Startup Culture

What We’ve Learned at PARC About the Business of Innovation

The business of open innovation is something PARC has been continually refining since we incorporated in 2002. Mastering the process of innovation is about far more than developing new technology; it requires a deep understanding of human behavior and context, and the ability to invent new business models to take the resulting products and services to market. We’ve found common themes. Three of them illustrate how we’ve been innovating at PARC over the past decade.

1. Solve the Right Problem

We often focus on solving the problem right. “What’s the right technology to use? What software do I choose?” Those are important questions to answer correctly, at the start and throughout the process. But innovation is rarely successful if you don’t first consider the human element. Understanding human behavior is a critical step to ensuring that you are solving the right problem. And solving the right problem is far more important than solving the problem right: If you’re not focusing on the right thing, a great solution to a problem that nobody really cares about creates little value. But even an imperfect solution to a problem people really care about can create a lot of value.

So how do we find the right problem? We should, of course, ask customers for feedback. But customers typically can’t tell us what they really want in a new innovation or technology. Even if they could, focus groups, surveys, and interviews typically only answer the questions you think to ask. So how do you find the right problem to solve? You need to uncover people’s unmet and unexpressed needs and desires and find creative ways to solve the problems people are currently working around without even noticing it.

This is where ethnography comes in. By directly observing what people really do, rather than what they say they do, and systematically analyzing their behavior, ethnography can reveal opportunities for new product concepts and tell you how to design a product so people will welcome it into their lives.

Sony recently engaged PARC’s ethnography team to help it explore the rapid changes in how people use technology to connect with each other. PARC conducted an ethnographic study to better understand how groups use technology to share their experiences.

Using ethnographic observation and video analysis methods, PARC identified an emerging content-sharing and communication phenomenon it calls “channel blending.” This is the integration of interactions and content across multiple channels and multiple devices into one coherent conversation. Channel blending is easily mistaken for multi-tasking because it involves people using multiple devices to connect with multiple people. But our ethnographers noted an important distinction: With channel blending people are trying to have one conversation that integrates content across multiple devices, rather than switching their attention between multiple separate conversations on those devices.

Channel blending often involves multiple people in the same location connecting to one or more people in another location. It’s easy to miss this, since many studies are set up to look at people using technology to connect while remote. But our study found that people are often face-to-face with some people even while they’re connecting with remote others. Since current technology isn’t designed to support this configuration, people have to compensate. They read their texts aloud so they can include local friends in their conversations. They pass around their cell phones to show local friends a funny image shared by a remote friend, getting the joke in sequence rather than simultaneously. And they waste time re-finding a video they previously shared from their laptop so they can all watch it together on the TV now that they’re face-to-face.

Since channel blending is the opposite of multitasking, the main challenge is not in managing interruptions and attention, but in maintaining common ground while sharing content and communications within the group. Through these and other insights, PARC enabled Sony to identify a range of technology opportunities for better addressing channel blending and capitalizing on people’s desire to stay connected.

Ethnography works in tandem with other tools to help us identify latent and unmet needs. Rapid field methodologies, user modeling, and social network and conversation analysis are also important for finding the right problems.

2. Stay Agile

The second innovation theme is the need for agility. We must be able to test a hypothesis quickly—learn, fail, and iterate. Innovation at its core is fundamentally a learning exercise, so the faster you can learn and improve the better.

And while it may seem counter-intuitive, you must set your initial bar for success as low as possible. There is a “learning loop” you need to move through quickly and furiously. Do you really want to start out with technology that tries to solve one of the hardest problems? A better approach is finding a simple problem with a lot of value and an interesting opportunity for your innovation. Solve that problem and then build to your vision over the long term. This aspect of agile innovation says, “Find that new space where you can add value that other people can’t, set the bar low, and iterate over time.”

Take printed electronics. This technology has been around for a while and initially a lot of the focus was on developing displays. However, building a display is a complex challenge. Our printed electronics program works instead with many startup and exploratory applications. We are currently working with ThinFilm, for example, to create tags on pharmaceutical bottles that monitor efficacy over time. And sensors can be printed on food packaging for, of all things, fish. As packaged fish ages, it releases a chemical. The printed electronics tags on packages can sense this chemical, giving a real-time look at the freshness and safety of the fish.

Simple applications with printed electronics can solve numerous problems. But it also moves us toward the Internet of Things, while solving important issues that we have indeed learned how to work around (and maybe not all that well). This is how low-cost and incremental steps can move us to the future. Radical changes almost always start small but end big. The Homebrew Computer Club was a small startup that ended big when it helped launch the personal computer revolution. Being the canary in the innovation coal mine can be incredibly valuable. Even if you don’t reach your final aspiration, you may create immense value along the way.

3. Build an Innovative Culture

A third critical theme in the practice of innovation is the importance of building and maintaining an innovative culture, a “learning culture.” In that kind of atmosphere it is accepted that people are going to make mistakes but also expected that they and others will learn from those mistakes. Failure is an essential part of the innovation process. The key is not to think of it as a failure that ends abruptly—but as failure that continually evolves your learning. You also must figure out how to learn and adapt rapidly and at low cost.

I have two teenage daughters, and I’m lucky because both are highly self-motivated. One of my daughters gets very upset if she doesn’t do well on a test. I say to her, “It’s OK because now you know what you need to learn. It’s not about the perfect grade. It’s about what you do in response to it.” And that’s innovation. Innovation comes from experiments and learning what is needed the next time.

You should never tolerate predictable mistakes. But as scientists know, some of the most valuable experiments are those with the most surprising outcomes.

Learning cultures are where unexpected discoveries are made, and sometimes such cultures enable entire companies to pivot and transform. We have found this to be true at PARC as we moved in 2002 from a closed research center to an open innovation business model. The same is true for IBM, which transformed over the past 20 years into a services and technology company. And Apple, of course, has undergone a massive transformation from being just a desktop computer company to one that operates a world-defining content and media device business.

Practicing Disruptive Innovation

Disruptive innovation as a practice can be chaotic and sometimes feels like it results in more failure than success. There’s disruption if the innovation succeeds not only in the marketplace, but also in the development process. But this disruptive innovation isn’t just innovation by happenstance. It’s directed; it’s intentional; it’s repeatable; and it’s sustainable. It’s a deliberate practice.

If you feel like your innovation efforts are getting stuck, consider these three lessons. Be sure you are trying to solve the right problem: get out and watch how people are working around  problems, maybe without even realizing it. Stay agile: set a high long-term goal but set your initial bar for success low, and focus on creating and learning from incremental value. Encourage a learning culture that embraces mistakes, while propelling your people forward through continual learning with speed and agility and at low cost.

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