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Monday, December 28, 2015

The Innovative Power of Criticism 12-28

The Innovative Power of Criticism.

The business world is awash in ideas for new products, services, and business models. Thanks to powerful ideation approaches such as design thinking and crowdsourcing, it has become incredibly easy and relatively inexpensive for companies to obtain a vast number of novel concepts, from both insiders and outsiders such as customers, designers, and scientists. Yet many organizations still struggle to identify and capture big opportunities. A division head at a global consumer electronics corporation recently told me, "We have a mass of ideas, but honestly, we don’t know what to do with them. While we’ve tried to explore some unusual avenues, we’ve ended up committing ourselves to ideas that are already familiar." From what I have observed, his company is the rule rather than the exception.

Why is this the case? Clayton Christensen, of disruptive innovation fame, and W. Chan Kim and Renée Mauborgne, the inventors of "blue ocean strategy," have shown that big changes in society and technology fundamentally challenge the conventional understanding of what is valuable. Those changes render obsolete whatever criteria companies are using to identify customer problems they could address. To see which ideas truly have potential, managers need new assessment criteria.

From studying and working with 24 companies that have captured big opportunities, I discerned how to create such criteria and synthesized those companies’ individual approaches into one four-step process, which I now advise organizations to employ. (The steps can be useful individually as well.) My process is a complement to Kim and Mauborgne’s "strategy canvas" for coming up with a blue ocean strategy and Christensen’s "jobs to be done" framework for finding disruptions. About a dozen companies are now adopting it, including two major consumer-packaged-goods firms, a high-end fashion company, and a manufacturer of optical cables.

Unlike design thinking and crowdsourcing, which rely on the art of ideation, my process is rooted in the art of criticism. Instead of soliciting early input from customers and other outsiders, it engages a company’s own employees. It helps them articulate their individual visions and then compare and discuss their contrasting perspectives in order to distill them into a handful of even better proposals. The views of outsiders are sought only at the end.

The Art of Criticism
Whether for products, services, processes, or business models, two levels of innovation are possible: improvements and new directions.

Improvements are novel solutions that better satisfy existing definitions of value. Whether incremental or radical, they address problems that are already widely recognized in the marketplace. Consider residential thermostats. Most companies in this business assume that their main value lies in enabling people to better control the temperature in their homes. Innovation has therefore focused on creating digital thermostats with novel features such as touchscreen displays with multiple menus, day-of-the-week schedules, different room settings, and programmable fans.

In contrast, new directions arise from reinterpreting the problems worth addressing. They redefine what customers value. In November 2011 Nest Labs came up with a brand-new value proposition for thermostats: to help people be comfortable in their homes without having to fuss with the temperature. Its founders understood that the complexity and unpredictability of family life in America had made it nearly impossible to program a thermostat with a regular schedule. In addition, they saw that the technology of sensors and mobile phones had matured to the point where temperatures could be set through simple interactions, which would appeal to people fed up with complicated interfaces.

Nest’s Thermostat

It learns the habits of a home’s inhabitants and automatically sets the temperature. Nest’s founders saw that the unpredictability of family life, exasperation with complicated interfaces, and technological advances had made possible a new value proposition.

Users switch the thermostat on or off with its straightforward rotary interface or a smartphone; the device requires no programming. Equipped with sensors that detect whether people are in the house, it automatically adjusts the temperature to save energy when no one is home. In a few days, the thermostat learns the habits of the household and takes care of the temperature settings itself. The software platform is open, allowing third parties to build complements for the thermostat. Although Nest does not release sales figures, it claims to have sold millions of its thermostats, which retail for about $210 to $250. In 2014 Google bought the company for $3.2 billion.

It is highly unlikely that Nest’s geeky founders, who initially had vague ambitions to create a "smart home," would have pursued their thermostat if they had relied on currently popular methods of innovation. Generating lots of ideas works well for improvements, but it doesn’t help to spot new directions. If companies don’t change the lens through which they assess ideas, they won’t be able to identify the outsiders they should seek, know what questions to ask them, and recognize their most valuable input. As a result, they will tend to pick customers and other outsiders who support their current directions and dismiss ideas that lie off the beaten path. Indeed, most of the ideas incorporated in the Nest thermostat were already known to the industry, but none of the existing players recognized their potential.

