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

The book certainly has broad appeal. It's clearly written and carefully structured, with numerous fascinating case studies that show how this approach works in practice. These come from well-known companies across the spectrum of business, from LEGO and GoPro, to Gatorade and Disney.

In each case, we see how this Third Way can be used to reinvigorate flagging products – and sometimes whole businesses.

So what is this Third Way, which delivers the "power of little ideas"? In simple terms, it reverses the commonly accepted view that in order to grow, you must take your core product to ever more customers. With the Third Way, you take more products to the same customers and grow your customer base that way.

This involves building a family of complementary innovations around a key product or service, which will increase the appeal of that product or service. These complementary innovations are usually small and low cost, but their effect may be huge.

The book sets out how to do this, from both strategic and practical standpoints. So it will be of most interest to leaders who are looking to innovate. They may feel their market position is weak, or their products need a refresh. It's also valuable for innovation and product managers, charged with injecting new life into products and services. They'll find everything they need to embark on the Third Way, from planning tools to warnings about potential pitfalls.

David Robertson is a Professor of Practice at the Wharton School at the University of Pennsylvania. He's also a radio and podcast host. From 2002 through 2010, he was the LEGO Professor of Innovation and Technology Management at the Institute for Management Development in Lausanne, Switzerland. He's the author of "Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry," and his knowledge of that company provides useful examples in this book too.

Kent Lineback has spent more than 25 years as a manager and executive and, before that, several years as a consultant and a creator of management development programs. He's collaborated on several books focused on business practices and experiences.

So keep listening to find out which four questions lead to successful innovation; why product managers should be recast as "solution integrators"; and how a leading brand of diapers turned its fortunes around.

The book is divided into eight chapters, which follow a logical order. It starts by making the case for its main idea, that little changes around a key product or service can make that product or service soar – the so-called Third Way to innovation. To prove the point, the authors devote a whole chapter to two detailed case studies: how LEGO and Apple Computers reinvigorated their flagging businesses in the early 2000s.

Typically, innovation is understood to be radical; to involve major changes to products and services. These case studies show how the Third Way is different. Both LEGO and Apple focused their innovation around their core products. For LEGO, this meant developing comic books, video games, movies, and events to complement the plastic bricks and toys.

Second, these little innovations worked with one another, and with a key product, to deliver a single strategy or promise. Think of how iPhones, iTunes, and other Apple innovations complement the company's key product, Mac computers, to help users manage their digital lives. And third, the complementary innovations in these case studies were closely and centrally managed.

After laying this foundation, Robertson and Lineback move on to the four key decisions that form the "how" of the Third Way. These are framed as questions: What is your key product? What is your business promise? How will you innovate? And how will you deliver your innovations? They devote one chapter to an overview of these decisions and how they relate to one another. Then there's a chapter on each of them, presenting insights and best practice, as well as challenges and tips on avoiding problems. The book ends with another detailed case study, this time of The Walt Disney Company.

Throughout the book, the writing is clear and careful, with just the right amount of repetition. Each chapter ends with a three-point roundup of what's been covered. This makes it easy to keep track of the framework as you work through the book, and can serve as a useful reminder of the key points, if you return to the book later.

The idea of a key product is central to the Third Way, so let's have a look at Chapter Four, which describes what key products are, and how to prepare them for Third Way success. The authors reiterate that choosing a key product means honoring it as it is, and building small innovations around it. This is not about replacing it with a revolutionary new version.

Sometimes it's obvious what to choose as your key product. It may be something that defines your brand, like LEGO's plastic bricks or Apple's computers. But in case it's harder to identify, the authors provide six tests to help. These are framed as questions and include: Does or could this key product appeal to a distinct and sizable set of customers? Does or could the key product exist more or less autonomously? And, could the product and its complements generate significant revenues?

Robertson and Lineback say you may want to pick more than one key product. That makes sense for certain types of companies; for instance, if there are several different divisions, each with distinct products. But they warn against putting too many key products on to the Third Way. Each one will need complementary innovations, which will take time, effort, and money to develop.

Once you've chosen your key product you need to communicate this to everyone involved. Explain why this product was chosen and why you think an opportunity exists to increase its sales. Describe how most innovation efforts will be focused around this product, not on the product itself. And explain that the complementary innovations will come from across the organization, and maybe from outside partners. If you want people to play a role in the process, you need to get their buy-in.

Although the key product itself isn't a candidate for innovation, it may need a little tweaking to prepare it for the Third Way. Usually, this means culling superfluous variants and strengthening the ones that you keep. Steve Jobs eliminated dozens of models of the Macintosh computer during the turnaround at Apple.

