How to Define Your Innovation Program’s Diamond Nugget

An exploration into finding the right metrics to focus on growing your Innovation program.

Attending Lean Startup Conference? I’ll be hosting a workshop on this topic on November 14th at 2pm. Also, I’ll be hosting mentoring sessions throughout the event that you can sign up for here. Hope to see you in my session.

Everyone is on a journey.

Some people quite consciously, others perhaps unknowingly, move, evolve, and hopefully grow as individuals.

Businesses are inevitably part of that journey. Through their products and services, they influence the journeys. Their influence might be, quite frankly, for better or for worse.

All our individual journeys are made up of numerous sub-journeys. These are the different threads of our lives made up of family, friends, or business relationships. They're made up of the actual trips we take; the phases of our life from childhood to adolescence, school, work and maybe college and our careers. And, some of those sub-journeys include our relationships with the companies who sell us products.

I believe it's each of our responsibility to be conscious of our journeys and to seek to better ourselves. But it's also our responsibility to help others on their journeys. And so, in business, part of our responsibility is when creating products and services, we help others pursue their journeys: we should provide value to human beings.

It’s no coincidence that in business, we leverage experts who actually map those relationships and call them, lo and behold, “customer journeys.” We can use customer journeys to track the progress toward creating value for the customers, and driving impact for companies.

The Value Stream Discovery Board (download available here) provides a way to view a customer's interaction with a company. It describes the journey from the customer’s perspective. It doesn’t look only at the experience with a particular product, but rather the customer's relationships with a company -- from first becoming aware to becoming passionate.

Enterprise Innovation programs have customers. Not only those who will interact with future products, but internal customers, who might include:

• Innovation team members
• Innovation coaches
• Program leaders
• Program sponsors
• Company leadership

We use the Value Stream Discovery tool to track the journey of each of these stakeholders.

7 States Customers Experience While on Their Journey

The states go like this:

First you are aware, and then you become intrigued, and trusting. Then you are convinced, go through this funky state of being hopeful, then satisfied and ultimately, passionate. (More on each individual state here.)

As you can see, this journey combines what might be considered acquisition marketing (aware), with product marketing (intrigued and trusting), the sales funnel, including conversion (convinced), and then product engagement (hopeful and satisfied), and ends with what some people include with product, or others, brand marketing (passionate).

To use the value stream, you start by hypothesizing the behavior you see that indicates which state a customer is in, what you as the business must DO to get that behavior, and how you will measure the behavior. It’s important to focus on customer behavior, because this represents real market evidence.

It’s not what a customer says they’ll do.

You apply the 3 E’s of lean innovation, develop empathy, run rapid experiments, analyze evidence -- data + insights -- to find the right actions the business must do to illicit the behavior.

Most businesses rely on traditional business-driven funnels. In other words, we focus on the business activities. Key performance Indicators (KPIs) focus on people executing business activities. By focusing on customer behavior, we’re using our empathy for them to create the right business activities, as well as tracking the customer behavior. A marketing or sales funnel, by definition, filters people out. You actually want to create multiple cylinders.

The diamond nugget is the core of this behavior stream. Three essential components are necessary to build a thriving business and the rest is essentially optimizing getting people into and through the stream.

The Diamond Nugget

At the core of this journey is a diamond, comprised of 3 states: Intrigued, Satisfied, and Passionate. These 3 emotional states of the customer journey are fundamental to all successful businesses. These form the basis of everything else. The “nugget” must be completed for each customer segment. We prefer to identify the segment with a real person, we call a persona. See our Customer Zoom tools.

Intrigued

Intrigued is when a potential customer first thinks, "Hey they're talking to me. What they're saying is interesting." It has two components: utility and aspiration.

Utility is the customer need that must be fulfilled for the product to succeed. This is a promise that must be kept.

We create 5 hypotheses. The first 2 represent what you are marketing, the 3rd, how you will market, the 4th, the expected response, and the 5th, how you will measure it.

1. UTILITY NEED: What are the core needs of this persona (no more than 3)
2. ASPIRATION: What is the journey the persona will join or major impact
3. BUSINESS ACTIVITY: How will you communicate this message?
4. CUSTOMER BEHAVIOR: A customer is intrigued when: she does ________________.
5. METRIC: To measure behavior: we track __________.

The intrigued marketing is inexorably linked to the next two states.

