In the first episode of our seventeenth season, guest Stefan F. Dieffenbacher discusses innovation strategies for business growth. With 90 percent of innovation initiatives failing, Stefan shares insights from his book, “How To Create Innovation” and introduces us to the UNITE framework. We learn why Stefan favors the Jobs To Be Done approach over traditional Buyer Personas, how the Culture Canvas fosters innovation, and ways that AI can be used to support true differentiation.
Episode Transcript
Adrian Tennant: Coming up in this episode of IN CLEAR FOCUS
Stefan F. Dieffenbacher: It is so critical that you choose a brand positioning that truly reflects for the customer what he’s going to find with you and what you can truly offer from a business and operations perspective. So look at the value disciplines and think about who you can be, who you want to be and who you should be in light of your competition.
Adrian Tennant: You’re listening to the first episode in the seventeenth season of IN CLEAR FOCUS, fresh perspectives on marketing and advertising produced weekly by Bigeye, a strategy-led, full-service creative agency growing brands for clients globally. Hello, I’m your host, Adrian Tennant, Chief Strategy Officer. Thank you for joining us. As we’ve discussed over the past five years of this podcast, innovation is crucial for survival and growth. Yet studies show that up to 90% of innovation initiatives fail. So how can businesses create a culture of innovation, employ effective strategies, and successfully navigate digital transformation? Well, today’s guest is an expert in answering exactly these types of questions. Stefan F. Dieffenbacher is the founder and CEO of Digital Leadership AG, an open-source consultancy. He’s led numerous large-scale innovation projects with companies including Amazon, BMW, Google, and Pfizer. Stefan has built up and managed a workforce of over 400 people and has overseen a total investment of over 100 million euros in innovation initiatives. Stefan is also the lead author of the new book, “How to Create Innovation: The Ultimate Guide to Proven Strategies and Business Models to Drive Innovation and Digital Transformation,” published by Wiley. The book results from more than five years of systematic research, analyzing 75 pain points innovators struggle with and incorporating insights from over 60 distinguished global thought leaders, practitioners, and researchers. To discuss some of the book’s key ideas and share insights on creating successful innovation strategies, I’m delighted that Stefan is joining us today from Zurich, Switzerland. Stefan, welcome to IN CLEAR FOCUS.
Stefan F. Dieffenbacher: Hello, hello. Thank you so much for having me.
Adrian Tennant: Stefan, you’ve had a fascinating career journey from co-founding an internet startup in the 1990s to working with Boston Consulting Group and Sapient Nitro, and now leading your own firm, Digital Leadership AG. Could you tell us a bit about your career path and what led you to become so passionate about innovation and digital transformation?
Stefan F. Dieffenbacher: Well, I guess my career started just after the internet was born. So the first startup was in 1998. I started selling computers in 1996. So I just entered this fascinating world with that first startup where we tried to compete with Yahoo, etc. And that was basically a startup is right in the middle of innovation. And then I stayed on the entrepreneurial side for a few years. And after that, I wanted to see how the big guys out there were doing this. So I was literally Googling the internet and seeing that was the biggest project worldwide. And that was back then in Saudi Arabia. So I joined IBM launching the second telco in Saudi Arabia. And from there I moved from country to country. following basically some of the largest projects globally. So today I live in Zurich in Switzerland, which happens to be my 14th country. And I guess I’ve been leading some of the biggest initiatives globally and my fascination for innovation and transformation and change in general has remained over all of those years.
Adrian Tennant: Amazing, 14 countries. Your new book, “How To Create Innovation,” results from an extensive research effort involving over 60 co-authors and 300 contributors. Stefan, what inspired you to undertake a collaborative approach to writing this book, and how do you manage such a large-scale project?
