Innovation of Business

and the
Business of Innovation™
 
Value from the Fuzzy Front End

Getting Innovation Right, from the Very Beginning

What is the single most important concept in business? The most relevant and inspiring idea? The one that both sellers and buyers agree on? The one key notion that can drive innovation from start to finish?

Consider value. Value to customers is the sum of benefits that result when an innovation is used to meet needs. Value to businesses is the sum of benefits that result when customers and other stakeholders invest. Value is a system – product for purchase, investment for return on investment, value for value, win for win. So long as the system operates, customers receive value greater than their purchase price, and companies receive value greater than their costs.

If value is that fundamental, then it makes sense to focus on value from the very beginning, during ideation at the fuzzy front end of innovation. Yet such ideas are not products or businesses. How can we define value that early? And how will that help ensure complete project scope, minimal rework, optimal time to launch, rapid market penetration, and high customer satisfaction?

It is this simple. We can analyze our fuzzy, embryonic idea to define a value promise to customers. In the process, we will have developed requirements for our innovation that will honor that promise. Further, we will have justified investment in both development and ultimate purchase.

If our analysis can’t find a powerful value promise, the idea should be scrapped. At ideation stage, ”no-go” answers are as important as “go” answers.

 

Value promises jumpstart innovation.

Marketing-Based Innovation Visioning


Imagine for a moment. You’ve been contracted to build a bridge. What is your first step? Start buying steel and rivets? No, you’d do homework first. You’d develop a rich, detailed vision of the finished span, then plan how to turn vision into reality.

Well designed visioning is both strategic and value driven. It asks and answers questions core to business success. It discovers and tests assumptions, enabling conscious decisions. Visioning finds both strengths and weaknesses, delivering leverage. It makes critical decisions, putting us in control. Visioning looks at core questions from both customer and company perspectives, then synthesizes results.

Let’s call this process “Strategic Pre-Planning™”, logical homework to do before planning or acting.

Pre-Planning accelerates planning accelerates performance.


As a natural result of answering the right questions, strategic Pre-Planning delivers powerful, multi-faceted, fully formed value promises. Those value promises and other results of analysis, in turn, can be used to drive innovation strategy and tactics, from ideation through launch to ultimate product retirement.

Example from Texaco



To get a feel for Pre-Planning, let's work an example from a powerful source of innovation... Texaco's Bellaire Research Lab in Houston.

When oil companies produce oil from wells, water also comes up. The % water in an oil production stream, or "watercut," is diagnostic of the health of an oil well. In the late 1980’s, Texaco researchers had an idea – use gigahertz-frequency microwaves to measure water cut. Measurement would be continuous and highly accurate, solving two major problems of then current systems.

By 1991, they had a prototype for license. I helped them develop a strong vision, and in so doing, helped them see the true value of their invention.

Short Keys: Three short keys – name, class, and slogan – open minds to other information about an innovation. Texaco named its system TMWM (for Texaco Microwave Watercut Monitor). Try saying either out loud. Not easy! Acronyms are the least successful naming convention. Late in the analysis, the team chose: StarCut™. The new name caught on in the industry within months of first public use.

The “functional class” is the market arena in which a product competes. StarCut’s class was obvious – Water Cut Monitor. Knowing the class identifies competitors, even for a fuzzy idea. If the class has no competitors, the idea already has market leadership.

Short Description: Stating functionality in a few words often delivers an “aha!” response of delight from technical teams. This team chose:

StarCut transmits
10 gigahertz microwave energy
through an oil production stream
to continually measure, analyze, and report on
fluid composition.


The team clarified its view of the potential product in use by customers.

Customers: The market for StarCut was:

Oilfield operators worldwide
who need accurate measurement
of water cut in production streams
at remote or unattended sites.

Innovation Pre-Planning™


StarCut’s primary market became ocean-bottom production facility where a large number of wells blend produce fluids into one pipeline to a surface production platform. For such facilities, higher costs were more than justified.

Purchase decisions would be made by production managers influenced by four distinct professionals: Facilities engineers: Design both monitor and data flow into facility systems.
Production engineers: Operate and manage the monitor.
Reservoir engineers: Use the data to make production decisions.
R&D staff: Evaluate new technology.
This mix immediately implies high complexity of requirements. Technical performance is just one. For subsea applications below a couple hundred feet, for instance, maintenance would be done by remote operated vehicles. The team had done nothing at all to engineer for ROV access.

