Innovation teams can accelerate growth, allowing traditional product teams to focus on operations
We will provide relevant examples of categories that have been reinvented, organizational models that work, and how external partnerships can accelerate speed to market.
The fox knows many things. The fox is a very cunning creature, able to devise a myriad of complex strategies to sneak attack upon hedgehog. The hedgehog knows one big thing, rolling up into a perfect little ball thus becoming a sphere of sharp spikes, pointing outward in all directions. You can almost imagine the hedgehog rolling his eyes each time saying, “Here we go again. When will he ever learn?” The hedgehog always wins despite the different tactics the fox uses.
“The fox knows many things, but the hedgehog knows one big thing.” — the Greek Poet Archilochus
The key to being a hedgehog is to figure out a singular concept or big idea that is effective despite competitor's tactics. Innovation teams are especially good at being foxes, but are challenged to narrow their focus down to that of a hedgehog. Innovation teams either flounder about as clever foxes, or, gain momentum and traction through the focused discipline of a hedgehog.
I sat down with Pat Boehnen to understand his leadership approach to running the New Category Development team at Liberty Hardware. Pat is currently the VP of Marketing at Predicta, but recently served as the Senior Director of Marketing while at Liberty. Pat is a dynamic leader who inspires motivation and loyalty from his team and consistently drove growth through launching meaningful new programs. In many ways, our conversations felt like I was a biographer interviewing great Shapers like Ray Dalio or Steve Jobs. Over the course of working together to develop the Closets by Liberty program, I developed a deep appreciation for his perspective, which we eventually named Hedgehog Innovation.
Disrupting Shower Doors
Pat’s first major win at proving out innovation efforts at Liberty came as a request from a major home center to review the shower door category. The incumbent supplier had grown complacent with an 85% market share across all home centers, showing little initiative beyond maintaining what share they owned. In accepting this challenge, Pat realized that a “me-too” product would not be scalable or sustainable. In order to compete and win, they would have to reinvent the shower door category.
Up until this point, Liberty had topped out its own market share with an operations-driven approach to incrementalism. When Pat began the shower door program, the near adjacencies within decorative hardware had become limited, requiring the company to look outside the core business categories for meaningful growth. At a functional level, this meant changing up the innovation team dynamic.
A Recipe for Incrementalism
Pat observed the status quo in his organization that is common across most corporate product management teams. Stemming from 3M’s famous 15% Rule, which allows employees to spend 15% of their time experimenting or doodling on ideas that could lead to new products, this has been misapplied to product managers. Product Managers are given 20% of their time to develop new products while spending the remaining 80% of their time to manage the core business product line. By definition, spending 20% of your time on a task requires the scope to be narrowed to small, incremental product line extensions. When compared to a 2-year program where the same individual gives 100% of their focus, the 20% allocation would take 10 years to produce the same result. These clever foxes are doing the best they can, but are structurally not allowed proper focus. As Pat says, this leads to “Slightly bigger, better, cheaper… yawns.”
Blue Sky Innovation Teams
At some point, the CEO gets frustrated with the incremental progress on market share, bangs her first on the table and declares, “IT’S TIME TO GET INNOVATIVE!!” Funds are released to form teams, but execution comes up short. These Blue Sky Innovation teams might spend lots of time scanning the market looking for the next big thing. It might seem obvious, but those who stay at the Fuzzy Front End of innovation never get anywhere.
Oftentimes, the group can get enamored with technology solutions which they then try to fit to a customer problem. Sometimes this manifests as attempting to apply the core business technology to new markets, which has merit. For Blue Sky Innovation Teams, however, it will more likely mean starting with a new technology that is a pet project (drones, AI, etc.) outside of the core business capabilities, then trying to find a new market in which the company might enter. The team might also hire expensive consultants to help them look innovative. Big exciting expensive projects get approved, yet these clever foxes are easily distracted by the next pet project, squirrel, or shiny object.
Hedgehog Innovation Teams: Focused, Nimble, Dangerous
Pat’s initial team included a marketing manager, project manager, and engineer. He was able to remove his team members from responsibilities to the core business and allow them to focus on the objective. His team was directed to focus on developing new categories, not just one-off “things” that would be hard to sustain if successful. As a result, they developed a portfolio approach to the projects they worked on. Some ideas were labeled Speedboats, which had to solve a specific consumer pain, be quick to make, launch, test, kill, and iterate. Speedboats could be a mechanism for building incremental sales outside the core. Other ideas were labeled Oceanliners, which involve entering new categories with significant potential and would come to form the primary focus of the team.