Stefan F. Dieffenbacher: I mean, I noticed that corporations were hugely struggling with innovation. Therefore, we decided to develop an innovation approach that was superior. And therefore, we started working on the methodology back in 2015. But basically, we discovered ourselves as well, that we were reaching the boundaries of our knowledge. We therefore decided to get contributors in on subjects which we were not firm on. Then it became bigger and bigger. So we suddenly thought, hey, we have to address corporate culture and organization culture and how to address it. Then organization and more and more special topics came into play. And then the group grew and grew and grew. And the tough thing, I guess, wasn’t so much about writing this book. It was more a research effort, for example, to develop better tools on business model innovation. was a consolidated effort of one particular group of which we had 45 members. And so is the same with the culture and organizational culture. There were like 50 people in that subgroup. And each subgroup basically had one or two or three leaders. who were moderating the effort, who were sharing best practice, who were sometimes calling for workshops, who were proposing new ideas. And so basically the work was split up in at least a dozen groups over time to develop better practices to address some of the biggest challenges. And how did we identify the biggest challenges? Well, we looked in the end at 270 postmortems, so 270 failed initiatives in innovation or digital transformation. We looked at the reasons of failure and we tried to identify there were better ways of doing that and addressing systematically those points of failure. And that is why we addressed culture, organization, all of those different topics related to innovation to ultimately increase the odds.
Adrian Tennant: I mentioned in the intro that 90% of corporate innovations fail outright. What are the primary reasons for this high failure rate and how does your approach aim to improve these odds?
Stefan F. Dieffenbacher: From those 270 postmortems, we have a clear list of items why innovation efforts fail. And I would like to particularly focus on the two biggest ones. The biggest one is failing to develop or setting up the right kind of foundation. Typically, organizations go with what they have and what they know into developing innovation. And that, by definition, cannot work. You have to develop a very specific setup that use very specific methodologies with different people, with different practices, et cetera, that are different from your day-to-day operations. And that is what organizations systematically fail at doing. The second biggest issue is identifying where to innovate to start with, because most ideas are absolutely not worthwhile pursuing. So then the biggest challenge becomes what is actually worthwhile pursuing? These are the two biggest ones.
Adrian Tennant: Excellent. You’ve developed the UNITE framework for driving innovation. Stefan, could you give us an overview and explain how it differs from traditional approaches to innovation?
Stefan F. Dieffenbacher: Yes, the UNITE framework is basically an acronym, and it means Understanding and Navigating Innovation and Transformation in Enterprise. And it’s basically not a single framework, but it’s an umbrella for in total something like 70 tools, models, frameworks, approaches, and canvases. that are systematically designed to overcome the biggest challenges corporate innovators and corporate transformation people that they face. I guess what is very special about those tools is they are not one-trick ponies. So we all know the business model can be some, but most people struggle to move from business model canvas to operating model canvas, and from there to organizational structure, and from there to organizational culture, and from business model to value proposition, to elevator pitch, to important but unaccustomed, etc. The biggest challenge we often face is that those models are not interconnected. And if you think about it, excellence in individual disciplines is heavily overrated. When it comes to developing innovation or transformation, you can come up with a very mediocre business model and a mediocre value proposition and a mediocre financial plan. That is good enough as long as you manage to connect the dots. This is where we most often fail. And I guess this is what makes the UNITE models very special is that they are systematically covering the biggest challenges and that they are for the first time integrated so we can really explain how you connect and go from one thing to another.
Adrian Tennant: Great. Stefan, when we were preparing for this interview, you shared your critique of using buyer personas in marketing. Could you explain your perspective on this and the approach you recommend?
