Open innovation, by definition, requires that a company understand and assimilate highly specialized information from diverse inputs outside of its traditional competencies. That sounds scary. It requires the company to develop a new set of capabilities. That sounds even scarier to anyone who has tried to teach an old company new tricks.

Among the most important of these new tricks is how to quickly and effectively triage information. To accelerate this process (and do it right) many companies have learned to use external subject matter experts to quickly and inexpensively synthesize information and assess innovation opportunities. It may be tempting to find the expert with gravitas but those having the most success are not using the big name HBS authors. They are tapping the “everyday” expertise of disciplines as prosaic as pharmacists, chefs and even auto mechanics. This “innovation triage” is a capability that tomorrow’s best-in-class innovators are mastering today.

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Business Innovation (biz’-nis in’-e-va‘-shen) n. a significant change to an existing business process, program, product or service that leads to profit growth

Note that under this definition innovation is well beyond “product” and, above all, it must lead to profit growth. Lampoon or savior? Profit growth sounds much more like savior to me.

Every so often I see a presentation or read a book that brings clarity to something that I have learned intuitively through my client work but haven’t quite articulated yet. Last week’s Front End of Innovation conference provided several of these moments of illumination.

Microsoft taps hard-core gamers to create the Xbox

Dev Patniak, the author of Wired to Care told the story was about how Microsoft entered the gaming and entertainment spaces. Several years go Sony’s Playstation represented a serious threat to Microsoft. With a DVD player and Internet access, Playstation was positioned to challenge the PC as one of the primary information and entertainment devices for the home.

Microsoft hired a team of hard-core gamers – people who indulge in all-night marathons of “first-person shooter” games driven by immense volumes of caffeinated energy drinks. This team created the Xbox and launched it with the blockbuster game, Halo. It was the most successful new game system launched in the US in over 20 years and successfully countered the Playstation threat. A few years later, Apple launched the iPod. Microsoft again recognized the threat. They moved quickly to have the Xbox dream team develop a response for Microsoft. The result was the Zune – a total failure. How was Microsoft able to enter one market with entrenched, mature competitors successfully and utterly fail in another using the same exact team and approach?

The difference between the Xbox and Zune

It turns out that the Xbox development was an “empathic process.” In other words, the developers knew exactly how to handle the thousands of little everyday decisions about how to create the Xbox because they intimately understood the life of hard core gamers. They were gamers. They literally developed a system based on their intuition as gamers. This team of gamers was completely disconnected from the audiophiles who were the initial buyers of mp3 players. They developed the Zune from reading research reports about the target segment. They had no intimate knowledge about the life of audiophiles and they never engaged any experts or luminaries with tacit, intuitive knowledge about audio.  Therefore, they had no intuitive basis for making all the daily decisions that impact what the product would look like and how it will be positioned.

Innovation success through empathizing with consumers

This pattern of success-through-empathy has been repeated at companies like Harley-Davidson (they all ride motorcycles) and Jet Blue (the CEO flies coach 2-4 times a week to intimately immerse in the customer experience). P&G makes its senior management spend several weeks living with research participants so they better understand, at an intuitive level, the lives of their target consumers. The primary idea is that corporations often mute rather than amplify our intuition about customers and we can lose touch with the outside world unless we create innovation processes that enhance our natural empathic abilities.

Polo Ralph Lauren is a highly empathic company. It never conducts market research – no focus groups, no ethnographies, not even secondary research. And yet it has developed and continued to maintain strong brands without gathering and analyzing data about consumer preferences and buying habits. This is almost heretical in the world of brand marketing.

But is it? I would make the case that Polo Ralph Lauren, like Harley-Davidson, is among the most empathic organizations. Walking around the Polo Ralph Lauren headquarters in Manhattan is like stepping in to catalog photo shoot in Nantucket. They all wear Polo Ralph Lauren and more importantly, they live the Polo Ralph Lauren lifestyle. Polo Ralph Lauren hires people who understand the target segment because they are the target segment. And their leadership embodies the values and lifestyle. People at PRL develop an intuitive sense of the styles and colors that will shape the next season’s fashions by living everyday in the world of their consumers. They are intuitively equipped to make the thousands of decisions about fashions and colors and advertising and branding that will strengthen their brands and appeal to their consumers because the result is intuitively appealing to them. Just like the bearded men on the assembly line in Milwaukee and the caffeinated gamers in Seattle have an intuitive sense of how their work will appeal to, well, them.

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Join us for an evening of food, drink, and engaging conversation about becoming your customers’ habit, not just their choice. We will be introducing our partnership with Dr. Neale Martin, celebrated author of Habit. Dr. Martin will be discussing his breakthrough approach to marketing that uses a consumer habit lens to give companies a competitive advantage and increase customer loyalty.

When: March 24th from 5:00 pm to 6:30 pm

Where: (r)evolution office
3340 Peachtree Rd. Suite 1452
Atlanta, GA 30308

Refreshments and hors d’oeuvres will be served

Please RSVP to Erica Connelly, econnelly [at] revcompany.com

For more information check out the Rehab website.

Our own Brad White will be speaking at the 7th annual Front End of Innovation conference in Boston, MA. The conference is sponsored by the Product Development and Management Association (PDMA) and the Institute for International Research (IIR) and will be held from May 18-20, 2009.

Brad will be speaking the afternoon of May 18. Click here to register or visit the website for more information. Hope to see some of you there!