Sarah welcomes Tony Ulwick, strategy expert, innovation thought leader, author of Jobs to be Done: Theory to Practice and What Customers Want, founder, and CEO at Strategyn, to share why he views innovation as a science.

Sarah Nicastro: Welcome to the Future of Field Service. I'm your host, Sarah Nicastro. We talk a lot on this podcast about outcomes-based service, today we're going to be talking about outcome-driven innovation. I'm excited to welcome to the podcast today, Tony Ulwick, who is a strategy expert, innovation thought leader, author of two books, Jobs to Be Done: Theory to Practice, and What Customers Want, as well as the founder and CEO of Strategyn. Tony, welcome to the Future of Field Service podcast. 

Tony Ulwick: Sarah, thank you so much. I appreciate it. 

Sarah Nicastro: Absolutely. So anything to add to your bio? Do you want to talk at all about your background, your journey, and any context for folks? 

Tony Ulwick: Sure. I think talking about how I started my interest in innovation is interesting because it came out of necessity. I was working for IBM at the time, this was back in the 1980s, and I was part of a team that was going to change the way people did home computing. It was a bit promising, it's a product called the PC junior. The only problem with it is the day after it was introduced, the headlines in The Wall Street Journal read, "The PC junior is a flop." And it was.  And it got me really wondering about how a company like IBM, with all its vast resources, could invest in something that turned out to be a flop. And the funny thing was, but not funny, the horrible thing was it took us a year to reconcile that it was a flop, pull it from the market. It was a billion dollar failure.  

So we got to be very interested in thinking through, well, how can we avoid this? I didn't realize at the time that this was a problem that existed across every company, I thought it was an isolated incident, but it's not, of course. And I've spent my career working through better ways to innovate and creating an innovation process that would help you conceptualize products that you know are going to win in the market before you start developing them instead of finding out after you launched them that they failed. 

Sarah Nicastro: It's interesting though, a lot of the conversations that I take part in or hear around innovation we talk about the fact that failure is a part of the process. So was it that it was that far along and that big of a failure that you felt some emotion around? Or I guess what are your thoughts on failure being a learning opportunity, not something to completely avoid? 

Tony Ulwick: Well, the way I like looking at it is if you fail, certainly you're going to learn something from it, but why wouldn't you try to avoid failing? I don't believe that innovation has to include failing, because you know what you're trying to do when you're innovating, you're trying to create products that will, in our terms, help people get a job done significantly better. So if you've come up with an idea that doesn't do that, then why would you pursue it? Or if you can prove that the concept that you came up with does get a job done a lot better, well, that's going to give you the confidence of knowing that it's more likely to win in the market. 

So there's some very basic things we could look at here to help avoid failure. One thing I find interesting is even to this day a lot of companies don't consider innovation to be a process, which I find interesting. And of course the innovation success rates are quite low, and it's just assumed that failure is part of this and you can't turn innovation from an art to a science, there's just too many unknowns, there's too many variables that can't be controlled. And this is the thinking I've been through for the last 30 years, what are all those variables that are causing failure and how do you control them? Because if you could, you could turn something that seems random and unpredictable into a scientific process, and that's exactly what we've done. 

Sarah Nicastro: And we're going to obviously talk more about that, but you mentioned the art and science aspects. So to you, is it a combination of both? 

Tony Ulwick: Not really. It's definitely far more science than art, because the way I like thinking about it is once you know exactly where to focus your value creation efforts, in other words, once you know where people are struggling to get a job done very precisely, and once you know that, you can come up with solutions that will address those parts of the job. We rarely... I'd say never, we have never run into a situation where companies say, "We don't have any ideas." People don't say that. They usually say, "We have so many ideas, we don't know which ones to pursue." And so now we're doing idea management and they think about innovation as an idea management exercise. I don't think about it that way. What I think about it is more like a problem solving exercise where people are struggling to get a job done, let's figure out how to help them get it done better. 

