by futurist Richard Worzel, C.F.A.
There are innovations in the field of innovation itself, as well as older principles of innovation that have been around so long that many people either aren’t aware of them, or ignore them despite their value. I thought it was about time to explore both trends.
The particularly interesting thing about innovation is that its entire purpose is to carve out a future in the shape you want. It is a true tool for inventing the future. In this blog, I’m going to talk about what you should be trying to achieve with your innovation, the manner in which you should be focusing your innovation, rather than how to go about it. I’ve talked about how elsewhere (like here), so with that in mind, let me outline the 9 trends in innovation that I see emerging – or re-emerging – today.
1) Exclusivity is overrated; fanaticism is more valuable
There’s a natural tendency in sales to discount prices in order to boost volume. Unfortunately, this is a bad trade-off. Suppose you have a 25% pre-tax profit margin on your widgets, and offer a 10% discount to boost sales. That 10% comes right out of your profits, cutting your pre-tax profits by 40%, from 25¢ on the dollar to 15¢. Moreover, in today’s environment, offering people a 10% discount is virtually an insult, and may actually reduce sales rather than increase them.
One strategic way that companies attempt to counter the discounting impulse is to create a premium brand, and one of the ways of creating a premium brand is to foster a sense of exclusivity about your products or services. Their reasoning is that people are less likely to expect discounts on something that only certain people are eligible to own. Of course, if you look at the ads for luxury goods, most notably luxury cars, you can see that this doesn’t always work – and may not even work any better than for a mass-market brand.
A better way to avoid discounting is to seek to create a fanatical customer base that is devoted to belonging to, or being a member of the experience you create. A classic example of this is the Disney Company, and the clearest example I know of is found with the Disney Cruise Line (“DCL”). People rarely think of Disney offerings as being “exclusive,” yet, on one of the Disney ships, the cost of a one-bedroom suite with concierge service can be 50-100% higher than a comparable suite on a competitor’s boat. If you read some of the online forums for DCL, you will see repeated queries from confused consumers wondering why DCL suites are so overpriced. The simple answer is that whereas other cruise lines have fans who buy suites, Disney has fanatics that would rather pay more for the Disney experience than less for anything else. As a result, the suites sell-out almost as quickly as they go on sale, with the result that Disney can charge big premiums for them.
Of course, creating fanatics is not easy. It takes years of work, meticulous attention to detail, and outstanding customer service. In an environment where management wants instant results, where the bottom line seems to scream for cutting corners, and where customer service is known simply as “overhead”, none of these are popular choices. But look at those companies that have fanatics instead of fans, look at their profit margins, and then ask yourself whether it’s worth it or not. Nobody said innovation was easy, but if you’re serious about it, ask yourself what you would have to do to convert customers into fanatics. (I’ll come back to Disney because they do so many things so well, as you would expect from a company where innovation has always been part of the corporate culture.)
2) Create ecosystems, not products
If you look at the best technology names in the world today, they don’t create individual products, they create systems that interact and support each other. The Macintosh computer was a marginal success with less than 5% of market share when Apple introduced the iPod in October of 2001. But under the revitalizing and visionary influence of Steve Jobs, who had returned to the company he co-founded, the iPod was not just another “me too” MP-3 music player (and remember that Apple wasn’t the first to introduce such players). It was merely the front end of a music-and-information system that included iTunes in cyberspace, arrangements with most of the major music companies that made it easy, legal, and relatively inexpensive to download music, plus provided a means for entrepreneurs to plug in and use the iPod for their own ends. Podcasting became a way for people to become their own broadcasters, and create an audience for themselves without having to work through a media company. And along the way, the revamped iMac became the world’s first computer that sold essentially as an accessory to an MP-3 player, the iPod.
