a challenge to find ideas that forge connections between them — not unlike a cat’s cradle of connections between opposing anchor points.
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<h3>Commercial creativity at work</h3>
Does this impede creativity? Quite the opposite. Creativity loves an intriguing problem to solve, a compelling array of stimuli, an ability to bounce around among different perspectives, and the adrenaline rush of making new connections.
Beyond this first killer app of using parallel sets of consumer and commercial insights to catalyze idea development, Money + Magic&#8217;s second killer app is marrying the &#8220;wow&#8221; with the &#8220;how.&#8221;
In a two-problem orientation, the &#8220;wow&#8221; is that transformational idea capable of catalyzing both a great offering for the end-user and a great business for company stakeholders. The &#8220;how&#8221; is the operational, technical and financial road map to making an idea doable and profitable in a reasonable time horizon. The distinction between working this way vs. the traditional orientation of Design Thinking is quite profound.
Design Thinking’s single-minded focus on consumer realities, followed quickly by a leap into product prototyping, leaves it either to chance, to someone else or to a subsequent phase of work to worry about turning a consumer solution into a strategically, financially and operationally attractive outcome.
Money + Magic not only says the needs of the business should be solved in parallel, but that they can — with no compromise to the inventiveness of the idea or its impact on a consumer’s life. All that’s set aside is that too common breed of ideas that might have been great for consumers, but never had a shot at reaching them, owing to big strategic, economic or operational flaws.
Money + Magic says that if an idea can’t actually reach consumers, improve their lives, and create commercial value, it&#8217;s not a great idea.
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<h3>Money + Magic, short &amp; sweet</h3>
To sum it up, in the pursuit of high-impact business growth, Money + Magic is both a philosophy and a structured methodology for developing and accelerating transformational innovation.
<ol>
<li>It&#8217;s the outcome that counts 
Innovation success isn’t measured in meetings; it’s measured in market. The right innovation process is one that serves this end. Having an idea without knowing how it makes money is as valueless as knowing where growth lies without having the idea to unlock it.</li>
<li>The two-problem orientation 
Unlike human-centric models, Money + Magic works from day one to uncover two separate sets of problems — those of the consumer and those of the business — and to solve them concurrently rather than sequentially.</li>
<li>Parallel Insights 
The pain points and unfulfilled aspirations of the consumer are identified through observation and creative empathy. Those of the business are uncovered through intensive strategic, financial and operational exploration. This two-front quest delivers separate arrays of consumer and commercial insights to catalyze invention.</li>
<li>Answer at the crossroads 
The creative process is unleashed on spotting patterns and new connections between the needs of the consumer and the needs of the business, sparking ideas out of the tensions between them. Of the many possibilities in view, the only ideas that advance are those with a sightline to solving for both need sets.</li>
<li>The wow and the how 
Bringing ideas to life with high order creative insight, design, sensory experience and storytelling delivers the wow. Robust strategic, operational, financial, and technical dimensions deliver the how.</li>
</ol>
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The net result is ideas that are big, fast, and doable, making transformational innovation the more impactful and reliable growth engine companies need it to be.

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Why Innovation Strategy Is Horribly Broken, And What To Do About It

