Wharton’s David Robertson discusses his new book on innovation.

When most people hear the word innovation, they think about Uber, Airbnb and Amazon — disruptive companies that upended entire industries with a radical new way to do business. But Wharton operations, information and decisions practice professor David Robertson argues that this view is too narrow a definition of innovation, and one that is not useful to most companies.

In his book, The Power of Little Ideas: A Low-Risk, High-Reward Approach to Innovation, Robertson talks about a more practical way companies can innovate: by focusing on complementary actions around a key product. He teaches innovation and product development at Wharton and is the host of Innovation Navigation, a Wharton Business Radio program. Robertson recently spoke to [email protected] about his book.

The Power of Little Ideas

The Power of Little Ideas: A Low-Risk, High-Reward Approach to Innovation by David Robertson

An edited transcript of the conversation follows.

[email protected]: The inspiration for this book actually came, in some ways, from a can of paint. Why don’t you tell us about that?

David Robertson: My previous book was about Lego, and that was a story about a company that figured out that you didn’t want to innovate inside the box — that wasn’t going to get them anywhere — and you didn’t want to innovate outside the box because that almost put them out of business, but rather, around the box. Complementary innovations around a core product — the brick for Lego — was what really led them to their recent success.

I got my house painted a couple of summers ago, and the contractor I hired put together a proposal. He helped me choose colors and helped me decide what kind of paint, what things needed painting the most, and how I’d manage on a limited budget. He put together a proposal, and he picked Sherwin Williams paint.

I looked at my favorite consumer ratings magazine, and Sherwin-Williams paint is good, but it’s twice as expensive as another paint that’s equally good. So I talked to him, and I said, “Can’t we use this other paint?” And he said, “Well, yes, we could, but it’s going to raise your price.” I said, “I don’t understand, the other paint is half the price.” And he said, “Yeah, but paint is only about 15% of the total cost of your project. I have to think about all the supplies; I’ve got to line up the labor; there’s the overhead of running a company, etc..”

He said, “What Sherwin-Williams does is help me though the entire process of working with you, from helping you choose your colors — there’s a Sherwin-Williams color consultant — to figuring out how much paint is needed for the primer, and for the paint itself, brushes, tarps, all the other supplies. Then, during the project, it is keeping me supplied — I can return extra primer if I don’t need it. If I run out of something, that Sherwin-Williams rep will be over at the site, delivering what I need. Then, at the end, he helps me put together that next proposal. Because there’s always a next proposal, as any homeowner knows.

I looked, and it turns out within a five or 10-minute drive of my house, there are more Sherwin-Williams stores than there are Starbucks, and that’s because they realized who their customer is. It’s not me. I’m the end consumer, of course, and I’m the one that has Sherwin-Williams paint on the house. But it’s that small business, the painting contractor, [that they focus on]. Sherwin-Williams, like Lego, realized it’s not so much about the product — their product is a can of paint — it’s about their innovations around the product that make that product more valuable.

I wanted to write a book for companies that wanted to try this approach to innovation. I don’t argue that there’s one best way to innovate, but it seems like it’s a tool that every innovation leader should have in their tool belt.

[email protected]: What isn’t being discussed when companies think about innovation, or how they should strategize toward an innovation?

Robertson: I interview innovation thinkers, gurus, consultants, executives who have done interesting innovative things, and I continually see this binary view of innovation … — [develop] an incrementally better version of your current product here … or something revolutionary and disruptive, be it some kind of Blue Ocean Strategy thing (creating an uncontested market) or lean startup or disruptive technology, some kind of new and better version of your business. In other words, leaving the old behind and venturing out into new territories.

“Sherwin-Williams … realized it’s not so much about the product — their product is a can of paint — it’s about their innovations around the product that make that product more valuable.”

To see innovation in that binary way is dangerous. Most people in most companies doing most of the innovation are focused on that current product that needs to become more competitive. Maybe it’s competitively challenged; maybe it has become a commodity, whatever. What I liked about the approach of Lego and Sherwin-Williams was that it was focused on that type of innovation: How do we take our existing product and make it more compelling, make it more valuable for our customers?

[email protected]: Your book is not saying that in using this ‘third way’ of innovating, we have to throw out things. It’s more about finding the right toolkit to use for whatever your problem happens to be, or to solve your market issues. Are there ways, once you start using this third way, to keep your employees on track?

Robertson: This book was a hard one to write, because the stuff in the middle is really review. It’s the material at the beginning and the end that’s different. What I lay out in the book is a four-step process. And the first step — what you are asking about — is really the step of answering, “Who are we as a company? What are our crown jewels? What are those things that we did yesterday that we’re going to do today and that we are going to do tomorrow? The things that made our company great, that our customers still depend on us for? What’s our [Lego] brick?”

Some companies have many different bricks. Lego was easy. Sherwin-Williams was easy. But there are other companies where it’s more difficult [to find the key product]. But starting small, choosing something important, and then trying to understand what customers are getting from the product is the first step. That is a different step. It’s almost where you’re not going to innovate. What’s going to stay the same? I think that’s a much more stable base to build innovation efforts from. Then, once you’ve done that, it’s understanding what the value is to the customer, what I call “the promise,” that’s the second step.

Then you come to the third step, which is the creative idea generation, and there’s lots of different ways to do it. Then, going into some of the prototyping and experimentation to understand whether you have the right ideas, that’s all pretty well-trod territory. I put in

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