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Nespresso only took off when it stopped targeting offices and started marketing to households, a strategy the data did not support. (DENIS BALIBOUSE/REUTERS)
Nespresso only took off when it stopped targeting offices and started marketing to households, a strategy the data did not support. (DENIS BALIBOUSE/REUTERS)

MONDAY MORNING MANAGER

Six ways to bring insight to innovation Add to ...

We live in an era of big data and big analysis. The direction of our organizations is supposed to be driven by the numbers. But Alessandro Di Fiore, a Rome-based strategy and innovation consultant who works with European multinationals, worries that this thirst for numbers is dampening innovation.

“I work with organizations where I see ideas killed by their data-driven processes. They are missing qualitative ideas and judgment,” he said in an interview.

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Most companies put innovation through stage-gate processes, in which the idea must pass through various gates, gaining approval at each stage by justifying the effort economically. It’s a logical and safe approach. But it can be disastrously wrong.

He points to Nespresso, the coffee brewing system, which initially floundered and only took off when it stopped targeting offices and started marketing to households. But, by the numbers, it shouldn’t have been allowed to proceed in that effort.

“Behavioural evidence on how households would respond to the new concept was poor and suggested that consumers’ intentions to purchase did not meet quantitative threshold requirements set by market research protocol at Nestlé,” Mr. Di Fiore notes in the London Business School’s Business Strategy Review.

“Jean-Paul Gaillard, a young marketing head of Nespresso at the time, believed strongly in this idea and thanks to his interpretation of the data, convinced the company to take the risk. If he had only listened to quantitative research, the concept would have never got off the ground,” he writes.

It’s not that stage gates are a dumb idea. Mr. Di Fiore buys into the concept, but says we have “overengineered” the process, with too many gates and templates to be filled out. “We must use more qualitative judgment at key points,” he said in the interview.

He promotes six rules to help gain a better balance by restoring qualitative judgment in a world of numbers:

1. Encourage insights from all areas

The widely heralded Toyota Production System, or lean production in manufacturing, is based on pushing down to the lowest levels of the organization the responsibility for identifying and solving issues. We need the same principle for the generation of insights, getting everyone involved, rather than leaving it to a small number of folks in market research or business development. “They are the elected ones for innovation. But the opposite approach is needed, to get … a large number of people involved in creating innovative ideas,” he said.

2. Train the masses

The various quality initiatives don’t simply ask employees to make improvements; the companies train them in how to do so. It’s the same with innovation. Employees throughout the organization need to be trained and given tools to help them develop creative ideas. He points to Procter & Gamble, which in the early 2000s developed the notion that its staff was a “community of explorers.” The company created an innovation college with a dozen courses. As the masses were trained, the company’s innovation capacity grew.

3. Seek knowledge from within

Innovation stems from knowledge. And the people with the knowledge are your own employees, particularly those dealing with customers, so don’t look to external consultants or internal experts who spend their lives in the solitude of their office. The deep knowledge you seek will be found by meeting with customers and watching them in the environment where your product or service might be used.

4. Standardize practices

At the same time, it’s a mistake to leave innovation totally to individuals. They need to be operating with standard techniques and practices that can help them to be effective. He points to the restaurant D’O in Milan, where there are no professional waiters – instead the cooks take turns waiting on tables (and learning from customers). You might ask managers to spend a day once a month with customers, including that task in their job description and performance review.

5. Use qualitative judgments

Within those processes must be methods to keep innovations alive until the concept can be properly assessed. “Instead of requiring a business case and numbers early, you need good questions to test the insight,” he explains. For example, Corning asks eight qualitative questions to assess whether a project will move from the idea to experimentation state, including: Is the opportunity potentially large? Is the problem significant – requiring a step change in cost or capability? What is the hypothetical value proposition? Is Corning’s approach unique?

6. Support the innovators

When a person has a good idea, he or she should receive support from a corporate innovation unit with experience in new ventures. Samsung Electronics has a value innovation program centre that accepts about 90 projects annually. The centre provides a home for ideas and their creators, offering 20 project rooms, 38 bedrooms, a gym and table tennis.

Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column Balance. E-mail Harvey Schachter

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