Episode 33: Innovating for the Future

Brian Hauch: We’re sitting here, it’s the fall of 2020, and as they say, what a decade has this year been with COVID, and the impact on business, and what have you been seeing out there, Andy, as you talk with companies, and what are they dealing with right now?

Andy Van Solkema: Well, wow, that’s a complex question in of itself, isn’t it? You know, yeah, it’s been quite a year, but there is a reality. I think there’s a reality to the shift that I’m seeing play out in a lot of our customers and a lot of companies. You know, I think that early on there were some things, there were some needs that had to be taken care of, but where that gave way to was a discussion of priorities, and, yeah, some priorities have shifted in some organizations as the behaviors of their consumers shift or as constraints on their business so their supply changes, so prioritization is a big piece of the puzzle. I also think that fundamentally, you know, large organizations, though they’re changing and they have to have conversations a priorities, they’re not changing fast enough. This has been accelerated. I think it was either Nadella or Bill Gates came out and said that, you know, in the first three months of COVID, we accelerated. We accelerated our shift to digital or organizations accelerated towards digital in a factor of three years, so it was more of a bigger acceleration than I think we had anticipated. But with that, I think there’s opportunity for every company, and I think we’re going to cover a little bit of that today.

Brian Hauch: Yeah. You know, just talking about change, change is always so difficult, and in this case, it’s like change is complicated by speed and like magnitude of change, right? It’s not incremental change, it’s like systemic change.

Andy Van Solkema: Yeah, absolutely.

Brian Hauch: And I liked how you were starting to describe that and, you know, like people, when they’re confronted with this change, there’s different paths forward, right? There’s kind of a reaction and putting out the fire. It also sounds like there is a—another more thoughtful approach where people try to reprioritize things and shuffle things around, and then it sounds like there might be another idea about reinventing who you are.

Andy Van Solkema: Yeah. You know, and as I kind of hit on, in simplest terms, you know, the path has been we have to take care of the fires that we have—there are a few dumpster fires we have. Once those give way, there is a discussion about what priorities should we be identifying and putting in our strategy, putting in our budget, giving dollars towards, and then shifting that thinking once there’s a strategy, once things are stable to where are the opportunities, what has actually changed in the market, and that poses questions that what else has changed in the world? Who is our competition? What does the market we’re in look like? What does the industry we’re in look like? What behaviors have changed from the customers we had versus the customers we can now acquire, and the interesting thing with that is we all, in our organizations, make plans, make budgets for the year, and no doubt was that the case this year, and we had a few clients who had a strategy going into January, and come March kind of had to throw some of that strategy out. One for instance was a client who held face-to-face events, and—to help sell their product, they’d go to shows, for instance, and they took that entire budget and shifted it towards the digital budget, and started to accelerate how they connect with customers that way. So it’s a bit of real time pairing that’s happening, I guess, is what’s been happening in my opinion. But as we, you know, you mentioned we’re in October right now, what I think is interesting about this turn of the year in October, not only are the leaves changing, but maybe our horizon is changing to what is happening today towards what do we need to start planning for in the future and what business are we in in the future? So…

Brian Hauch: You know, as you were going through those list of questions and considerations, it made me think, like, if I was running a business, and I have my whole business kind of optimized around making this thing and delivering this thing to the market, all those questions you brought up, they had nothing to do with that thing, right? It’s kind of like all these outside factors, how do I—can reconsider my business, how do I—what other value can I start to create to kind of respond to this new world, is there, like, how do you help people walk through, moving from I’m thinking about this thing to like, I have to respond to this whole system of things happening to me?

Andy Van Solkema: Yeah, no, that’s a great point. I mean—and this is pre-COVID—we tend to think of innovation as this event that happens, right? Or this new technology or this—a new way of reaching the market, and it’s very specific towards a product or even a service we’ve innovated, but historically, it’s not been an innovation of the model. Now, there’s plenty of examples in that history, but you know, holistically, our definition of innovation is pretty focused on something, but you know, as we’re learning technology and digital products, products in and of themselves, don’t change the world, the model around it does, you know. Overused example, Uber did not employ any new technology. GPS has been around for a long time, I think since the 1960s, but what they did do is they established a new model, and I think therein lies a very innovation, as I was speaking about opportunities earlier, there lies a very interesting opportunity for organizations to take a look at their ecosystem, their model, their business model, if you will.

Brian Hauch: It was interesting when you’re talking and describing Uber almost as a relief to me, like if I was running a business and it’s like, “Oh, so I don’t have to reinvent everything from scratch, right?” It sounds like that it’s possible to just kind of leverage technologies that are out there, but still to something significant.

