Formulating a Growth Strategy for the Aging-In Population - A Market Research Study Presented To CABA - By Sandy Bat

2. 2

3. Introduction

4. The Situation Baby Boomers are increasingly approaching retirement age. By 2030, 71 million Americans will be over age 65, according to the US Census. Currently, 90% of elderly Americans prefer to age in their homes in a healthy environment. Home health care, much of it for the elderly, is one of the fastest-growing segments in the country’s fastest-growing health care industry. 4

5. What is the Goal?The identification of a new market space of innovations that help seniors remain longer in their home as long as possible. To meet this goal, we will identify what aspects of the aging seniors’ home environment needs improvement for them to be feel comfortable and safe. Areas to explore include Navigating through the home Interfacing with the home Safety within the home Informing others (caregivers) of health/ well-being issues; get assistance when needed Understand how the decision to stay living at home independently is made, how adult children influence that decision, and how the home environment influences whether the senior can continue living at home. 5

6. The Center for Social Innovation 6

7. Approach Validated in Academia … 7

8. … And Business 8

9. Innovation Stalls for Several Reasons – 1. No Definition 9 Let’s talk about what innovation is. We say that innovation is the process of devising solutions that address unmet customer needs. Engage: What are the key challenges in getting this “fit” right? What would the “ideal” process look like? On the one hand, you have your customer needs, and on the other you have the myriad of different solution variations that might satisfy customer needs. What must happen to bring these two things together in an optimal manner? Possibilities (and a summary that can be offered to the engagement question): Must have actionable needs – needs that guide solution development Must have a complete set of needs to guide solution development Must keep needs and solutions separate This also relates to where most innovation processes go astray.Let’s talk about what innovation is. We say that innovation is the process of devising solutions that address unmet customer needs. Engage: What are the key challenges in getting this “fit” right? What would the “ideal” process look like? On the one hand, you have your customer needs, and on the other you have the myriad of different solution variations that might satisfy customer needs. What must happen to bring these two things together in an optimal manner? Possibilities (and a summary that can be offered to the engagement question): Must have actionable needs – needs that guide solution development Must have a complete set of needs to guide solution development Must keep needs and solutions separate This also relates to where most innovation processes go astray.

10. 2. Wrong Inputs 10 Companies have been talking about satisfying customer needs for so many years – at least since the 1950s. Yet to this date there is no agreement as to what a need is – that is what its purpose, structure, content and format should be. Without this agreement, conflict between marketing, development and sales continues. The dynamics of a typical employee/customer exchange is almost comical. First off in a typical exchange with a customer, the company does not know what inputs to capture. They know they are trying to capture requirements but they do not know if they are looking for wants, needs, latent needs, unarticulated needs, ideas, solutions or delighters. All they know is that they want customer input – or requirements. Of course, customers do not know what inputs the company needs either, so it is a very interesting conversation that is set up --- you are both going to sit down and neither of you know what you are talking about. So what is going to happen? You are probably not going to get the information that you really need to succeed. Because customers don’t know what input the company wants, they talk about requirements in a language that is convenient to them. From our research we find that they will typically talk about solutions, they will talk about product specifications, they talk about high level needs statements like its got to be reliable, and durable, and more comfortable, they will talk in terms of benefits (faster, better, cheaper, easy to use). Most companies know that those types of inputs aren’t that helpful in designing products so they take these inputs and start translating them into something more useful. This is usually an internal translation process. In the end, you end up with all different types of inputs – all with a different structure, content and format. This is what is derailing the innovation process. Companies have been talking about satisfying customer needs for so many years – at least since the 1950s. Yet to this date there is no agreement as to what a need is – that is what its purpose, structure, content and format should be. Without this agreement, conflict between marketing, development and sales continues. The dynamics of a typical employee/customer exchange is almost comical. First off in a typical exchange with a customer, the company does not know what inputs to capture. They know they are trying to capture requirements but they do not know if they are looking for wants, needs, latent needs, unarticulated needs, ideas, solutions or delighters. All they know is that they want customer input – or requirements. Of course, customers do not know what inputs the company needs either, so it is a very interesting conversation that is set up --- you are both going to sit down and neither of you know what you are talking about. So what is going to happen? You are probably not going to get the information that you really need to succeed. Because customers don’t know what input the company wants, they talk about requirements in a language that is convenient to them. From our research we find that they will typically talk about solutions, they will talk about product specifications, they talk about high level needs statements like its got to be reliable, and durable, and more comfortable, they will talk in terms of benefits (faster, better, cheaper, easy to use). Most companies know that those types of inputs aren’t that helpful in designing products so they take these inputs and start translating them into something more useful. This is usually an internal translation process. In the end, you end up with all different types of inputs – all with a different structure, content and format. This is what is derailing the innovation process.

