Your newsletter on applied creativity, imagination, ideas and innovation in business.
Wednesday 3 July 2013
Hello and welcome to another issue of Report 103, your twice-monthly (or thereabouts) newsletter on creativity, imagination, ideas and innovation in business.
As always, if you have news about creativity, imagination, ideas, or innovation please feel free to forward it to me for potential inclusion in Report103. Your comments and feedback are also always welcome.
Information on unsubscribing, archives, reprinting articles, etc can be found at the end of this newsletter.
Most articles in this issue of Report 103 can also be found in the archives together with dozens more articles, papers and thoughts.
In this issue of Report 103
- The Insane Journey
- Don’t Be Surprised By Your Customers
- Does Your Company's Innovation Initiative Deliver the Expected Results?
- It's All About Profit
By Jeffrey Baumgartner
My novel, The Insane Journey will be released in Kindle format next week, in other ereader formats shortly thereafter, and print in August. Meanwhile, you can find more information on the web site or on the book's Facebook page.
In a tomorrow slightly to the left of yours and mine, Maxwell van Mars fights to remain two steps ahead of a psychotic preacher and his team of lethal ninja nuns. Maxwell is a spoiled, eccentric womaniser – but is he the demon from Hell Father Forge believes he is?
As they travel across desolate, windswept Europa, Maxwell and his best friend, Wendy – an intellectual kairuku penguin – meet lifeforms who may help or hinder their goal of returning home to Erps-Kwerps, Belgium, including a hitch-hiker who may or may not be an angel, a bumbling team of agents from the Interplanetary Intelligence Agency, a gang of dimwitted human-cockroach hybrids, and a pair of well-meaning aliens with wandering eyes.
Exploring themes of religion, surreality and the complexities of human (and alien) relationships, The Insane Journey blends science fiction, magical realism and humour to create an unforgettable tale that will make you laugh and think.
Note: My apologies. In my rush to get Report 103 out last week, I failed to double-check the link for the novel web site -- as many of you informed me, I got it wrong. I've learned my lesson. I've double-checked the links above!
By Jagan Nemani
Mid February 2013, CEO of Maker’s Mark, Rob Samuels was preparing to reverse the biggest marketing blunder in the history of this company. Their decision to water down their bourbon from 45% alcohol content to 42% alcohol content was not received well by the market. This resulted in a backlash from their loyal customer base and gave competitors an opportunity to attack them.
Over the past few years, Maker’s Mark Bourbon had seen a surge in demand
which has led to shortfall in supplies. It takes six years for the bourbon to
age, making it difficult to for Maker’s Mark to increase supply in response
to the demand. They worried that their loyal customer base would switch to other
brands when they would be hit by supply shortages. Hence Maker’s Mark
was left with no choice but to water down the alcohol content to meet the demand.
They estimated that this action would increase the supplies by 6%, which would
make a lot of happy customers.
Well the mistake they made is that they misread the customer experience needs of their target segment. Their customers enjoyed the high quality bourbon they got from them and were not willing to trade that to fix supply shortages.
In fact this is a story of many successful companies. They become successful by delivering good customer experience. But once they get there, they lose touch with their customers and hence open doors for others to out innovate and deliver better customer experience. This has been the focus on my research for the past few years and I have published a book on the topic of customer experience driven innovation, titled Shift: Innovation That Disrupts Markets, Topples Giants, and Makes You #1. My research found that customer experience needs across many different industries can be described by nine factors, which are Requirements, Price, Convenience, Availability, Service/Support, Quality, Fashion, Social Responsibility and Brand (download detailed explanation of this framework here, or watch 4 min video about this framework here). Customers demand best-in-class experience across three to five factors on this framework, and offer their business in return to companies that deliver such experience. Most of the customers just care about their experience and are seldom loyal to a company. And when a company makes decisions that deteriorate their experience, they take up arms and make noise.
This is exactly what happened in the case of Maker’s Mark bourbon. Any whiskey that is bottled over 80 proof is considered to be Bourbon. By reducing the alcohol content down to 42%, Maker’sMark was cutting down the proof to 84. This will still make it Bourbon, but it would reduce the quality of the drink for customers who are used to 90 proof whiskeys. Hence this decision was considered as a downgrade from the best-in-class customer experience its customers received on “Quality” factor to improve the experience they received on “Availability” factor. This was not acceptable to its customers and hence the company had to reverse its decision. Had they known their customers better, they would not have made this decision and be surprised by the customer reaction.
