Skinny Innovation

Skinny Innovation Innovating when your company is on a diet 2 The new heroes are back to basics 3 Think shopper 4 Float like a butterfly sting like a bee 5 Meet your new consumer 6 It‘s all about people ?What If! Soapbox The Skinny Issue Welcome to The Soapbox: The Skinny Issue The Soapbox is an ongoing series of ?What If!’s points of view on innovation. This issue is about innovating in the struggling economy. As innovation practitioners, we’re digging into it every day, learning from consumers, and talking with clients over a cheap happy-hour-beer about the changes they’ve had to make when our economy and companies are on a diet. We doubt that business leaders need a lot more commentary on the subject; so instead, we’ve zeroed in on a few practical, critical solutions. Inside you’ll find our thoughts on what’s impacting innovation today and some things you can do to adapt. This is a conversation starter from the Soapbox at ?What If!. 1 Refocus on the bottom line 2 The new heroes are back to basics 3 Think shopper 4 Float like a butterfly sting like a bee 5 Meet your new consumer 6 It‘s all about people Remember the good-old-days? We had fully staffed growth teams, generous innovation timelines and deep pockets for disruptive innovation. And on the horizon, a consumer market hungry for all the new stuff we had to offer. Now we look around at our battle-weary teams and the tone is quite the opposite. We face a brand new world with an ambiguous future, which means new rules that aren’t very clear either. So far, company leaders have done what they’re supposed to do: Freeze spending, cut costs to stop the bleeding, scramble to adjust projections and tell ourselves to stop reading the newspaper, (it’s depressing). But, looking forward, what’s next for innovation? Conventional wisdom says companies that continue to innovate come out of a recession on top. The hard part though is “how?” Especially when people are driven by fear, the organization doesn’t give permission to innovate and consumers aren’t pulling out their wallets. The good news is, we’ve learned from the past. One of the benefits of tough times is that they expose the parts of our business that need fixing. In many ways good times created an illusion of progress and a reliance on over-designed processes to chug out ideas. Prosperity led to a lot of extra “fat” in the company, such as complexity and over-think. And chubby companies move slowly. Today company climates look very different, driven by worry, scarce resources and more work done by fewer people. Many believe that this new marketplace is here to stay. If so, it could be dangerous for companies to circle in a holding pattern, waiting for a bounce-back. It’s time to do things differently. We’re in skinny times, on a very long resource diet. But this is actually a great opportunity to find the entrepreneur inside us — innovation might seem risky right now but it can pay huge dividends. So you may expect the next few years to feel like a scramble for survival. But hopefully you can use this as a turning point to do business in a profoundly different way. As the saying goes, “Let’s not waste a good crisis!” 2 3 Skinny times call for Skinny Innovation Skinny Innovation is a way of looking at innovation in response to the downturn It’s an approach to innovation that’s lean, flexible and fast. It’s not a model or method, it’s just a “reset” on the topic. Being skinny is more about imagination than process. In fact you know how to do it, you just left it behind when times got fat. And this can help you rediscover the skinny approach. What follows is a practical guide on how to be skinny to help you move into entrepreneur mode and capture new opportunities. 5 Contents The skinny six 1. Refocus on the bottom line 4. Float like a butterfly, sting like a bee 2. The new heroes are back to basics 5. Meet your new consumer 3. Think shopper 6. It’s all about people 6 7 1. Refocus on the bottom line Skinny Innovation Refocus on the bottom line If your company defines innovation as new product development and has recently become more risk averse, then it’s likely you’re launching fewer products. So your leaders may be rumbling that the innovation team is less essential, but a narrow view of innovation misses all the places you could add value. Innovation is much more than new product development. It’s problem solving through insight and creativity, and this can be applied almost anywhere. You can use innovation to find the right cost savings, change the supply chain, increase customer conversion rates, increase margin, reduce acquisition costs by boosting loyalty, and much more. Maybe it’s these kinds of challenges that become the face of your innovation projects. Imagine the shift in mindset of innovating for enterprise AND efficiency – two concepts often handled in very different ways. Enterprise is created by innovating on top-line growth. Efficiency is typically solved through cost cutting on the bottom line, but innovation can help here, too. Chevron Energy Solutions is a subsidiary built on an innovative business model. CES retrofits commercial buildings with energy-efficienct infrastructures, and charges next to nothing up front. They make their money based on performance, from the energy savings of their customers over time. The innovation here wasn’t simply to sell new services but to build a radically new business model that’s timely and relevant. 