So if we know precisely along what dimensions they're struggling, we can focus our creativity on those dimensions and solve them. A quick example, we've worked with Bosch helping them enter a North American market, and once we identified the top 14 unmet needs in the marketplace, it took them just three hours to conceptualize a new circular saw that addressed all those unmet needs. And as they said, "Well, it's not as if we hadn't had these ideas before. The problem is we've had thousands of ideas before. We just didn't know that these 14 in this combination was the magic win." 

Sarah Nicastro: Okay. So I want to go back. I feel like I jumped over my first question. So let's go back there before we go ahead, because I always have other things come to mind and I'll get us off track. So let's start with making the decision to focus on innovation. So can you talk a little bit about if an organization, if a company wants to focus on innovation, what's necessary to do so in terms of mindset, leadership, any of the factors? 

Tony Ulwick: As we often say, to be great at innovation, you need a great innovation process. This is true of any business discipline. If you want to be great at lead generation, you need a great lead generation process. You could run that. I think there's 140 some odd business processes that are common, it's true of everyone, which means you have to treat innovation as a process. Again, as I mentioned earlier, half the population believes innovation isn't a process. Well, that's problematic. So if you think it isn't, then you're not really going to work very hard to try to turn it into something that's filled with discipline. So the first step in taking on innovation is to recognize that it is a process, and that often requires a different mindset. The mindset shift is generally a shift from a solutions first orientation to a problems first orientation. So a lot of people that believe innovation is not a process, believe that innovation begins with ideas. 

And then you take those ideas, you go prototype them, test them, get feedback from customers, iterate on the product, go retest, and you go through this iterative process until hopefully eventually the product that you've come up with addresses the customer's needs to the degree that they want the product. Well, that is a very, very expensive way to learn customer needs. The other approach is a problems first or a needs first approach where the goal is to understand the job the customer's trying to get done, break it down into its component parts, understand how they measure success along each step of the way, and figure out where are they underserved in getting the job done. All this can be done with precision. And as I mentioned, if you know the top 14 or 15 or 20 unmet needs in your market, then you can focus on them very specifically and help come up with a solution that helps people get the job done a lot better. 

So I think just that mindset shift and knowing that that's possible is the first step. I'd say the second step is then getting everyone on board with an innovation process that aligns people and the organization. So everybody can be rowing in the same direction, focused on value creation, and so they're not debating what market they're in or who their customer is or what a customer need is, but if they agree on all that, then they can sit and debate what is the best solution for my customer to solve that particular problem. So it's a transformation, you're shifting a mindset where people don't agree on what a need is to the entire organization agrees on what the needs are which you're unmet, and now we're debating the best solutions. That's where you want to get the organization. 

So I should mention, Sarah, we've done a lot of research on these very specific questions, and we find that in over 80% of product teams, they don't agree on the best way to define a market. They define a market as a product or a technology or a geography or a vertical or a persona or a use case or so on. Over 90% of product teams don't agree on what a customer need even is. Is it an exciter, a delighter, a feature, a value driver, a specification, a requirement, a pain, a gain? And we've heard all these terms used interchangeably as if any input into this process is going to yield a great result, and of course that's not true. 

We know that over 80% of product teams don't agree on the best way to segment markets. So they segment generally around personas, use cases, demographics, psychographics, attitudes, and these are all done as proxies for segmenting around unmet needs, because the goal of segmenting is to find groups of people with different unmet needs, but companies don't segment around unmet needs because they can't agree on what a need is. So it's this combination of factors that's causing companies to go off track. So if you could align your organization around a common language of what a market is and what a need is, so you have a common language of innovation in a process that leverages that insight into something more predictable, that is half the battle. 

Sarah Nicastro: Okay. So we're talking about the how of innovation, when we think about what are the best areas of opportunity for any given company, what is the advice you would give someone on how to find the areas of innovation that will yield the best results for their business? 

