Part 3- In Search of Innovative Problems

Part 3 of In Search of Innovative Problems. Simultaneously published in five parts here, on my LinkedIn page and on the LinkedIn page of my co-author, Bradley Strock. We want to conduct an ongoing dialog on finding problems and innovation. We invite your comments here (leave a Note on our Medium page by clicking on the ‘+’ that appears when you hover on the right side of the first line of any paragraph on the post on which you wish to comment).

Type II problems involve known problems and unknown solutions. At any point in time, a huge number of known problems exist, and the main focus of classic corporate R&D and current market research tools is concentrated on finding solutions to these known problems. Take a snapshot of announced R&D projects in the pharmaceutical and medical device markets at any point in time and you will see a portfolio of Type II problems – finding safer and more effective anti-obesity/weight control drugs; better cholesterol and diabetes control drugs; effective non-invasive blood pressure measurement devices and non-stick glucose measurement tools. Typically, these problems are known to many competitors at once.

Significant spending throughout an industry is directed at the problem and the result is often a solution that provides a short-lived competitive advantage for one competitor or multiple, nearly simultaneous solutions from two or more competitors. The length of the head start can depend on the ability of the market leaders to respond. In The Innovator’s Dilemma, Professor Clayton Christensen dissects the innovation process and its impact on market leadership. He looks at and distinguishes between sustaining innovations (innovations that improve the performance of established products and services along the dimensions of performance that mainstream customers in major markets have historically valued) and disruptive innovations (innovations that change the value proposition in a market, typically underperforming established products in mainstream markets, creating new market opportunities for which mainstream customers see no current need or value but which eventually move up to capture existing and larger markets when those needs shift). His research shows why it is quite difficult for market leaders to successfully maintain their leadership position when disruptive technologies enter the market.

While the appearance of disruptive innovations or technologies results in similar levels of market tumult that occur when Type IV problems are discovered and exploited, many of the examples used by Professor Christensen are really Type II problems that were known across the industry yet not aggressively pursued by the market leaders for the myriad reasons detailed in the book. If those in leadership positions follow the approaches laid out by Christensen, they can position themselves for fairly prompt responses to new market entrants.

The advantages resulting from solving Type II problems can be extended by leveraging intellectual property or making significant capital investments. In response, competitors (with substantial investment of their own directed to solving the problem and with in-house expertise already developed through their own efforts) can usually find non-infringing alternatives to the first solution in relatively short time periods.

Type III problems involve known solutions and unknown problems. This is the classic “technology in search of a market” or lab error that leads to a big idea. Famous examples include 3M Post-It” notes, Teflon® non-stick surfaces, and Gore-Tex® breathable materials. Gordon Gould invented the LASER and then waited for the technology to solve a myriad of problems across many industries for many years. Type III problems are simply too serendipitous to merit significant time and effort. When a solution can be fit to a problem, then is the time to make a significant investment in Type III problems.

The Fertile Field — The Innovative Type IV Problems

We turn now the fourth quadrant of the Problem-Solution Matrix, to the unmined territory, the potentially fertile ground where the innovative Type IV problems reside. Here, both the problem and the solution are unknown.

This area has never been the serious focus of the corporate world, for a number of very practical reasons. First, no good tools existed in the past to explore this area with any rigor. Second, there was a presumption that finding solutions where the problems were unknown was extremely difficult, requiring large sums of money and persistence. This presumption was correct so long as the focus was on finding the solutions, not the problems. And finally, there were always so many known problems already available to try and solve.

The advent of the Internet and the massive proliferation of Silicon Valley and similar startup communities and companies (these startups are typically led by a single entrepreneur or a small group of creative thinkers, usually with innate coding skills) have dramatically expanded the pool of Type IV problem identifiers. Most often, they have followed a gut idea or a subject matter passion and have not followed any repeatable methodology to identify a Type IV problem. These startups have usually zeroed in on one problem in this quadrant of the matrix and bootstrapped minimal resources until they have a working solution and an initial following of adopters. They then seek out seed and later stage funding to rapidly develop, refine and expand their Type IV solution. The phrase “There’s an app for that” often refers to a solution that has been developed as a result of identifying a hard-to-identify problem.

Occasionally, they are able to repeat the process more than once. Evan Williams, co-founder of Blogger and Twitter, describes the driving force for his current attempt at a third successful product, “I kept being obsessed with this problem area, … I kept coming back to this area because I wanted write more, I wanted to get back to blogging and I went back to the tools that I used and it didn’t feel like they had evolved much over the last decade.” Last.fm founders Martin Stiksel and Felix Miller describe a similar experience attempting to launch their second attempt at success. “This idea kept on nagging us, so two years ago we formed a new team and started working on Lumi. It dawned on us that browsing history contains a lot of information about what you are interested in and could be a really good basis to do recommendations on.”

We have developed a reusable, repeatable methodology and a set of practical tools to seek out and identify Type IV innovative problems and transform them to Type II known problems. The beauty of this transformation is that the identification of the problem converts it to the type of problem the corporate world is experienced in solving, with a significant added advantage — if a business chooses to use this methodology and focus its energies on problem seeking efforts in the fertile Type IV field, it can create longer-lasting competitive advantage as the only competitor working to develop solutions for a now Type II problem. By innovating in areas where competitors are not concurrently investing in similar problem-seeking processes, a differentiated product or service can be built, extending the often too brief and constantly shrinking time lag before competitors and competitive products enter the market and erode the first-movers’ advantage.

© Copyright 2014 Brian J. Leitten & Bradley R. Strock

Part 4/5 will reveal a framework for mining the fertile field and recognizing the signposts of innovation.