Studies by Gabriel Szulanski, Eric von Hippel and others have shown how difficulty it is to verbally transmit key information: even within the same firm. I had personal experience with this phenomenon when I moved to Hong Kong.

For a couple of years in Chicago I was making a morning call to some institutional bond and derivative clients in the US and Asia. After I moved to Hong Kong one of the Asian accounts commented that my trading ideas did not seem as fresh. I initially blamed it on how busy I was running an Asian sales operation and increased my efforts to read research and study charts.

It dawned on me later that what was missing was my 45 minute train ride with the department economist in the morning and my chat with Tommy Tubz and the other floor people at the CBOT before they went to work. I regularly called Tommy and our economist and they diligently tried to convey all of their important information to me in 5 minute phone calls… but I was missing a lot of information that probably none of us might identify as important!

This raw information, including context, is valuable. Firms must be aware of sticky or contextual data and use more invasive market research tools.

This phenomenon is also another concern of mine about outsourcing. Information and ideas from factory workers and service reps are key inputs into new product development. What happens to this key information when production and service are outsourced???

“Product innovation gives less than three months competitive advantage. Process innovation gives at least 12 months competitive advantage.”                            - Sir John Bond, Chairman HSBC, 2001

http://www.deloitte.com/dtt/cda/doc/content/DTT_DR_GlitteringPrize_May2005.pdf

1. “Many Crummy Trials BEAT Deep Thinking” (4/20)
2. “the cost of trying is lower than the cost of analyzing.” (4/1)

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An executive in charge of online services at a major Wall Street firm sent an email which included:

[I] sent this article onto a few of my staff – it happened to hit at a particularly interesting time.  I have a project with very complex business logic and the analysis phase is quite painfully slow.  I had been contemplating this very issue – as the article puts it, “is the cost of detailed analysis greater than the cost of iterative trials.” 

I like the notion of “cost” here – either time or money.

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One comment on the site said that trials instead of analysis was already a key part of innovation in his bank, but that better techniques to manage and prioritize the trials was needed.

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In two comments and five emails (I hope ratios will reverse some day: WordPress makes it easy to post) NO ONE found the idea of trying before analyzing to be strange. I think this is a result of interest in its own right.

One financial service executive did note that at her firm development teams tended to BELIEVE in analysis or prototyping/Beta culture with religious zeal that is not impacted by empirical data. In her firm the North American team believe in getting Beta version out quickly, the European group believed in analysis, and the two Asian teams were also split into one each. Therefore the development process followed for a new service depends on which regional group is in charge of the project.

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One commentor questioned whether crummy trials had the potential to hurt the brand name.

I indicated that in my experience (B2B) we picked the testers carefully and indicated that we were Beta testing even if it was really Alpha or first time testing.

B.J. Fogg, the author of the original study of Facebook applications cited and the source of the “Crummy trials” quote, also responded to that comment, indicating that “As of right now there are no major brands in the top 50 applications on Facebook. It’s likely they are afraid of hurting their brand by doing something innovative and new – but eventually if they want to play the game they’ll have to figure out the rules. It takes a completely different way of thinking about innovation and most major brands haven’t learned to do that yet. Regarding crummy trials hurting brand, it’s an interesting question. There is certainly that potential… I think people are learning not to expect perfect execution all the time.” BJ Fogg Stanford Persuasive Technology Lab

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Crummy trials beat deep thinking. Ready, Fire, Aim! Probe and Learn. Experiment. Prototype. Beta Culture.

However you express it — just do it.

– But lets work to find a way to manage, prioritize and sell the experiential methods.

The original postings are below (4/20).

The link to the BJ Fogg Stanford study is

 http://www.slideshare.net/bjfogg/10-million-in-10-weeks-what-stanford-learned-building-facebook-apps

Process is the Product

Ed Furash, a well-know bank consultant, was quoted by a banker I interviewed in my NSD research as saying “In financial services process is the product.”

One of the problems with applying NPD models and ideas developed for goods firms to NSD may be that NPD has typically differentiated between product innovation and process innovation.

When automation allows a washing machine to be built in 2 hours rather than over two shifts, quality or price may ultimately be impacted. When online tools allow a mortgage to be granted in one hour rather than one week, the service itself has been dramatically changed.

Those of us interested in service innovation must take a more holistic approach and view innovation in a broader context.

Business Model Innovation is Intrinsic

Helder Sebastiao, professor of entrepreneurship at the University of San Diego, sent me a note yesterday in which he noted that a central theme through the postings in newservicecreation is that in service innovation, unlike NPD-goods, “business model innovation is intrinsic“.

It may be that the key difference between service innovation and traditional NPD-goods is that service innovation is more holistic:

1. Process is the product
2. Business model innovation is intrinsic.

Your thoughts??????????