- Companies need a story that consumers can connect with.
- A company’s story needs to be scalable.
- The consumer connection needs to exist beyond the transaction.
Harvard Business School recently brought together a group of executives from the beverage industry to share their thoughts on what modern companies need to do to build a brand. It became clear that success requires recognizing that today’s customers are trying to buy an experience rather than a product. In fact, while most companies focus their innovation efforts on building a better product, research has shown that the biggest opportunities lie in innovating around the customer experience and the profit model. After speaking with the executives in attendance, Associate Principal Dave Farber shares three lessons on how companies can build a brand experience that translates into sustained share of wallet:
This past August, Mass Innovation Nights launched its 11thMIN FOODIE event in Somerville, Massachusetts. Bringing together ten food and food tech startups, the night was an opportunity for these new business to showcase their ideas and get the word out about their companies.
It was impressive to see quite a few startups address tasks that consumers would like to prioritize in the everyday but struggle to get done. One company, for example, launched an app to help individuals find and buy local. Another made it easier for people to eat all-natural foods. A third focused on enabling people to reward themselves without feeling guilty. Having worked with a number of leading food companies, we have seen that customers are often willing to pay a premium for these exact types of services. This suggests that these young startups may be on to something.
Looking at the winner and the runners-up in the event, three big lessons stand out on how companies can differentiate themselves in crowded markets:
If you ask them, customers have a lot of needs—they want bigger, faster, more efficient, more variety. Most companies chase after this laundry list of to-do’s, churning out solutions that are increasingly elaborate and feature-laden. Sometimes they end up with a bullet train; other times, you get green-colored ketchup.
On the other end of the spectrum, we’ve seen companies direct their innovation efforts towards finding radical ways to do less—which correspondingly allows them charge less to their customers. These businesses are veterans at making tough trade-offs; they relish in ruthlessly and imaginatively funneling down to the bare bones of what their customers need. There are many ways to go about this cost-cutting, but the end result is almost always a transformative approach to the industry. We call this Costovation.
An example of this down-market innovation is Omenahotelli, a Scandinavian chain of budget hotels where just two things are guaranteed: a cheap rate and a central location. Anything else—like a lobby, receptionist, or even housekeeping services—is not part of the deal. Guests receive passcodes to unlock the front door and then self-service their way through their stay in highly-standardized rooms. Omenahotelli runs on a simple concept—price and location above all—and is as innovative as it is lean. It’s perfectly suited for budget travelers exploring an expensive part of the world.
Here are two key lessons about innovation that we’ve gathered from businesses that excel at Costovation.
Lesson #1: Innovation doesn’t have to be about more. We live in a world of ever-expanding phone display screens and 1000 flavor soda fountains, but catering to our ever-evolving whims comes at the expense of simplicity in the back-end supply chain. In contrast, one technique for Costovation involves rallying around the single most pressing customer need. It’s the opportunity to do just one or a handful of things very well.
Most new startups fail. That’s particularly true in the food and beverage space, where entrepreneurs often have great homemade products but lack the resources and business expertise to get their products to the next level. However, those skilled few that do succeed can be valuable bellwethers for how the industry will evolve. What’s more, the startups that take off often have important lessons for even the biggest consumer goods incumbents. That’s because those that succeed don’t do so based on luck. They thrive because they take a different view of the market – one that focuses on consumers’ jobs to be done.
The team at Mass Innovation Nights – an organization that helps local entrepreneurs promote their businesses – recently hosted an event to connect New England food startups with media members and innovation experts. Several of the companies featured at the event were already showing promise. Looking at how those businesses got their start and why they’re gaining so much traction, we’ve extracted three lessons that any consumer goods company would be wise to pay attention to. And in the process of learning from these young companies, we may well get a better idea of what’s coming down the road in the food and beverage realm.
On two recent occasions, we’ve heard about tech-savvy companies solving common problems with one of the least innovative products we can think of – socks. Kind of fancy socks, but socks nonetheless. Oddly enough, that pretty quickly made a lot of sense. That’s because innovation isn’t really about solving complex challenges, developing fancy technology, or even having that phantom “Eureka!” moment. Companies that develop breakthrough new products do so by responding to newly relevant customer needs. More specifically, they find ways to address under-satisfied jobs that customers are trying to get done in their lives, or they alleviate the pain points that stand in the way of getting those jobs done. To better understand how a Jobs to be Done mentality can help break down problems until the right solution seems obvious, we’ll look at how two companies – Yondr and Netflix – have started addressing real customer needs using little more than some socks.
