Designing for the future: game-changers and differentiators

In this age of Alexa, self-driving cars, and Google home, it’s clear that smart products are here to stay. But what’s coming down the pike may surprise you. Imagine ten years from now when your intelligent “VitAImix” not only guides your grocery purchases and recipes, but can influence the prices of certain ingredients for everyone!

© 2017 Institute for the Future, CC BY-NC-SA 4.0 International.
‘VitAImix’ artifact of the future © 2017 Institute for the Future, CC BY-NC-SA 4.0 International

Whether you make appliances, consumer goods, or food products, what the Institute for the Future (IFTF) calls the ‘Internet of Actions’ is a game-changer.  Rebecca Chesney, Research Director, IFTF, explains how in Three Strategies for Designing Kitchens of the Future. Though her article focuses on the kitchen, the trends in connectivity, technology, consumer behavior, and values could easily apply to any product category. The implications are far-reaching, both in terms of product innovation and societal impact.

She shares:

“the building blocks of this artifact from the future created by IFTF are already emerging today. For instance, IBM and Samsung developed Autonomous Decentralized Peer-to-Peer Telemetry (ADEPT), a proof of concept protocol that allows appliances such as washing machines, televisions, and refrigerators to purchase their own supplies such as detergent, negotiate with each other for energy use, and order their own maintenance. ADEPT leverages self-executing smart contracts based on blockchain technology to provide a secure, low-cost way for these devices to interact. People are already outsourcing their interactions with customer service representatives to bots, such as startup Trim’s bot that chats with cable television provider Comcast to negotiate prices. Soon these bots could be embedded directly in televisions and other appliances, turning machines into a consumer class in their own right.

In addition to connecting devices in a home to each other, efforts are also underway to connect home kitchens to the larger food ecosystem. Nestlè, Kroger, Unilever, and other global food companies are partnering with IBM in a consortium to leverage blockchain technology for traceability and transparency across the food supply web. Creating a data infrastructure from farm and factory to the store will eventually enable a suite of kitchen devices to consider country of origin, nutrition content, and price when deciding what recipes to download and foods to purchase. Finally, as indicated by Amazon’s acquisition of Whole Foods, personal preferences and shopping history will be added to this complex food database, and kitchens in homes will be able to tap into a vast logistics and distribution network.”

In designing the future of kitchens specifically, she recommends:

Strategy 1: Question autonomy.

Today’s smart kitchen offerings overwhelmingly focus on efficiency, saving time, and making cooking easy, often automating processes to the full extent possible.  However, automation can overlook  other customer needs, such as taste and sensory experience. Instead she suggests  using “adaptive automation design,”  the design of systems with varying levels of automation that people can set themselves based on their own values.

Strategy 2: Consider a wide set of values.

“Eaters bring diverse values to the table beyond convenience and taste, from remaking their bodies and communities to aligning with the environment…Cooking and eating are often about discovery, an attribute that may be lost in kitchens designed to optimize efficiency. For many of us, kitchens are places to revisit and create memories, perhaps by cooking through our grandmother’s recipes or by hosting friends for a Thanksgiving feast. To pursue this strategy, think about the most memorable meal of your childhood, a recent time you learned something in the kitchen, or a time when you were comforted by a food. Ask your friends, family, and target customers the same set of questions and develop a set of values people pursue in the kitchen, from experimentation to community and inclusivity.”

Strategy 3: Design using verbs.

“As machine intelligence becomes a utility, it won’t be enough to design ‘smart’ or ‘intelligent’ kitchen devices.  In the Internet of Actions, we’ll focus more on what these technologies do rather than on what they are. If you’re building kitchen appliances or designing a food product or service, design using verbs to imagine the new roles technology might play. Of course, a kitchen might be designed to shop or cook. Combining this strategy with the first two can help to expand the scope of your ideas and illuminate new value propositions. For instance, kitchens might be designed to teach cooking skills and healthy behaviors to help people re-engage more deeply with food, rather than remove them from the process.”

Augmented reality might tell a story, robotic arms might be used to design kitchens that enable. The Liftware Steady handle for spoons, forks, and knives uses a variety of sensors, stabilizers, and motors to counteract tremors so people with limited mobility can eat without spilling their food. How might other technologies currently being harnessed to shop or chop be leveraged for other roles in the kitchen? These are important value-add differentiators.

She concludes “even as these technologies empower us, they will create new questions about how to interact, negotiate, and navigate new possibilities with each other. The challenge is for us to decide how much we automate or engage with our food, what values we consider and design for, and the roles these technologies will play in our kitchens and in our lives.”

The Internet of Actions and other IFTF insights will be shared by Rebecca’s associate, Quinault Childs,  at the Innovation & Growth Leadership Summit on February 27, 2018 in Phoenix, AZ.

I&GL Challenge #3: Driving Shareholder Value

One of the toughest challenges – especially for mature companies — is driving shareholder value. Slow, steady growth is not enough in today’s disruptive world, and R&D executives are expected to step up their game.  If this is your situation, read The Shareholder Value Triple Play, by Tom Hansson and Abhijeet Shekdar of PwC.  The authors are clear: cost-cutting and portfolio rationalization are necessary but insufficient. The way to dramatically increase shareholder value is to “identify a portfolio of big ideas..that will likely double or triple the value of most advantaged units — while ensuring that the resulting corporation will be strategically coherent.”

This means building on current capabilities, not cutting them.  Rather than mandating across-the-board cost reduction, the shareholder value formula calls for an approach that preserves and enhances the distinctive capabilities that are critical to growth.

How is this done?

