In 2008, Intuit Inc. — maker of QuickBooks and TurboTax — grew revenue to more than $3 billion, creating a market value of $10.2 billion. But Scott Cook, Intuit’s founder and chairman of the executive committee, was worried. Intuit had seemingly reached a performance plateau, and its market value was beginning to fall. Worse, after studying new product launches from the prior decade, Cook discovered fewer than 10 percent were successful from a revenue and profit perspective.
Intuit was experiencing what happens to most successful companies: Over time, the focus on execution crowds out innovation, and the company loses the ability to perform what Peter Drucker called management’s fundamental task: “to create a customer.”
Creating a customer is more complicated than most managers realize — and its complexity will only escalate as new technologies and competitors emerge rapidly.
For our book “The Innovator’s Method,” we conducted research to understand how firms successfully manage the uncertainty of innovation by analyzing three groups: firms that maintained their innovation capabilities from the start, firms that reignited their innovation capabilities after a lag and firms with failed innovation initiatives. We discovered those that boosted their innovation premium used tools similar to those in design thinking, lean startups and agile software development.
We synthesized these perspectives into a single end-to-end process — The Innovator’s Method — four steps to solve high-uncertainty problems and turn insight into a successful innovation.
1. Insight: Savor surprises.Question, observe, network and experiment to search broadly for insights about problems worth solving. In Intuit’s case, Cook encouraged teams to look for surprises about unmet needs. These insights became the foundational “leap-of-faith assumptions” to be tested later.
2. Problem: Discover the job to be done. Rather than starting with solutions, explore customers’ needs or problems — the functional, social and emotional — to be sure there is a problem worth solving. For Intuit, this meant taking a step back from products and trying to first deeply understand customer need, which would give them the leverage to not just satisfy but to delight customers.
3. Solution: Prototype the minimum awesome product. Leverage theoretical and virtual prototypes for multiple solution dimensions. Then iterate each solution to develop a minimum viable prototype and eventually a minimum awesome product. Intuitbegan running “lean start-in” workshops whereemployee teams brought in an idea to meet a big, unmet customer need. In two days, the team went through the entire cycle of identifying a customer pain point, prototyping a solution and testing it with customers. As Intuit adopted these tools, its ability to bring innovations to market began to improve.
4. Business model: Validate the go-to-market strategy. Once you nail the solution, validate the other components of the business model, including pricing, customer acquisition and cost structure strategies. By applying this method and a strong go-to-market strategy, Intuit multiplied revenue from new products ten-fold to more than $100 million, and its innovation premium jumped by a third.
These four steps not only create new innovations, but also solve internal challenges. For example, an Intuit employee surprised by the time it took to answer simple billing questions leveraged the innovator’s method to discover the real problem and prototype solutions over just a few months, reducing response times from 15 to three minutes.
As soon as someone has an idea or a problem characterized by uncertainty, apply the method to solve it more quickly and inexpensively than you might have done using traditional methods. Each step is critical and involves an experimentation loop to test leap-of-faith assumptions in a repeated “hypothesis, test, learn” loop.
While traditional management works well for problems of relative certainty, it works poorly for problems characterized by uncertainty. By using these four steps learning leaders can learn how to creatively turn ideas into reality.