Companies should stop being surprised by their customers, as often this is not good news. Rather they should understand their customer experience needs and focus on innovating to deliver better experience. The nine factor customer experience framework helps you understand customer experience needs and minimizes surprises. There are many examples of companies that have innovated to deliver better customer experience, minimized surprises from the customers and have managed to shift the market in their favor. Much of this is covered in my book.
How does your company work on minimizing surprises from the customers? Would a structured framework help you minimize such surprises?
About the Author
Jagan Nemani is an innovation-focused executive who believes in developing innovative solutions to deliver a best-in-class customer experience. He has successfully formulated and implemented game-changing strategies that have improved the top-line growth and bottom-line business performance of his clients.
Based on years of experience and research for this book, he has developed an innovative customer experience framework that can be used to understand customers and deliver a best-in-class experience. You can visit his web site at http://www.jagannemani.com/.
Does your company's innovation initiative deliver the results you expect? In my experience there are three fundamental reasons why innovation initiatives fail to deliver expected results. Read about them, and what you can do about them, here.
By Jeffrey Baumgartner or someone who looks like him
In the end, every business has the same goal: to make a profit. If a business fails to do this it will have to shrink. If it fails for too long, it will die.
This means that any business action, such as innovation, that a business adopts of its own will must contribute directly or indirectly towards profitability. If it does the opposite, it is less than useless. It is dangerous to the continued existence of the company!
This is all painfully obvious, I know. Nevertheless, in our enthusiasm about innovation or any business trend, it is easy to forget that it is not about the trend. It is not about the activity. In business, it is about profitability.
In Theory, Business Innovation Is Good for Profitability
In theory, of course, business innovation is good for profitability. It is the creation of new products that your customers want to buy -- thereby increasing income. It is the improvement of operational efficiency -- thereby reducing costs. It is the invention of new business models thereby increasing revenue streams. It is the creation of new marketing communications plans that drive new customers to buy your products -- again, increasing income.
But Not Always
But not always. Some presumed innovative new products have proven to be expensive, profit-hurting disasters. The Edsel, New Coke and the Apple Newton are but a few examples. Moreover, employees generally do not like creativity and innovation -- in spite of what they say. This dislike can result in employees resisting the implementation of creative ideas, particularly when those ideas might affect their job descriptions or futures. Thus, new ideas that might improve operational efficiency are often harder to implement than they should be. People may fear that such ideas will at best reduce their importance to the company and, at worse, cost them their jobs.
In short, for the decision maker, innovation is always a gamble. The greater the potential innovation, the higher the odds. If the manager wins, she wins big. The company wins big. If she loses, there are consequences to profitability and to the company.
Not surprisingly, this results in feeble innovation programmes designed to encourage incremental improvements under the guise of serious innovation. Incremental improvements are low risk. Sure, managers will not win big if their incremental innovation works. But they will not screw the company or themselves if their ideas do not work out. And most humans -- including managers -- fear risk more than they value gain. All the more reason to stick with incremental improvement as innovation.
In fact, there are two approaches to this challenge. You can either talk a lot about innovation, but limit activity to safe, incremental improvement. Or you can acknowledge that no matter how elegantly worded your company's mission statement might be, business needs profit just like humans need food. Analysing innovation in terms of profitability --- or value add -- is a good way to look at big, potential breakthrough ideas. Devising ways to minimise risk to profitability is a good way to avoid damage to the company.
Death From Disruptive Innovation
Of course there is another risk. Some small, upstart company with far less to lose than is the case with your company, could come up with a breakthrough innovation that threatens to make your product or business model obsolete in no time. That, of course, is wickedly bad for profitability!To avoid this scenario, a little "insurance creativity" is wise. Insurance creativity is playing with scenarios in which your main products, services or business model becomes obsolete owing to a disruptive innovation by an upstart start up. Then you develop ideas that might enable you to cope with a competitor's disruptive innovation.
Now, that's enough of reading this article. Get back to work and do your part in making your company profitable!
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Report 103 is edited by Jeffrey Baumgartner and is published on a monthly basis.
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