Andy Van Solkema: Yeah, absolutely. You know, and maybe we’re jumping ahead here, but when I think about that, if you break down a business and simple businesses are complicated, right? Then you put people in them and they become even more complicated—

Brian Hauch: Okay.

Andy Van Solkema: but the opportunity areas for a business model, and we start looking at business model innovation, and we start looking at the what type of company we could be post COVID, the idea of, well, our customers, so the demand side, right? How has our product or our performance or our service or our channel reacting is one innovation, opportunity. The supply side is another, our partners, our operations, our resources, our production models. They also have the value proposition, you know, brand reputation offers, and the profit, financial model. And in combination, there’s an exponential opportunity there in terms of different ways that those pieces can be put together to create new models, and essentially that’s all, I think, a company like Uber did, was take a look at it. They didn’t invent, they didn’t invent a new product, mobile applications were there. They didn’t invent a new technology, the technology was there. They put it together differently. And with everything changing, the behavior’s changing, therein lies a potential opportunity formula for being able to apply these technologies.

Brian Hauch: Right. Like if you create a list and then you look at your list through the lens of these four levers to help create a new system for your business to live in.

Andy Van Solkema: Right.

Brian Hauch: It seems like that, you know, it seems like that is a big shift though in a lot of mindsets within companies to kind of think about like this ecosystem versus thinking about the thing.

Andy Van Solkema: Yeah.

Brian Hauch: What are some questions that people have is you talk with them as they’re trying to figure out their world now.

Andy Van Solkema: Well, so I want to talk about the shift aspect of your question. You know, there’s not only a shift happening because of COVID and because of behaviors and the way we get groceries and the way we order from restaurants and things like that, but, you know, as we think about our business, how future-proofed is it? Does it defend the past or does it look into the future, right? And a lot of times when you’re building strategies, it’s to find new opportunities and innovate, but a lot of times it’s also to optimize and defend the past and make us stronger in some respects in the way we’re currently bringing products to market. So if we’re really assessing the risk we now face, and everybody around us is moving, what is riskier, not having the opportunity or the optionality to be able to move into a space, or defending our current business? And I think that that is a major shift in the mindset of organizations, which, you know, really starts to push on some of the belief structures, and the—what do we value and what measures do we have and how are we tracking success? Because we still might have a great quarter coming up, but is it future-proofing us in some respects?

Brian Hauch: Hmm, it’s interesting. It sounds like a lot of it is how do we perceive risk, right? And how do we include that in our strategies and our processes as we—

Andy Van Solkema: Yeah.

Brian Hauch: think about change.

Andy Van Solkema: In terms of risk, we have to keep the core business going, right? That’s our lifeblood, that’s the model that is providing value, unless the shift has been that rough on us and it’s no longer providing value, and then we’re in this necessity mode of innovation.

And so one thing I do think is that for years we saw innovation as more of an ROI discussion. If we’re going to do this thing, what are we going to receive back? What can we predict that we’re going to receive back? And there is a bit of a class of businesses that are now looking at it as a necessity mindset, and I would argue that most organizations should be looking at it as necessity. When you further look at risk from a necessity standpoint, I think it’s more of a risk on whether or not we have alignment and whether or not we have the right information coming in, so that we can build towards that next thing, than the efficiencies of our current model, right? ‘Cause if we don’t have the right information coming in and we don’t have alignment as a team, how are we going to be building on that necessity or that need that has presented itself?

Brian Hauch: Yeah, that’s interesting to think about innovation through the lens of information that’s coming in, and, you know, kind of like decentralizing innovation in a company, so you have different perspectives, probably even doing user research, talking to your customer, understand what is their world look like right now, and that can help provide information for decision-making for companies.

What areas do you look at to find new ways to think about challenges or risks, or where do you go to find new information?

Andy Van Solkema: You know, I think what you’re saying, Brian, there is about, we like to have the analytics that come in, and we can measure a production system, and we can remeasure, you know, scores from our customers and profitability this quarter, and even to the point where we can measure use of an item that we put out there, especially if it’s digital, and those are all good feedback roots for us, but when we don’t know exactly what is going to be valuable to the market, to our customer, I think the best way is to experiment, is to put those tests out there, to do prototypes and pilots, and they are a little different, you know, prototype is a specific thing we want to focus on, and a pilot is actually the whole ecosystem of stuff that we’re trying, but putting those pilots out there to be able to gather information, to be able to understand and learn, and that—the challenge with that is that how we celebrate that and how we stand that up in our organizations is changing right now. How innovation happens across the whole versus just an R&D department or a specific team that finds those things when we really could think about these prototypes and pilots as experiments. And then the bigger question is, well, how many experiments should we have to learn the necessary information we need so that we have one success out the end? And that goes back to the drawing board of planning and pairing and prioritization again, like how are we making sure we have enough time and effort and resources to be able to do that? So all of that is riddled with challenges in an organization. Yeah, I guess what I’m saying mostly here is thinking a little bit of new paradigm, because we have shifted from ROI-driven innovation to necessity-driven innovation in some respects.