Satisfied

Customers are satisfied when the utility function is realized; in other words, the promise is fulfilled. Your first product version that attempts to deliver the promised value, is your Minimum Viable Product. So your 3 hypotheses might follow this structure:

1. BUSINESS ACTIVITY: In order to fulfill the utility promise, the product must have at least these characteristics:

a.

b.

c.

1. CUSTOMER BEHAVIOR: A customer who is satisfied: interacts with the product specifically in these ways:

a.

b.

c.

1. METRIC: To measure behavior: we track what the user does over a specific time period.

Passionate

Customers are passionate when they have successfully joined the journey toward achieving an emotional impact. This cannot be promised to the customer, since the success of the journey is shared. Sometimes this happens with the product itself, but more often than not is based on something else inside the business model.

1. BUSINESS ACTIVITY: We ask the customer to join us on a journey toward achieving the aspiration ______________.
2. CUSTOMER BEHAVIOR: A customer who is passionate: invites others to join by ___________.
3. METRIC: To measure behavior: we track the viral coefficient of product invites and signups

Child’s Music App Example

The Value stream will differ for different market segments. So you want to segment around people who share the same need for the utility and are drawn to the same aspirational journey. Your early adopters will be consciously aware of the aspiration.

You don't segment around demographics and you don't create personas based an amalgamation of data. Your segment must be about real people who have a common need and desire a similar impact on their life.

An entrepreneur in Toronto was building a music app for the iPad.

He discussed his “value proposition” like this: "If your child uses the app they will be having fun and practicing their music at the same time. So they will practice more."

When asked why he was building the app, he said, "To save parents money."

The first statement is a strong utility function promise. The child must practice more because of the app or the business is a non-starter.

The second question, however, was trying to get to the entrepreneurs “why”. Why did he feel driven to build a business around this concept? “To save parents money” is a pretty lightweight answer.

When pressed, he said, “Because I'm a musician."

When pressed more, he said, "Because I want kids to grow up to love music."

A ha! Why do you think parents pay for music lessons to begin with? Yes, there are less altruistic answers, but most parents who provide their children lessons want them to grow up to love music, too.

This is the shared journey.

The entrepreneur can't promise that. But the journey itself that the entrepreneur, the child and the parents go on together creates passionate customers.

Innovation Program Example

Innovation programs -- any internal organizational program -- has internal customers, therefore can use the Value Stream Discovery canvas.

Your Diamond nugget might look like this:

Intrigued

Let’s say the Customer Persona is a Program Sponsor named Ellen. She is a business unit leader with P&L responsibility for a key part of a large insurance company.

1. UTILITY NEED: Ellen wants ways to improve her business unit’s market share.
2. ASPIRATION: Ellen will be seen as an innovative leader who expands company market share, positioning herself for advancement.
3. BUSINESS ACTIVITY: Sharepoint broadcast of need for sponsor challenges for innovation team.
4. CUSTOMER BEHAVIOR: A customer is intrigued when: she submits challenge.
5. METRIC: To measure behavior: we track # of challenge submissions by sharepoint referral.

Satisfied

BUSINESS ACTIVITY: create a minimum viable product that includes:

• 90 day accelerator where an innovation team works on specific sponsor challenge
• Team has expert mentors
• Teams check-in with senior leaders every 30 days for progress review

CUSTOMER BEHAVIOR: Sponsor submits challenge to 3 accelerator cohorts

METRICS

• # Challenge submissions/year based grouped on start time

Passionate

BUSINESS ACTIVITY: Innovation program works with Business Unit leaders to secure the future of the company by discovering solutions to near and long term needs.

CUSTOMER BEHAVIOR: Ellen proselytizes Innovation program to other leaders

METRIC

• To measure behavior: we track sharepoint posts from senior leaders

Final Thoughts

Using the Value Stream Discovery Board provides a way to view a customer's interaction with a company in order to determine which metrics are vanity, and which actually drive impact.

When you look at the journey from the customer’s perspective, you can see when a customer first became aware that your brand even existed, all the way to the point they became passionate, and you can use this information tucked away inside the diamond nugget to build a strategy around defining and nailing those metrics that matter the most.

Click here to download the tool.

Interested in digging deeper?

Join me at the Lean Startup Conference, November 14th at 2pm. I'll be hosting a workshop on how to use the Value Stream Discovery Board to find the diamond nugget, so don't miss it!

Learn more about what's going on at LSC here.