Exploring Opportunities (Part 2): Uncovering Signals With Anomaly Driven
We have consulted business design for many corporates and enterprises in Japan by using design thinking to explore business themes identify business opportunities and issues, and validate business ideas for more than a decade. (For more information, click here.)
In this series of articles, in the theme of “opportunity exploration” in business design, we would like introduce about the basic concepts and our practical approach.
In previous article, we share our thought about Approach and Mindset to Capture Signs of Innovation. In this second article, we would like to introduce the methodology and mindset on “Uncovering Signals With Anomaly Driven”.
Either called “Signs” or “Trends”, by the time a trend is established, the business opportunity it presents has already been taken away by competitors. Peter Drucker, whom we mentioned in the first article, also argues that when any trend or sign appears externally, the advantage already is reduced, so it becomes important to capture the signs that appear within a company or industry as it will lead to innovation.
In order to gain an overwhelming competitive advantage, it might be necessary to identify “weak signals that cannot yet be called trends” scattered inside and outside the company before they become apparent, and to develop and adapt the business from that starting point. So, what should we do to find such “weak signals that are not even trends” (= anomalies), and what should we do to capture these signs as business opportunities?
In this article, we will share specific methodologies along with the mindset, discussed in “The Power of Anomaly,” published by the Harvard Business Review.
Anomaly-Driven Mindset
In order to encounter things like “anomalities”, “outliers”, and “the unexpected”, which is the very meaning of the word “anomaly,” it is fundamental to eliminate preconceptions and immerse yourself in the mindset introduced in the first article, especially the following three perspectives.
❶ Observe from an outside perspective
Anomalies basically occur at the boundary between the unknown and the known. Therefore, it is necessary not only to understand the behavior of the average customer, but also to understand the behavior of a wide variety of customers, including atypical customers, disengaged customers, and those who have never been customers.
❷ Doubt assumptions and mental models
While identifying anomalies requires the ability to imagine the potential meaning of high-quality new signals, we humans have built mental models internally to perceive, recognize, and act on various phenomena that occur in the real world. However, that mental model is subjective and is only a mold for understanding the real world. In order to uncover anomalies, we must be flexible and update that model. Simply put, “Is reality really like that?”, being such skeptical is important.
❸ Accept the ambiguity
As mentioned above, anomalies are on “boundaries” that cannot be explained by the current model, and the data supporting the anomaly is not always clear, so they are extremely vague and difficult to accept. However, it is important to accept the ambiguity and askquestion like “Can we draw a compelling story that turns the anomaly into a big opportunity?”
“Anomaly driven” steps
As I have introduced the mindset for finding “weak signals that not yet called trends,” next, I want to introduce the specific methodologies that we can follow.
STEP1: Analyze and visualize the data before processing
Smoothing data removes exceptions, and anomalies do not emerge or become noticeable. It is important to decipher data without relying on statistics, such as by structuring the data. For example, there are countless amounts of data collected at high frequencies, transaction histories of each individual, text data posted on social networking services, etc. If we classify and analyze the meaning of such data (i.e., semantic clustering), we can reveal patterns of sentiment and behavior behind such data.
STEP2: Finding Meaningful Anomalies
There are patterns that were seen in Step 1 but not all of the anomalies that are off from this are meaningful. It is necessary to identify anomalies that are valid as indications about the future. It is important to ask whether the anomaly has momentum (momentum), whether it is based on multiple data (robustness), or whether it is based on a pattern. (Momentum), is the anomaly common to multiple data (Robustness)? (Robustness) Does the anomaly suggest an opportunity for the company? (Impact). We evaluate the potential of anomalies based on these three points. This is what we call “weak signals that cannot be called a trend yet.”
It may also be a good idea to conduct surveys such as depth interviews, fieldwork, and ethnography on the anomalies you identified and analyze their qualitative inputs. There are various methods of analysis, but tool like 5 Model Anlysis, which analyzes the context of others socially, physically, and culturally, is effective in terms of installing others’ mental models in yourself (i.e., questioning your own mental models).
STEP3: Create a story with an anomaly
The futures or possibilities implied in Step 2 is made into a story about how those possibilities will appear in the user’s futures and what kind of value they will have. (= storytelling)
In other words, we create a story that will happen when “weak signals that cannot even be called a trend yet” becomes a trend, and understand its meaning.
When we hear the word “storytelling,” we tend to avoid it because of it is often difficult, but by creating stories, we can create new actions and portray people who are trying to become players in that new world.
STEP4: Verify and give form
Anomaly at this point are only a prelude to new opportunities, and is therefore prone to change with little things. Therefore, a speedy reaction is required. Specifically, by collaborating with customers and partners to validate ideas through a series of small experiments, we can shape ahead of time the new patterns that will form around the anomaly and how the new opportunity will develop.
Finally
One of the greatest advantages of having access to large amounts of data through technological developments is the ability to discoverunknown patterns. Starting from anomalies that occur at the boundaries between the unknown and the known as may lead us to business ideas that we have never been considered considered before.
References:
“The Power of Anomaly,” Harvard Business Review
“The Innovator’s Way: Essential Practices for Successful Innovation,” Peter J. Denning
“Business Ethnography: Qualitative Research for Opportunity Discovery,” Dai Tamura
“Contextual Design: Defining Customer-Centered Systems”, Hugh Bayer
Originally written in Japanese by Keisuke Minowa, Experience Designer at mct, posted at mct’s Blog