Stefan F. Dieffenbacher: But I’d like to start with an example to give us all some food for thought. I guess we got to know each other already a little bit. So you have a few information about myself. So imagine I am a persona and the persona being a typical representative of a customer segment. And customer segments are a core concept. So we develop innovation towards certain customer segments. We develop marketing approaches for certain segments. We developed advertising for certain segments. So here is a simple challenge. You got to know me now a little bit and I have a very simple question and it is, am I going to a fancy restaurant tonight or to a very nice bar? It’s a tough challenge. Imagine you have all the information of this world about my customer segment and me as a persona, and still with no significant probability you will be able to answer that question. That is the big problem. What unites us? is in the end not demographic and psychographic and sociographic information. What UNITEs us is a certain desire to achieve a certain end. So the question is, what are the important but unmet customer needs somebody is having? And if I give you my customer need right now, then it would become very easy for you. So let’s imagine I was in Paris two weeks ago. And I was meeting back with my fellow students from university, where I’ve been to university almost 20 years ago, and we’re looking for a nice place to go. Would you go out to a fancy restaurant or to a nice bar? Now it becomes obvious. Most likely the guys went for the very nice bar. Now it’s obvious because you’ve suddenly understood the important but unmet customer needs. Most likely these guys want to have a fun night out. It’s more likely to achieve that in a bar. And the interesting thing is that important but unmet customer needs remain the same over even long periods of times. We all want to be entertained while traveling to work. A hundred years ago, we would buy a newspaper. Today, we are using the iPhone to do whatever. So that core concept of important but unmet customer needs remains stable over time and therefore you can easily do that research and it will remain valid and reliable for the next decade to come most likely. That is basically the alternative I’m proposing. There is a methodology which allows you to strategically and with statistically significant probability discover those unmet customer needs. That methodology is called jobs to be done. That is what I’m advocating for. There was a recent newspaper article which said in innovation that you needed to create 100 ideas for one to fly. But how likely is it that you’re creating an idea that is inside the box, inside the frame, that is relevant, that it meets your distinctive capabilities, that it’s offering opportunities for differentiation, that it actually meets those important but unmet custom needs? It’s all very unlikely. So instead of ideation, I want to propose an approach that with statistical significance is hitting straight where we want to be. That is jobs to be done, important, but under customer needs. That is what we ought to be having because if we use ideation as a basis for innovation, it’s just by definition unlikely that we’re going to create a hit.
Adrian Tennant: Not so much gut reaction to things, but more a quantitative analysis that can be supported by evidence-based insights.
Stefan F. Dieffenbacher: Absolutely. And in essence, you’re trying to really understand a customer journey in depth and understanding how a customer is solving or resolving his important but unmet customer need or customer group. So you normally do 15 in-depth interviews roundabout to really understand all the nuances. and how customers measure success at every corner. And after this, once you have understood the challenges, the opportunities, all those details in that customer journey, you’re going for a quantitative approach. So normally you’re interviewing then at least 150 people to validate in depth each step of that customer journey. And then you have statistical significance behind it. That is how you ensure and that is of course a much better basis for innovation when you know exactly that people always struggle with comparing products in the e-commerce industry in whatever.
Adrian Tennant: I’m curious, Stefan, what do you think about the use of synthetic data in this kind of research?
Stefan F. Dieffenbacher: In the end, you’re talking about investment confidence. I mean, 90% of all innovations fail. In my opinion, we need to invest everything we can to increase the likelihood of succeeding, which is ultimately measured by the investment reliability we get. Therefore, with synthetic data, whatever shortcuts we can take, and there are a few other shortcuts we can take. Soliciting experts, just being one of them, asking chat GPT, generating data of whatsoever types. Ultimately, they’re all shortcuts. And I think what we need to do is really increase the likelihood of succeeding. Therefore, in the end, if it really matters, I would advocate still for doing the research and yeah, it’s a two or three months effort. If it doubles, triples or quadruples your likelihood, which it does, yeah, it’s very well invested time and money.
Adrian Tennant: Let’s take a short break. We’ll be right back after this message.
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Adrian Tennant: Welcome back. I’m talking with Stefan F. Dieffenbacher, the author of “How To Create Innovation: The Ultimate Guide to Proven Strategies and Business Models to Drive Innovation and Digital Transformation.” “How To Create Innovation” introduces the concept of the Culture Canvas. Stefan, can you tell us more about this tool and how organizations can use it to foster a culture of innovation?
Stefan F. Dieffenbacher: The Culture Canvas is basically a strategic tool which helps you identify the biggest driving forces for organizational culture, and you can well use it to the context of innovation or transformation to design the right kind of culture. Culture in general is the elephant in the room. We don’t know what are the primary sources. It’s easy to agree that culture eats strategy for breakfast. However, we don’t often know what it is. Is it sushi lunches, colorful offices, massages, and I don’t know, chocolates in the afternoon? We don’t know. And therefore, and that was I think the big work we did, we identified the most important driving forces of culture. and they are laid out on a very easy-to-use canvas, a bit comparable and similar to the business model canvas, and simply use those headings and work with post-it notes to identify how does your current culture look and how far is that away from your target culture, or if you’ve mapped that out as well, the right kind of culture you typically would require to develop innovation. And therefore, it’s a very straightforward tool. Feel free to download it. It’s contained as well in our book. And get started and get ahead. Because most of us really don’t know what culture really exists out of. And to be honest, we didn’t know either. It took one and a half years of debating with over 40 people to develop this one.
