Innovation Reconsidered

Clay Christensen is one of the world’s leading writers on innovation.  I recently read his book The Innovator’s Solution, which was actually a follow-up to his previous book, The Innovator’s Dilemma.  The hardwood lumber business is often not on the cutting edge of innovation, so the book caught my attention.

The basic idea underlying Christensen’s books is that real value, over the long term, is created only by innovation.  If you’re not innovating, eventually your competitors will commoditize you, your margins will shrink, and your business will be worth less.

The whole book is worth reading, but I thought the most interesting part of the book was in Chapter 3.  In this chapter, Christensen explores the best way to pursue innovation.  He rejects the traditional wisdom that innovators should focus their analysis primarily on the customer, but instead says that the focus should be on how and when the customer uses your product or service.  This probably sounds a little vague, so let me share with you the example that Christensen gives.

A quick service restaurant chain wanted to improve its milkshake sales and profits.  Two sets of researchers came in to study the situation.  The first focused on the customer and the product itself (milkshakes), and asked a group of customers whether they wanted thicker, chocolatier, cheaper, chunkier, etc. milkshakes.  These researchers got feedback from the customers, and then used it to make some changes in the milkshakes.  However, despite these changes, the restaurant got no substantial increase in sales or profits.

The second set of researchers took a different approach.  They focused on what the customers were trying to get done when they “hired” the milkshake, and this gave the company’s managers new insights.  The researchers spent an 18 hour day in the store and recorded the time of each milkshake purchase, what other products the customer bought, and whether the milkshake was consumed on or off premises.

Interestingly enough, nearly half the milkshakes were bought in the morning.  People who bought in the morning often faced a long, boring commute, and wanted something to eat or drink in their car that would last a long time, wouldn’t be messy, and would satisfy them past 10 AM.  By way of contrast, people who bought milkshakes at other times of the day were most often parents trying to placate their children after a long, hard day.  Unlike the morning folks, parents wanted their kids to finish the milkshakes quickly and not have to struggle to suck a thick milkshake through a thin straw.  As a result of these findings, the restaurant created a thick, chunky shake for the morning customers (so it would last longer), and a thinner, “quick drinking” kids shake for later in the day.

The second group of researchers focused on the job the product was being “hired” to do, and ended up designing different types of milkshakes based on what the different groups of customers were trying to accomplish.  It wasn’t just about the customer and the product, but rather was about the circumstances in which the product was being used.

In the hardwood lumber business, it’s sometimes challenging to think about what real innovation means.  And when we do think about it, we tend to think about the product we sell and how we can change that product.  However, for me, taking Christensen’s advice would probably mean more focus on the circumstances surrounding how my customer uses my lumber and less on the lumber itself.

Christensen’s book certainly challenged me to think about innovation differently