Sometimes it is ‘obvious’ what our problem is and so the answer is obvious too. This may very well be the case, but just in case it is not or perhaps to uncover a better solution we might need to uncover the real reason for something going wrong.
Problems and issues also tend to be multi layered and we have to scratch below the surface to work out what is really happening. Be careful when using it as continuously asking someone else ‘Why?’ may make them defensive.
Imagine the simple scenario ‘sales are falling’. One possible assumption might be that our sales people are no good at their job so we might replace them or retrain them. First, let us ask ‘Why?’
Q. Why are sales falling?
A. Because customers don’t like our products
Q. Why don’t they like our products?
A. Because they are outdated, not as cool as this year’s model
Q. Why are our products outdated?
A. Because we have not developed any new ones for 5 years
Q. Why have we not done this before?
A. Because the boss has not allowed us
Q. Why has the boss behaved in this way?
A. Because they have no spare time to spend
In this simple example our initial assumption of having a poor sales force is incorrect, the underlying issue is that the boss (possibly you!) has no time either because of high workload or poor time management. We can also see that the issue has multiple layers and unless the issues at lower layers are resolved then our initial problem is unlikely to be properly resolved.
You could thus use this for:
- Identifying the need for a new product or service
- Determining why your competitors are more attractive to customers
- Asking why your costs are higher than they should be
… and many more.
Only we can … I notice that a number of people play this game in their workshops but here is my version. It can be used in a number of different ways and can also be used solo or in groups.
If you are having issues with a current product or service then you might try to produce statements such as:
- Only we can deliver product xx within 24 hours
- Only we can produce xx at a cost of less than £5
- Only we have the technology ….
This should not be too difficult, especially if you are already having some success but if you cannot find statements of the above type that describe why your products and/or services are unique then you are probably flogging a dead horse and should consider cutting your losses.
It is then time to use this technique in a different way. You might have already created some new ideas which are still in your head or are just scribbles on a piece of paper. Try the same exercise but using knowledge of your capabilities and resources create statements of the form ‘Only we could …’. This might require some knowledge of your competitors as well so some digging will be required. Once again, if your product or service ideas fail this simple test then perhaps they are not worth pursuing.
All is not lost though. One final exercise is ‘If only …. then we could …’ so you might generate statements of the form:
- If only we had a new machine we could produce xx at a cost of less than £5
- If only we had a new van then we could deliver within 24 hours
So you can work out your unique advantage assuming that you can meet the conditions of your ‘If only …’ statement. This is a little easier and can usually be carried out with the aid of a calculator. If you are a larger business then you might wish to involve employees from all areas and at all levels in this exercise. Be realistic though, ‘If only we had infinite resources, we could do anything’ is not an option if you are trying to make a decision although it might be good for generating some wacky ideas.
There is no manual that says exactly how to estimate innovation costs but here is a common sense approach that seems to work well. Imagine that you are a company that needs to introduce 5 new products into the market place. First of all you need to spend some time generating ideas. Without knowing your actual method of idea generation and until you have had time to calibrate your own process then this is a bit of ‘wetted finger in the air’ calculation. We know that the ration of truly wacky ideas to those that might be worth looking at is one order of magnitude i.e. 10 to 1. Similarly, the ratio of ‘might be worth looking at’ to ‘definitely worth a look’ is once again an order of magnitude.
So if we want to have just one idea that is worth pursuing then we should expect to generate at least 100 crazy ideas, thus our small company wishing to create 5 new products will need at least 500 crazy ideas. So far so good, but how do we generate the ideas? You could collect them in a suggestion box but the quality would be variable and it may take a while although the cost would be low. An idea generation session with a group of people could generate your ideas in less than a day. This would be more expensive and would only use a ‘snapshot’ of the expertise and knowledge available to you.
By now you should get the idea that we can roughly work out how many ideas are required, and how long this would take and the resources that would be used. Not all ideas make it to products so some extra redundancy needs to be built in, and then there are overheads such as management and the costs of prototyping and manufacture, but these should be aspects with which you are already familiar.
So there you are, a simple way of working out your Innovation costs. But hang on a minute, life is not quite that simple. Below is a list of other things that you might wish to consider:
- HR requirements (culture, motivation, working practices)
- Idea capture systems (how do you record ideas and avoid forgetting them)
- Knowledge transfer (what worked, what did not, avoiding reinventing the wheel)
- Feedback for improving all aspects of your process (including estimating costs!)
This is a simple guide but good enough to allow you to get some sort of handle on the cost of Innovation if you have never done anything quite like this before. Reality is a little more complex – good luck.