Five Steps to Innovate like Big Tech
How to use customer focus, data and capital to reinvent your business
Executives in 2018 are not grasping the basics of modern innovation.
Having led major innovation programs at Amazon, Target, PayPal, Visa and Rosetta Stone — this summer I was asked to speak at an executive leadership conference, where I was surprised to learn that the majority of participants lacked a basic understanding of mobile, web, digital, machine learning, blockchain and other technologies.
When I pointed out specific examples of how platforms like Alibaba, JD.com and Amazon measure, optimize and automate every aspect of their operations to produce extraordinary results, these decision-makers — the next generation of leadership for America’s biggest companies — were in a state of total disbelief.
Rather than tracking emerging technologies and accumulating customer data, executives are narrowly focused on hitting bonuses, satisfying the Boardroom or appeasing Wall Street. Consequently, too much cash from operations is tracked into bonuses, dividend payouts or buying back shares while too little is spent accumulating data required to drive customer satisfaction and loyalty.
As a result, companies are ceding their future and America’s future. Too little is being invested in the foundations for sustainable innovation and growth, creating a negative impact on business and our country.
For the past two years, I have self-funded a team whose sole purpose is to scrutinize publicly available data across all operations of the best innovators: Amazon, Google, Microsoft, Facebook and Apple. In the course of our work, we identified five fundamentals for 21st century business innovation.
1) Understand Your Customer, Deeply
Jeff Bezos told Amazon shareholders in 2016 that sustaining “obsessive customer focus” was more essential for a company looking to see endless possibilities for growth than competitors, products, technology or business model.
“Good inventors and designers deeply understand their customer,” he wrote. “They spend tremendous energy developing that intuition. They study and understand many anecdotes rather than only the averages you’ll find on surveys. They live with the design.”
In 2018, ubiquitous technology is providing the opportunity for data capture that produces amazing possibilities for customer-focused growth and innovation, strategies and investments. This allows you to work backwards from your customer and build their future for them.
2) Understand Your Customer and Business Through Data
I was at Amazon a decade ago. Even then, every element of each business unit was measured and reviewed every week: customers, employees, inventory, servers, complaints and more. The metrics were incredibly deep, expressed in third decimal points and compiled in a 170+-page briefing deck, with five to ten graphs on each page.
I helped lead fraud prevention teams at Amazon. We evolved our operations continuously based on this data. We all had a strict range of key performance indicators to meet. If our graphs were out of range, we knew we’d soon be out of a job. Thankfully, our team reduced losses from free cash flow by 98% in less than three months.
This voracious examination of data continues to propel Amazon. Efficiency goals are set to cut costs, savings are redeployed back toward the customer, demand rises, more innovation unfolds and the virtuous cycle repeats.
3) Find Others Who Have Solved The Problem Before
In the early stages of any new innovation effort, the only currency the project has is the credibility of the leadership. Therefore, build your currency by hiring stars who have solved your problems before.
Hiring proven talent has made the biggest impact for me in de-risking and accelerating work streams for new product development at PayPal, Amazon, Rosetta Stone, Target and Bigcommerce.
While it’s imperative that everyone on a team proactively stay current in their professional development and (re)training with the abundance of free online resources, all too often I’ve seen companies try to save money with generalist teams that need to build knowledge on the job. 90% of the time, this results in firms getting behind-market and over-budget.
I’m all for the underdog, but given the pace of modern business, atomize the problem you’re trying to solve, and get the best talent available — no matter what.
4) Gauge Funding Needs to Match Available Capital
It is important to be transparent within your enterprise about how capital is allocated. If senior leaders’ mission and rhetoric are not aligned with capital allocation, disarray ensues.
Capital is your primary resource. And your customer is your capital’s primary target. The solutions you create to reduce risks and capture opportunities require funding. There are no shortcuts.
A company’s priorities come to life through capital allocation. If the firm is transparent with capital allocation, teams will be clear about the enterprise’s priorities.
5) Benchmark Against How Competitors Are Serving Your Customer, Then Reassess
Well-managed companies are often blind to competitors’ strategies, tactics and operations. For example, most industries did not perceive Amazon to be a threat; now they all consider Amazon a prime competitor.
If you knew the answer to this question you would take a different view of how to define your current competitors: What business models are most aggressively funded by big-tech and venture capitalists today?
I urge you to answer that question, quickly. If your company is not making long-term investments in your customer nor committed to customer-focused innovation, competitors are forming daily with better strategies.
West Stringfellow, Founder and CEO of HowDo has documented everything you need to know about company-wide innovation and emerging technology on his blog: we.st. He was Target’s first EIR, has led innovation at Target, Visa, and PayPal, was chief product officer at Rosetta Stone and Bigcommerce, and served three years as senior product manager at Amazon.