The Value of Innovation
What is innovation? And, what is the value of innovation?
These are the questions that I want to take a closer look at for this blog post.
Off the top of my head, I would add some other questions, closely related to the ones stated above: How do experience and innovation interact? How do emotions affect the value of innovation?
And, why am I focusing on innovation rather than straightforward selling? Because the focus, your focus as a marketeer should be on solving, not selling. Because solving sells.
What are we solving? We are solving our customers’ problems. We are responding to their needs. We address their concerns. We provide them a solution to their problems.
And that brings us back to the value of innovation.
What is innovation?
I cannot tell you how often I have heard the phrase ‘ideas are meaningless’. And this statement is correct.
An idea is just that, a daydream. A thought without application, without realization. An idea is unfinished.
What we really want, is an innovation. An innovation is applying an idea to someone’s status quo to make a beneficial change. An innovation helps someone accomplish something that they want to accomplish in their lives or their business.
When we think of the word innovation, most people think it means some sort of technology. It can be, yes, but it does not have to be.
An innovation can also be a system, a process, an approach, a way of doing things. It is not necessarily tied to tech, though we might often feel like it is. But, honestly, innovation is a synonym for ‘new’.
An innovation is solving.
It is worth repeating: Innovation = a beneficial chance to someone’s status quo.
If it doesn’t help them change their status quo, and change it for the better, then it is not an innovation. And hence, no value in innovation.
The difference between innovation and gimmick
A gimmick is something curiosity-producing that does not provide a change in the status quo.
Most times, what a business calls an innovation is actually a gimmick.
Gimmicks are meant to sound like a silver bullet. And to be honest, you sometimes need to build these into your marketing.
But, gimmicks are not innovation. They don’t offer the same value as innovation. Yes, they are new. Yes, they are unique. But, they do not beneficially change the status quo of your perfect buyer. Hence, no value in innovation.
And you need to be honest about that.
A good example is laundry detergent. It is often advertised with ‘new formula’ or ‘blue crystals’. But, these changes are often done for other reasons such as cost reduction. But, by not only calling them out, by actively marketing these changes, but we are also implying that they are better than what was there before. Not just different, but better, when they are not. They are a gimmick.
Now, an innovation can be a gimmick as well, but a gimmick that beneficially changes the status quo. And that is a good definition of the value of innovation to use.
There is the value of innovation when there are beneficial changes to the status quo.
Innovations can be new, unique, and curiosity-producing. But, and it is a big but, it also changes the way the perfect buyer does something. Or experiences something. It helps them make progress on their goals.
And honestly, talking from a marketing perspective, the best innovations are gimmicks. They produce curiosity. And, this curiosity causes the perfect buyer to dig in deeper, and build knowledge about the solution you offer. That is important because if a person does not understand an innovation, cannot see how this innovation solves their problem, cannot see how this innovation applies to them, then it has no value of innovation to them.
The value of innovation
Value is a measure of someone’s understood benefit of something.
The value of anything you do is in its capability to help people make progress on their problems.
You are helping your perfect buyer find a solution. You are solving. You are innovating. That is the value of innovation.
The innovation you provide can be mundane. Remember, innovation just has to be something ‘new’. The innovation you provide can be something as simple as someone not doing it themselves. In that case, the value of innovation is that you don’t have to do it at all.
Also, innovation can be something new that does not even change the physical properties of something. The innovation can be selling an emotional benefit. Here, the value of innovation would derive from the emotional relief offered. Meaning that you are helping your customer accomplish an emotional objective. This harks back to the idea of how human desires affect marketing decisions.
How do we determine the value of innovation?
There are four parts to determine the value of innovation: realization, agency, timing, and transfer costs.
It all starts with a struggle. People must have a struggle, and this struggle creates a desire to make a change to their status quo. A change for the better. This is the first part of determining the value of an innovation: a realization that ‘this is hard’, or ‘I am not getting what I need or want’. People generally don’t make changes to their status quo from a place of ‘this is great’. They only do so from a place of ‘this could be improved’.
Your customer has identified a problem, and now they seek help solving this problem. This agency is important. Because the second part to determine the value of innovation is that a person must want it. An innovation is not valuable if a person does not want it.
Think about it. A person must have some desire to make a change in their situation. You cannot sell seeds to a person sitting on a stack of seeds. You cannot sell a big meal to a person that just had a big meal. This references the third part to determine the value of innovation: timing. Or you could also call it situation or context. Things that are valuable only in a particular situation.
So, not only do people need to realize that there is a struggle, but they must also have a willingness to seek help with that struggle now. To actively go out and search for a solution to that struggle.
But, and this is where the fourth part to determine the value of innovation comes in: the desire to make a change must be greater than the pain of switching. The transfer costs have to be outweighed by the benefits gained.
Changing from the status quo is hard because the status quo is what we know, what we have come accustomed to, what we are comfortable with. If the benefits are the same as what that person experiences now, why would they change?
Nobody bothers for a ‘meh’ change. It is not that things have to be a deal — but the benefit to a person must be worth the cost of switching. It must be noticeable, tangible, appreciative.
There lies the value of innovation. Desire creates urgency. Urgency creates action. Hence, no desire, no action. It is as simple as that.
Communicating the value of innovation
When we buy or sell things, there is communication going on that we often forget. But, understanding this is critical to doing marketing correctly.
Think back to how we defined ‘value’: a measure of someone’s understood benefit of something. Understood. It means that valuing something requires understanding what the item is and how it is beneficial to a person.
When someone says something is valuable, some words are not spoken but are implied. What are those words? The words ‘to them’.