Likewise, LEGO cut several shapes and colors from its brick inventory as it reinvented itself. This rigorous approach helps clarify what the key product is and who its customers are, as well as freeing up resources to build the complementary innovations.

But before you start devising those innovations, you need to address decision number two: what is your business promise? Robertson and Lineback warn that it's a mistake to go straight from choosing a key product to choosing the innovations you'll add around it.

If you do this, you may end up with a collection of random, unconnected innovations. It's far more powerful if they work collectively, as a family. A clear promise is like glue, they say, binding the innovations together and to the key product.

The authors illustrate this with a look at the promise of Pampers, a leading brand of diapers made by consumer super-brand Procter & Gamble. It's an interesting example, because the promise changed in response to market conditions. In the 1990s, Pampers promised to keep your baby drier. Trouble was, rival diapers kept babies just as dry at lower cost, and this led to a decline in sales for Pampers.

In 1997, a new brand team set out to truly understand the concerns of mothers, and they discovered just how narrow their previous view had been. Mothers cared about whether their babies were dry and comfortable, yes, but they cared much more about their babies' healthy development and growth.

This led the team to reframe their promise for Pampers: it was now about partnering with moms in their babies' development. This guided the tone and approach of marketing materials, giveaways, complementary products such as baby wipes – and even external relationships. Pampers partnered with UNICEF to donate vaccinations to babies in developing countries, one for every pack of Pampers sold. The result was a complete recovery of the business.

This case study highlights the importance of exploring the customer context: how and why your customers use your key product. Fully understanding the customer context is crucial to the Third Way, and the book is full of strategies to help with this.

One is to adopt a "dating, not fighting" mindset. Position yourself as "dating" your customers, rather than fighting your competition.

Another tip is to learn from your most extreme customers. What is attracting the heavy users? Are they drawn by some product feature that others usually overlook? Are they using the product in unusual ways that might appeal to other people? Once you've answered those questions, you may be able to turn regular customers into heavy users.

When you've decided on your business promise, you can move on to decision three: how will you innovate? Creating the innovations that will surround and propel the key product is a three-step process.

First, generate a portfolio of ideas for complementary innovations, with your promise front and center. Second, narrow down that portfolio using some filters suggested in the book. Third, experiment with the shortlist of ideas to determine which ones will work best.

One way to experiment is to create cheap "pretotypes" of the innovation, which can be as simple as sketches on paper. Then ask prospective customers if it's something they'll buy. The authors say it's important to use the phrase, "Will you buy it?" not, "Would you buy it?" You'll get more useful answers with "will."

As the process progresses from ideas to execution, the role of the supervising manager moves into the spotlight. Robertson and Lineback suggest that project leaders should learn new ways of imposing structure and discipline on the innovation process. They need to encourage creativity while controlling costs, and this may be on a larger scale than they're used to.

The authors suggest that conventional product managers be redefined as "solution integrators," responsible for working through the four decisions, including the final one: how the innovations will be delivered. This might involve choosing and managing external contractors, or working with diverse departments within the organization.

There's a table in the book that spells out the difference between a conventional product manager and a solution integrator. For example, a product manager tracks competition. The solution integrator tracks competitors and potential partners for each component in the system. The difference may seem negligible, but it matters, the authors say. Their point is that the leader of a Third Way project needs wide-ranging and clearly defined authority to deliver on the business promise.

If this sounds daunting, don't worry. Chapter Seven is full of practical advice for solution integrators, including how to make an innovation matrix, which lets a team track and coordinate the different components of a project and their associated levels of risk. It's a powerful tool that will help leaders communicate the scope and challenge of the project to everyone involved.

So what's our last word on "The Power of Little Ideas"?

We're impressed. This is a carefully crafted and well-written book that delivers everything it promises. The structure will please even the most orderly of minds, being logical, clear and consistent, with each chapter building on the next. The text is well laid out – with sections clearly labeled – and the welcome takeaways that round off each chapter are neatly set apart.

As for the many case studies, they're well-chosen and engaging. It helps that most of the companies featured are household names. The final chapter is one long case study, charting the rise, plateau, and recovery of The Walt Disney Company. It's a vivid illustration of the Third Way in action and makes a fitting end to the book.

The authors are clear that their Third Way is not the only way to innovate. They point out that it wouldn't have saved Kodak from the digital photography revolution, for example. Rather, they say it can be a useful addition to every manager's innovation toolkit, and we heartily agree with that.

"The Power of Little Ideas: A Low-Risk, High-Reward Approach to Innovation," by David Robertson, with Kent Lineback, is published by Harvard Business Review Press.

That's the end of this episode of Book Insights. Thanks for listening.