10 13 11 Skinny Innovation Refocus on the bottom line How to be skinny Visit other groups to innovate. You can detour innovation skills to new places such as sales, business modeling and supply chain. Get various divisions in the company together and ask them simple questions: How can they do what they’re doing faster and better? Can we innovate in the way we build and sell our products or in the way we generate revenue? Your perspective could help. Bring in a fresh pair of eyes. Everyone likes to have a crack at someone else’s problem. Bring in someone outside your industry who can add a fresh perspective. Focusing on business model ideas? Go visit three different business models where you can gain some new ideas. Focusing on sales innovation? Hold an ideas session with a sales organization that’s very different from your own. Repurpose great assets. Send your team to mingle with other internal groups to find technologies, products and assets that can be used in new ways. There are ideas waiting to happen that don’t require major spending to develop and can help create efficiencies of scale. 12 13 2. The new heroes are back to basics Skinny Innovation The new heroes are back to basics In fat times, many companies tended to launch innovations with more features and benefits, and a higher price. But if too many innovations were built with premium bells and whistles, those companies could now be vulnerable. For example, Chrysler is in dire shape because its portfolio includes mostly gas-guzzling SUVs and too few smaller, efficient cars. The company was hit hard by consumer spending cuts, but Chrysler’s product set also lacked balance. Today, fancy innovations are not the heroes. If your company’s favorite brand or product is a premium item, it’s time to celebrate a new hero in the company: The relevant product. This might be the back-to-basics, lower-priced, stripped-down offering. But relevance isn’t just about price and no one wants to compete on discounting alone. Relevance is about offering customers a new value and sense of empathy. Something that says: “We understand your situation so we’re making your life easier through X.” Some good examples of relevance: Allstate’s “Accident Forgiveness” program promises it won’t raise customers’ rates if they have the occasional fender-bender, breaking through category conventions. Pay-as-you-go phone plans, which are the fastest growing payment options in the mobile category. Consumers are rejecting long-term contracts in favor of flexibility and control. Hertz Connect, which offers city residents the ability to use a car without the full commitment of owning one (the original idea came from Zipcar). Paying $8.50 an hour is a lot more appealing to urbanites than a three-year lease at $300 a month. Starbucks is struggling to pull more customers into its stores or increase sales of $4 lattes. So instead of relying on sales of its premium products, Starbucks turned to an unlikely solution: VIA instant coffee for a buck. Instant coffee would’ve been unheard-of for the brand five years ago. Today, it’s a necessary strategy to keep sales steady and ensure Starbucks can compete against down-market competitors. The idea for VIA may be obvious; the real success is in how CEO Howard Schultz enlisted the support of the company. VIA is one action in a larger strategy of becoming relevant, trusted and valued. As Schultz said, “There’s a new level of sensibility around values and attitudes that people have – it is a sense of humanity.”1 1 Andrea James, “Starbucks CEO: ‘We want to be trusted’,” Seattle Post-Intelligencer, March 18, 2009. 16 17 Skinny Innovation The new heroes are back to basics How to be skinny Keep customers in the family. In the new market, do you have a critical balance to keep customers from moving away from your brand? Run a portfolio check to be sure you have a balance of products, and offer a value product right now. You might not be able to sell customers your highest-priced item anymore but at least keep them in the family. Use a relevance lens. Question what your product really offers and how relevant it is to consumers today. What kind of new value are you giving them? Are you making their lives easier or better? Are you answering a timely need? Celebrate your value brands all over the place. It may be hard to get your people to embrace your more “boring” brands or products, but these may be the ones keeping you afloat or making the most impact on customers. Celebrate the impact of those brands and give people a sense of pride around them. For instance, maybe you’re saving the average American family a dollar every day. Think along the lines of Southwest Airlines’ employee mantra to always “Do The Right Thing.” 18 19 3. Think Shopper Skinny Innovation Think shopper As media spending declines, advertising can’t get the message out like it used to. But look around your local store and you’ll spot customers with crinkled brows, studying labels and weighing their purchase decisions with more consideration. Retail and sales channels are the critical “new media” where purchase decisions are made. Brands these days have more opportunities (and pressure) to sway purchase decisions through the retail experience. Retailers know this is a timely advantage and are responding with aggressive private-label strategies. The competition is heating up to stand out at the shelf. A beverage brand decided to pair up with one of the largest retailers in the U.S. to develop branded retail ideas. The brand funded the project, knowing that an exclusive idea crafted for this retailer would deliver big returns. The aim was to develop concepts for the beverage aisle that for the first time focused on shopper needs over business needs and would raise category sales. Together, the retailer and brand shadowed shoppers for new insights, which led to breakthrough ideas for the beverage aisle. Both also walked away with a shared mission that they could use to develop a partnership and a shared understanding of shopper needs. 