With the average lifespan of the world's leading companies in a freefall, consistent innovation is essential for corporate survival. The challenge, according to Curt Carlson, is that most companies have no comprehensive system for value creation.
Carlson knows a thing or two about innovation, having led the teams that developed Siri and HDTV while serving for 16 years as CEO of SRI International.
Now Carlson, and his partner Leonard Polizzotto, have teamed up with Northeastern University to share their proven innovation methodology with businesses around the world. In addition to Value Creation workshops delivered on-site, the duo has created an online course that will be available on Coursera in January 2020.
“We want to give the gift of value creation to people worldwide, and Northeastern is the best place for us to do that,” said Carlson, a Professor of Practice at the D'Amore McKim School of Business. “Innovation is all about active learning, and at Northeastern, there is a deep understanding of those principles.”
The Value Creation System
Over the last half-century, the average lifespan of an S&P 500 company has plummeted from 61 years to just 17 years—and the decline is accelerating, according to McKinsey & Company.
“The problem is that most companies think about what they're already good at, then try to adapt it to every situation,” said Polizzotto, a former VP at SRI and Draper Laboratories who is now an Executive in Residence at the business school. “They need to put aside their expertise and really listen to what customers need and observe how they behave.” Carlson and Polizzotto have distilled nearly four decades of constant innovators into a comprehensive value creation system centered around answering four basic questions:
- Need: What is the unmet need for consumers and the market?
- Approach: What is the innovative offering that satisfies that need?
- Benefits/costs: What are the benefits to the customer compared to the costs?
- Competition: What solutions and alternatives already exist and why is your innovation better?
For a project to succeed, the team has to answer each of the “NABC” questions. Although this sounds simple enough, few teams get it right without extensive practice.
“If you go around the world like we have, you see mostly failed attempts at innovation,” said Carlson. “We've used this methodology with at least 500 teams and not one team has been able to succinctly and quantitatively answer all four questions at the beginning. And their problem usually starts with the very first question—articulating the need.”
Customer Focus
Maintaining a customer focus must be a “living and breathing element of the corporate culture, not just a sentence in a business plan,” said Christina Jaracz, D'Amore-McKim's Executive Director of Corporate Learning Practice.
But simply asking customers what they want is usually not enough, because people can only ask for a better version of what they already know. That's why it's so important to observe customer behavior to discover what they are trying to accomplish. Carlson uses the iPhone as an example. “When people surveyed customers about what they wanted, the response was overwhelming—a better keyboard,” said Carlson. “But Steve Jobs realized that keyboards are clumsy and get in the way of other applications. He knew that people wanted more convenience, but that could only be achieved with something they had never seen. Eventually, that became the touch screen.”
Active Learning
Carlson and Polizotto's Value Creation Forums are built upon two key principles of active learning—real-time feedback and repeated practice.
Participants are divided into five teams of five people (numbers can vary). Each team presents an innovation proposal and explains how it addresses core NABC questions.
“There are no case studies; these are all real proposals,” said Polizzotto.
After their initial presentation, each team listens to feedback from the four other teams. This feedback is essential because those outside the team “are not blinded” by their existing expertise,” said Polizzotto. Team members use this input to refine, and sometimes radically change, their idea. This process is repeated eight times in a two-day value creation workshop.
“Any complex activity that requires creativity involves practice, practice, and more practice,” said Carlson.
Half-formed ideas that are doomed to failure can often be transformed into breakthrough innovations by the repetition of feedback, research, and revision.
“This is how we developed Siri,” said Carlson. “We had little sense of what it would be in the beginning. All we knew is that we wanted to create a personal assistant that was something like Hal in 2001—but friendly. Over time, we arrived at how to do it. The last and hardest part was developing the business model for how the company would make money. It took several years.”
For example, in another workshop, a group proposed a walking device to assist the elderly and children with cerebral palsy. Their initial idea involved a robotic exoskeleton strapped to people's waist.
“The problem was that the exoskeleton weighed 20 pounds,” said Carlson. “It was the last thing you wanted to strap to your little girl or grandmother.”
During one of the feedback sessions, a member of the group suggested Chinese puzzle “handcuffs”—the little tubes you stick your fingers into that clench when you try to pull your fingers back out. This idea led to an approach that allowed moving the device to the waist to the legs, and the robotic assist system became a pair of pants with a mechanism resembling the Chinese puzzle in each pant leg. This seemingly off-the-wall idea became the breakthrough innovation that launched a promising startup.
This systematic practice also ensures that the “NABC” process becomes a part of the corporate culture at every level.
“Very few people are true entrepreneurs,” said Carlson. “But everyone, at every level, should be a value creator. Everybody has a customer, and if you have a customer, you should be delivering value to them all the time.”
Carlson emphasizes that experience has taught him that consistent innovation requires a systematic approach. He said that when he worked at RCA early in his career, innovation was hit or miss—and mostly miss.
“But at SRI, with Len and others, we were able to transform an organization that was about to go bankrupt into one of the most successful companies in the world,” he said. “We were the same people. But we had learned how to create value. This systematic approach enabled us to grow SRI 3.5 times and create one multi-million dollar business after another.”
Written by Bill Ibelle
Meet Curt this February at Northeastern
Join Raj Echambadi, Dunton Family Dean of the D'Amore-McKim School of Business for a conversation with Catherine Keating, Chief Executive Officer of BNY Mellon Wealth Management, and innovation pioneer Curtis Carlson, D'Amore-McKim School of Business Professor of Practice and co-developer of Value Creation: The Carlson-Polizzotto Method.
Learn how Dr. Carlson and his team at SRI International used this method to create the technology behind the iPhone's Siri, HDTV, and many other groundbreaking innovations. Following the presentation, join Catherine Keating and Dr. Carlson for a fireside chat to address how value creation fits into the current business and financial landscapes, and how it can be employed to differentiate your business in the future. Register here!