Needs + Solutions = Innovation

Here's a simple equation that leads to new thinking and novel products. But it's a formula that too few companies have grasped

by Dev Patnaik

Over the next few weeks, colleges across the country will open their doors to welcome a new batch of freshmen. Some will find their way into an introductory economics class, where they'll begin to grapple with the fundamental concepts that underpin that discipline: namely, supply and demand. Most disciplines rely on a handful of basic precepts that serve as the building blocks of larger theories and more complex arguments.

What, then, are the fundamental concepts of innovation? Do equivalent building blocks exist that can help provide clarity to practitioners of this somewhat opaque art? Obviously, we've yet to apply the same rigor to the study and practice of innovation that we have to other disciplines. Innovation as it's currently understood seems more akin to medieval alchemy than it does to modern science. Still, some basic principles are emerging.

One fundamental concept is the difference between needs and solutions. The basic concept is simple enough. Let's say you're looking for ways to improve store efficiency, and you observe that the clerk is having trouble getting boxes from a high shelf. You conclude that the clerk needs a ladder. A ladder certainly works, but what if you frame it this way, asking, What does the clerk need to get boxes from a high shelf? A ladder is but one of several possible solutions. Lowering the shelves and rearranging the boxes is another. You may find many more. Reaching a box is a need. Getting a ladder is a solution.

TWO-PRONG STRATEGY.

Understanding this distinction can affect how you listen to your customers, how you conceptualize new products and services, even how you analyze existing markets to create new strategic platforms. Nike (NKE) has long understood the benefit of distinguishing between needs and solutions. It has continued to improve its footwear, working relentlessly to ensure that the latest pair of Shox is as appealing as the original Air Jordans.

At the same time, Nike has explored the needs of its customers, providing an expanding pallet of products for them. Today, Nike's portfolio includes watches, sunglasses, and even MP3 players. Every new offering is designed to enhance the experience of playing a particular sport. Nike is still a shoe company at its core. But it recognizes that a two-prong strategy of recognizing new needs and providing new solutions is necessary if it's to continue growing long after we all own a pair of Nike sneakers.

Without an attention to both needs and solutions, a company can find itself optimizing products for a set of needs that no longer exist. Take Ampex (AMPX). A Silicon Valley company long before the valley got its name, Ampex was a pioneer of magnetic-tape technology, the stuff that would eventually end up in everything from floppy disks to videocassettes.

NARROW FOCUS.

Still, Ampex spent much of the 1970s developing high-end analog equipment, including turntables that could play vinyl records better than the competition. So married was Ampex to existing solutions, that it was completely blindsided by the advent of compact disks. Indeed, Ampex's primary reaction to CDs was to trumpet the relative superiority of its analog solutions. It derided the needs of casual listeners.

Ampex still exists today, but it's hardly a giant. Like many past leaders in technology, it paid far more attention to the solution side of the equation and ignored the changing needs that underpinned its business.

Separating needs from solutions can make it possible to better gauge a market's receptivity to innovations, as well. In the 1970s several Japanese electronics manufacturers began to experiment with fax machines. Facsimile technology had existed for decades, and companies such as Xerox (XRX) had tried using faxes for everything from photography to sending newspapers directly to people's homes.