22 13 23 Skinny Innovation Think shopper How to be skinny Focus on the decision moment. Brands should build their retail muscles to create innovative shopper experiences. Choose a retailer for collaboration and develop ideas together using combined insights and advantages. Know your shopper. The consumer becomes a shopper once they enter a store, and the retail experience must capture them. Just a few examples the brand must deliver are: – “Grabability” that makes the shopper touch the product – Routine interruptions to cause shoppers to “try on” your product – Built-in experience clues that sway purchases Aim for wider platform innovation. For many brands, new innovation ideas should be viewed as a platform where products, accessories, services and retail drive one another. Think Nespresso, iTunes and Kindle. Build spidery ideas that connect products and services, and how they’re sold. If you’re developing a product, deliberately aim for wider ideas that may incorporate sales channels. 24 25 4. Float like a butterfly, sting like a bee Skinny Innovation Float like a butterfly, sting like a bee Remember, chubby companies move slowly. Iterative stages are painful and can stall progress. But slow processes also come from the tendency of people to protect and control ideas until they’re perfected. Companies that will thrive now will find ways to act on intuition and cut out the fat, rather than rely on slow, bulky validation processes. They’ll also practice “letting go” of ideas earlier. Organizations that are simple, agile and speedy will win. If there’s a single, most important action at the core of Skinny Innovation, it’s being agile. Agility by definition means “quick and well-coordinated in movement.” While newspapers are in big trouble, the New York Times has launched a category-changing move called the “The Local.” It’s a local news blog that uses unpaid contributions from resident journalists to report on neighborhood news. It combines low-cost technology, self-service advertising and no-cost citizen journalism 12 break away from the old model of traditional newspapers. It’s an innovation that’s to low on cost and risk, quick to trial and high on imagination – hallmarks of Skinny Innovation. 28 29 Skinny Innovation Float like a butterfly, sting like a bee How to be skinny Make ideas real. Prototype and make ideas real at the early stages. This might require new views of what a “prototype” is in your organization. Very rough visuals of ideas are often good enough to get a quick read internally and externally. Use quick & dirty ROI tools. Most innovation processes wait until the end to run return-on -investment (ROI) exercises and rely too heavily on expensive studies. While there must be due diligence, how can you do smaller “gut checks” earlier to keep the idea on track? Use simple back-ofthe-napkin ROI tools for course correction versus validation. This will keep ideas moving forward. Let go. Put ideas out into the world and let the innovation evolve on its own. Think iPhone apps. This isn’t right for every category or idea, but if you’re willing to let go of a concept earlier, collective minds can take it places where it would otherwise get stuck. For example, a Spanish travel agency called Yokmok develops adventure trip ideas by first holding a beta-version exploratory trip at a reduced price. A group of their customers participate in the trip to help build the idea. This in turn builds loyalty through a key group of brand enthusiasts. 30 31 5. Meet your new consumer Skinny Innovation Meet your new consumer Consumer spending has dropped, but it’s also shifting among categories. Movie theaters suffer while DVD rentals have shot upward. Shoe retailers are in trouble while cobblers are doing great. Traditional restaurants are in decline while takeout and delivery places, such as Domino’s and McDonald’s, are expanding. And the down-trading customer who used to spend a lot at restaurants is now buying the most expensive pizza on the menu with a side of breadsticks, which boosts the average check at Domino’s. These changes mean that most brands now have a different customer profile entering their space as those people trade down from another brand or category. They’re not only trading down, but simply spending differently. For instance, sales of champagne and wine are up. This includes people who previously didn’t buy wine for home enjoyment. Who are they and what are their needs? Maybe they’re redirecting the money they used to spend on travel. Whatever your category, get to know your new customers and understand their needs. Jamie Oliver’s newest offering captures consumers who are eating out less frequently. A celebrity chef in the UK with restaurants, books, DVDs and TV shows, Oliver has just launched “Recipease.” It’s a chain of shops that offers ready-to-cook meal assembly with instructions to take home for the family. Recipease is made 12 trading-down consumers who are spending less at restaurants and eating more for store-bought food at home. 34 13 35 Skinny Innovation Meet your new consumer How to be skinny Get close to your customer in a skinny way. Full-scale research isn’t always feasible and it’s expensive. There are many ways to understand a consumer target quickly enough to build ideas. The key is to get past the stale “research interview” and get real. Try these: Shopper critique – Have a consumer follow you around a store while you shop for them. Afterward they critique you and tell you what you did wrong. Go steady – Every member of a project adopts a consumer for the length of the project, with periodic assignments, like hosting a dinner party in their consumer’s home. If you develop a better intuition around your customers you’ll build ideas more efficiently and waste less time on ideas that won’t work. Explore their whole wallet. It’s likely you now have a wider set of competitors. Consumers are making more trade-offs on spending decisions and parceling out their spending across a variety of options. For