Adrian Tennant: In your book, you also discuss the importance of identifying “Search Fields” and “Opportunity Spaces” for innovation. Could you explain these concepts and how they can help organizations focus their innovation efforts?
Stefan F. Dieffenbacher: You don’t want to innovate everywhere. You want to innovate in the right kind of places. And therefore, we have two concepts on a macro level, like think very high level. Which planet do we want to invest in is the Search Field. That is the highest-level definition. And each search field contains multiple opportunity spaces, which we then would consider to develop innovations in. And multiple angles go into those search field and opportunity spaces. And perhaps a little bit of a war story. Once I was working for an insurance giant and they came up with building a t-shirt printing factory because they, for some reason, had found something cool in there. I don’t even remember what it was anymore. Obviously, it’s difficult for us to see the connection between insurance and t-shirt printing. And therefore, does it make sense? Does it add strategic value to the group? No, it doesn’t. And therefore, one of the most important factors to take into account as you think about where should we be innovating, you have to consider what you’re differentiating capabilities of your parent organization that you want to be leveraging. Because we all like to be talking about unfair advantage. But there is no such thing as unfair advantage. If I’m not leveraging the things, my parent organization is already strong. So you absolutely want to identify the differentiating capabilities of your parent organization and use those as one of the key driving forces To identify what can I do with those? How can I use them in an innovation? Because only then are you sure you’re going to build an unfair advantage and are using something that is still relevant to your parent company. That’s one of the most important driving decisions we make and we utilize. And therefore, I think that’s one of the cornerstones which I think are most critical. So think about carefully these differentiating capabilities that you are going to leverage. These are part of the opportunity fields where it really makes sense to innovate.
Adrian Tennant: You mentioned the business model canvas a few moments ago. Your book presents a novel approach to business model innovation. Stefan, could you give us an example of how this approach has been successfully applied in a real-world scenario?
Stefan F. Dieffenbacher: So the first question is, where can you be innovating as part of a business model canvas? And the short answer is everywhere. You can innovate all parts of your business model. You can innovate your cost model. You can innovate your operating model. You can innovate your value proposition, your service model, et cetera. You can innovate all parts. The question is, what ways of innovating are there for each part? And we have, amongst others, developed a library of patterns, we call those the business model innovation patterns, which strategically lists the 95% of all typical patterns organizations can choose in each part. So we list, for example, the 20 most typical ways a cost model can be innovated. Surprisingly, most business model innovations are absolutely not new. Millions of organizations around the world have tried to innovate that and they’ve all figured out the way of doing to optimize costs in the business and to develop suitable pricing strategies. So you don’t have to reinvent pricing strategies. You can simply look up which pricing strategies exist. And if they would fit the business model you have in mind. So innovation then becomes not a luck-oriented process but again a strategic and methodological process where you start with the business model innovation patterns. Consider your pricing challenges. Go through the list of pricing options and check with each one. Oh, does this help? No. Next one. Does this help? So it becomes a very simple and methodological process. It allows you to make sure you have covered 95% of all patterns. And that again is drastic progress because again, you don’t rely on luck anymore. You rely on simply a solid foundation, which you can look up. And again, the business model innovation patterns are available as part of the UNITE models. You can get those for free. They’re also contained in the book.
Adrian Tennant: Marvellous. Well, I have the book right here. Stefan, I’ve got to say you and the team at Wiley have done a great job with the visual layout and format of “How To Create Innovation.” It fits very neatly on my bookshelf alongside the “Business Model Generation” book from 2010. And like that book, it benefits from some really helpful illustrations. You’ve also included over 50 ready-to-use tools and models in the book. Could you highlight one or two that are particularly valuable for brand marketers and explain how they could be applied?