11. 3. Wrong Order 11 Key Truth: Innovation is broken because it is either being executed (1) In the wrong sequence, or (2) With the wrong inputs Engage: Why do companies take the ideas-first approach? What is the problem with this approach to innovation? The ideas-first approach has generated its own set of false beliefs: Innovation begins with an idea Innovation is inherently disorganized, and cannot be structured Successful innovation is a numbers game … the more ideas, the better The goal is to fail fast – quickly evaluate ideas to see which are best Needs-first approach fundamentally fails due to a poor understanding of what a customer need is – how customers define value (we have already seen how this can happen with our opening discussion/demonstration)Key Truth: Innovation is broken because it is either being executed (1) In the wrong sequence, or (2) With the wrong inputs Engage: Why do companies take the ideas-first approach? What is the problem with this approach to innovation? The ideas-first approach has generated its own set of false beliefs: Innovation begins with an idea Innovation is inherently disorganized, and cannot be structured Successful innovation is a numbers game … the more ideas, the better The goal is to fail fast – quickly evaluate ideas to see which are best Needs-first approach fundamentally fails due to a poor understanding of what a customer need is – how customers define value (we have already seen how this can happen with our opening discussion/demonstration)

12. Revolutionary Needs-First Approach 12 The process needs to be executed needs-first. First we must understand all the customer’s needs, then figure out which ones of those needs are unmet, and only then can we devise solutions that specifically address those unmet needs. That is solving the equation in a very specific order and this is the only order in which you can solve the equation and guarantee your success. The other way is just guessing. If you lay it out this way and you truly can understand and capture all those needs, and you truly can figure out which are unmet, then you can solve the equation in the right fashion. We maintain that most companies don’t have the discipline or the know-how to execute the process in this order and that’s what we are going to be teaching you. How to execute it in this order. Relation to the algebraic equation: Let’s talk about what innovation is. We say that innovation is the process of devising solutions that address unmet customer needs. That is a pretty straightforward, simple definition. Now, the way I like looking at innovation is to compare it to an algebraic equation. Many of you have seen equations like this one shown here back in algebra class. There are at least two ways to try and solve this equation. One is to guess at it. You could guess, for example that x = 1 and y = 3, plug in the numbers and see if the equation is solved. You could keep doing this until you guess the right answer – but there is one problem. There are so many possibilities you may never guess it right. The second way to solve the equation is to systematically solve it as we were taught in algebra class … by separating the constants from the variables and solving for the variables x and y. So, how does this equate to innovation? Innovation is the process of devising solutions that address unmet customer needs. On one side of the equation you have the customer’s needs, which may number one hundred or more, and on the other side of the equation you have all possible solutions which include the technologies, materials, combinations of features and so on. To solve the innovation equation, companies are trying to figure out what combination of features, technologies and so on best address the customer’s unmet needs. The constants in the equation are the customers needs and the variables are the solutions. This equation too can be solved in one of two ways – by guessing at it or systematically solving it. Since guessing at the answer to a simple equation was hard enough, it should be quite obvious that correctly guessing at the best combination of features to address unmet needs is next to impossible. So that leaves solving the innovation equation in some systematic fashion. To solve the equation systematically, you must draw a very clear distinction between what a solution is and what a need is. It is common for companies to confuse solutions with needs, and to treat them as if they are the same sort of thing. It is very important that you don’t make that mistake, there is a distinction, and we are going to make it very clear what that distinction is. In the end, all we are trying to do is apply the right discipline to this equation so that you can solve it. The process needs to be executed needs-first. First we must understand all the customer’s needs, then figure out which ones of those needs are unmet, and only then can we devise solutions that specifically address those unmet needs. That is solving the equation in a very specific order and this is the only order in which you can solve the equation and guarantee your success. The other way is just guessing. If you lay it out