When Apple introduced the iPad, they also introduced an App Store, which resulted in thousands of entrepreneurs creating applications and selling them to iPad owners. This storm of creativity was supported by Apple, and Apple was able to sell and profit from things they hadn’t created. But they benefited even more than mere profits because competing touchpads had to cahse after not only the Apple interface, but also all of the apps available for the iPad.
facebook is perhaps the best example of creating an ecosystem, only here they’ve created the ground, and allowed others to plug into it and grow their own businesses, from games, to advertising, to organizing groups for disparate reasons, and much more. It has become the de facto means for communicating for many people, especially the young and the technologically adept, to the point where many people no longer use email or IM outside of the facebook ecosystem. And facebook gets paid through advertising for providing this fertile ecosystem, and benefits from the entrepreneurial instincts and efforts of those who create more networks, games, recipe groups, political groups, and more. They have become an engine that entrepreneurs can plug into.
Likewise, Google has created an ecosystem that includes free tools, free email, free news, free tracking systems, free data storage, and more. And it all integrates, and funnels down into their revenue generation. People like free things, they like useful, powerful free things even more, and they’re willing to put up with the attendant ads that make it possible.
3) “It’s not the customer’s job to know what they want”
This comment, apparently, is something that Steve Jobs has said repeatedly within Apple. If you are innovating, then you are, by definition, doing something new. And if you’re doing something new, then your customers won’t know if they like it until they’ve actually tried it. Hence, it’s your job to figure out what your customers are likely to want before they know themselves. Let me give you an example of why this is so.
When the very first cellular licenses were being offered, I was working with a group that bid (unsuccessfully) for one of the licenses. My job was to write the science fiction section of the application; you know, the part that said people would be able to send fax messages from their cars, and walk down the street talking on the phone. Since, at that time, most portable phones had their guts in the trunk of a car and were highly unreliable, this was all very wild and wooly, and people wondered what kind of funny-smelling cigarettes I had been smoking.
Meanwhile, our financial backers were nervous about whether there was actually a market for this very expensive technology, so we commissioned a consumer survey to find out how many people were likely to want a cellular telephone. The survey results came back, and everyone was pleased and relieved that there was, indeed, a big enough base on which to build a business: the survey indicated that fully 7-8% of working adults would consider acquiring a cellular telephone. Of course, now this seems foolish as our survey results were short by more than a factor of 10. But it was difficult for people to know if they wanted a pocket telephone, something they had never experienced.
To truly innovate, you have to imagine not only what might be, but also how your clients or customers might like something they’ve never experienced before. Fortunately, there are some guidelines to help, one of which is next.
4) Seek beauty and perfection in what you offer
I did some work for Lexus US, and the CEO, Mark Templin, told me a story to make a point about their cars. He said that one of his neighbors came over and knocked on his door to tell him that she was going to buy an SUV, but not from Lexus. He blinked, and said, “OK, I appreciate you telling me. May I ask why?” It was because, she said, that too many people owned Lexus RX’s, and she wanted something that stood out. He thanked her, they finished the conversation, and she went home.
A couple of weeks later, he saw her again, and she was driving a Lexus RX, just as she had said she wouldn’t, so he went over to her house and knocked on her door, asking her what happened. “You know,” she said, embarrassed, “I tried all of the others, then tried the RX, and yours was just so much better that I couldn’t imagine owning anything else.”
Seeking perfection sounds like a hippy-dippy, naïve, lamb-choppy thing to say, so let me approach it in another way. If you asked your mother to use your product, would she find it easy to do so? Would she enjoy it? Do people connect with what you offer in an emotional way that makes them feel good about themselves as well as with what you’ve sold them? Are they proud of owning or using what you offer?
It’s easy to make something “good enough”, and good enough often sells. But if you are truly trying to innovate, good enough is never enough. Magnificent is what you’re after. Or, again quoting Steve Jobs, you want to create something “insanely great.”
Indeed, the insanely great 1984 Macintosh created such a powerful impression that it is still benefiting Apple today. Apple’s head of design is an Englishman named Jonathon Ive. In a September 5th, 2011 article in the Los Angeles Times, reporter Jessica Guynn related the story of Ive’s first encounter with the Macintosh computer:
“He says the company’s revolutionary nature was clear to him from the moment he first touched a Macintosh computer. At the time he was nearing the end of his four-year industrial design studies in England. Not one to read an instruction manual, he was frustrated with personal computers and feared he was ‘technically inept.’ Then he turned on a Mac and said he felt an instant connection to the computer and to the people who designed it.
