Innovations That Will Sustain the Disruption

2008-12-23

Gaining a foothold is just the first battle in the war. The exciting growth happens when an innovation improves in ways that allow it to displace incumbent offerings. These are sustaining improvements, relative to the initial innovation: improvements that stretch to meet the needs of more and more profitable customers. With low-end disruptions, it can be easy to determine the right sequence of product improvements in the up-market march. After the steel minimills established their foothold in the rebar market, for example, the next logical step was fairly obvious: Tackle angle iron and thicker bars and rods—the grades of steel that were just above rebar. For Target Stores, the goal was to replicate the product line, brands, and ambiance that previously were only available in expensive, fullservice department stores. The low-end disruptor’s marketing task is to extend the lower-cost business model up toward products that do the jobs that more profitable customers are trying to get done. With new-market disruptions, in contrast, the challenge is to invent the upward path, because nobody has been up that trajectory before. Choosing the right improvements is critical to the disruptive march up-market. Here again, job-based segmentation logic can help.

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Jack Trout’s Four-Step Marketing Process

2008-12-22

Long ago, Peter Drucker, considered the father of business consulting, made a profound observation that has been lost in the sands of time. He said, ‘‘Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.’’ Today, when top management is surveyed, the order of their priorities is: finance, sales, production, management, legal, and people. Missing from the list: marketing and innovation. When you consider the trouble that many of our icons have run into in recent years, it is easy to surmise that Drucker’s advice might have helped top management avoid the problems they face today. But as the years rolled on, rather than learn about marketing and innovation, executives started to search for role models instead of marketing models.

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Strategic Management: The IKEA Way

IKEA’s aim is to provide customers with ‘affordable solutions for better living’. The better living comes from a range of furniture and household furnishings offered at prices which appeal to those just starting up their own homes and expanding their families, offered in a style and a context which satisfies the desire for beauty and modernity. Nearly all the products on offer by IKEA are sold in IKEA stores throughout the world. IKEA has achieved the impossible, to create a range of products attractive to consumers everywhere, in countries with very different cultures, and to apply a formula for presentation and sale of those products which reinforces the attractiveness.

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Grow by Concentration - An Introduction

2008-12-18

Previous posts have reviewed three strategy rules: shift to the offensive, maneuver by indirect strategy, and act with speed. What needs your attention now is an all-inclusive strategy rule that allows you to deploy your material, financial, and human resources to increase your chances of success. The rule is concentration. This classic principle is in sharp contrast to the overly common approach of spreading time and thinning out assets across numerous segments, objectives, and isolated actions—all of which would dramatically multiply your chances of failure. The hardnosed evidence leads unequivocally to adopting a strategy that aims at concentrating resources where you can gain superiority in as few areas as possible. Using the broad guidelines of deploy, target, and segment, the examples presented in the post illustrate the application of concentration.

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Steps to Uncover the Extraordinary Business Opportunities: The Importance of of Buyer Personas

Tuned in organizations who understand that the best way to develop products and services that resonate is to identify the unresolved problems of a particular group of people. By breaking buyers into distinct groups, understanding what problems those groups (or ‘‘buyer personas’’) have and how to solve them, and then cataloging everything you know about each buyer persona, your hard work becomes easier. You are more likely to create breakthrough experiences, articulate powerful ideas about what your organization can do, and establish connections with people. This approach is utterly different from what most organizations do: either not segmenting the market at all (creating nonspecific offerings and marketing them to everyone) or segmenting based on their own egotistical view of the world.

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On the Role of Customers in Creating New Market: The Case of GAUSS

One technology company, Gauss, built a plan to let its customers drive product and marketing requirements. This post offers suggestions for how you might adapt that plan to your business. There are three fundamental steps to letting your customers help build your new markets (i) Make sure that your business understands the problem as the customer sees it; (ii) Find a way to ask the prospective customers how they define success for solving this problem, even if they do not understand the issue itself; and (iii) Quickly bring a product to market that clearly addresses those success criteria. Remember, the product includes everything the customer experiences, not just the technology. To apply these three steps, let’s look at the problem of managing content on websites.

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Rules for Enhancing the Innovation Pipeline: Ideate Around Specific Themes

In their recent book entitled “Innovation to the Core: A Blueprint for Transforming the Way Your Company Innovates” Peter Skarzynski and Rowan Gibson has suggested five design rules for enlarging and enhancing your innovation pipeline. The first three design rules are about enlarging the pipeline-building a high-yield process that generates and captures a flood of novel ideas from across the organization and beyond. They are: (i) Involve many minds; (ii) Sow enough seeds; and (iii) Widen the front end. Applying these rules can take your organization a long way toward creating an innovation-friendly culture, which means that your chances of spawning the kind of ideas that generate dramatic new wealth are going to be much, much higher. However, enlarging your pipeline - by increasing the sheer volume of ideas - is only half the story. The simultaneous challenge is to enhance the pipeline by improving the quality of those ideas, not just the quantity. That’s what the last two design rules are about: (i) Increase the combinations and (ii) Ideate around specific themes. This post will present the second rule: Ideate Around Specific Themes.

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