Tony Ulwick: And that's a great question. Not only do you want them to yield the best results, but they have to be within their capability set as well. So there's two things happening here. You want to figure out where's the customer underserved in areas that we can address? That's more or less the question you're trying to answer. And to figure out where they're underserved, that is where the outcome-driven innovation process comes into play. And again, I've alluded to identifying the precise underserved needs associated with getting a job done, focusing on those, of course, that lays out what I'd like calling the most efficient path to growth in problem space. So in other words, here's my opportunities in priority order, in problem space, but I may not be able to solve them in that order because I may not have the capability to address that top need or this other need or so on, so you're going to have to come up with solutions that you can address that will put you on the most efficient path to growth from a solution perspective. 

But there are some general rules of them that we follow that lay out the best ways to grow, and it's always growing from the core, because this is where you have the greatest set of capabilities. So most products get only part of a job done. You could be a kettle maker, for example, and a kettle's used heat water to a desired temperature, but people are using a kettle to maybe prepare a hot beverage for consumption. It's part of a bigger job. So the market isn't the kettle market. The market is a group of people who are trying to prepare a hot beverage for consumption. So if you take that as an example, you can grow from the core. You can say, "Okay, I'm a kettle maker today and I can focus on heating water to the right temperature better than anybody else." And that's a good starting point. Take your core, take the thing that you're doing, and do it exceptionally well. In other words, satisfy all the unmet needs associated with getting water to the right temperature. 

Once you've accomplished that, you can look adjacent. You can say, "Well, what's the step that comes before heating water to the right temperature, and what is the step right after we've heated the water to the right temperature?" And say, "Well, can I get more of the job done?" These appear to be adjacent markets, but they're really part of the market as the way the customer defines it, because they're trying to create a hot beverage for consumption. And then, of course, if you can get the entire job done on a single platform, that is the next expansion to growth. And it's often common to see a kettle maker, for example, get disrupted by a company that gets the entire job done, like Keurig or Nespresso, where they have their machines that get the entire job done in a single platform. 

But you can see that trajectory coming years away. 20 years ago, you could sit there and know that, well, people are heating water, but they're trying to create a hot beverage for consumption, and you could envision the solution to the future and figure out, well, how are we going to get there step by step over time? So that's more or less the formula I like thinking about that works really in every company, that's the most efficient path to growth for me, problem perspective and from a solution perspective. 

Sarah Nicastro: Can you talk a little bit more about the outcome-driven innovation methodology? 

Tony Ulwick: Sure. So the approach is broken into five steps. The first step is to define a market, but not as a technology or a product or a use case or persona. We're going to define the market as the group of people trying to get a job done. So it could be consumers who are trying to prepare a hot beverage for consumption. Sounds simple enough, but oddly enough, it isn't. A lot of companies don't want to define the market around a group of people getting a job done. They'd rather define it around a geography or a persona or a use case and so on. So if you have that debate within an organization and people can't agree on what market they're in, it's going to be hard to go take the next step in the ODI process, which is to uncover the customer's needs. 

Now here we're going to define needs a little different. We know people are getting a job done, so we can break that job down into steps and figure out how do people measure success along each step of the way. So in the case of the kettle maker, minimize the time it takes to get the water heated to the exact temperature, minimize the likelihood that it cools quicker than it should cool, minimize the likelihood of overheating it to make it too hot. Now, there's very specific metrics that you can use to make sure you're getting that part of the job done perfectly, we call those statements the customers desired outcomes. They're solution independent, so they're not tied to a product, they're stable over time as the job is stable over time, they're unambiguous, they're knowable and discoverable. There's no such thing as a latent outcome, because we often talk about latent needs. 