The point of strategy is growth. The driver of growth is innovation. So why are top tier strategic consultancies struggling so mightily at igniting innovation strategies? And what should you do about it?
If you’re like most business leaders, at some point you glance across the landscape around you, get the nagging feeling that the growth you need isn’t lying around in plain sight, and decide to get some help finding it.
In search of big answers to those killer questions like where to play, how to win, and how to best aim your resources to ignite growth through innovation, you call in some strategic hired guns—a big name management consultancy that nobody’s ever been fired for hiring. The firm parachutes in a few of its best and brightest to live on site, peppering you and your colleagues with questions and data requests. Months later they present their final deliverable. (Oddly, the final package still carries the caveat “draft for discussion purposes,” but you brush that off as a typo.)
Chances are, the content has a familiar ring to it. It’s a robustly supported set of logical head nods, and a well-packaged playback of what you and your colleagues fed them over the course of the engagement. Taking it all in, you feel validated, litmus tested and solidified, though perhaps not enlightened or inspired.
Now fast forward to a year or two later. You once again look at the landscape and find you’re not much further along than you were before. The strategies you hoped would ignite waves of growth through innovation made theoretical sense back then, and still do today. And those consultants, if they’re still in the mix, continue to pepper you with questions. But for all the tidiness and logic the strategy holds, the tangible innovation outcomes you needed it to ignite are still nowhere in sight. The gush of innovations you hoped to see is still a humble trickle.
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<h3>Waiting for Lift Off</h3>
If you’ve experienced this kind of misfire – or to be more accurate, let’s call it a non-fire – you’re not alone. Having the outputs of a top tier strategy firm fail to translate to big innovations is a lament heard with increased regularity from leaders of big and emerging businesses alike.
Ultimately, for all the strategic challenges that top management consultancies are world class at handling, instigating innovation isn’t (or isn’t yet) one of them.
Two important questions jump out of this. Why the struggle? And, more importantly, what should you do about it to ensure you pursue the right innovation opportunities and see them come to fruition?
The answer to the first isn’t complicated, but it is also not readily solvable. Great management consultancies struggle with innovation strategy for four straightforward reasons.
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<h3>Form Follows Function</h3>
Innovation strategy is very different from the other forms of strategy that big-name consultancies built their capabilities and reputations around. The types of strategy that are their bread and butter can be confidently managed based on analytical assessment of the known. Benchmarking a company’s business models, product portfolios, operational models, cost structures, and performance metrics vs. comparable peers (many of whom are also the same consultancy’s clients) has long been the backbone of top consultancies’ approach to strategy, and will always be fundamental and valuable.
The trick is that innovation strategy is less grounded in the known and the similar. It’s a more forward-looking discipline of opportunity creation.
Unlike other forms of strategy, innovation strategy straddles the provable, the plausible, and the merely possible. It requires levels of creativity, instinct, hunch and intelligent educated guessing that, for analytically-based organizations who built their cultures and reputations on solid provability, falls well outside the comfort zone, and arguably beyond the edge of competency.
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<h3>The Nature Of Competition Has Fundamentally Shifted</h3>
Decades ago, while the choices a company faced didn’t necessarily seem easy, competition was more akin to chess: it was like fighting like. Big companies with largely similar goals and capabilities scrapped with one another for market share and linear performance improvements, enhancing their processes and operations and fighting in well-defined categories, channels, and geographies.
In hindsight, the choices that seemed tough in those bygone days were small debates among various forms of low-hanging fruit. But it’s not that way anymore.
These days competition is more entrepreneurial and willing to take risks. Barriers to entry that once promised incumbents a level of permanence have come down. Technology has leaped ahead at ever declining cost and with open-source innovation, direct access to consumers without massive marketing campaigns, e-commerce, and forces of disintermediation, those big companies can’t just stare each other down anymore.