We’ll start by looking at Yondr, a company that satisfies two different types of jobs – functional and emotional – that have become increasingly relevant in recent years. Yondr essentially makes socks for smartphones. Once individuals put their phones in the socks, the socks lock and prevent those individuals from using their phones until they step outside of a defined geographical area. On the functional side, Yondr is helping venue owners and performers combat the problems that have developed as phones have become more advanced. Concert venues and comedy clubs, for example, now have a way to prevent attendees from capturing and posting images and videos of their events – an issue that has become increasingly problematic as phones with high-quality cameras have become ubiquitous. Similarly, testing centers can have students put their phones in these socks before taking tests, preventing them from accessing the Internet or copying testing materials. On the emotional job side, Yondr’s socks also give individuals a way to more fully experience the events they’re at by taking away the temptation to view the event through the screen of a phone or to rely on their phones as a social crutch rather than interacting with other attendees.
Although Yondr’s “socks with locks” may seem like a particularly clever idea, finding the need for such a solution is actually quite intuitive. It simply involves giving some thought to how the world is evolving, finding those jobs that are either new or more important than they once were, and learning where customers struggle to get those jobs done to their satisfaction. In this case, cell phones have become both more widespread and more powerful. Instead of thinking about how to incrementally improve phones and add more functionality, Yondr looked at a broader set of stakeholders to understand what jobs they were trying to get done – and where they were struggling – in this new smartphone-first era. It quickly became clear that among other needs, there were under-satisfied jobs related to protecting IP rights and sensitive content. Framed in that light, a simple sock with a locking mechanism provided a fairly obvious solution.
Many companies are not doing enough to fend off low-cost rivals. They worry that adopting a down-market strategy could ultimately harm their brand. At the same time, young customers who are establishing roots could become valuable, long-term customers. Is the risk worth the reward?
Our new piece for Forbes looks at five of the strategies employed by companies that have successfully made the shift down market. We also explore how Mercedes-Benz is faring with its recent foray into the entry-level luxury car market.
This post was written by Steve Wunker. Click here to learn more about our work in strategy.
Much of this week’s tech excitement has been around the size, shape, and display of the new iPhone 6. Perhaps the most important long-term implications, however, will come from Apple Pay, Apple’s new play in mobile payments. Apple Pay – enabled by Near Field Communication (NFC) – is hardly a noteworthy technology innovation. Despite limitations in point-of-sale (POS) infrastructure and relatively slow roll-out in the corresponding phone technology, Google Wallet and others long ago made mobile proximity payments a mass possibility. NFC has been around for roughly a decade. At the same time, companies such as Square have been steadily popularizing mobile payment solutions for both consumers and smaller merchants.
So, why is Apple Pay significant? Much like with Apple’s past successes, the relevant technology is now being integrated into a larger business model innovation. Somewhat serendipitously, this business innovation nicely coincides with shifting consumer behaviors and demands for retailers to upgrade POS terminals. In particular, Apple Pay benefits from five key advantages that might allow Apple to be the driving force in fueling the growth of the US mobile payments market.
Note: BestWatch recently came to New Markets looking to size various target markets using Jobs to be Done, and to develop a strategy for adjusting its product portfolio. The name and industry of BestWatch have been disguised.
BestWatch’s challenge was one that many companies face, though this fact was of little comfort to BestWatch’s executives as they watched their deadline grow closer. BestWatch had seen exceptional growth in its relatively new line of high-end watches, but analysts were warning that highly anticipated smartwatches would soon be adorning wrists everywhere. With a board of directors meeting looming, BestWatch’s executives needed guidance on whether to continue to invest in its high-end watch line. Historic sales data of other types of watches and bracelets suggested that BestWatch should continue to push its high-end watches. Meanwhile, advisors had averaged the wildly varying projections for smartwatches to determine that they indeed would be the next big thing. BestWatch hoped that Jobs to be Done could provide the real story.
“Jobs to be Done” is a term first popularized by Harvard Business School Professor Clayton Christensen. It is shorthand for a way to look at latent need in marketplaces and the wide variety of ways that people accomplish certain goals beyond just buying a product. For instance, a car buyer isn’t just purchasing a mid-sized sedan, but a way to express his personality, plan for a growing family, and impress his neighbors. He has many other ways of accomplishing those same jobs, and so an automaker has a broad range of competitors, as well as many hidden levers for getting those jobs done beyond everyday functional specifications such as turning radius and headroom.
For consumer goods executives, keeping up with all of the reports on how difficult it is to win in the industry might be just as difficult as actually winning in the industry. Countless articles and reports repeat Clayton Christensen’s statistic that 95% of new products fail, or note how very few new products end up being breakthrough innovations that meaningfully impact their categories. Many more detail how new product launches fail to meet a variety of specific metrics, such as covering development costs or having a material impact on the company’s growth trajectory. Most recently, however, Nielsen revealed its list of 14 Breakthrough Innovation Award Winners. Of more than 3,400 consumer goods product launches in 2012, only these 14 met Nielsen’s strict criteria for breakthrough innovation: (1) distinctiveness – delivers a new value proposition to the market; (2) relevance – generates a minimum of $50 million in year-one sales; and (3) endurance – achieves at least 90% of year-one sales in year two. Looking at the patterns among these 14 game changers reveals several best practices that consumer goods companies can leverage to create their own success stories.