‘I could just use the product straightaway. It was a really profound moment. I don’t think I ever had actually quite the same sense of ‘wow’ with a product before,’ Ive said.”
If Ive had not felt such a strong and immediate connection with the original Macintosh, he would almost certainly not have joined the company. And if he had not, himself, sought to create perfect, intuitive products while he was working within Apple, he would not have come to Jobs’ attention when Jobs was seeking a new head of design. But because both things happened, Ive wound up as Apple’s Head of Design, and become an internationally renowned designer. His goal is always to “make something that looks like it wasn’t really designed at all because it’s inevitable.”
Seeking perfection supports the goal of creating fanatics, as described in #1 above, but while related, it’s separate. Indeed, if you don’t have beautiful, magnificent, insanely great products, you’re not going to be able to develop fanatics. The two complement each other.
5) Create experiences, not products or services
Companies often become so focused on what they’re doing that they lose the customer’s perspective, thinking only of what they’re trying to do, how they need to market, distribute, sell and deliver their offering. But if you think about it, the customer doesn’t care about any of that. The customer only thinks about what they experience, and what they would like to experience (if, indeed, they know).
There’s an old marketing cliché that “Nobody wants a quarter-inch drill; what they want are quarter-inch holes.” That’s still true, but what has also happened is that consumers are looking past or through the product or service, and considering their experience with the results. Or at least, that’s what they want to do. This is particularly evident among car companies.
For 31 years, BMW used the marketing slogan “The Ultimate Driving Machine.” Then, in 2006, they changed it to “The Ultimate Driving Experience.” This would be consistent with the quarter-inch hole dictum: do people want a driving machine, or a driving experience? Clearly, BMW decided that, at least for now, they want a driving experience.
Lexus is perhaps an even more powerful illustration of the importance of experience instead of product. In a 2009 interview with David Brimson, the head of Lexus UK, publication The Executive Issue commented on Lexus’ rise among luxury cars in Europe that:
Customers had to fall in love with the complete experience, the product and the customer handling, this made the Lexus brand famous, then customers were more loyal and told their friends about Lexus.
“A car is new and exciting for a while, but after the ‘honeymoon’ people get used to it,” Mr. Brimson explained. “After one or two service cycles the car is just a tool. But if customers have a real relationship with the retailer, that helps to bond them to the brand.”
Brimson went on to describe why focusing on the experience is actually quite difficult:
…automotive retail has remained largely [unchanged]. By looking through [the customers’] eyes we learned more. We saw that we were forcing them to perform the way WE wanted.
E-mail is a great example. Many of our premium customers live on their Blackberries, an increasing percentage want to use e-mail or use mobile internet, just as they would normally in their jobs. But very few retailers have processes to respond to e-mail in anything like an acceptable time, so customers really have to use the phone.
So forget the quarter-inch drill; go for the experience. And the experience starts and ends when the customer thinks it does, not when you think it does. Sticking with cars for the moment, the customer experience begins when she first thinks, “I wonder what it would be like if I bought a new car? What’s out there?”, not when they walk through the door of a dealership. This means that the experience includes how easy it is for them to get information about the cars you sell, if they can find the information that they actually want (even if they don’t know what they want), if that information is satisfying to them and encourages them to continue moving forward, and so on.
And the ideal is that the experience persists even beyond the customer’s life span, that they have talked glowingly about you and what you do so that their kids or their friends want the experience as well. You are aiming not just womb-to-tomb, but beyond as well. Their experience becomes a permanent relationship (which is fanaticism) – and that leads me to the next trend.
