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The best way to predict the future is to create it.

– Peter Drucker
The Digital Innovation Playbook
A Resource For Infinite Business Creativity

Innovation is hard. Let your customers help.

Innovating your business can be risky and difficult at the best of times. And in the fast-moving
digital age, it can be downright terrifying. How do you best focus your resources in a world where
everything is changing and anything seems possible?

It’s easier than you might think. The secret is to stay focused on your customers, rather In a six-year study
than technology. from 2007 to 2012
In their book Subject to Change, our colleagues at Adaptive Path in San Francisco describe the by Watermark
Segway scooter as an example of innovation that is detached from the needs of real people: Consulting, firms
“Crazy predictions peppered the web prior to the launch of the high-tech Segway scooter. that were customer
Its patented technology was supposed to change cities and create a new world. Steve experience leaders
Jobs referred to it as ‘an incredibly innovative machine.’ generated total
The Segway was certainly new and certainly innovative, but the problem was that no one returns that were
wanted to use it in the context for which it was intended. The Segway was targeted to fit three times higher
a need that few people actually had. The experience of riding on a Segway is new and
on average than the
different, but the Segway technology in its current form isn’t relevant to the way people
move through their lives.” S&P 500 Index.

This white paper will show you how to reliably and consistently increase profits and better serve
your customers online by putting people at the center of your digital business strategy. But first,
let’s review some common, yet unsuccessful approaches to web innovation.

Not good enough: Popular strategies that don’t work

1) Parity. The parity play involves watching what your competitors do, and then either copying
them or one-upping them. Parity is seductive because it’s easy and it’s safe. And it can lead to
incremental improvements. But it’s just as likely that you’re imitating an expensive tactic that didn’t
help your competitor. In either case, you can never lead your market by following the pack.
Takeaway: Don’t chase your competitors. Chase your customers.

2) Novelty. Every business wants to be new and different, so many business leaders equate
innovation with novelty. They think if they introduce something new, something that nobody else
offers, they will differentiate themselves and capture attention. But what’s new isn’t necessarily
valuable or better than the alternatives. In fact, few business breakthroughs are actually new:

• Apple didn’t invent the graphical user interface, digital music player or smart phone.
They vastly improved on existing products.

The Digital Innovation Playbook: A resource for infinite business creativity

© Modus Associates, LLC

• Google didn’t invent the search engine.
• Nintendo didn’t invent the video game.

Takeaway: Newer isn’t better. Better is better.

3) Usability. Many web initiatives cite usability as a business objective. While usability is a must
for long-term success, it’s just table stakes in the web game. If your websites and products aren’t
useful as well as usable, then all the usability in the world won’t save them.
Takeaway: Be useful first. Then usable.

4) Technology. The technology play remains the most common approach to web innovation. It
involves making a list of feature ideas or technologies, and then designing your websites around
them. Designing products based on feature lists leads to unsatisfactory experiences because
those lists aren’t oriented to the perspective and needs of your customers. In fact, the majority of
your customers don’t care about features and technology. They just want products that are useful
to them.
Takeaway: Design your business around people, not technologies.

5) Epiphany. Some managers are always on the lookout for that next big idea that will change
everything for their business and their industry. Sadly, this is encouraged in the business press and
in our cultural myths about how innovation happens. While epiphanies sometimes do happen,
they’re too unreliable as a business strategy because they can’t be controlled.
Takeaway: Don’t bank on epiphanies. Processes that are repeatable and controllable
are the most reliable sources of innovation.

There is a better way: Innovation in 4 steps

The most successful business innovators today – whether they’re creating something new or
improving an existing product – are those with the best understanding of their customers. On the
web, this understanding requires a customer-centered design approach.

In broad terms, customer-centered design is a best practice in which the needs, wants, and
limitations of your customers are given close attention at each stage of the design process. The
chief difference from traditional software design philosophies is that customer-centered design tries
to optimize the user experience around how people can, want, or need to work, rather than forcing
users to change how they work to accommodate your system.

With customer-centered design, you are more likely to:

• Make things that people want and use

• Reach the right people with the right message
• Eliminate misspent development costs by making things right the first time

Our favorite example of customer-centered design is Apple’s iPhone. Progress in the mobile
phone industry had been hampered for years by the need for phone manufacturers to design their
products around the standards and limitations of the major cellular networks. Apple was the first
manufacturer to design its phone entirely around the consumer, and then challenge the carriers to

The Digital Innovation Playbook: A resource for infinite business creativity

© Modus Associates, LLC

adapt their system to the phone. The rest is history. Apple’s iPhone ignited the mobile revolution
after years of false promises and incremental progress.