We say, "Customers don't have latent needs. They only have latent solutions." They can't envision a microwave, they can't envision the automobile when they're riding horses, you've heard all those arguments, but they do know what they're trying to accomplish. Those jobs stay stable over time. So focusing on outcomes from that perspective gives us a long term focal point and a value map for, or a map of value creation, I should say. The third step is then to figure out, well, which of these needs are unmet? And to do that, we put surveys together that go out to some portion of the population, it may be 1200 or so consumers of kettles, or Keurig machines, and we would ask them to tell us how important is each of those outcomes and how satisfied are you with your ability to achieve the outcome given the solution that you're using today? So what we're looking for quite specifically is where are they struggling in the job given the solution they're using. 

And we can plot this out mathematically. So we've created what we call the opportunity algorithm that takes the importance of the outcome and then subtracts the importance minus the satisfaction. And so if a need, an outcome is really important to most of the population, but most of the population is dissatisfied with it, well, then we would say that's an unmet need, so we can figure out which needs are unmet and to what degree. And with that, then we can focus on the needs that are most underserved in a market. The next step, which is extremely important, is to recognize that in most markets people don't agree on which needs are unmet. This goes back to marketing 101, there are always segments of people with different unmet needs. It's true, we've proven it over and over again. Having said that, how do you discover those segments? Again, by segmenting around personas, or use cases, or demographics, psychographics, attitudes, behaviors, they're all proxies for doing what you should do, which is to segment around the unmet needs. 

So once we know what these needs are, maybe half the population wants to minimize the time it takes to get the water heated to the right temperature, and they're unsatisfied with that. Maybe the other half says, "I want to minimize the likelihood of exceeding that temperature and getting it too hot." People disagree on what's important and unsatisfied. So you'd want to know that so that you can create products or maybe different products for different segments that will satisfy their unique unmet needs. Again, it's marketing 101. It's just hard to do in practice. 

And then the final step is to take that information and build out your strategy. The first step of that is what we call the innovation strategy, which is picking what segments do we go after and which element needs to be targeted. In that Bosch example I mentioned much earlier, there was one segment that had 14 unmet needs in the market, and that's where Bosch focused its attention. They said, "In order for us to win and differentiate against DeWalt and Makita, we're going to go after that segment, address those 14 unmet needs, and position in this matter." Then comes to product strategy. How do you do it? I know what I'm going to go target, I know what segment I'm going after, what features do I have to have on my product? And it could be hardware features, it could be service features, it could be software features that can come to bear to help customers get the job done better. 

And in the end, what you've done is you've created a solution that you know is going to win in the market. And how is that? Well, because the feature set that you've generated is tied to a set of needs, and you know those needs are the most unmet needs in the market because you've done all that research, and you know that by satisfying those needs, you're going to get the job done significantly better. And we have a threshold too. We say, "If you can get the job done, about 15% better or more, that's the tipping point." 

Now, if you come up with a product that just satisfies one unmet need a little bit better, nobody cares. Would you switch from your favorite brand of anything if a new brand got a job done 1% better or 2% better? And the answer's generally no. So if you can reach that threshold, that's the tipping point. And the trick, of course, is if there are 14 unmet needs in a market like Bosch discovered, the question isn't how many of those needs do we address, the question is how do we address all those unmet needs so we can make a big difference? 

And I think it's that mindset shift that makes a difference as well. A lot of companies stumble along and have to go through incremental improvements, product iteration after product iteration as they discover one or two unmet needs, but to the customer they're never getting the job done a lot better, so they can't go with an upcharge in their price and execute on a differentiated strategy. They're stuck more in a sustaining strategy, adding features, maybe even adding costs, but not really increasing their profits. So that's a dangerous position to be in, and you can overcome that by understanding all the unmet needs in a market upfront and going after quite a number of them. So you're looking like you're creating a breakthrough solution, it's a radical solution compared to what existed before, because it's gotten the job done so much better. 

Sarah Nicastro: Okay. Now, you mentioned earlier the difference between innovation and I think you said idea management, and so we talked about how sometimes these innovative ideas pick up a bit of momentum, but then get to a certain point and just fizzle out. So for companies that are looking at ways to innovate within an existing business, our audience, like I said, is typically looking for ways to evolve and transform from a service perspective, what is the trick to taking those ideas and really getting them to scale, and have an impact on the business? 