Where competition once inched along like chess, today it’s closer to Harry Potter’s quidditch: played at lightning speed on a three dimensional field, with three kinds of balls winging in all directions at once, instant directional pivots, and the ability for the game to end instantly – with once solid businesses getting undermined to the brink of extinction. This means the basic premise of strategy practice being founded on the relative competitive positions of similar businesses is obsolete. More multi-billion dollar business have been born in the last few decades than in the 100 years before. Winning and losing happen faster and less predictably.
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<h3>Lack Of An Inventive Filter</h3>
The third area of struggle is that consultancies tasked primarily with analyzing things (rather than creating them) don’t have an inventive filter to apply to strategies under consideration. People who invent for a living will instinctively ask a critical question of gestational strategies: “can we create something big out of this strategy.” They’re assessing that potential strategy’s tensile value to propel them into the inventive phase that follows. If you’ve spent your life analyzing things, you don’t have the instinct and muscle memory to lean on in these moments. What too often happens is that strategies defined without that inventive filter are aligned at high levels of an organization, then handed off to the creative minds accountable for creating something out of it.
They’re asking the “what can we do with this” question after the strategy is baked. And too often, the answer is “not much.”
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<h3>Igniting Action</h3>
The success of innovation strategy hinges not only on its ability to make good choices, but to stir the imaginations and passions of the people tasked with turning strategy into compelling new offerings. Strategies aimed at streamlining operations or entering new geographies may not be easy to execute, but they can be tangibly engaged with just a few keystrokes from a CEO. But innovation is different.
In innovation there’s a fuzzy human ignition step that stands between hopeful intent and realization.
Where the “customers” of other types of strategy are a CEO, CFO, board, and division heads, the key customers of innovation strategy include the people tasked with turning it from PowerPoint slides into real things: compelling new products, services, and experiences. Other forms of strategy need only to “inform and choose,” but innovation strategy has to “inform, choose and ignite” – imparting a sense of importance, fascination, possibility, and an opportunity to change the world. They have to inspire intelligent leap-taking.
For all the things that top tier consultancies are best in the world at doing, taking leaps isn’t just non-core, it’s antithetical. In consultancy halls, “that’s a leap Phil” isn’t a compliment; it’s a condemnation of a tenuous unproven assertion. Over the decades that saw these consultancies become great institutions, they’ve sold and honed their offerings as an antidote to unproven speculations, getting out of bed in the morning to ferret out “the leap,” leaving them hard pressed to flip a switch and inspire others to take leaps of their own. That’s what great innovation strategies have to do.
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<h3>What To Do About It</h3>
Innovation strategy is not the same as other types of strategy, and we recognize there are several causes for the struggle that strategy consultancies face when attempting to apply their expertise towards innovation. But how can we move ahead and develop and deploy more successful innovation strategies?
If you’ve already done that strategy work, come in behind it as quickly as you can with an inventive partner capable of mining and elevating that strategy, backfilling that forward looking, inventive orientation it may not yet have, then turning it into the big new offerings you need to hit your growth goals.
1. If you’re about to embark on an innovation strategy project with a management consultancy that made its name on other types of strategy, think twice. Innovation strategy is a different animal. Look instead for firms that specialize in innovation strategy every day, that have that mix of analytical and inventive capabilities, that have the experience to confidently vet a fledgling strategy based on its tensile ability to create opportunity, and that get the “ignition” part of innovation strategy.
2. If you’ve already done that strategy work, bring in an inventive partner capable of mining and elevating that strategy as quickly as you can to backfill that forward-looking, inventive orientation the strategy may not yet have.
3. Turn it into the big new offerings you need to hit your growth goals. Move quickly to turn that strategy into tangible stuff.Any strategy, even a great one, has a built-in half life. The clock starts ticking the minute it’s sold in. The longer it takes to monetize a strategy, the higher the odds that leadership and the organization will start to doubt it. Leaving you looking across the horizon, wondering who the growth will come from and starting the loop again.
It all starts with understanding that innovation strategy isn’t like other forms of strategy. Find the right mix of skill sets to span the comforting confidence of the known and the forward looking pang of the possible.
The countdown to lift off starts now.