In order to find and exploit the opportunities made possible by big changes in technology or society, we need to explicitly question existing assumptions about what is good or valuable and what is notand then, through reflection, come up with a new lens to examine innovation ideas. Such questioning and reflection characterize the art of criticism.

"Criticism" comes from the Greek word krino, which means "able to judge, value, interpret." Criticism need not be negative; in this context it involves surfacing different perspectives, highlighting their contrasts, and synthesizing them into a bold new vision. This is a significant departure from the ideation processes of the past decade, which treat criticism as undesirablesomething that stifles creativity. Whereas ideation suggests deferring judgment, the art of criticism innovates through judgment.

In my four-step process, individuals question their assumptions and come up with new interpretations of customer problems that their company could solve. Then people work together in pairs to refine their visions before moving into a larger group for discussion. Finally, the best ideas are tested by users and by internal and external experts in a wide range of fields. Because none of the original 24 companies behind the method employed all the steps, I will illustrate it with several cases, including Vox, a mid-size furniture manufacturer in Poland; Nest; Microsoft; and Alfa Romeo.

Individual Reflection
Imagine that you’re a manager who perceives major transitions under way and big opportunities emerging. How can you spur innovation so that your company can capture those opportunities? Piotr Voelkel, the founder and chairman of Vox, faced this question. He was concerned by major changes in customer demographics, particularly the aging of the European population. He felt that in order to prosper in the future, Vox needed a novel interpretation of what furniture should be. To come up with it, Voelkel chose 19 people in his organization, including himself, and asked each to reflect on how Vox could create a new offering for an aging population. He was careful to assemble a heterogeneous group: Some held senior positions; others were promising young talent. Some had long experience in the industry; others had come from outside it. They represented a variety of departments, including sales, marketing, product development, manufacturing, design, and branding. Some were more analytical by nature; others were more intuitive. What they had in common was that their roles in the company or their personal interests were likely to have led to insights.

After a briefing, Voelkel asked the members of the group to spend time thinking about one or more proposals for products or services or business models. To ensure that they would focus on new directions rather than mere improvements, he gave them a strict directive: Solutions should be based on brand-new concepts of value. To make the new direction explicit, each proposal should contain an arrow indicating the change from the existing value proposition to the proposed one.

This approach differs from popular innovation methods in several ways. First, Voelkel did not ask his people to start with the insights of customers or other outsiders; he asked them to start with their own. We all sense changes in our environment, and we all have hunches, both conscious and subconscious, about how the world might become better. We often keep these personal hypotheses private. Voelkel understood this, so he asked the members of the group to make their hypotheses explicit. Once made explicit and then challenged, those intuitions would become precious raw material for creating new visions. And the process would combat the natural tendency of individuals to let their subconscious intuitions affect how they perceive the insights of others. Voelkel realized that participating in the exercise himself would enable him to more clearly see and objectively consider visions that would ultimately have been proposed to him.

Second, Voelkel asked everyone to reflect alone rather than as a team. This allowed people to dig deep into their own insights and not dilute or withhold them, as they might in a group brainstorming session. It gave each person freedom to perform the task as he or she saw fitrelying on a particular analytical framework, on data, or simply on intuition. This increased the likelihood that the 19 would propose diverse directions.

Third, he gave people one month for reflection. They were expected to keep performing their regular jobs, but the time was sufficient for each individual to sketch out thoughts, let them percolate for a few days, and then refine them and add new ones. This is especially important for coming up with provocative or outlandish hypothesesthose that are often so blurred in the early stages that they can be quickly dismissed.

