Why Didn’t I Think Of That? Seven Symptoms of Incremental Thinking and How to Treat Them

Andrew Razeghi

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Organizations think.  They think about earnings.  They think about market share.  They think about growth.  Why then, if organizations have the capacity to think, do so many of them not think of “that”? That is the next big idea.  That is the headline that grabs analysts’ attention.  That is the $500 million growth opportunity. That is the future.  That is the object of the statement, “Why didn’t I think of that?”  Unfortunately, these words are painstakingly more common than “I thought of that!”   Why?  And how can organizations think of that more often?  

In order to promote innovation as an organization capability, organizations must first understand why they lack the capacity to think of that.  The reason is profoundly simple.  Most organizations are thinking of this.  This is the cash cow.  This is today’s product.  This is the organization’s existing market share.  This is often the reason why organizations do not think of that.  Unfortunately, the religious practice of worshipping at the altar of the cash cow is oftentimes the greatest obstacle to innovation.  The inability to understand what the organization does well versus what it sells is a stumbling block to growth.

That is the result of innovative thinking.  This is the result of incremental thinking.  Both methods of thinking contribute to the successful maintenance of the current business and growth of the enterprise; however, it is common for incrementalism to blind the organization to new methods, new products, and new markets. 

Businesses think when they analyze challenges, opportunities, markets, products, and competitive threats.  While incremental thinking may help at managing earnings in the near term; innovative thinking is required to identify non-linear routes to growth. 

Innovative thinking is defined by a unique set of characteristics required when analyzing the business landscape and its subsequent opportunities and challenges.  These include: identifying and defining core skills, creating disruptive change, challenging convention, and identifying unarticulated customer needs.  Conversely, incremental thinking typically involves a much more myopic analysis of the landscape and the organization’s role in it. 

The good news is organizations have the option to think of this and that simultaneously.  The challenge is to identify and successfully treat the symptoms of incremental thinking and to create a process whereby the organization can successfully pay homage to the existing business while seeking new routes to growth.  Metaphorically speaking, the greatest challenge an organization has is to learn how to build and manage a birthing ward in a nursing home.  How can organizations give birth to new ideas while milking the cash cow?        

Organizations that think incrementally typically suffer from early warning signs – precursors to market irrelevance.  These symptoms, seven in all, are observational themes discovered from consulting to large and small companies, innovators and laggards, and privately-held and publicly-traded firms on issues of growth, strategy, and innovation. Incremental thinking exhibits specific symptoms. Treating these symptoms, if done effectively, will assist the organization in its search for new wealth.  Here's how.

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SEVEN METHODS TO TREAT INCREMENTAL THINKING  

1.  OBSERVE WHAT CUSTOMERS CAN’T DO TODAY VERSUS WHAT THEY CAN

The first symptom of incremental thinking is the inability to attract and retain customers.  High customer turnover is often symptomatic of the inability to identify, define, and meet unarticulated customer needs.  Differentiating between an articulated need and an unarticulated need can have a profound impact on the organization’s sales performance. Articulated customer needs are explicitly stated. They often take on the form of “I want it cheaper, faster, better.”  Articulated customer needs are often the result of surveys, focus groups, and conjoint studies. For example, if asked how a fast food retailer may increase visits among its core customers, it may receive responses as elusive as “more food, lower price”, “cleaner bathrooms”, or “bigger burgers.”  The challenge with delivering on articulated customer needs is that customers are typically unable to understand what is possible.  Customers are not good innovators.  Think of your customers.  Do they truly know what is possible?  Consider a pharmaceutical manufacturer who employees hundreds of scientists, experts, and physicians in the process of drug discovery.  Think of the discrepancy in knowledge between this group and a patient suffering from heart disease.  While the patient may “feel the pain” associated with the disease, she may not necessarily know what is possible in order to treat it.  Pick your innovation: the Sony Walkman, sugar substitutes, compact discs, power-by-the-hour aircraft maintenance contracts, and the clockwork spring radio were never articulated by customers.  They were created.  They were responses to unarticulated needs. 