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Incubating Innovation

As innovation has become virtually synonymous with growth, the urgency to innovate has surged. With that has come equal urgency for companies to develop internal innovation capabilities. Everywhere you look these days, there’s an announcement about another Fortune 500 company launching some form of innovation lab, hub, or incubator. In the U.S. alone, the number of internal innovation incubators has grown from twelve in 1980 to an estimated 7,000 today. Incubating Innovation is one of the major themes in our latest report, <a href="http://www.fahrenheit-212.com/introducing-big-entrepreneurship/" target="_blank" rel="noopener">Big Entrepreneurship</a>.
You can now read or download the entire article below.
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<a title="Incubating Innovation" href="https://www.slideshare.net/secret/pppZbyipjeH6OZ" target="_blank" rel="noopener">Incubating Innovation</a> from <a href="https://www.slideshare.net/Fahrenheit212" target="_blank" rel="noopener">Fahrenheit 212</a>
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<a href="http://www.slideshare.net/Fahrenheit212/fahrenheit-212-big-entrepreneurship-55253989/1" target="_blank" rel="noopener">Read all of Big Entrepreneurship on SlideShare</a>
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There’s a massively unhelpful misconception out there that insight somehow defies definition

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21_Insights_insight-on-an-insight

Insight On An Insight

There’s a massively unhelpful misconception out there that insight somehow defies definition. Can we really look the world in the eye and say with a straight face that insight is all-important, but we’re not telling you what it is? In a word, no.
In an age where nearly every human and commercial phenomenon is measured, bench-marked and analyzed within an inch of its death, where businesses of immense scale are built on the premise of giving away things of value solely to acquire the sellable data beneath them, and where  the relentless march of the digital algorithm threatens to neuter those precious human gifts we call intuition and instinct, this highly loaded term insight has been bought, sold, sliced, diced, diluted and bastardized with liberal abandon.
Today, companies great and small face an unprecedented need for the growth that transformational innovation can unlock, and insight is the hard-edged flint from which innovation’s brightest sparks fly, but you can’t get sparks by banging marshmallows together. Much of what is touted today as insight is merely information in sight–insight’s distant ancestral cousin at best. What’s helping this unhelpful dilution run rampant is that so much about insight remains shrouded in ambiguity—starting with the seemingly simple task of defining it&#8230;
“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description, and perhaps I could never succeed in intelligibly doing so. But I know it when I see it&#8230;”
US Supreme Court Justice Potter Stewart penned this classic line in 1964. He was talking about porn, and by refusing to sully his hands with the messy business of defining it, he instantly embedded “I know it when I see it” in the lexicon. (He also avoided the full frontal assault on the nation’s innocence that any definition authored by nine blushing septuagenarians would have unleashed.)
The problem for innovators is that Stewart’s non- definition could be airlifted verbatim into the nebulous conversation around insight. It’s murky at best. On innovation’s front lines, where there is no shortage of unknowns in play already, that’s nakedly unhelpful.
No matter where you hunt for definition, you find scant satisfaction. Try the handy digital dictionary bundled into Microsoft Word and you get this&#8230;Insight (noun): 1) perceptiveness, 2) clear perception, 3) self-awareness, or 4) perception that hallucinations are not real. (No, you’re not hallucinating. It really says that.)
Webster calls it “the act or result of apprehending the inner nature of things or of seeing intuitively.” (This captures insight more as a capability than a thing.) IDEO’s Tim Brown is no more helpful: “That insight cannot yet be codified, quantified, or even defined—not yet, at any rate—makes it the most difficult but also the most exciting part of the design process.”
Can we really look people straight in the eye and say insight is all important, but we’re not telling you what it is? In essence, you’ll know it when you see it?
Being paid handsomely to help companies see opportunities they can’t readily see themselves, we probably owe the world a better answer. If not the masses, surely the pros have a straight-laced, straight-faced answer. A casual polling of some of the best and brightest at Fortune
100 companies along with highly respected researchers who buy and sell insight daily yields definitions like these: It’s the a-ha&#8230;It’s that door opener that says, hey, you’re talking about me&#8230;It’s that goose bump moment&#8230;It’s an epiphany!
These definitions aptly capture the wind that gusts through our hair when a great insight bursts into the room. (Yes, we know it when we see it!) But they don’t even flirt with defining the thing we’re actually reacting to. It’s like describing Parliament Funkadelic as music that makes you want to boogie. OK, that’s the response, but what’s the music?Between the capability that begets it, and the reaction that comes in its wake, it seems we’ve got insight surrounded. But we still aren’t quite touching it.