example, consumers are no longer making decisions between frozen meal brands, but between a frozen meal and a set of freezer-storage bins where they may be storing homemade meals. Learn across businesses. Do you have a company with many brands? If you can learn about consumer groups from other brands, this is a great opportunity to share their knowledge of these consumers on the move. If brands are losing customers to other brands in the company, at least be sure to make good use of that existing insight. Now build something for them. If you’ve identified new consumers in your brand space, redefine your products as a solution. For example, a lawn-care brand could bridge their customers’ previous spending habits (paying Joe’s Lawn Service to groom my lawn) with new ones (buying supplies to reluctantly do it myself ). This could be good timing for the lawn-care brand to offer a professional-grade lawn fertilizer with the same technology professionals use at a cheaper price. 36 37 6. It’s all abo ut people Skinny Innovation It’s all about people Everyone at your company may be worried about their futures. Worry becomes paralyzing and creates a “don’t rock the boat” mentality, which leads to inertia. And inertia is the enemy of innovation. It’s important to “de-worry” people in the company. How can you continue to inspire people and motivate employees through projects that challenge them in positive ways? The collective value of people behaving in a good way is massive. But this doesn’t need to be an item on your to-do list; it’s a way of being as a leader and as a company. The company that is humming along right now, inspiring its people and continuing to look forward is working at prime. Remembering that it’s still all about people will help you win in tough times. Wim Roelandts, former president and CEO of silicon chip manufacturer Xilinx, used to move his desk every six months, allowing him to sit in very different parts of the organization. “It stopped people clustering around me” he says, but also “let me have lots of interesting interactions with all sorts of people across the business.” 12 behavior kept up an element of surprise and let everyone know that he was This thinking about people. 40 41 Skinny Innovation Its all about people How to be skinny Create momentum around “events.” Rally people around an innovation event, which gives them something to care about so they don’t focus on worrying. Despite fear (or maybe because of it), your whole company is motivated to help right now. Run an innovation frenzy about how everyone can help keep the company moving forward. Find your fence-sitters and shove them off. Worry creates a “play it safe” mindset that stalls innovation. Encourage your fence-sitters to jump one way or the other instead of getting stuck. You want people to articulate opinions and continue to try things out. Find moments of playfulness. If you’re facing another meeting in a stale conference room with a Powerpoint presentation, stop and reconsider. A room full of colored paper and laughter can do wonders for morale. And yes, playfulness IS practical – it tells people it’s OK to veer from the status quo. Play the role of “Chief Enthusiast.” In this climate it’s hard to find a positive outlook, so you can’t have too many enthusiasts. Practice the “glass-half-full” attitude and see it rub off on others. Beware of the impact you make through water-cooler chat and make sure it’s a positive one. Shout about your wins! Successes can be harder to come by now, so shine a spotlight on every achievement you can and celebrate thinking differently. Generate some rubbernecking around small victories by telling success stories every chance you get. 42 43 What it all means for you Skinny Innovation starts with you. A lot can happen in a company when a few individuals simply start doing things differently. If this hits a nerve – if you believe in the benefits of innovating in a new way – then enlist your teams, your colleagues and your boss to role model Skinny Innovation. This will require some bravery. It might feel uncomfortable. While there is some personal risk to going skinny, it’s small. It’s not losing-your-home-type risk. You might waste a few days, spend three bucks on a bus pass, or feel uncomfortable when you zig while the rest zag. But you might even have a bit of fun. Soon you’ll notice others behaving the same way, creating a refreshing Think shopper new drive for innovation. What will you do first? 3 4 Float like a butterfly sting like a bee 5 Meet your new consumer 6 It‘s all about people 1 Refocus on the bottom line 2 The new heroes are back to basics Get lean. Be flexible. Move fast. Go skinny. 44 The Soapbox comes to you from ?What If! USA The ideas in Skinny Innovation are compiled by innovators in our New York Office ?What If! is the world’s largest independent innovation company. Since 1992 we’ve been transforming the innovation agendas of many of the world’s most admired companies. Our human-centered and collaborative approach to innovation has been applied to clients’ products, services and people and delivered outstanding returns. ?What If! also has a dedicated social innovation division. ?What If! is made up of 260 people worldwide, with offices in New York, London, Manchester, and Shanghai. The global team works in over 40 countries and across a wide range of sectors and markets. ?What If! clients include Abbott, AstraZeneca, BP, British Airways, Cadbury Schweppes, Citigroup, Coors Brewers, Emirates, Hasbro, HSBC, Kimberly Clark, Nestlé, Nike, Nokia, Shell, The Coca-Cola Company, Unilever, United Nations and Vodafone. 3 Think shopper 4 Float like a butterfly sting like a bee 5 Meet your new consumer 6 It‘s all about people 1 Refocus on the bottom line Copyright ?What If! 2009 www.whatifinnovation.com www.theinnovationdiaries.com