The Problem Lens

Defining strategy around the customer, not your business

Aug 07, 2024

I was recently invited to speak to a group of executives about the missing link between strategy and innovation in large corporations.

In our discussion, one executive shared a story from her own firm that alarmed her.

Her company had recently developed a brand-new technology, and the top leadership had immediately announced sales targets to get it into the field. But the product had not yet been used by even a single customer.

As she pointed out—her company was focused on the product it had built, rather than on what customer needs it might meet.

This is classic behavior in what I call an "engineering-driven company." You start with a technical innovation (or more specifically, a new solution), and then expect strategy to follow.

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Last month, I wrote an article about the importance of setting strategic priorities in digital transformation (DX).

Why DX Needs Strategy

David Rogers

Jul 3

Read full story

I’m going to return to that topic here, and in my next few posts.

We will see how any organization can define a focused set of strategic priorities for its DX efforts.

And we will learn to do so by applying two lenses—the problem lens and the opportunity lens—to define your own strategy.

The Problem Lens

The first way that we can uncover our own strategic priorities is by using what I call the problem lens.

This entails thinking about strategy in terms of a set of problems that we aim to solve—rather than in terms of solutions to build.

Let me give an example.

A pharmaceutical business serving the cattle industry can easily choose to focus on developing and selling its next round of antibiotics.

Or it could spend time listening to cattle farmers to find out their most urgent needs. If it does so, it may discover the farmers’ biggest problem is not treating disease better but anticipating and spotting it sooner.

If so, this might focus the firm’s strategy, and its innovation agenda, in a new direction—diagnostics.

A problem by any other name

The problem lens is often given other names. You may hear it described in terms of finding a customer’s “pain point,” their “job to be done,” or their “unmet needs.”

At Amazon, a key principle is that innovation should always “work backwards from customer needs.”

At Microsoft, CEO Satya Nadella has stressed, the ability “to meet unmet, unarticulated needs” as the source of innovation.

Whatever name you give it, the problem lens is a critical tool in defining strategy—and in putting customers at the center of this effort.

It also represents a major shift in thinking for many organizations.

Problems and the “Four Religions” of Innovation

It is worth stressing that much of modern innovation practice is rooted in this perspective.

We can see the problem lens at work in each of the methodologies that I refer to as “the Four Religions of Iterative Innovation” in my latest book.

Lean startup recognizes that most entrepreneurs begin with a solution in mind. So, the method starts not with product development, but with “customer development”—in which entrepreneurs talk to customers to validate what problem their innovation could possibly solve for them.

As my friend Bob Dorf always stressed to me, your startup has no chance of success unless you can find an urgent problem (“a top five problem” for your customer, he’d say) and direct your effort towards solving that.

The problem lens also matches a key goal of design thinking: to study and solve problems that are complex, human-centered, and systems-based. Many of the most popular tools in design thinking are focused on problem definition.

In both agile software development and product management, every cross-functional team is defined in terms of a persistent problem that it is working to solve iteratively over time, whether as part of launching a new product or optimizing a long-standing business process.

Product managers will refer to this as “product thinking” or a “product mindset.” Don’t be misled by the terminology. Their point is that you should focus on the problem you aim to solve—rather than on the product you think you might build.

Company Centric vs. Customer Centric

Focusing on the problems of customer is not always easy.

The natural tendency in an established business is to focus on your own core competencies and the products and services you deliver.

Instead, you should seek to frame your strategy from the customer’s point of view. Begin by asking, “What is our customer’s unmet need? And how will we fill it?”

There is a bit of a mental reversal at work.

In a famous analogy of Ted Levitt’s, if you are running a hardware store, you may think you are selling a quarter-inch drill bit. But the customer is buying a quarter-inch hole.

Jeff Bezos applied the same reverse thinking to Amazon’s e-commerce business, observing, “We don’t make money when we sell things. We make money when we help customers make purchase decisions.”

Fall in Love with the Problem, Not the Solution

In most companies, people will start their innovation process with a focus on the solution: “Let’s decide what to build, and then get out there and deliver it!”

Instead, we should all strive to follow the mantra of Silicon Valley entrepreneurs to: “Fall in love with the problem, not the solution.”

Very often, this requires some detective work.

In strategy workshops with business leaders, I usually find people will rush to start writing down imagined solutions they believe will help to grow their business. I then have to press them to define what problems they think each solution would solve.

Vince Campisi has dealt with this in his role as Chief Digital Officer of aerospace powerhouse Raytheon Technologies (RTX). As part of its digital transformation, Campisi has established a “digital accelerator” unit to help unlock new growth in the core business.

What he usually finds is that executives from the business units will come to the accelerator with a request to build a specific new digital tool or service—what Campisi calls “a problem disguised as a solution.”

The first job of the digital accelerator team is to peel back that disguise. They engage the executive in a workshop to define a clear problem statement, including the customer experience or outcome the business is trying to create.

“Ten out of ten times,” Campisi says, “when an opportunity walks in our door—by the time it leaves, the solution we will actually build looks a lot different.”

Widening Your Aperture of Innovation

This points us to an under-appreciated benefit of applying the problem lens to strategy.

As we have seen, the problem lens will help you to focus strategy on the customer and not just your company.

Also, the problem lens will spare you the massive resource waste that comes from trying to build something nobody truly needs—a “solution in search of a problem.”

But perhaps the biggest benefit of “falling in love with the problem” is that it helps you widen your aperture as you look for possible solutions.

When Mario Pieper was CDO at BSH Home Appliances he used the problem lens to help his team to look beyond obvious digital innovations—such as adding recipe screens to its refrigerators—and envision wholly new ways to help customers meet their kitchen needs.

As Pieper explained: “If the pain point of somebody in the kitchen is that he wants to eat, then of course you can cook, but you also can order something in.”

The question he pressed his team to ask was, “What is the best solution for the problem?” and not “What product do we have and what can we do with it?”

Escaping the Distraction of New Technology

The problem lens offers one more benefit, in the context of DX.

When leading a digital transformation effort, there is an inherent danger that technology itself can become a distraction from strategy.

Too often, business managers become fixated on some exciting new tech and how they are going to use it—rather than focusing on the problems they are trying to solve.

As I have previously written, “ChatGPT is not a strategy!”

The same is true of blockchain, Web3, cloud computing, or any other technology.

This is yet another reason why digital transformation should always be led by the business and not by IT.

An executive leading digital strategy at energy services firm Schlumberger stressed to me the importance of their moving DX out of IT, where it had started. “We needed to take digital out of our software vertical and bring it into a horizontal that cuts across [the organization... because] one of our key tenets is for digital to solve customer problems.”

But what do you do if your leadership has already allocated resources to a dedicated team focused on a technology like Generative AI or blockchain?

The best workaround I have seen is to task that team to focus on testing a few early “use cases” for the technology. In other words, pick a few problems you think could be solved using this new tech, and experiment to see if you can deliver measurable results.

More to Come: Future Posts on Strategy

In my next few posts, we will further explore the topic of strategy.

We will look at:

The limitations of the problem lens
How to address those limits by applying the opportunity lens
A new tool—problem/opportunity statements—to crystalize your strategic priorities and spark ideas for new innovation
Methods to identify high-value problems and opportunities, such as customer journey maps, and the Problem/Opportunity Matrix.
Why engaging everyone in the strategy process is critical to making the shift to a bottom-up organization.