this way and you truly can understand and capture all those needs, and you truly can figure out which are unmet, then you can solve the equation in the right fashion. We maintain that most companies don’t have the discipline or the know-how to execute the process in this order and that’s what we are going to be teaching you. How to execute it in this order. Relation to the algebraic equation: Let’s talk about what innovation is. We say that innovation is the process of devising solutions that address unmet customer needs. That is a pretty straightforward, simple definition. Now, the way I like looking at innovation is to compare it to an algebraic equation. Many of you have seen equations like this one shown here back in algebra class. There are at least two ways to try and solve this equation. One is to guess at it. You could guess, for example that x = 1 and y = 3, plug in the numbers and see if the equation is solved. You could keep doing this until you guess the right answer – but there is one problem. There are so many possibilities you may never guess it right. The second way to solve the equation is to systematically solve it as we were taught in algebra class … by separating the constants from the variables and solving for the variables x and y. So, how does this equate to innovation? Innovation is the process of devising solutions that address unmet customer needs. On one side of the equation you have the customer’s needs, which may number one hundred or more, and on the other side of the equation you have all possible solutions which include the technologies, materials, combinations of features and so on. To solve the innovation equation, companies are trying to figure out what combination of features, technologies and so on best address the customer’s unmet needs. The constants in the equation are the customers needs and the variables are the solutions. This equation too can be solved in one of two ways – by guessing at it or systematically solving it. Since guessing at the answer to a simple equation was hard enough, it should be quite obvious that correctly guessing at the best combination of features to address unmet needs is next to impossible. So that leaves solving the innovation equation in some systematic fashion. To solve the equation systematically, you must draw a very clear distinction between what a solution is and what a need is. It is common for companies to confuse solutions with needs, and to treat them as if they are the same sort of thing. It is very important that you don’t make that mistake, there is a distinction, and we are going to make it very clear what that distinction is. In the end, all we are trying to do is apply the right discipline to this equation so that you can solve it.

13. Paradigm Shift: Make the Job the Unit of Analysis 13 "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!“ Theodore Levitt, 1975 The job’s perfect execution reflects the customer’s true definition of value. When the job is accepted as the sole unit of analysis, companies must stop capturing requirements on products and service and instead must capture requirements on the jobs that those products or services are intended to perform. This is a whole new way of thinking. Also, note how the focus on a customer job transcends professional/non-professional; B2B/B2C; products/services/software "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!“ Theodore Levitt, 1975 The job’s perfect execution reflects the customer’s true definition of value. When the job is accepted as the sole unit of analysis, companies must stop capturing requirements on products and service and instead must capture requirements on the jobs that those products or services are intended to perform. This is a whole new way of thinking. Also, note how the focus on a customer job transcends professional/non-professional; B2B/B2C; products/services/software

14. Making The Job the Unit of Analysis Jobs define the actions for which a solution may be hired ; goals to be achieved; problems to be resolved Current products are merely point-in-time solutions that enable customers to get jobs done Customers migrate to products that get the job done best – they are “loyal” to getting the job done The goal of innovation therefore is NOT to build a better widget. It is to devise ways to help customers get a job or jobs done better. 14 Engage: Why does the focus on the job matter? Do you have an example from your industry? Note that all jobs begin with an action verb – they are goals or problems to be resolved/avoided Engage them here briefly about an example from their industry of a solution that has changed over time though the job is still the same Engage: Why does the focus on the job matter? Do you have an example from your industry? Note that all jobs begin with an action verb – they are goals or problems to be resolved/avoided Engage them here briefly about an example from their industry of a solution that has changed over time though the job is still the same

15. Needs Are Constant, Solutions Are Variable 15 These are outcomes – metrics on a particular job.These are outcomes – metrics on a particular job.