One person suggested that Vox think about bedroomsthe focus of only minor innovation in recent decades, but a place where elderly people spend a significant amount of time, especially when sick. He suggested transforming bedrooms fromplaces for rest into places that contribute to health: For example, the beds might contain devices that the elderly could use to do simple exercises. Inspired by projections of decline in the birth rate as well as growth in the elderly population, another participant imagined a day when grandparents would compete for time with their rare grandchildren. She envisioned a change in home furniture from being decorative and functional to being a means of socializing with relativesfor example, tables that could be easily converted into spaces for cooking, painting, or playing. When the month was up, the 19 people had envisioned 90 possible directions (seven of them Voelkel’s).

Sparring Partners
In the second step each person subjects his or her vision to the criticism of a trusted peer. The peer acts like a sparring partner, providing a protected environment in which the person can dare to share a wild or half-baked hypothesis without being dismissed.

A relationship like this was instrumental in the creation of Nest. Tony Fadell and Matt Rogers, the company’s founders, had previously worked together at Apple. In an interview with Derek Andersen, of Startup Grind, a community of entrepreneurs, Rogers described how the two had shared early visions at a lunch meeting. Rogers had begun by saying, "Tony, I want to start a companyand I want to start a company with you."

"What do you want to do?" Fadell replied.

"I want to build a smart-home company."

Fadell was building a new house at the time and was privately contemplating a similar rough idea. But he said, "You’re an idiot. No one wants to buy a smart home. Smart homes are for geeks."
The conversation could have stopped there. But because the two liked, respected, and felt safe with each other, they continued to talk, dug deeper into each other’s ideas, and eventually decided to focus first on the thermostat.

In his book Collaborative Circles: Friendship Dynamics and Creative Work, Michael P. Farrell shows that pairs have been the foundation of many breakthroughs in art and society, especially when the definition of "good art" was challenged. He explains that working in pairs creates an environment of "instrumental intimacy" in which people can sympathetically and constructively criticize each other.
The first daring experiments in impressionism, for example, were conducted in pairsby Claude Monet and Frédéric Bazille and by Pierre-Auguste Renoir and Alfred Sisley, and later by Monet and Renoir. Farrell also mentions the authors J.R.R. Tolkien (The Hobbit, The Lord of the Rings) and C.S. Lewis (The Chronicles of Narnia), who discovered that they shared an interest in what Lewis called "Northern-ness."

Trusted peers provide a protected environment for sharing half-baked ideas.

Recent history is full of pairs who created legendary companies: Steve Jobs and Steve Wozniak, Sergey Brin and Larry Page, Bill Gates and Paul Allen, to name a few. I’ve found that pairs can also play a key role in the innovation process at established organizations. An example is Microsoft’s successful 1999 venture into the game-console market with the Xbox. Previously Microsoft had focused on software, most notably productivity applications. A move into hardware, young consumers, and entertainment was a radical departure; furthermore, it involved creating an operating system that was incompatible with Windowsan act that would once have been considered heresy.
What triggered the Xbox effort was Sony’s announced plan to introduce its PlayStation 2 game console. Bill Gates realized that it posed a serious threat to Microsoft: Households could be enticed to enter the world of computing through consumer-friendly game consoles instead of PCs. He issued a call for fresh ideas about what Microsoft should do.

Microsoft’s Xbox


The system sprang from a vision in which gaming would be regarded as high art, game developers would be the artists, and Microsoft would provide developers with technology to freely express themselves.

There are always people in large established companies who silently develop theories about how unfolding changes in the world might redefine markets. Microsoft is no exception. Four radicals at the company were Jonathan "Seamus" Blackley, a recent hire with significant experience in digital-game technologies; Kevin Bachus, a product marketing manager for DirectX, Microsoft’s software tool for designers who developed games for the PC; Otto Berkes, a DirectX programming whiz; and Ted Hase, a manager in the developers relations group. Although they worked in different parts of the company, they shared a rudimentary vision: a world in which gaming would be regarded as high art, game developers would be the artists, and Microsoft would provide them with the most powerful technologies available so that they could freely express themselves. This would require a platform designed explicitly for game artists.