Unarticulated needs are often observed, experienced, or discovered.  For example, the same fast food retailer may discover a relationship between its stores and its customers that is profoundly more valuable than the relationship its customers have with its products.   For example, in Japan it is common for young people to visit McDonald’s in order to learn English.  Why?  Because most employees of the restaurant speak English as a second language.  The store attracts English-speaking foreign visitors, and for the cost of a burger, fries, and a Coke, the visit is substantially more cost-effective than enrolling in a Berlitz English Course at a local college.  This is an unarticulated experience that customers have with the retailer.  It would not typically be made evident on a survey, rather it must be observed, experienced, and discovered

There are many ways to attract new customers and treat high customer turnover.  Whether you implement customer loyalty programs, drop prices, increase promotional efforts, or improve product features, all of these tactics are just that – tactics.  In order to treat turnover effectively, the organization must identify those unarticulated (i.e. unspoken) needs of its customers.  This requires strategy.  This requires unconventional thinking.  This involves creativity.  For example, in its efforts to identify ways to attract Generation Y to buy appliances, Whirlpool did not ask people what price they would pay for a refrigerator, nor did they offer buy-one-get-on-free promotions.  Rather, they gave disposable cameras to people in this segment and asked them to take photos of moments in a given day when they have a problem.  The results provide insights much more powerful than surveying.  For example, photos were returned questioning what to do with a half-eaten pizza that won’t fit in a dorm room refrigerator.  Other photos gave insights into the “troubadour” culture of Generation Y.  They move around – a lot.  How can an appliance manufacturer attract this segment with big white boxes?  They can’t.  At least not with their current strategies, products, and marketing efforts.  Rather, they must create new products (or perhaps services) for this segment that deliver on such unarticulated needs.  Perhaps a surrogate “maid” might be a more appropriate solution for Generation Y versus a fancy new appliance?  After all, many of them never had the responsibility of doing their laundry or cooking their own meals at home anyway.  Or if one were to follow their existing behavior, versus creating a new behavior, a laundry delivery service may be more relevant than a dorm room dryer.       

In order to begin to develop methods for identifying and defining unarticulated customer needs, organizations need to adopt new behaviors including:

• Spend a day in the life of customers and non-customers
• Have customers keep journals on why they buy, when they buy, and what they buy
• Give customers and non-customers disposable cameras and ask them to chronicle obstacles in their relationship with everyday activities (e.g. if you’re in the transportation business, have them document issues with cabs, buses, trains, cars, airplanes, etc.  For example, why are airplane overhead bins - overhead?  Wouldn’t they be much more accessible as “under seat bins”?)
• Ask customers to shop your competitors and compare the experience.
• Ask your customers what they would do if your organization didn’t exist (i.e. how would customers needs be met?  Force customers to innovate.)

2.   DEFINE THE ADDRESSABLE MARKET BY CUSTOMER BEHAVIOR VS. NUMBER OF CUSTOMERS

The second symptom of incremental thinking is evident in how the organization defines the addressable market for its products.  This symptom has its foundation in the way organizations measure performance and growth.  For example, many retailers suffer from focusing too stringently on Same Store Sales rather than on the behavior of their customers.  Although Same Store Sales is a good indicator of year-to-year store performance and an easy mechanism for communicating operating results to regional store managers and Wall Street, it is a weak indicator of relevance.   

As a measure of performance, Same Store Sales doesn’t reveal lost sales due to new entrants, substitute products, or alternatives.  It doesn’t give any indication of opportunity cost.  Where did customers go?  Why did they leave?  Who is fulfilling their needs today?  Same Store Sales is merely directional – sales were up or sales were down.  The larger questions that retailers may wish to focus on would include share of disposable income, product-experience behavior, and willingness to buy in the presence of substitutes.  In other words, why and when are they really choosing the store as their provider of choice?  In order to promote creativity and innovative thinking among its employees, organizations may wish to look to new metrics.  For example, it may behoove Home Depot, in its fight with Lowe’s, to re-define its competitive set by including new targets beyond the Do-It-Yourself (DIY) contingent.  Emerging trends would suggest there is a significant opportunity for a Do-It-For-Me (DIFM) offering (e.g. aging baby boomers, Generation Y, busy executives) as well as a Do-Nothing (DN) offering as witnessed by emerging trends in modular design and construction. 

In order to begin to understand the opportunity costs associated with narrowly defined competencies, organizations must begin to ask themselves new questions including:

• When do customers and non-customers not shop us?   
• Why do customers and non-customers shop our competitors?
• What products and services offer the same benefits?  How are they delivered? 
• What do our customers do “in between” transactions?
• How can we participate in the moments between transactions?