Tony Ulwick: Well, you're assuming they're good ideas, but when you're going down this idea management path as your approach to innovation, generally there's not just two or three ideas, there's thousands or at least hundreds of ideas, and somebody's responsible for evaluating them. So how would you even evaluate an idea? So the first thing you'd do is you'd say, "Well, is that idea in a market that I want to be in?" That's how we approach it. We'd say, "If that idea is addressing a group of people trying to get some job done, who's that group of people? What is the job they're trying to get done? Do we want to play there?" So that's the first test. Assuming the answer is yes, then you'd take the next step and say, "Are people underserved in getting that job done? And can we help them get the job done better? Do we believe we can't? Do we have the capabilities?" 

If the answer is no, then you don't want to go play there. If the answer is yes, then you go to the next step. The next step then is investing in understanding what are the unmet needs in that space. And as I've described the ODI process, figure out precisely where the customers underserved, so you can come up with solutions that will address getting the job done significantly better. Now, it may be that the original idea that you had really does the trick and it gets the job done a lot better, or it may be that it's getting part of the job done well and that you need to enhance it so you build on that idea so it turns into something that will get the job than 15% better or more. 

But what we're doing here is we're trying to move this ideas first mindset into a market first mindset. In other words, don't start by saying, "Hey, I have a thousand," or I think in Bosch case it was 10,000 ideas. I know IBM at one point had an ideas database of 100,000 ideas in it. What do you do with all that? So what you'd rather do as management in an organization, instead of saying, "Everybody have lots of ideas and we'll figure out which are good," what you want to do is say, "We want to go after this group of people who are trying to get this job done, and here are all their unmet needs." Now, organization, go out, figure out ways to satisfy those needs, and we can be successful in those markets, that's how it should work. And so organizations who are becoming outcome driven follow that kind of thinking, pick the markets that you know are attractive, that way you you're playing in the right ballpark. Where to play, ODI helps figure out how to play to win, and then you can go on to be successful from there. 

Sarah Nicastro: So the piece about identifying the unmet needs makes perfect sense. What I'm wondering though is a little bit more about the process of... Let's take the Bosch example. So with Bosch, they had this group of people for whom shared this 14 unmet needs, and they decided that was a good fit for them strategically to go after. So what happens then from that decision to keep them on track through execution? 

Tony Ulwick: That's a great point because teams can easily get derailed once they start developing products and go off track. I think the beauty of having a set of metrics like these outcomes that we talk about to guide your decision making process and the trade-off decisions that you make through development are absolutely critical. Like in the case of Bosch, people are trying to minimize the likelihood that debris flows up in their eyes when they're making a lengthy cut, or they're trying to minimize the likelihood that the extension cord gets caught on the piece of plywood as they're leaning over, making a cut. There's very specific things. So if you know those are the metrics, that helps guide you even in development, so all the way through launch. So you can conceptualize the product up front that you know is going to win, but it's only going to win if it satisfies those outcomes. 

So it's often the case that when we go into development, we turn the concept into a product specification or product requirement that gets acted on with this added information, and we can even add to it, minimize the likelihood of the debris flying up in the user's face. Well, what is the likelihood of that happening? Is it 100%? Does it always happen? Does it happen half the time? And you can quite literally measure it. Engineers can set up an experiment and say, "It used to take this amount of time to go to get this part of the job done, and now it takes this much time. We've made progress. It's measurable." 

Sarah Nicastro: I guess I'm trying to think through this in the service context and a service example, because obviously a lot of that is far more intangible than product specifications and some of those types of measurements. I don't know if you have any thoughts on that. 