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<h3>A Freudian Blip</h3>
Fresh insights about insights come from our Head of Research, Dr. Barbara Nurenberg, Ph.D.—a trained psychologist with an extraordinary gift for seeing through the layers of fog to what lies beneath.
“You want to know who really gets insight? The Psychoanalysts! It’s their professional bread and butter. They define it metaphorically as seeing with the eyes of the mind to make connections&#8230;a powerful integration and synthesis that, once put together, forms a new perspective. The result is an analyst being able to say ‘Look!’ to the patient, or the patient saying ‘Eureka’ to himself. The ‘a-ha’, however, is only half of the story. Yes, an insight is an end point—an intuitive leap, a synthesis of data—but more importantly, it’s a starting point, valued so highly in therapy because it holds the potential for self-change.”
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<h3>A-ha indeed</h3>
This theme of potential for change, conspicuously absent from the litany of definitions in circulation, is for those of us on the innovation front lines, the defining characteristic of great insight—the kind capable of igniting transformational innovation.
Potential for change is the reason great innovators get goose bumps from great insights, which hurl open the gates to new possibilities that weren’t visible before. This innate potential is the genetic trait that separates the merely interesting from the catalytic.Pivoting on this core idea of potential for change, we get to the definition that’s pinned to our wall at Fahrenheit 212, and that we teach our people to obsess about in our daily pursuit of transformational innovation for the world’s great companies. In the pursuit of transformational innovation, an insight is a fresh, potent and energizing truth.
Perfect? Of course not. But massively more useful than any other we’ve seen. A little deconstruction shows how useful it is, both in defining what we’re chasing, and filtering wheat from chaff, flint from marshmallow. To deconstruct it, start at the end.
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<h3>A Fresh, Potent &amp; Energizing Truth</h3>
Physicists, engineers and architects obsess over tensile energy and strength. To innovators, great insights are spring- boards with tensile value. Throw the weight of your imagination upon them and they will forcefully propel you in new directions.
Yes, your honor, there’s a noun. A thing called truth. To be a truth  is to be resonant and reflective of meaningful underlying reality. It doesn’t mean an insight has to be universally true. Great insights are often found at the bellwether fringes. But it has to be true and ring true.
In pursuit of transformational innovation, an insight can either be a truth about a human experience, aspiration, unmet need or tension, or about a business, category, strategic ambition, product or analog that points the way to profitable opportunity. (More on these commercial dimensions in a minute.)
It is a fresh truth because if we’ve heard it before, chances are it’s a topical observation, evident to all, rather than a bona fide insight. Insight is a form of competitive advantage born of seeing things that our competitors can’t. Old truths are table stakes, likely to be widely recognized across the competitive set, and therefore not a source of new competitive advantage. Even if we’re hunting for a new solution to an age-old problem, and leveraging accrued institutional knowledge, fresh answers require fresh perspective, be it from new depth of understanding, new connections between phenomena we didn’t realize were connected, or some other source of new edge. But if it’s not fresh, it’s more likely to offer foundational understanding than catalytic ignition.
A fresh, potent truth, because there are many deep underlying truths about life or a business that are merely interesting cul de sacs. (While it’s true that the human eye can perceive more than a million colors, there isn’t much innovation you can build off it, and it’s not really an insight.)
To provide the sparks we need, our insights have to be richly laden with opportunity for transformation and new possibility. The potency we need usually comes from an unresolved tension. Physicists, engineers and architects obsess over tensile energy and strength. To innovators, great insights are springboards with tensile value. Throw the weight of your imagination upon them and they will forcefully propel you in new directions. There is no prescription for the nature of that tension — functional, emotional, experiential, interpersonal, sensory or financial tensions, or simply unfulfilled aspirations are all viable ways in.
A fresh, potent energizing truth because yes, our reaction does matter. Insight needs to inspire and ignite ideas and action among the people it touches. Forget the images of the lonely inventor in the garage. Innovation is a team sport and great insights will electrify and galvanize teams around a sense of new possibility. No, we can’t define insight solely by the reaction it creates. But it’s still a critical piece and source of its value.

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Mark Payne

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