The first is so obvious that most companies miss it: You must have a specific strategic challenge in mind. And it has to be the right one—one that demands true innovation because it’s a problem with no apparent solution. For online retailers, this might be how to increase their share of customers’ weekly groceries, the category least penetrated by these companies. In the pharmaceutical industry, it could be a reinvention of the product launch model, which has failed to keep pace with the many changes in its market. As Henry Ford once said, “The air is full of ideas. They are knocking you in the head all the time. You only have to know what you want, then forget it, and go about business. Suddenly, the idea will come through. It was there all the time.” He understood that you have to know what you are looking to solve in order to find the innovation to solve it.
Problem in hand, you begin your search for possible solutions by answering this question: For each part of the challenge, who else—anywhere, anytime—has solved a piece of the puzzle? The objective is to create the largest possible inventory of precedents that are relevant to solving the challenge. We call this your “What Works Inventory.” The bigger and better the list, the more likely it is that it will contain the critical set of dots that can be connected to produce a breakthrough innovation. Our opening question cites four precedents that are relevant to solving the retail distribution challenge for banks: The Dodge Dart Registry yields a clue to how banks can engage consumers in financing their milestone purchases; Facebook suggests ways for banks to become a welcome hub of consumers’ financial lives; Old Spice shows how a stodgy brand can earn new equity with the next generation; and Restoration Hardware’s drive to reduce its retail footprint by 30 percent while repurposing most of its remaining properties into showrooms and design galleries sparks thinking on what banks could do with their high-cost retail branches. It is essential to look outside your normal domain. If your challenge is a rapidly changing business ecosystem, look at how other species—in the business and natural world—survive and thrive when their ecosystems are disrupted. If your challenge is to simplify the selling of multiple drugs for the treatment of diabetes, look at how www.Mint.com simplifies the selling of financial services. One thing is certain: You will not find true strategic innovation by looking at best practices inside your own industry. Nor will you find it by looking for simple analogs that take your strategic challenge as an indivisible whole. Which brings us to the third part.
You now need to engage in what we call “intelligent recombination.” Start by putting together a table of precedents from your What Works Inventory that offers a range of proven solutions for each piece of the puzzle that is your strategic challenge. We call this your Insight Matrix (a Duggan term borrowed from General Electric’s famous “Work-Out” process), where the first column lists components of the strategic challenge that must be addressed and the rows display a series of companies and precedents that apply to those components. The exhibit below shows the Insight Matrix developed for a strategic challenge faced by many professional-services firms: how to retain more women in their senior ranks.
Now you are ready for the “creative” part. “Creativity is just connecting things,” Steve Jobs said. “When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while.” In our context, this means looking for connections between precedents in your Insight Matrix to find a breakthrough idea—the “Eureka!” that solves the problem of your strategic challenge. For example, to address the challenge of retaining woman, one firm developed a solution by combining elements of these three discrete precedents: (1) the broken windows theory of focusing on smaller tasks to create a larger impact; (2) an accounting firm’s “latticed” career structure that gave women a wider range of options than just climbing the corporate ladder; and (3) the model of remote consultation pioneered in telemedicine.