Tony Ulwick: Sure. So let me give you an example. We worked with an agriculture firm that made seeds and fertilizers, pesticides, herbicides, a bunch of products, and we studied the job of growing a crop. That's what growers do, they grow crops. And we studied that job from beginning to end, understood all the metrics they used to measure success when getting that job done in a solution agnostic way. When we were done, there were about 50 of the 150 outcomes that related to service-oriented solutions, they had nothing to do with pesticides and herbicides, they were really more along the line of getting help at the right time, or having things show up at the right time, or things like that, that can't really be solved from a hardware standpoint, they can only be solved from a service standpoint. But they also discovered another 40 or so outcomes that related to information flow, which lent itself to software solutions or digitalization as it became digitalized farming. There are many outcomes that growers were underserved with because they didn't have the right information at the right time. 

And then, of course, a whole bunch of needs related to the hardware products that they already made as well. So by studying the job at that broad level, from the customer's perspective, it takes you out of that mindset as to whether or not you're a hardware company, a software company, a service company, you're a company that's going to help people get the entire job done. The entire job generally requires all three types of solutions, some hardware solutions, some software solutions, some service, not always, but you should think along all those fronts. Most hardware companies certainly can find opportunities to find underserved outcomes that could only be solved by services or by software, so it's great for them to move in that direction. A lot of software companies don't like moving into service or hardware because it's much more complicated, lower margins impact, valuation, all that type of stuff. But generally, it makes good sense for a hardware company to go into services and to go into software even, because it can help with their growth and valuation. 

Sarah Nicastro: That makes sense. So we've talked through a couple, but if we think about what are the most common mistakes you see companies make, and what's your advice to avoid those? What comes to mind? 

Tony Ulwick: The biggest mistake is failing to recognize that innovation is a process and that it can't be turned into a science. The biggest mistake is thinking that it's impossible to hand over a set of needs to a product team that are complete, that points out precisely where the customer's underserved. I think companies are still on this ideas first mindset and struggle to break out of it, and it's pervasive. Like I said, if half the companies believe that innovation isn't a process, or those that do believe it is a process think it's all about ideas management as opposed to uncovering needs and discovering solutions that address them, that's the biggest mistake. 

And that's where the mindset shift has to come into play. And we've been at this for 30 years, we've certainly changed some minds over the years, people see that this works, it intuitively makes a heck a lot more sense, but behaviorally it's very hard to change the way people want to approach this, because it's really fun having ideas and getting people to rally behind your idea, and seeing it get developed, seeing it come to market, all that is super fun, but it's not much fun when it fails. And I think if we start with the end in mind and know that we are creating solutions to help people get a job done better, we can prove to ourselves that the idea that we had will get the job done a lot better before we start developing it so we don't have the IBM PC junior mistakes. 

Sarah Nicastro: That makes sense. Tony, tell everyone where they can find more information on you, the books, and the work that you do. 

Tony Ulwick: Sure. So our homepage is strategyn.com, it's strategy with an N on the end of it. That is one location. You can contact me directly at ulwick@strategyn.com. And there are two free books available as well. Well, it's the same book. It's available as a ebook and as an audiobook, and that can be found that jobs-to-be-done-book.com with all hyphens, jobs, hyphen, to, you get the idea. So that's available there for free download, and that should set you on your journey to develop a new mindset about innovation. 

Sarah Nicastro: Awesome. All right. Well, Tony, thank you so much for coming on and sharing your insights with us. I appreciate it. 

Tony Ulwick: Sarah, thanks so much for the opportunity. I appreciate it as well. 

Sarah Nicastro: Absolutely. 

Tony Ulwick: Thank you. 

Sarah Nicastro: Thanks. You can learn more and find more at futureoffieldservice.com. While you're there, be sure to take a look and sign up for the Future of Field Service Insider. Also have a look at the Future of Field Service live tour dates, and be sure to register for the event nearest to you. You can also find us on LinkedIn and Twitter. And the Future of Field Service podcast is published in partnership with IFS. You can learn more at ifs.com. As always, thank you for listening.