Problem-First Innovation
Ignore the incumbent and design directly around the customer’s problem
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 5
- Confidence
- 97%
Problem-First Innovation redirects attention away from the company or industry a team hopes to disrupt and toward the underlying customer problem. Fixating on incumbents fills the team's frame of reference with their assumptions, processes, and product structures, which encourages imitation even when the stated goal is destruction. Instead, describe the unmet need independently, study the affected people, and design backward from the outcome they require. The resulting business may appear disruptive, but disruption is a by-product rather than the objective. Square followed this logic by addressing small merchants who could not participate fairly in card payments. It did not eliminate the major card networks; it enabled a new market of previously excluded sellers.
Origin
Extracted from Masters in Business during Jim McKelvey's explanation of why Silicon Valley's emphasis on disruption misdirects innovators.
Core principles
- 01Focus attention on the problem rather than the incumbent
- 02Studying what you want to destroy can trigger imitation
- 03Measure success by customer value and market creation
- 04Allow the solution to differ radically from industry conventions
How to run it
- 1
Remove the rival from the statement
Write the problem in customer terms without mentioning an incumbent, industry, or product category.
Pro tip Describe who is blocked, what they are trying to accomplish, and why it matters.
Watch out A statement such as 'build a better version of X' already anchors the team to X.
- 2
Study the unmet need
Investigate the customer's constraints, costs, and desired outcome rather than cataloguing competitor features.
Pro tip Pay special attention to people whom existing providers consider too small or unprofitable.
Watch out Do not confuse established industry rules with unavoidable realities.
- 3
Design from the outcome backward
Choose the product, pricing, and operating model required to deliver the desired outcome, even when those choices differ from convention.
Pro tip Ask what you would build if the current industry did not exist.
Watch out Avoid novelty that does not materially improve the customer's result.
- 4
Audit for copied assumptions
Review the proposed solution and identify decisions inherited unconsciously from incumbents.
Pro tip Require a customer-centered reason for every major design choice.
Watch out Teams can copy an industry while believing they are disrupting it.
- 5
Measure creation, not destruction
Track newly served customers, newly possible transactions, or newly created value rather than competitors harmed.
Pro tip A growing new market is stronger evidence than an incumbent's discomfort.
Watch out Destruction without customer creation is not meaningful innovation.
In the wild
Square focused on artists and small merchants who could not afford or navigate conventional card processing. Its phone-based reader and simpler economics enabled those sellers to accept cards. The major card companies remained intact and grew, while Square created access for a new class of merchant.
→ The company expanded participation instead of merely taking transactions from incumbents.
Common mistakes
Targeting destruction
Defining the mission as disrupting an incumbent keeps the incumbent at the center of the team's thinking.
Copying hidden assumptions
Teams may change a product's surface while preserving the pricing, distribution, and customer exclusions of the old system.
Mistaking novelty for value
A difference is useful only when it improves the outcome for the customer whose problem motivated the work.
Is it for you?
Best for
It is best for teams addressing underserved customers or creating a market that does not yet fit incumbent models.
Not ideal for
It is not ideal when the task is explicitly to benchmark or incrementally improve an existing product.
From the transcript
“if you're looking to disrupt, it puts your eye on the thing you're trying to disrupt.”
“I believe you should kind of ignore the thing that you are replacing and just focus on the problem trying to solve.”
“What we did instead was we created a new market.”
From the episode
Jim McKelvey on 'The Innovation Stack' (Podcast)