Creating New Innovations

Volume 11 Letter 8

Copy cats with cheaper materials, inexpensive labor and knock off technology will eventually appear ready to attack your market share. Continued success in business requires a work environment where innovation takes place, customer value is created and strategies are developed to take those new innovations to market. So how does innovation take place? Researchers and strategy experts believe you can create the atmosphere for these flashes of insight to happen! Here’s how it happened at Google and how you can do it your company.

Three academics at Stanford were working on a data mining project to see how e-commerce was affecting traditional retail outlets. They used a search engine called AltaVista to look for companies to study. One of the researches noticed that if they typed in a URL, the AltaVista search engine would list other sites linked to that URL. In a sudden flash of insight the researcher thought of how Academic journals ranked authors by tracking how often their articles were cited. What if you could do the same for websites? The group adapted their project and started ranking websites by number of hits.

At this point the trio thought their website ranking system was a great topic for a thesis. During the preparation of their thesis the University of Stanford prompted them to open up their research project to the rest of the school. Soon University users were telling the three researchers what a great search engine they’d developed eventually giving them the impetus to give up on academic life and formally start the company, Google. But the story doesn’t end there…. they still had to figure out how to make money. Adding pop up advertisements and banners to the Google search site would only make users linger and thus defeat the purpose of the search engine, that being getting users to their target as fast as possible. Then one day while browsing the internet one of the founders noticed a site that sold advertising and display ads as search results. This prompted another insight – what if they added advertising to the search results. The group wrote a program adding advertising to internet search results and, in a gross understatement, Google’s money problems were solved.

Google is just one example of strategic insight. Strategic insight refers to that step between market analysis and strategy development where a sustainable competitive advantage is fused with a market opportunity. It’s a process of modifying a solution that was used to solve a problem in one context to solve your complex business problem. In Google’s case ranking authors lead to the insight to rank web sites. Here’s how to make it work for you:

  1. As a team at the top of a matrix write down your current understanding of the problem.
  2. List in rows what actions you think could succeed in solving the problem
  3. Next ask the most important question: has anyone else in the world ever made progress on this or a similar problem and list the sources of info.
  4. Ask team members to search out the sources – as they do flashes of insight are likely to happen

As a leader it’s not your job to have the flashes of insight – it’s your job to create the environment so they can happen. Flashes of insight give you ideas for your strategy and the matrix lets your whole team harness those flashes. Companies like GE and 3M use the above process in a formal way to create new ideas and get insights into solving tough strategic challenges. Create an innovative environment, solve tough problems and create customer value.

For more reading
William Duggan Strategic Intuition: The Creative Spark in Human Achievement (Columbia Business School Publishing, 2007

Recent Posts