Value drives innovation
There is no such thing as useless innovation.
Often we confuse creativity (something new or different) with innovation. But innovation necessarily involves an increase in value. If you are only making something different but not offering a new way to create or capture value, you are not innovating.
We talk about values a lot in the business world, but often as an internal metric. “Our mission — our values”. A tag line or list of buzzwords that employees are expected to live up to.
But what if we look at value as a priority list, a guideline of what we pursue at the expense of other things?
Patagonia is a stellar example of a company that lives its values. They aspire to “build the best product [and] do no unnecessary harm”. That tension guides how they approach decisions. In the article “How Patagonia balances social value and business value”, VP Rich Ridgeway discusses how the company abandoned a technological advancement because it didn’t improve the product from the consumers’ perspective.
I’m a big advocate for customer insights gathering, and understanding a customer’s journey and desired path. What is he trying to achieve? How can his life improve? What is standing in his way?
It’s obvious, isn’t it? If I have a barrier to doing or achieving something important to me, I’ll be open to ways to move forward. I’ll be willing to trade something — which is an exchange of value.
This is a major aspect of Jobs Theory, which is about understanding the progress a customer is trying to make when he “hires” or “fires” a product or service.
This weekend I participated in an extreme running event. Three marathons in three days, around Lake Tahoe. Every evening, I needed to focus on physical recovery. I gladly handed over money for a product with the hope that I’d feel better the following day.
In this case, I traded money. Know what I didn’t do? Get a massage. Because that involved a trade-off of time. Time to find a place in a strange city, time to make the appointment, and time to get the massage itself.
It’s not that I didn’t value recovery, but there was a mismatch of the value I perceived I’d get from a massage as a solution and the time I had to give up for it.
Value is a relative term, calculated as a function of the consumer, the solution and the situation. Which is why pricing is so hard!
Too often we can get caught up in creating new alternatives or replacement products, with little to no discernable difference from what already exists. In this case, we’re simply flooding the market and slicing the pie more thinly rather than increasing the overall market opportunity.
Innovation doesn’t just reallocate resources. It’s useful in shifting markets, opening doors and changing the world. Absent a new value exchange, you simply aren’t innovating.