Needs and Benefits: Value is the sum of benefits, and benefits are results of meeting needs. Analysis derives benefits by considering the negative consequences of not meeting the needs. The team prioritized needs as follows.

Diagnostics at each well
Diagnostics for the oil field as a system
Confidence – accuracy, no false alarms
Continuous data – reliability
Automation – minimize
manpower requirements

Requirements for diagnostics implied predictive capabilities, so time-to-delivery of watercut data became a core requirement.

Each customer type saw value (sum of benefits) differently.

Better decisions – Production engineers, management
Faster response time – Production engineers
Lower risk – Production engineers, management
Confidence in data quality – Reservoir engineers, R&D, management
Effectiveness in remote environments – All
Lower total cost – Facilities/production engineers


Note that the benefits list didn’t mention the innovation itself. Benefits are always about the customers, never about the product. Value accumulates as the innovation is used to meet needs.

The value of StarCut thus included confidence in business decisions. Every feature and function was fine tuned for absolutely reliable performance, because decisions based on StarCut data could impact billions of dollars in revenues.

Uniqueness: StarCut faced competitive systems. To compete, we identified competitive factors and rated each competitor on each factor. The team had stressed the importance of measuring 0-100% water cut, yet Texaco did not have distinct advantage in that factor. Texaco excelled in ability to work in a range of salinity and in variable salinity, yet customers didn’t rank those as critical.

However, every class of customer put operational effectiveness high on their lists. Facilities engineers want simplicity; production engineers want quick, easy answers; and reservoir engineers want answers that make physical sense over a broad range of reservoir behavior. Even better, Texaco rated very well against competitors in that grouped category.

StarCut also had clear advantage in simplicity of operation. Auto-calibration, remote operation ability, and ease of testing further improved Texaco’s position.

That is, the early focus on 0-100% water cut was important, yet far from the only operational requirement. Investigating the competitive situation informed the team of requirements not previously considered.

Desired Perceptions: To manage perceptions, begin with what the market believes now, then ask how we want our innovation to be perceived. Boil that second list down to a “position statement” that can become a lens to focus everything said and done about the product. StarCut’s statement was:

StarCut is the world's only field-proven microwave watercut monitor that provides reliably accurate measurements of 0-100% water cut in the presence of gas, salinity, crude type, fluid temperature, and flow rate, even in subsea and other hostile environments.


The concept of field-proven was new with this perspective. Quality in the lab would not be good enough. Facilities engineers, in particular, would not justify StarCut until they could see operations reports of robust effectiveness in real world conditions.

Mission: With a strong feel for the larger justification for StarCut, the team developed a mission statement for the innovation itself.

The mission of StarCut is to
enable proactive-oil production decisions
through operationally effective measurements
of water cut and other fluid properties
of oil production streams.


This mission is both value driven and quality driven. Value is correct decisions, made in the right time frame. Quality is operational effectiveness that delivers data that enables decisions. The mission is a commitment by the team to deliver specific value and quality to specific customers.

Brand: A brand is a value promise, accepted by customers, and attached to a name, logo, slogan and functional class (collectively called the “brand concept”). Complete innovation visions help make value promises apparent. StarCut’s was:

StarCut™

Water Cut Monitor
Field-proven, operationally efficient
microwave water cut
for timely, confident production decisions,
even from remote fields in hostile environments
The Microwave Measurement

Take a moment to capture the breadth of the value promise. Consider the technical and operational requirements implied. Then consider the implied quality specs to deliver on those requirements.

Getting Innovation Right From the Very Beginning


We’ve applied Innovation Pre-Planning™ to develop full-scope requirements integrated into a coherent vision. This is logical homework to do before planning or implementing innovation projects.

The innovation brand concept summarizes the vision, thus becoming a powerful tool for driving development of value for customers. Innovation visions also establish content of marketing messages useful for gate reviews, champion development, market launch, and sales.

With full scope defined early, costs and time to completion can be estimated more accurately. Integrating expected costs with the market business case yields more accurate estimates of profits.

Value-driven Pre-Planning, enables all of this… up front, in the ideation phase of innovation. Indeed, Pre-Planning takes much of the fuzziness out of early stage concepts and directs attention to a sufficient range of requirements that development gets the innovation right, from the very beginning.
 


 

4. My experience has been that creating a compelling new technology is so much harder than you think it will be that you're almost dead when you get to the other shore. (Steve Jobs)

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