While most business leaders like to think they know their customers, many are really just guessing.
The following approach, developed over 12 years and hundreds of web initiatives for the world’s
leading brands, offers a proven, flexible framework for tapping into the needs of your customers
and increasing your odds of making things they want.

4 Steps To Successful Web Innovation

1. 2. 3. 4.
Discover Ideate Validate Execute
Discover your Envision Test your ideas Create
opportunities the future with real the future

+ Customer needs + Future-state + Customer and + Innovation

analysis prototypes stakeholder roadmap
+ Competitive analysis validation testing

+ Web traffic analysis

+ Industry research

Discover Your Opportunities
Fortunately, bringing customers into your development and innovation processes is easy, and there
are many ways to do it. Some require an investment of time and resources. Others leverage data
that you probably already have. Here’s a run-down of commonly-used techniques:

• Customer interviews and focus groups: Nothing beats direct customer contact to
help you understand the lives and attitudes of your customers, where you might fit into
those lives, and where you don’t.
• Surveys and questionnaires: Surveys and questionnaires are an effective and cost-
efficient way to gather opinions and insight from large numbers of customers.
• Social media monitoring: Blogs. Twitter. Facebook. MySpace. LinkedIn. Community
sites. Product review and rating sites. Monitoring the social web is a great way to learn
what people are saying about you and your competitors. And the explosion of social
media has brought with it an explosion of customer insight for you to mine.
• Web analytics data: Your web traffic data yields precious insights about what your
customers like and don’t like, where they’re struggling with your product or websites,
who they are, and how they’re finding you. Chances are you already have this
information. Are you using it to its fullest?
• Customer service logs: This is data that most companies already have but don’t
utilize. Talk to your customer service manager to find out what customers are saying.
Usually, there are five issues that customer service reps hear over and over again. Find
out what they are and address them online.

The Digital Innovation Playbook: A resource for infinite business creativity

© Modus Associates, LLC

• Customer feedback forms: More and more organizations are including a prominent
Reality Check customer feedback form on their websites and products. If you don’t have one, add one
Continuously ask and watch for the feedback patterns that develop.
yourself: “Is this decision • Third-party research: Research firms like Forrester, eMarketer and MarketingSherpa
mainly good for me, or produce mountains of great industry and customer insight every year. If you can’t do
for my target audiences your own research, buying it can be just as valuable.
as well?”
• Usability Testing: If you’re looking to improve an existing site or product, usability
testing with customers is a great way to identify areas for improvement, and areas that
should be left as is. Usability testing is also a good way to gain stakeholder buy-in for a
project, by asking members of the project team and senior stakeholders to observe the
testing sessions.
• Competitive Benchmarking: Benchmarking (also known as “best practice
benchmarking”) is a process in which companies evaluate various aspects of their
websites and marketing programs in relation to best practices, usually within their own
industry. This then allows them to develop plans on how to adopt such best practices.

Most organizations don’t have the time or resources to try all of these techniques at once. But
any combination of them, incorporated over time, will amass a formidable foundation of business
insight that you can use to identify both tactical quick wins and longer-term strategic opportunities
for your organization.

Envision the future
Now that you’ve identified your best opportunities, the next step is to visualize your ideas in
prototype form and validate them with your colleagues and customers. There’s no better way to
communicate business ideas and build consensus than literally getting everyone on the same page
with a paper or clickable prototype.

• Prototyping: Prototyping involves creating mockups of websites, applications and

other experiences, with enough detail to demonstrate how the experience works and to
allow users and stakeholders to evaluate them. Prototyping lets you inexpensively test
and refine new ideas early in the R&D process, prior to investing in costly programming
and development. Paper prototypes can range from a simple pen and paper creation,
through to those created in graphic design packages or prototyping software.