If someone had suggested such a thing in a workshop where various ideas were discussed, it might well have been dismissed or reframed and diluted to fit the existing way of doing business. But that’s not what happened. The four renegades met for a few weeks. They alternated between working in pairs (Blackley with Bachus and Berkes with Hase) and as a quartet. Blackley and Bachus became so close that others dubbed them "Laurel and Hardy." During their sessions together, Bachus worked to strengthen the business case for Blackley’s proposal.

In Dean Takahashi’s book Opening the Xbox: Inside Microsoft’s Plan to Unleash an Entertainment Revolution, he recalled: "I refocused it. I said, ‘Let’s think about what kind of consumers we’re building this for, and how to get game publishers onboard.’" Through this process, the four transformed their vague notions into a robust vision that eventually withstood the harsh skepticism of others at Microsoft, including some senior executives.

How can you find a sparring partner who shares your general vision? You needn’t have had a previous relationship, as Fadell and Rogers did. Nor must companies rely on serendipity (Blackley had been hired just a few weeks before he started to collaborate with Bachus and the others). The odds can be improved with a sort of speed-dating process whereby people with similar visions can find each other and agree to work together to polish their ideas. After step one, in which individuals reflect independently on possible directions, invite them to a meeting and ask them to briefly illustrate their ideas, which can be posted on a wall. Then have each person choose another’s idea that he or she would like to explore. If more than one person chooses the same direction, ask them to indicate a second and, if necessary, a third choice. Voilà, you have your pairs.

Radical Circles
In step three these promising hypotheses are subjected to deeper criticism through discussion in a group of 10 to 20 people who have envisioned other new directions. I call this group a radical circle. Its purpose is not to decide which hypotheses are right or wrong; it is to judge why and how they are different, what important underlying insights might have been overlooked, and whether a value proposition even more formidable than all the hypotheses might be found.

This exercise, which can be held in an intense two- or three-day workshop or over the course of four weeks, needs to be conducted carefully so that it is constructive, not destructive. Clashes should push people to dig deeper and identify more innovative spaces, and shouldn’t constrain thinking or compromise good ideas.

The circle should include people with a variety of backgrounds, perspectives, and personalities—like those of the 19 people at Vox. At Microsoft, about a half-dozen managers joined Blackley, Bachus, Berkes, and Hase in plotting the company’s gaming path. Blackley and Bachus had the most radical vision: Abandon Windows and don’t make game makers pay royalties. The vice president of Microsoft’s hardware division wanted to create something that was compatible with Windows. In the middle was James "J" Allard, a respected figure within the company who had successfully championed big transitions in the past, including Microsoft’s embrace of the internet in the mid-1990s.

You can keep the process positive and creative by having the radical circle focus initially on where everyone believes the company should not go and who its enemies are. Often members can converge more easily on what they dislike than on what they like, and a common enemy is a powerful incentive to come together and articulate a new direction. Although the members of Microsoft’s radical circle had different visions, they agreed that the enemies were Sony and its new PlayStation 2 console, along with their own company’s strategy of pursuing a generic, PC-based approach to games. (The team named the Xbox endeavor Project Midway, after the sea battle between the U.S. and Japanese navies that was a turning point in World War II.)

Then contrast the visions and try to combine them, two at a time. Are there places where they overlap? Are there strong elements of the individual visions that didn’t occur to others? At Vox, after the 19 had independently developed their hypotheses, they got together for a three-day workshop. The strategy that the company ultimately pursued grew out of a combination of the two unrelated directions mentioned above: an active role for bedrooms, and home furniture that offered possibilities for socialization. It was called the "living bedroom," a central space in a house where the elderly could pleasurably spend time with relatives and friends. One product, launched in 2012, is a bed that incorporates a large bookshelf, space for visitors to put their shoes, and a folding screen for projecting movies. As of this writing, Vox had sold nearly 3,600 of these beds in Poland and neighboring countries, and unit sales were growing at 88% a year.