Stefan F. Dieffenbacher: So brand is a relatively well understood topic, and normally organizations don’t fail because of brand. There is, however, one strategic topic, I think, which many brands struggle with. Therefore, I would like to briefly discuss the value disciplines triangle. Each brand has the opportunity to either be customer intimacy, which is who knows the customer best, who best understands the customer needs. That might be the person who is doing your hair, for example. He or she might perfectly know how you would like to have your hair cut. Then you have product leadership, and product leadership is the best available product. The best available product might be, for example, the iPhone in its category. Or you may be the operational excellence guys, and the operational excellence guys have their processes under control. They’re normally the fastest and the cheapest. These are the three macro positionings. And many organizations fail to clearly choose one of those three macro positionings. Are you the custom intimacy brand, the product leadership brand, or the operational excellence brand? And still today, you’re forced to choose. First of all, from a customer perspective, the customer wants to clearly understand, who are you? You’re the cheapest, the best. That’s from a customer perspective, but also from a business perspective, you have to make a clear choice. Are you the cheapest? The best or the most fitting, and you have to make that strategic choice. Most organizations don’t think about that very basic and fundamental question and therefore try to choose something in between, which by definition cannot work, particularly at the beginning when your resources are extremely limited. It is so critical that you choose a brand positioning that truly reflects for the customer what he’s going to find with you and what you can truly offer from a business and operations perspective. So have a look at the value disciplines and carefully choose and think about who you can be, who you want to be and who you should be in light of your competition.
Adrian Tennant: That’s great advice. For any listeners who want to start improving their organization’s approach to innovation, what’s one actionable step you’d recommend they take right away?
Stefan F. Dieffenbacher: We talked a little bit about the concept of jobs to be done and how it helps to increase the likelihood of customer success. And that is absolutely fundamental. So go for this one. But even more fundamental is the primary reason why organizations fail is to create the right kind of foundation. As I mentioned somewhere at the beginning, the tools, the approaches, the frameworks, your team set up, your culture, your human resources, your process, your procedures, everything changes radically depending on if you’re executing and improving, if you’re transforming or if you’re innovating. And most organizations don’t make that conscious choice, don’t have the right setup. And if you don’t have the right setup, you by definition cannot succeed or it becomes really an uphill battle. The organizations are typically not really used to creating a setup designed for innovation. Why? Because that’s what they only do every couple of years. Often they struggle because they don’t have the right team. Procurement doesn’t play in their direction because et cetera and so on. Everything changes radically. And therefore I can’t stress that enough that before you do anything, think about what kind of setup you truly need to create successful innovation. There we actually have a framework as well, we call it the three horizons of growth. And alongside over 50 dimensions, we have detailed out what it truly means to execute and improve horizon one, horizon two, transform, horizon three, innovate. And we have really detailed out what it means in terms of technology, in terms of procurement, in terms of leadership, in terms of culture, et cetera. You have to think about all of those dimensions and really create a setup that works for you. That is why most organizations fail.
Adrian Tennant: Looking ahead, Stefan, how do you see innovation evolving in the next three to five years, let’s say, particularly with the rapid advancements in AI and related technologies?
