How To Tackle X-problems

X-problems consist of a cluster of related challenges that assault executives time and time again. Adam Richardson has tips for dealing with them

By Adam Richardson

Dark matter takes up more than half the universe. But until recently, no one knew whether it existed at all. The only way to detect its shadowy presence is by observing the influence it exerts on visible matter, such as how it alters the orbits of planets.

In the business world, something equally enigmatic is interfering with our ability to be consistently successful at innovation. It is a truism now that too many innovations get stalled, squashed, sidetracked, or warped beyond recognition by byzantine organizational processes and decision-making edifices. The word "innovation" itself is so widely overused it has lost its meaning.

But innovation is not the problem. The problem is the problem.

The scope and complexity of problems that businesses must solve has changed, and we lack the tools not only to diagnose them but also to focus our innovation efforts to be more consistently successful. These are X-problems. They are the dark matter of the business universe.

X-problems consist of a cluster of four related challenges that come up over and over again for companies of all sizes, across many industries. Treating them systematically allows you to unlock the opportunities that lie inside.

1. Disruption is the new normal.

The worlds of consumer electronics, digital entertainment, mobile communications, and computing are colliding head on, and companies that used to operate in just one of those areas are now finding themselves competing against each other in unpredictable ways. This same pattern of hypercompetition is repeating in many categories.

Would consultants who advise small businesses on how to run their organizations have predicted they'd be competing against shoe retailer Zappos? That is exactly what started to happen when Zappos Insights was launched, a subscription service that advises small business owners on customer service and company culture. Zappos realized it could sell two of its well-known assets—its reputation for excellent service and a quirky, fun culture—and created the spin-off to do just that. This is a great example of a company looking at innovative ways to grow and reach new customers—and at the same time disrupt others.

2. Deep understanding of customers is more vital than ever.

Customers are becoming more sophisticated and demanding. They expect ease of use and a quality experience from a product, regardless of its category.

In the high-pressure world of stock traders, the conventional view held that traders put function above form when it came to equipment that tracks the market. IPC, a manufacturer of sophisticated phone systems that allow traders to handle hundreds of calls a day, recognized that today's traders have grown up with iPods, cell phones, and Xboxes. This meant they have a very different set of expectations about how to interact with high-tech devices.

Working with my employer, frog design, IPC set out to improve traders' usage experiences dramatically. In 2007, the first year of its new generation of systems, 70% of new clients bought the new system, a huge improvement over the standard of 10% adoption for new IT products in the financial services sector.

3. Think ecosystems, not products.

Customer demand is shifting from individual products to ecosystems of hardware, software, and services. Aligning and integrating these elements is a major challenge as ecosystems cut through conventional org charts, requiring previously separate groups to collaborate together to craft a common customer experience.

Zipcar is the leading car-sharing service in the U.S. Car-sharing was previously seen as complicated, inconvenient, and appealing mainly to hard-core environmentalists. By converging an integrated ecosystem of physical products (cars), software (Web site), and services, Zipcar changed this perception and gave it mainstream appeal. Management's smart choices as a startup ultimately helped give Zipcar proprietary advantages others have found hard to replicate.

4. There is no clear right or wrong answer.

X-problems are highly ambiguous, and usually there is little agreement on what the problem actually is, let alone how to solve it. A nimble, experimental approach works best here, with feedback loops that allow the organization to learn from each experiment and feed that knowledge into the next version.

Social networking is a category in tumultuous formation. Everyone is trying to understand how people want to use it, but because it so new, there is great uncertainty about how to build out new services. Such was the case with Twitter, which has grown exponentially since its launch (around 50 million tweets are sent each day). But much more than a way for people to communicate "what they are doing right now," Twitter now serves as a news feed, trend tracker, and public relations platform. People found unexpected ways to use the service, and the company had to adapt on the fly.

Do these four challenges sound familiar? They are becoming the norm. Taken together, they create massive complexity that stands in the way of effective innovation. We need a new approach to innovation that tackles that complexity head-on. If solved properly, X-problems unlock new ways to engage with customers and create sustainable competitive advantage for any business in any industry.

Adam Richardson is a creative director at global innovation firm frog design, where he has worked with companies such as HP, Intel, Motorola, Logitech, and Yahoo!. His book, Innovation X: Why a Company's Toughest Problems Are Its Greatest Advantage was published by Jossey-Bass in February 2010.

Business Exchange

Track and share business topics across the Web.