6) Eat your own lunch – and everyone else’s
The world changes. This is such an obvious statement that people never really think about what it means. It implies that your market changes as well. And that means your offerings have to change. Yet, many companies resist the idea of introducing significant changes to what they do for fear it will eat into their existing sales and hurt their revenues. The reply is obvious, and again, it’s so obvious that people never actually think about it: whether you introduce changes that eat into your existing sales or not, someone else will. So the question then becomes: do you want to cannibalize your sales, or let one of your competitors do it? This is an old, established principle in innovation, but one that is so well known that people take it for granted – and don’t, as a result, make use of it. And with the speed with which things are changing now, this old principle takes on a new urgency.
Worse, you also need to take risks when you introduce new things, precisely because the world is changing so fast. If you make timid changes, you risk being left behind.
I have to come back to Apple again, because Apple does this better than anyone else. Apple popularized the use of the mouse-and-desktop metaphor. (They didn’t invent it – that was done by Xerox at their PARC research group, but they were too timid to exploit it.) And Apple were the ones to first push customers to move beyond it. People still use mice with their computers – but Apple found them too limiting for their iPods and iPads, so did away with them, substituting touch and tap technology instead. They were the first to do away with floppy disks, and, more recently, with any kind of external drive, including CD and DVD drives in their MacBook Air.
Yet, what Apple and Jobs did was far more profound than just leapfrogging their own creations. They went outside of the computer industry and ate other industries’ lunches as well. In the words of a New York Times article (David Carr, “Steve Jobs Reigned in a Kingdom of Altered Landscapes”, August 27th, 2011, NYT website), “[Jobs] didn’t set out to destroy existing business models, he just noticed their lack of relevance and came up with new ones that kept consumers happy and Apple fat. Along the way, he changed the vocabulary of media: Songs became files, subscriptions became apps, and media became just one more way to make that thing in your hands appear all the more magical.”
So, when you set out to innovate, make no small plans, and don’t even think about protecting your own business and your existing sales. Think beyond the boundaries of what you sell your clients, and think instead what you could do for them with what you have.
7) Speed kills – your competitors
Carrying on the discussion of how Apple has grown seemingly effortlessly over the past 10 years, they have forced the pace of change to the point where competitors are struggling to catch up to their last innovation while they’re already working on its successor.
I remember when Apple introduced the iPhone in January of 2007. There was a lot of criticism of what it couldn’t do, and of its shortcomings. I thought such criticisms, while perhaps warranted, were short-sighted because I knew that Apple’s pattern was to introduce a product, and then immediately and rapidly work to improve it. Sure enough, most of the shortcomings of the original iPhone were corrected (or at least improved) in subsequent releases, first of the software operating system, and then of the device itself.
There’s even a management cliché about this process: “Ready! Fire! Aim!” Introduce your revolutionary device, even if it’s not quite ready for primetime. Meanwhile, work like fury to smooth out the shortcomings, and listen carefully to the bitching and complaining about it so you can make the improvements that will make a difference to people who are using it. Use the market as the beta tester, because waiting too long saps your speed and allows competitors to catch up.
Of course, speed can kill you, too, if you don’t listen, or don’t want to listen, to criticism of your offering, or are unwilling to change it. If you bet the farm on a new offering, and then refuse to tinker with it, you will create enormous momentum – towards the scrap heap. So, you need to keep ahead of your competitors, and force them to make bad choices and introduce poor imitations of what you’ve done – but you also need to treat your own offering as a poor imitation of what it is going to become when you improve it.
8) Make lots of small mistakes
This seems to contradict trend #6, but it doesn’t. In a handbook I created for my consulting clients, titled “Innovation and Leadership: Techniques to Lead Creativity”, I talk about why companies proclaim their dedication to innovation when they secretly loathe and despise it because of the risks it forces them to take, and the fear of failure that comes with such risks. I then suggest that the way to overcome that fear is to institute a process of continuous improvement (from the Japanese process of kaizen), introducing a steady flow of minor changes that, collectively, add up to massive improvements over time. There are two aspects of this that complement, rather than contradict, my “speed kills” trend.
First, when you create a culture of continuous, all day, everyday improvement, and everyone is always looking to do things better today than they did the day before, the cumulative changes add up very quickly, supporting the Need for Speed. Creating that culture is not easy, but in today’s market, I believe it is essential.