The Digital Innovation Playbook: A resource for infinite business creativity

© Modus Associates, LLC

Test your ideas with real customers
Once you’re satisfied with your ideas in prototype form, validate them with actual customers and The business
project stakeholders to ensure they understand the experience, how it works and its value. The
most commonly used technique is the design walkthrough. consultancy Bain &
Company surveyed
• Design walkthroughs: Design walkthroughs are used to validate your design
hundreds of
decisions and collect feedback from users, stakeholders and members of the design
team. The technique is typically used early in the design process using a paper companies that
prototype. However, it can also be conducted with an electronic prototype or parts of felt they delivered
the website that are fully developed.
superior customer
A design walkthrough involves taking a group of participants through the website design
experiences. But in
using real-life user scenarios or tasks. Participants are asked to specify their actions
they would take on each page and to make comments about the usefulness and reality, only 8% of
usability. Results are documented and recommendations for improvement are made. those companies’
customers agreed
STEP 4: PRIORITIZE, PLAN, AND EXECUTE that the experience
This step requires no explanation. With
was superior.
problems and solutions already identified,
individual projects can be executed with Phased Execution
extreme efficiency.
Project 1

Remember, it’s not about generating hundreds Project 2

of ideas that will never see the light of day. It’s
about creating a pipeline of good, achievable Project 3

ideas that will drive the evolution of your online

business presence for years to come.

So you innovated, but will they buy it?

How innovations gain adoption
There’s nothing more disappointing – and wasteful – than investing in new ideas that are rejected
by their intended audience. How can you increase the odds that your investments will be adopted
by the marketplace and pay off?

Scott Berkun, in his book The Myths of Innovation, identified the following conditions that lead to
widespread adoption of new products and services.

1) Relative advantage: What value or advantage does the new thing have compared to
the old one? This is perceived value, as seen by potential customers of the innovation,
not by its makers. Perceived advantage is built on factors that include economics,
prestige, convenience, fashion, and satisfaction.
2) Compatibility: How much effort is required to transition from the current thing to the
innovation? If this cost is greater than the perceived advantage, most people won’t try
the innovation. These costs include people’s value systems, finances, habits or personal
beliefs. Technological compatibility is only part of what makes an innovation spread: the
innovation has to be compatible with habits, beliefs, values and lifestyles.

The Digital Innovation Playbook: A resource for infinite business creativity

© Modus Associates, LLC

3) Simplicity: How much learning is required to apply the innovation? The shorter the
learning curve, the higher the rate of acceptance.
4) Trialability: How easy is it to try the innovation? Samples, giveaways and
demonstrations are centuries-old techniques for making it risk-free to try new ideas. On
the web we have product tours, free trials and even free products and services. The
easier it is to try your innovation, the faster it will diffuse.
5) Observability: How visible are the benefits of the innovation? The more visible the
perceived advantage, the faster the rate of adoption, especially within the social groups.
This is where strong communication skills are critical.

Additional Reading
> Outside In: The Power of Putting Customers at the Center of Your Business, by Harley
Manning, Kerry Bodine and Josh Bernoff
> Customers Included: How to Transform Products, Companies, and the World – With a
Single Step, by Mark Hurst and Phil Terry
> The Myths of Innovation, by Scott Berkun
> The Lovemarks Effect: Winning in the Consumer Revolution, by Kevin Roberts
> Democratizing Innovation, by Eric von Hippel
> Outside Innovation: How Your Customers Will Co-Design Your Company’s Future,
by Patricia Seybold
> Wikinomics: How Mass Collaboration Changes Everything, by Don Tapscott and Anthony
D. Williams
> Subject to Change: Creating great products and services for an uncertain world, by Peter
Merholz, Brandon Schauer, David Verba and Todd Wilkens

The Digital Innovation Playbook: A resource for infinite business creativity

© Modus Associates, LLC

About Modus Associates
Modus Associates is a digital innovation and design consultancy founded to help global brand
leaders and visionary start-ups more fully realize the business potential of the digital age, where
customers rule, connectivity is everywhere, and creating value for profit and social impact is the
name of the game. Clients include ADP, Comcast, NBC Universal, NYSE Euronext, SIRIUS Satellite
Radio, and Wyndham Hotel Group.

Contact Us
Modus Associates
37 West 20th Street, Suite 304
New York, NY 10011
Tel: 212-255-6768
Fax: 212-255-6264

Founding Corporate Member:

Customer Experience Professionals Association

Inc 500 | 5000

America’s Fastest Growing Private Companies

The Digital Innovation Playbook: A resource for infinite business creativity

© Modus Associates, LLC