Brian Hauch: As you’re talking, it makes me feel like, one way to think about, and one way to respond to everything that’s happening in 2020 is to think kind of systematically about a business, and what is my business purpose and what am I doing here? Are there tools or ways or lenses to think kind of systematically about my business model, or how do you typically begin to go down those paths with people?

Andy Van Solkema: So we talked a little bit about being a innovator and how organizations have innovated through products or technology, and what we’re really encouraging is this view of a platform, right? If you’re creating an ecosystem, if you’re creating a platform, you’re creating an ecosystem, so your business model’s broader, and the way I would kind of frame that is, you know, what business do we believe ourselves to be in? And here’s a couple of examples. You know, auto manufacturers, like GM and Ford, both believe that they’re in more of a mobility space than transportation. Someone like the weather channel, which has historically delivered, you know, weather news believes that they’re a data source for the world’s weather data, and if you’re a travel provider, you’re more of a curator of experiences. My point is is that as you look at demand, supply, value proposition, profit model under the greater framing, and then you assess and you counter that with the changing behaviors of customers and what data and what additional outside circumstances to consider, you can really start to frame a new vision, new driver for your innovations, and kind of shift from being just a simple product innovation to more of a platform innovation, and provide yourself the optionality to be at—to add other points of value on that, so…

Brian Hauch: As people change, do they have to reconsider channels and how they connect to their users?

Andy Van Solkema: Absolutely. It’s either new channels or modification of current channels, obviously. I mean, take restaurants or grocery right now, that’s a bit of a modification of their model, but our channel, you know, us as a channel, and a much more of a necessity driven one, but as you start to think about the opportunity there, anticipating or being able to look at the needs of your customers and how their behaviors are actually changing a market systemically, and then, again, experimenting with new ways to reach them is an opportunity to start thinking about channel innovation as a focus.

Brian Hauch: What I really like about this conversation is that it feels very intentional, right? And in this day and age, everything feels so reactionary, right? And what I think you’ve highlighted are there are strategies and there are ways to think about change that are not reactionary, but you can have some control over it, right? And still respond to the situation.

Andy Van Solkema: Yeah. And that’s the thing about the ROI necessity model that I was talking about, where you’ve got dumpster fires, you’ve got reprioritization, and then you have opportunity assessment and innovation. Those—that really is pivoting from reactionary to proactive, right—ideally it is—but that’s kind of the opportunity I see for this, you know, we’re—the world has changed, the market’s changed, so what’s the opportunity?

Brian Hauch: I like that. And I’m wondering, so I’m trying to put myself in the position of a senior leader out there that might be listening to this podcast, and are there any sort of questions or prompts that you might provide people to kind of help them on their first steps down this journey of thinking proactively about change?

Andy Van Solkema: Yeah. I mean, depending on where they are on their journey would pose the first question, you know, if there are things they have to take care of for their core business, that would be the first question: what do we have to do to shore up our core business? Then I would start asking, what business are we in? Are we considering innovation a product initiative or a platform initiative? Do we see ourselves as a platform, you know, using technology or do we put technology into our products? Then I would look at those levers of the ecosystem, you know, where are there opportunities with demand, supply, value proposition, and profit—profit model that we can start to tweak and think about aligned to customer—changing customer behaviors, aligned to what data we’ve seen from the market or that we’ve gathered, and what other outside circumstances in our industry should we consider, you know. And so there’s a lot of different tools there and a lot of different ways to think about the problem of your business in that respects.

Technology is a constant, you know, product management is a constant, all these things we do at OST in various projects, data is a constant, those things are really important, and there should be a foundation for them, but implementing something that doesn’t allow for optionality in the future, because all those levers are also relevant, would kind of be cutting your legs off at your knees, and that’s what we want to be able to support a changing business model, not just a new technology.

Brian Hauch: That’s great. That’s great to think, you know, and not to cut yourself off at the knees, right? But to give yourself choices as you get down this path of innovation, and I can really see that as being beneficial and really ensuring that your strategy provides for optionality, as you said.

Well, thanks for this conversation today, Andy. This is great.

Andy Van Solkema: Yeah, thank you so much.

Lizzie Williams: OST, changing how the world connects together.