Value is a belief. It is subjective. It cannot be forced on someone. You cannot sell anyone that something has value. You can only explain to them why it should be valuable to them. Then, the perfect buyer has to decide if it is.
Nothing is valuable as itself. It becomes valuable by us seeing and understanding it as valuable to us. The value of innovation has to be communicated.
This is even more true nowadays. Information is particularly meaningless. The information we have available to us now at a click would be mind-blowing from someone even twenty years ago. But, information like everything else, only becomes valuable if you understand what to do with it.
When we discussed how to determine value, we talked about timing, situation, and context. That one can only value something if one understands how to apply it to their lives and get a change. Your perfect buyer has to see that the innovation can be used to solving a problem that they have right now.
This is something that you have to communicate to your perfect buyer. Your perfect buyer might understand how something could be valuable, but if they cannot see the path as to how you will apply it to their status quo and make a beneficial change, then it is not valuable to them. They will not understand the value of innovation because they cannot grasp it.
The desire for change. Understanding something and its benefits. The process to apply it and get the results. All these things must be in alignment. And, all these things must be effectively communicated.
Diamonds are a marketer’s best friend
Diamonds are made of carbon, the most common stuff on earth. They are cut, shaped, and polished to look brilliant.
What do people buy diamonds for? What problems are they solving? What change are they making to their status quo?
People buy them to solve a communication problem. How do I communicate love, desire, or interest in a long-term relationship?
The value of the diamond is not in the diamond itself. It is in its ability to communicate. People understand that ‘diamonds are forever’ and that ‘diamonds are expensive’. One person giving another person a diamond applies this shared understanding and communicates that the person is valuable to the offerer.
In the case of diamonds, this shared understanding is near-universal. But, that is not necessarily so. In fact, it is an exception.
Rather, as we have established, value is situation and context-dependent.
So, how do we define our innovation so that our perfect buyer desires it, understands it, and can apply it to their situation?
By defining the status quo.
Define the status quo before you define the innovation
Tony Ulwick and Clayton Christensen are two great thinkers on this stuff. I can’t take credit for any of this thinking—this is all their expertise. Their books and strategies are well worth a read and watch.
But, to make things easier, I will summarize my takeaway from their books.
My first takeaway:
An idea’s first approach to innovation produces unicorns — and unicorns are imaginary. The business becomes a guessing game based on luck and chance, and trying to fit square pegs in round holes.
Frost & Sullivan reports that only 1 out of 300 new products actually impacts company growth. Only 1% of new products recoup their product development costs. The Corporate Strategy board’s outlook is similar. Over the last 4 decades, only 5% of businesses had sustained growth greater than the GDP.
Clayton Christensen covered this problem in his books “The Innovators Dilemma” and “Competing Against Luck.” He states that the secret to growth is understanding what causes perfect buyers to make choices to help themselves achieve progress on something they are struggling with within their lives.
To get to the right answers, Christensen says, you should ask “What job is my perfect buyer hiring me to do?”
When someone buys something, they “hire” it to get the job done. If it does a good job, they hire it again.
My second takeaway:
It is not how much better your product is than the competition. Rather, it is how understandable and obvious it is as an answer to the perfect buyer’s current situation.
In “Building a StoryBrand”, Donald Miller said it best: “People don’t buy the best products; they buy the products that they can understand the fastest.” Speed to understanding is the key to everything.
Good, effective communication is key here.
Back in the 1970s, Alvin Toffler, the futurist wrote a book called “Future Shock.” It’s a good read if you haven’t read it. He described that the world was changing from an “industrialized society” to one that was “super industrialized.” All of this acceleration causes people to feel overwhelmed. He used the term “shattering stress and disorientation.” And, this was before the internet.
And Toffler was right. Choice is disorienting. Change is disorienting. This is why changing from the status quo is so difficult.
And, this is our problem as marketeers. This leads me to my third takeaway.
My third takeaway:
Be aware of the marketer’s dilemma. We must understand the perfect buyer’s problem — what we are being hired to do in their status quo. We have to make ourselves the obvious choice for this versus all the competing ways a perfect buyer can improve their status quo. And, we have to communicate our obviousness faster than the competing choices. One of which is to do nothing.
For me, this realization is the core of the marketing problem. This is the dilemma we have to overcome to be successful as a marketeer.
It is not just about us. So much of the work is on the side of the buyer. Yes, we have to effectively communicate, but so does the buyer.
It is not just about innovation. It is about the perfect buyer understanding your innovation. Understanding what its benefits are to their situations. Understanding how to apply it, and get results.
Communication aids in understanding. That means that you have to communicate better than the competing options. And, you have to communicate easier and faster than your competition as well.
I believe that is why products lose market share or never take off. Because the value proposition has not been effectively communicated. The communications were not effective, or they were too much work.
This is why communication is so critical to everything that you need to do. In fact, marketing is communication.
The Hero’s status quo is everything
The point I am making is that you have to make sure you understand your customer.
When you understand your perfect buyer and their status quo (including their desires), you can begin to educate them on why you are the obvious choice.
And, because everything that you see, feel, though, is through your senses, it is all experiences.
So, when you want to understand your perfect buyer, the hero, think in terms of the experiences that the hero has with the status quo. What are the inputs that have educated them about their current status quo? What needs to change in their mind for them to make a change?
That is going to be discussed in a future blog post. So stay tuned for it.
But I want to leave you with a great quote that gets at the heart of understanding the perfect buyer’s experiences and needs:
“People don’t want to buy a quarter inch drill. They want a quarter inch hole!.”
Drucker on Marketing book by William Cohen
Innovators Dilemma book by Clayton Christensen
Competing Against Luck book by Clayton Christensen