My mentor Clayton Christensen, Professor at Harvard Business School and originator of the term “disruptive innovation,” is fond of saying that great innovations come from deeply understanding customers’ jobs to be done. Are “jobs” different from customers’ needs or sought-after outcomes?
Yes. All too often, marketers define “needs” in terms of product requirements, like the need for a car driver to have a cupholder. A driver’s “jobs” can be much more expansive. For instance, he may have a broader job to eat while driving, and still a broader one to avoid wasting time. Seen through this lens, an automaker has many more avenues for innovation than simply perfecting a cupholder. To address the job of eating while driving, the company may create a thin but sturdy tray that folds out from the center dashboard to hold a sandwich, and a tab under the passenger’s side dash where the driver can attach a small plastic trash bag. To help the driver avoid the feeling of wasted time, the company could e-mail its customers a weekly set of “best of” podcasts chosen to meet their interests. Importantly, the competition for getting a job done often is not in a company’s traditional product class, but instead customer frustration and doing nothing, or an alternative from a completely different industry. Examining jobs to be done can vastly increase the number of levers a company might pull to create innovative offerings.
Creators of disruptive innovations are frequently seized by the power of their idea. They envision all that it can become and the transformative effect that their innovation will have. Unfortunately, their zeal can blind them to the need for walking customers through several stages of adopting revolutionary ideas. Counter-intuitively, to launch a disruptive innovation you need to start small.
I came to this realization the hard way. In 2000 I led a team creating one of the world's first smartphones. We knew all that smartphones could potentially do, but we could not accept that customers would use only a small fraction of these functions at first. Later, I founded one of the first mobile marketing companies and was perplexed that the idea took off so slowly. Eventually I researched the patterns of how disruptive innovations get adopted, and I discovered useful insights I wished I had known years earlier:
In 2003, Clayton Christensen popularized an idea that he believes will be as transformative as his the concept he termed "disruptive innovation". The idea -- not yet as well known as disruptive innovation, but profoundly powerful -- was stunningly simple: instead of selling people products and services, help them to get jobs done in their lives. In many years of consulting with Christensen, I saw how this idea could lead firms to re-frame markets, address new types of competitors, and unlock vibrant sources of growth. Yet I also witnessed companies struggle to think about jobs-to-be-done in the sort of rigorous way needed to capture ideas precisely and translate customer insights into finished products and services. Read about a six-step process to apply the concept of jobs-to-be-done in my piece for Forbes.
This post was written by Steve Wunker. Click for more about how New Markets Advisors helps companies to re-frame markets through understanding jobs-to-be-done.
Samsung's plan to invest $41 billion -- this year -- is a bold but well-calculated strategic move. In industries with high fixed costs, beware the free-spending titan; it will happily up-end the economics of would-be competitors. A big reason the company can confidently make this investment is because of its forward integration from electrical components into devices. It can create markets to consume the output from its big bets on new plants and R&D. Read more in my piece for Forbes.
This post was written by Stephen Wunker, author of Capturing New Markets: How Smart Companies Create Opportunities Others Don't.
The first impulse of companies on the current stock market roller coaster may be to fasten their seatbelts and sit very tight. But with record amounts of cash on their books, many firms have been sitting tight for some time, and their prospects for organic growth have shrivelled. There are five things companies can do to nuture growth even when cash is dear and markets are volatile. Read more in my post at Harvard Business Review.
This post was written by Steve Wunker. Click for more of New Markets' thinking on innovation capabilities.
How could a hero of market creation become so staid?
This question has been asked frequently of Starbucks, which once up-ended traditional assumptions about coffee. From 1993 to 2006, the company rose from obscurity to ubiquity, in the process driving a stock price appreciation of 80,000%. It proved that people would pay vastly more than historical prices for coffee, because it was selling an experience as much as a beverage. In the process, the company claimed an important space for itself on the landscape of jobs that consumers are trying to get done (Harvard's Clayton Christensen originated this way of examining the market, and applied it to Starbucks here). When people are looking to fill time or be productive outside of the home or office, Starbucks gets the job done exceedingly well. Similarly, if people are looking for a morning treat to make themselves feel special, an ultra-customized Starbucks beverage does the trick. Although the company's coffee ranked lower than Folgers Crystals in a Consumer Reports blind taste test, Starbucks' success was driven not by superior flavor, but through deep understanding of what jobs people want to get done in their lives.
Then the company seemed to lose the plot. In the pursuit of operational efficiency and incremental sales, Starbucks automated processes, pushed Point of Sale items like stuffed "Bearistas," and generally succeeded in ekeing out gains quarter by quarter. Simultaneously, the company gutted the experience that had created such loyal customers, losing the labor-intensive elements of "coffee theater," reducing coffee aromas, and seeming more and more like the massive corporation it had become. Patrons ultimately defected.
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