16. The “Job” of Completing a Surgical Procedure 16

17. The Job of Obtaining Health Care 17

18. The Opportunity Algorithm 18

19. 19 As it turns out, none of these beliefs are true. Today we are going to show you how to reinvent the innovation process.As it turns out, none of these beliefs are true. Today we are going to show you how to reinvent the innovation process.

20. What process will we use?

21. Outcome-Driven Innovation® Process 21

22. Define the Market of Focus 22

23. Market Ecosystem – Aging Adults 23

24. Understand Customer Needs 24

25. The Job of Achieving a Healthcare Goal (Patients) 25

26. Identify Opportunities 26

27. What is the Opportunity Algorithm? If 90% of the respondents rate an outcome a 4 or 5 for importance, the Importance value entered into the algorithm is a 9.0 If 30% of the respondents rate an item a 4 or a 5 for satisfaction, the Satisfaction value entered into the algorithm is a 3.0 27 NOTE: clarify that everyone knows what this is telling them… ? measuring the amount of opportunity in any market… Q ? Why above 10? A ? historical norm…NOTE: clarify that everyone knows what this is telling them… ? measuring the amount of opportunity in any market… Q ? Why above 10? A ? historical norm…

28. Opportunity Landscape for Patients - Jobs 28 Do we have a baseline comparison for insured workers for outcomes? Do they have the same opportunities? How about for jobs?Do we have a baseline comparison for insured workers for outcomes? Do they have the same opportunities? How about for jobs?

29. Zoom Area (10.0 or higher) 29

30. Segment Descriptions – High Opportunity Segments 30

31. Target Areas for Strategic Growth 31 Need to take a moment here to build this up as a major “ah hah.” This is what it is all about, and ODI gives you the insight to develop a comprehensive market strategy built around customer needs! Need to take a moment here to build this up as a major “ah hah.” This is what it is all about, and ODI gives you the insight to develop a comprehensive market strategy built around customer needs!

32. What can YOU DO with the data? 32

33. Virtual Lab for Concept Testing, Evaluation, and Prioritization 33

34. Program Outline

35. Detailed Project Description Objective The purpose of this study is to examine and determine potential connected home product, service and business opportunities based on needs and expectations of the senior consumer market to support aging in place. Several core opportunity platforms to explore with consumers will be established based on the final set of sponsoring member companies and their collective interests such as: Health and Wellness Food (eating, cooking, etc.) Exercise & Fitness Universal Design Medical Support Communications Entertainment 35

37. The Target Demographic Aging adults ranging in age from 55 – 80+ Secondary audience is caregivers of this age group (both adult children and paid caregivers). This audience will be appended to the study if we receive over 13 participating organizations. Diversity among the population to include Geography – US & Canada, as well as a good distribution within these countries Health – from very healthy to those with chronic health conditions to those in poor health who need care today Activity levels – from very active seniors to more sedentary Family network – both size and involvement of the network in the senior’s life Attitudes toward, and use of, technology Type of home they are currently living in (will want those that own their home) Ethnicity, gender and other basic demographics Others defined by the participating organizations 37

38. The Process

39. Summary of Jobs to Study

41. What are the Benefits of the Study? Identify new market opportunities and new platform creation Provide inputs necessary for study participant ideation processes - ensuring execution against statistically identified customer needs Provide quantifiable analysis of where market is under- and over-served, including segments within the population Provide statistical validity to how study participants can/should connect with target audience on an emotional level - assisting with product design, messaging, marketing and sales 41

42. Proposed Study Work Plan: Deliverables and Schedule

43. Questions and Answers NOTE: This CABA program will be executed with the partner organizations through Step 4. Each organization can select whether they would like to engage with Strategyn for any of the Step 5 workshops. Step 5 workshops will be available at a discounted price for CABA members including: Ideation Portfolio optimization Messaging and Value Proposition development Merger and Acquisition evaluation 43