Identifying Opportunities for Innovation

One fundamental reason companies struggle to figure out how to identify opportunities for innovation is because they lack a clear definition of just what an opportunity is. “Opportunity,” has been defined and redefined in so many ways that it does not have a clear meaning. Often, when managers talk about uncovering areas of opportunity, for example, they are referring to identifying new ideas, technologies, or solutions that customers may want. A razor manufacturer, for example, may believe that adding a fifth blade is a great opportunity. (When will they stop!) Companies believe such solutions offer opportunities for growth, but that thinking is backwards.

Innovation is the process of devising a solution that addresses unmet customer needs. It follows then that to successfully execute this process, a company must be able to identify all the customer’s needs and determine which, among all these needs, are poorly satisfied or unmet. These underserved needs are the real opportunities for value creation. In the outcome-driven paradigm, opportunities for innovation are defined as jobs or desired outcomes that are underserved.

The discovery of underserved jobs reveals opportunities for new market creation and ancillary market growth. They are jobs that customers are trying to get done but cannot do so satisfactorily because products or services designed to get those jobs done do not exist. If it were determined that people want to wake up with fresh breath after sleeping all night, then that job would represent an opportunity for a brand new market. If it turns out that preventing skin dryness is an important and unsatisfied job when shaving, for example, then customers would value a product that would help them get that job done.

The discovery of underserved outcomes reveals opportunities for core market growth and sustaining innovation, as they pinpoint what aspect of a specific job needs to be improved in order to get the job done better. These underserved outcomes point to where customers want to see improvements made—and where they would recognize the delivery of additional value. If circular saw users, for example, feel that minimizing the likelihood of the cut going off track is an important and unsatisfied outcome, then that would represent an opportunity for improvement among the 50 to 150 outcomes related to getting that job done.

Opportunity Algorithm

The opportunity algorithm, shown below, is a simple mathematical formula that makes it possible to identify and prioritize the most promising opportunities for value creation and innovation. An opportunity for innovation exists when a job or an outcome is important and not well satisfied. The more important the job or outcome is, and the less satisfied customers are, the greater the opportunity is for value creation. As shown in Figure 1 below, the desired outcomes that are most important and least satisfied receive the highest priority:
 

The opportunity algorithm states that opportunity equals importance plus the difference between importance and satisfaction, where that difference is not allowed to go below zero. The importance and satisfaction ratings for each job or outcome are entered into the equation to determine the level of opportunity.

To see how this opportunity algorithm works, take a look at Figure 1, which lists some of the many outcomes Bosch culled from carpenters, roofers, electricians, and others who use circular saws in their work and mock data for importance and satisfaction. In outcome 1, users gave a very high rating (9.5) to “Minimize the likelihood of going off track when approaching the end of the cut.” This rating means 95 percent of those interviewed rated the outcome a 4 or a 5 for importance. They gave a much lower score (3.2) when asked to rate the degree to which this outcome was currently being satisfied. This rating means that only 32 percent of the interviewees rated this outcome a 4 or a 5 for satisfaction. Those two scores were inserted into the formula, [(9.5 + (9.5 – 3.2)], yielding an opportunity score of 15.8.

Outcome 2, “Minimize the amount of splintering that occurs when making a cut,” was rated as important as outcome 1, but was satisfied to a much greater degree (7.5 versus 3.2). As a result, outcome 3 represents a much lesser opportunity for innovation, as indicated by its opportunity score of 11.5.

A visual opportunity landscape can be created to see the degree to which all the jobs or outcomes are under or overserved. Click here to see the opportunity landscape model.

 
Figure 1: Opportunity Scores Reveal Underserved Outcomes

Share this