Alfa Romeo, too, created a vision. The brand has a legendary history: It was the first to win a Formula One race, and it produced such famous models as the Spider Duetto convertible driven by Dustin Hoffman in the movie The Graduate. But for a couple of decades the company struggled to compete in the premium segment, which German manufacturers dominate. To address this challenge, Alfa Romeo launched an innovation project in 2010 that involved a radical circle of about 20 people. One proposal was to move from the prevailing notion that people buy premium cars to display their wealth (cars as luxury goods) to a concept of premium cars as a means for people to express their passion for driving. Another was that a car’s agility and responsiveness to the driver’s commands—rather than a superpowerful engine and a high maximum speed—would be critical elements of the value proposition.

Alfa Romeo’s 4C Sports Car


To compete in the premium segment, the company came up with a new concept: a car that would allow people to express a passion for driving, rather than their wealth, and would be agile and responsive, rather than superfast and superpowerful.

The team combined the two ideas and proposed that the company focus on building responsive cars for skilled, passionate drivers. One member used a helpful metaphor, comparing the premium car industry to the Michelin Red Guide, which recommends luxury restaurants to inexpert tourists. The vision that emerged was likened to the Lonely Planet guide, which passionate expert travelers use to find restaurants off the beaten path.

An instantiation of the resulting strategy is the Alfa Romeo 4C, launched in 2013. Compared with many other sports cars on the market, it is less expensive, has a small engine, and is light—thanks in part to an extensive use of carbon fiber and stripped-down equipment (for example, the car has neither an assisted-steering system nor carpets). But its power-to-weight ratio is comparable to that of much more expensive sports cars, such as Ferraris. The concept was a hit: Within a few weeks of the car’s release to the market, the entire first year of production had been booked by consumers.


A radical circle may converge on one or a few possible directions, which should then be subjected to the criticism of outsiders—step four. Remember that, unlike open innovation approaches, involving outsiders is not intended to generate new ideas. Rather, it is meant to raise good questions—to challenge the innovative direction you propose in order to help you strengthen it. In addition to targeted users, outsiders should include experts from far-flung fields with novel perspectives. I call them interpreters, because of their ability to find meaning in trends that might not occur to the product’s users.

After considering more than a hundred candidates, Alfa Romeo tapped 14 interpreters of the travel experience. Most came from outside the auto industry’s typical networks: Among them were, for example, a maker of leather goods, the CEO of a high-end resort, a manufacturer of fitness equipment, and a theater director who had just written an irreverent piece about how modern wealthy people perceive themselves. The Alfa team briefed them on the hypotheses underlying its novel vision and then met with them to discuss and challenge those assumptions.

Similarly, when Philips Electronics was developing its Ambient Experience for health care, a breakthrough application for reducing the anxiety that patients often experience when they undergo medical scans, it tapped a wide range of interpreters—both the usual suspects (doctors, hospital managers, engineers of medical equipment, marketing experts) and people from unusual domains (architecture, psychology, contemporary interior design, LED technology and video projection, interaction design, interactive hardware and software). A child psychologist refined Philips’s vision by addressing anxiety not only during the exam but also in the waiting room beforehand. And in Vox’s bed project, a spa and aromatherapy specialist advised against designing the bed explicitly for elderly people and suggested making it attractive to all kinds of customers. In addition to expanding sales to other market segments, this idea increased the bed’s appeal for the elderly. In "Designing Breakthrough Products" (HBR, October 2011), I describe how to find good interpreters.

A common enemy is a powerful incentive for people to find a new direction.

Classic strategy-analysis tools, such as Kim and Mauborgne’s strategy canvas and Alexander Osterwalder and Yves Pigneur’s business model canvas, are another means of challenging new directions. So is the large amount of data available from the web—for example, on customer preferences. You might consider assembling two data analytics teams, one to find data that supports the hypotheses of a new direction and the other to find data that undermines them, and then determine which results are more compelling.

When seeking new solutions to existing problems, criticism may hamper the ideation process. But if it’s properly applied in discovering new problems and redefining value, criticism is an engine of innovation. By finding a new direction, a company can make sense of the myriad ideas for offerings and business models and recognize the handful that will really make a difference.

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