  1. Rationalize your portfolio through a shareholder value/capabilities lens.
  2. Stabilize the old core. Highly branded mature categories may not always get adequate returns from divesting (or spinning off) businesses; some will therefore remain in the portfolio. Find the balance between under- and over-investing. Don’t spend excessive time and resources on the old core at the expense of new growth avenues.
  3. Expand existing profit pools. Don’t underestimate the growth potential of your existing core. Identify and ‘surgically invest’ in your most attractive profit pools to maximize profitable growth. Distinctive capabilities provide superior returns and allow the company to gain share or tap into growth pockets. These investments may take many different forms, including focusing product innovations on specific channels, boosting promotional spending for specific customers, or devoting more R&D resources to specific product categories.
  4. Pursue step-out growth. Most companies don’t have enough attractive investment opportunities in their portfolios to create sustainable, profitable growth at an annual rate of 4 to 6 percent. The key is to focus on a few material initiatives that leverage and strengthen what the company does best, and to extend those by category or geography. These step-out plays can take a variety of forms, including: “Big bang” innovation (home runs versus singles), new approach to foreign markets , nuanced approach to on-trend businesses (ie purchasing smaller entrepreneurial businesses, grow by providing sales access and distribution resources to boost the targets’ sales, while preserving startup culture); roll up your sector (focus on a narrow range of products,  develop advantaged capabilities in that category); adjacent M&A “near-in” adjacencies are the most promising.

Executing the strategic triple play of aggressive cost reduction, portfolio simplification, and substantially new approaches to growth based on capabilities is not easy, but those that succeed will reap significant rewards.

This challenge has many variations and is a key topic to be discussed at the I&GL Summit.  Jean Spence was part of Mondelez cost reduction and growth initiatives, Shiv Iyer is one of the foremost experts on leading significant transformation of operating models to build capabilities and drive reinvestment for growth, and most of the other speakers have wrestled with this challenge as well.

I&GL Challenges: Topic #2 – Boosting Margins

Last week we discussed alignment, a critical component of organizational effectiveness and innovation success.  Perhaps even more critical is the impact of alignment on profit margins.

If senior leadership is not in agreement about where to focus R&D dollars, innovation managers will not know where to focus efforts.  Short-term projects rule the day, competing priorities confuse people, and results fall short. Large organizations seem to struggle the most. They push for growth and innovation, yet fear losing current business. So the message is mixed – take risks, but don’t forget the bread and butter.

What’s an innovation leader to do?  If misaligned tires slow down a car, how can misaligned companies move fast, steer straight, and get the best mileage?

According to a recent Accenture white paper, Increasing Agility to Fuel Growth and Competitiveness, there are several steps you can take:

  • First, know where growth is coming from
  • Make informed decisions and identify the right areas to funnel costs
  • Align cost reduction and reinvestment to the growth strategy
  • Foster a culture centered on continuous cost management with outcome-based measures and metrics
  • Weed out inefficiencies; leverage new technologies
  • Change how the company operates across the ecosystem

These steps are not simple, and organizational buy-in is everything. In an agile, aligned organization, knowledge workers become judgment workers, decisions are predictive vs. reactive, and people move together swiftly with confidence. New operating models and approaches like zero-based budgeting can yield millions of dollars in savings, which can then be used to fuel growth strategies.

The white paper discusses how to create cost-competitive operating models and make the necessary cultural shift. Shiv Iyer, who has helped many top companies build capabilities and drive reinvestment for growth, will share how-tos and examples at the Innovation & Growth Leadership Summit.  If your organization needs better alignment around R&D spend, this talk is not to be missed.

Your questions and comments are encouraged in advance.  Either email me or post on our LinkedIn group.  Look forward to hearing from you and seeing you in Chicago!

I&GL Challenges: Topic #1 – Alignment

Looking ahead to the Innovation & Growth Leadership Summit (I&GL), we wanted to start discussion now about the biggest challenges many of you face.  One that stands out is alignment — how do you get everyone on the same page?

CIMdata recently conducted research with a group of chief innovation executives from Electrolux, Givaudan, GOJO Industries, Henkel, Honeywell, Procter & Gamble, and Sanofi.  For these executives, innovation alignment is a combination of strategy and tactics that generate new business value.  It means being “clear about where you want to grow, where you want to go, and how you want to get there.”

Ideally, short-term objectives (product improvements, line extensions, etc.) are balanced with the longer term horizon (new technologies, new markets, new business models).  Strategic and tactical roadmaps are harmonized. Portfolio choices generate measurable payback.  Leaders think beyond their own business and make decisions based on what’s best for the enterprise.

The reality?

As one executive put it, “people have become so focused on the internal processes, workflows, and administrative hurdles that they forget their primary mission is R&D, which is to be connected with innovation networks and what is going on their scientific field.”

Another said there are pockets of innovation but no ‘single source of truth,’ making portfolio management a challenge. Other struggles include poor visibility into financial commitments, unclear communication, and fragmented processes.

So, what approaches are helping?

  1. To drive change, first identify executive champions with the right qualities
  2. Train people through a network of innovation ambassadors – develop capabilities
  3. Establish governance structures and processes to help align on goals
  4. Bring in digital solutions that are agile and visual to support faster decisions
  5. Prioritize openness, configurability, flexibility, and adaptability
  6. Look for features that can connect to best-in-class functionality spanning research, design, sourcing, manufacturing, sales, marketing, service, etc.

Organizations that have addressed both cultural and digital capabilities are better aligned than those that have not. They are also achieving better results faster.

To learn more, download Enterprise Innovation Management: Solutions Landscape – Connecting the Dots.  Suna Polat, co-author of this study, will share more about the findings and answer your questions at the I&GL Summit on April 26.