Stefan F. Dieffenbacher: So I guess the most important question is how and where can we apply artificial intelligence to augment our business model? And like innovations happen frequently. If you just take a historical perspective or look at into the last years of innovation, what did we see? We saw crypto, we saw big data. We saw machine learning already before that, and so and so and so. And now we can ask ourselves the question, have we benefited from those innovations and those new technologies? More often than not, in most cases, organizations really haven’t managed to benefit from those. Now basically AI comes into play and everybody has huge expectations from it and currently they are at the top of the hype cycle and most likely falling down. The problem is not technology. The question is where can we apply those technologies to make most sense. Let’s briefly discuss one framework which is absolutely essential. We call it the Strategy Execution Framework. The Strategy Execution Framework tells us that 80% of all processes and capabilities in a firm are not even industry-specific. So the way you do marketing, the way you do HR, the way you do technology, the way you do production, even most likely, is not specific to your discipline. So in those 80% of all cases, you do want to apply what they call best practices. But in reality, there is no such thing as a best practice. If somebody calls it the best practice, it’s a standard practice. So you want to roll out standard practices in the 80% that is not even industry-specific with the objective to ultimately cut costs and standardize as much as possible because in areas which are not even industry-specific, it’s extremely unlikely. that you find ways of differentiating. And therefore, the question is, where can we actually differentiate? They’re the core areas of a firm. The core areas are 15% of all processes and capabilities of a firm, which are industry specific, but where we are not better. So we are battling heads to head. with other firms out there, but are typically not better. A firm typically differentiates in only 2-5% of its processes and capabilities. So you have to wonder, as you go back into your office tomorrow, with what is my firm truly differentiating, there will be one or two things only. And if you want to drive innovation, if you want to drive differentiation, if you want to drive and build strategic advantage, then you have to strengthen your differentiation. Let’s go back to the question of where to apply artificial intelligence. You want to apply artificial intelligence in those two to five percent of your organization to strengthen your differentiation. You’re just cutting costs, going to cut some costs, who cares? It’s not going to make a drastic difference typically, but to win the battle and to win the future, you have to invest in your differentiation. That is what most organizations haven’t got and what they’re all making wrong. I’ve personally led the first hackathon with Microsoft and OpenAI with 17 strategic accounts globally. And that is organizations struggle again to identify where they should be applying artificial intelligence. The answer in the end is easy. Not somewhere in the operating model, not in the non-core areas where 80% is not industry specific. You want to apply AI to strengthen your differentiating capabilities to invest in those 2 to 5% and identify those. If you’re good at this, then most likely you will do the right kind of thing.
Adrian Tennant: Great conversation. Stefan, if listeners would like to learn more about your work at Digital Leadership or your book, “How To Create Innovation,” what’s the best way to do so?
Stefan F. Dieffenbacher: On our website, you’ll find the UNITE models, where you can get started for free and simply download these models. They are all well-documented, so simply go to digitalleadership.com/UNITE, get started with one of the models, or get started with the book, “How to Create Innovation.” You can find it in any store around the world, on Amazon, of course, on our website. And our website has a very long preview available. Like, you can download, I think, close to 100 pages at digitalleadership.com/createinnovation. So have fun, go out, enjoy those resources, and get started.
Adrian Tennant: Excellent. Stefan, thank you very much for sharing your insights with us on IN CLEAR FOCUS.
Stefan F. Dieffenbacher: Thank you so much for having me. And thank you for the very good questions and insightful conversations, Adrian.
Adrian Tennant: Thanks again to my guest this week, Stefan F. Dieffenbacher, the author of “How To Create Innovation.” As always, you’ll find a complete transcript of our conversation with timestamps and links to the resources we discussed on the IN CLEAR FOCUS page at bigeyeagency.com. Just select Insights from the menu. Thank you for listening to IN CLEAR FOCUS, produced by Bigeye. I’ve been your host, Adrian Tennant. Until next week, goodbye.
TIMESTAMPS
00:00: Introduction to Brand Positioning
00:24: Welcome to Season 17 of InClear Focus
00:45: The Importance of Innovation
01:18: Guest Introduction: Stefan F. Dieffenbacher
02:29: Stefan’s Career Journey
03:58: Collaborative Approach to Writing the Book
05:47: Reasons for Innovation Failures
06:31: The UNITE Framework Overview
07:43: Critique of Buyer Personas in Marketing
13:21: Understanding Customer Needs
14:30: The Role of Synthetic Data in Research
15:37: The Culture Canvas Tool
17:24: Identifying Search Fields and Opportunity Spaces
19:10: Business Model Innovation Patterns
21:35: Value Disciplines Triangle for Brand Positioning
26:32: Actionable Steps for Improving Innovation
28:25: Future of Innovation and AI
32:26: Resources for Further Learning
33:25: Closing Remarks
RESOURCES
Creating the right setup for innovation to succeed
https://digitalleadership.com/unite/unite-horizons-of-growth/
The Culture Canvas
https://digitalleadership.com/unite/organisational-culture/
The Strategy-Execution Canvas and Where to Apply AI
https://digitalleadership.com/unite/strategy-execution/
Get Started with ‘Jobs to be Done’ and Understanding Important but Unmet Customer Needs
https://digitalleadership.com/unite/jobs-to-be-done/
More Information on the book “How to Create Innovation” including a long preview