And second, when you use creativity-enhancing techniques in the quest for a steady flow of small improvements, you will occasionally stumble across a really big idea as well. Of course, most people either back away from a big idea because it’s so scary, or fail to recognize it at all because it seems so different, so out of context, so “outside the box.”
What’s more, pursuing incremental improvements on an on-going basis does not preclude making a concerted effort to find the Next Big Thing, either, although that is harder.
I worked with one client, taking them and their people through an “Inventing the Future” process. At the end of that process, two things happened. First, the workshop participants came up with what I thought was a brilliant new approach to their market that was a relatively simple (although not easy) extension of their existing customer service process. It would have created substantial market differentiation, setting them apart from everyone else in their very busy market. Yet, their reaction was definitely ho-hum. They didn’t see it as being that important. This is, in my mind, a classic example of failing to recognize. They were looking for something dramatic and flashy. This was – but they didn’t see it that way, and so chose not to pursue it.
Meanwhile, as a result of preparing and running the visioning sessions for them, I had an idea that went ’way outside the box, bringing technology into their business in a dramatically new and different way. However, they hadn’t hired me for my ideas, but for my ability to stimulate their thinking and facilitate their brainstorming process. Indeed, this was explicitly spelled out in the terms of engagement. Accordingly, I approached the management privately, told them I had an idea that might be of value to them, but warned them it was a radical departure from their current way of doing business. They didn’t want to hear about it. They didn’t ask any questions. They basically just brushed it off without knowing anything about it.
9) Use technology to make magic
When people marvel to me about all the changes technology has introduced over the past 10 years, my reply is always, “You ain’t see nothin’ yet!” Technology is advancing so quickly that it’s almost inconceivable what we will experience over the next 10 years.
Yet, technology is doing things that even 20 years ago people would have dismissed as improbable, impossible, or thought was just plain magic. So exploit that magic. You may be in an established, mature industry that uses very little technology. But look for ways of improving your customer experience of your offerings by using technology to make it magical. Again, Disney is great at this.
I was on one of their new cruise ships in January of 2011, and while there were lots of interesting, well-executed things on this ship, one thing caught my imagination and stuck in my mind as really neat: they had magic pictures on the walls (or bulkheads, if you insist). When you were walking through some of the public areas, there were all kinds of pictures, illustrations, photographs, and decorations from their movies and creations. A few of them, though, were magic: while they looked like pictures, for example of a pirate ship, when you walked up to them, a motion sensor turned it from a static picture to a cannon battle between the pirate ship, and a port city fort, complete with sounds.
There was no compulsion to do this. Disney’s earlier ships had static decorative pictures and such on the walls. But this was an opportunity to use technology to make something ordinary into something magical. And since Disney sells the experience of magic (even though they don’t actually have magic), it was a natural progression for them.
You don’t have to be Disney to do this. You could run a lunch counter, and offer your regulars the opportunity to order their lunches by email. Once you had that established, you could email photos of what they normally ordered, along with suggestions for sides that might complement such dishes, and an offer for a (first time) discount if they were ordered together. Once you got your regulars used to that, you could match similar taste combinations from the things that other customers who liked what this customer liked, and make suggestions of things they haven’t tried, along with a (first time) discount to encourage them to experiment. In short, you could use technology to look for ways to make their experience (Trend #5) easier, better, and more memorable. In fact, I’m sure there are lunch counters that are doing just this, even though I don’t know about them.
“Any sufficiently advanced technology is indistinguishable from magic,” said author Arthur C. Clarke. Technology is making magic on a daily basis – so find a way to bottle this lightning, and turn it to your advantage.
There are many other developments in innovation beyond what I’ve said here. I started work on this blog by listing ideas, and then wound up discarding a bunch of them in order to focus on the ones I thought were most relevant right now. If you are truly interested in innovating, then it must become a way of life, not just something you think about when reading an online article.
And if I can help, contact me.
