There is often a gap between your aspirations and your actions.

I was reminded of this at a strategy workshop where I gave a keynote speech last week. At the start of the second day, one of the participants said that the process reminded him of the Underpants Gnomes in South Park. If you haven’t seen it before, here it is (warning: it includes all of the usual South Park crudeness, so skip the video if that bothers you):

Here is the summary. The Underpants Gnomes steal underpants. A lot of them. When the boys ask the Gnomes why, the response is that “Underpants are just phase 1!”

Here is their complete strategy:

Underpants Gnomes Business Model (Photo credit: John Swords)

The guy at the workshop was pointing out that their strategy had a similar hole in Phase 2.

This is surprisingly common.

This is another version of Nilofer Merchant’s air sandwich:

An Air Sandwich is a strategy that has clear vision and future direction on the top layer, day-to-day action on the bottom, and virtually nothing in the middle—no meaty key decisions that connect the two layers, no rich chewy filling to align the new direction with new actions within the company.

Phase 2 is that critical middle step – what do we do to connect our day-to-day actions to our larger goals and objectives?

This is a problem in innovation as well. The Innovation Gnome approach looks like this:

If you collect a lot of ideas and expect to end up with innovation, you’re in for an unpleasant surprise.  You need to have the middle step that connects ideas to outcomes.

This is why it is important to have some kind of outcome in the way that you think about innovation. This disconnect between generating ideas and turning them into innovations is one of the key reasons that firms end up as bewildered innovators – with a high investment in innovation but poor results.

Of course, I’ve also seen the opposite problem.  The most common place is in pitches from startups.  In this case, they get very hung up on the functionality of whatever it is that they’ve come up with – forgetting to connect their features to outcomes that are important for the customers.  In other words, they have plenty in Phase 2, but nothing in Phase 3.

The bottom line here is that to innovate successfully, you need to have all three phases worked out.  As Jorge Barba says, you need a purpose for innovating.

With that in mind, we can then start by defining value. Again, value means different things to different people. And here, is where it gets interesting because we are talking about an organizations value proposition. And, when we talk about innovation, we are talking about a different value proposition than that of what currently exists. This is when change really happens because you are changing the value proposition. Not the technology, not the branding, but everything that supports your value proposition.

So, coming full circle. What you need to do, is define a set of criteria of how you will define that new value that you will create.

But that’s not enough.  You also need to figure out what day-to-day activities will support this value creation, and how these activities link up to do so.  Jorge uses the example of Zappos:

My guess is he thought about how Zappos could create a different kind of value putting customer service at is center, and therefore enriched its value proposition by focusing on delivering exceptional customer service.

So here, exceptional customer service is Phase 2, and all of the actions that people at Zappos take on a daily basis are the Phase 1 actions that the whole approach is built on.

When you’re building an innovation capability, experimentation is a critical Phase 2 skill to develop.

You don’t want to be an Innovation Gnome – with a big gap between your daily activities and value you’re trying to create. To innovate successfully, think about how to address all three phases – that’s the best way to reach your goal.