Clarity via a Project Charter
Similar to a creative brief, Pat established clear criteria for launching new category projects:
- Vision for change. The team had to have a clear idea for creating a new meaningful consumer value proposition
- Only projects outside the core business - no line extensions
- The incumbents in the target category are complacent
- Stagnant or commoditized categories of sufficient scale ($200M+) might have opportunity
Build Internal Momentum
With a small yet focused Hedgehog Team in place, Pat built support within the core business by recruiting cross-functional team members from across the organization. Once the concept for the shower door program was established, Pat began to articulate the vision for change so that others would want to be part of it. As new cross-functional team members got excited, it also created a sense of momentum and buzz within the organization that attracted new team members from more humdrum roles. By involving members of the core business early on, Pat established a strong path to hand-off as the program matured into the core operations of the business. Of course, the increased visibility also created challenges as the rest of the business sought to influence the Hedgehog Team’s direction. Operations and innovation teams, by definition, have organizational conflict. The Hedgehog team often had to curl up into a spiky ball to maintain its focus in the face of unhelpful organizational pressures.
Pat also realized that he needed to bring in external partners early. Enter Trig. After having worked with a few expensive innovation groups that didn’t prove to be effective, Pat’s team opened up an RFQ process to find outside industrial design support for a speedboat project. At the time, Trig was a scrappy small team compared to an established top Tier1 industrial design firm who had also become a finalist for the RFQ process. The internal team decided to split the project in half and run both Trig and the Tier1 firm in a head-to-head process. By the end of that project, Trig had generated better customer insights, prototyped its first virtual ideation session, and had created objectively better new product concepts as demonstrated through concept validation research. That initial success led to more successes. Eventually, the stop-start mechanism of generating purchase orders for each project led to the formulation of a managed services model between Trig and Liberty, providing Pat’s team with flexible, on-demand access to skill sets outside of his organization.
With a well-defined project charter in place, the team could focus on learning as much as possible about the new category by going deep and wide. This means pulling in external partners to help with the exploration.
- Customer dissatisfaction - learn what works / doesn’t for customers in this category through ethnographic research
- Industry - learn as much as possible about the incumbent competitors, niche players, and baseline success criteria
- Supply chain - learn what manufacturing supply chain complexities exist
- Regulatory - learn what hurdles might cause problems down the road
- Look across channels - is there more opportunity beyond the dominant retailers?
- Category scope - what other products can be integrated within this category once entered?
- Category growth - can the category be expanded beyond what it is today?
Pat’s shower door team began by thinking about how they could leverage low-cost Asian glass suppliers to reduce overall costs in order to better compete with the domestic supply base of our competitor. The thought of importing glass separately led to the “Ah-ha! moment” of,
“Why not just package the glass for retail in Asia?”
The move-forward concept was clearly to “decouple” the product into its base components (glass, aluminum track, and towel bars) to be sold separately. By doing this they completely changed the way retailers think about shower doors and how consumers shop for shower door. Pat’s team provided the consumer a component-based program whereby the consumer was able to mix and match track finishes with glass types and towel bar designs. This allows the consumer to find exactly what they wanted, where they had previously been forced to make concessions, based upon the incumbent’s “all in one box” program. In the same retail footprint where there were originally only 24 SKUs, they were able to provide the consumer in excess of 160 unique combinations; satisfying the consumer’s need to customize their purchase and providing them the opportunity to walk out of the store with exactly what they were looking for.
Prior to launch the team conducted several consumer shop-ability research projects to make refinements to the packaging graphics, signage, and display. This involved building full-scale prototypes of the retail experience, running diverse customers through a shopping experience to then test, adjust the prototype, and re-test to arrive at a calibrated experience prototype. These adjustments took the consumer shopping time down from the incumbent’s 22-minute shopping experience to a 7-minute shopping experience. The consumer satisfaction rating went from the incumbent’s dismal 13% satisfaction rating to an impressive 83% satisfaction rating. This resulted in a reduction in returns due to buyer’s remorse from 14% to a return rate below 4%.
Consumer walkaways have all but been eliminated resulting in incremental adjacent “add-on” purchases and increased consumer loyalty. Retail sales are up, consumer satisfaction is up, profits are up, and returns are down. Liberty’s shower door program has been such a dramatic improvement over the incumbent’s that they have become the sole supplier with a retailer that rarely allows full categories to be managed by a single vendor.
Having successfully disrupted one category, the Liberty New Category Development team has become known to be a driver for innovation within the home improvement industry. The Trig team is excited to continue to partner with them in support of a pipeline of new programs.