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A leading innovation and marketing blog from Braden Kelley of Business Strategy Innovation

Sunday, September 30, 2007

Are $300 Jeans an Innovation?

I came across an interesting article by Chip Heath and Dan Heath in Fast Company. The article hypothesizes that people's enjoyment of luxury goods has moved beyond the feeling of status to personal enjoyment. Think about the concept of wine connoisseurs moving beyond wines to jeans, watches, mens dress shirts, and even coffee. Traditional luxury goods consumers would prefer that every one knew that they were wearing or using a luxury product. Connoisseurs instead are happy to remain invisible to the masses but conspicuous to other connoisseurs. They are passionate about jeans or coffee or whatever it might be, and enjoy talking about their choice with other connoisseurs. The question the Heaths pose is: will the proliferation of new "connoisseurs" spread to even something as mainstay as socks?

A designer named Nagrani is already selling $35 socks, but is there really potential for sock connoisseurs to be a large enough group to create a $300 sock market?

What do you think?

This idea of the luxury market evolving towards a connoisseurs' market begs the question of whether there is a connoisseur innovation that you could lay claim to in your industry. Can you think of a way?


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Saturday, September 29, 2007

Business Model Innovation?

I came across an article on BusinessWeek.com that I just have to write about because it asserts that GM has achieved a business model innovation by shunting its retiree medical obligations onto the Union (and getting away with only contributing 70% of the outstanding obligations to the fund).

This is not a business model innovation, but purely a negotiation outcome and nothing that will give GM any sustainable competitive advantage. Ford and Chrysler will end up doing the same thing and the parity of competition amongst US manufacturers will be restored. A business model innovation is Southwest Airlines establishing a new airline focused on providing low fare point to point air travel instead of creating another airline based on a hub and spoke model, or Saturn selling their cars for a fixed price, not GM pushing obligations off their balance sheet.

GM is not losing in the automobile industry because of health care costs for retirees. They are losing because their operations result in cars that less and less people want to buy. GM needs to stop complaining about peripheral issues and trying to be like Toyota and instead focus on how they can be better than Toyota.

When workers come back on the job, nothing will have changed in their business, the business of designing, manufacturing and selling cars. If anything the workers are going to come back to work feeling like they have just given even more away to the corporation, just so that the CEO's balance sheet look better. This is not a business model innovation. The Big Three will not avoid the inevitable by simply squeezing their union workforce, they need to design and manufacture better cars. This deal with the unions may slow the inevitable, but not avoid it. Toyota is passing GM, the Korean manufacturers are quickly improving their quality, and the Chinese will begin entering the US market in the next few years. One of the Big Three will go out of business in the next ten years. The real question is which one?


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Friday, September 28, 2007

The Second Coming of the Retail Health Clinic

There used to be a day when you could go to your local barber and get all sorts of wonderful health treatments. That fortunately or unfortunately faded with the old west.

That day is returning however, or at least in a slightly different fashion. All across the nation companies like MinuteClinic are opening locations in drug stores like CVS. What is driving this resurgence?

Well, first and foremost is the escalating cost of health insurance and ranks of the uninsured. According to the US Census the % of individuals with employer-sponsored health insurance has dropped from 63.9% to 59.7% from 1999 to 2006. Amongst Blacks (49.3%) and Hispanics (40.0%) the current situation (2006) is even worse. This is while the average employee contribution for employer-sponsored health insurance has increased from $342 to $565 for an individual and from $1,275 to $1,987 from 1996 to 2002 according to the U.S. Department of Health and Human Services. Putting that together with some information in an article I saw in Fast Company, it would not be surprising if the growing ranks of the uninsured would rather pay $43 to someone like RediClinic or MinuteClinic instead of an $87 average for a doctor's visit.

The secondary rationale for the growth in these retail health clinics is the unending quest for revenue and profits of corporate beasts like CVS who are looking to their new tenants to drive sales of prescription and non-prescription remedies alike. It's a brilliant complementary innovation when you think about it, especially when you factor in that whether you go to a clinic like this or to a doctor's office, most of your time is spent with a nurse practioner anyways.

So what do you think? Is this a good development for consumers or a bad one? Will insurance companies force people to go to these clinics once they catch on instead of going to a doctor in order to save costs?


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Thursday, September 27, 2007

Can Microsoft out-innovate Google?

Microsoft announced today a round of updates to its Live Search offering. Searchengineland had a good story on the developments.

Microsoft, a late comer to the search engine game, has stepped up their pursuit of the number two spot, putting Google and Yahoo! on notice that they are serious about playing in this market.

Microsoft already has arguably the best image and video search of any of the big three and over the coming days and weeks they will be rolling out other updates. Will it be enough to start convincing people to give Live Search a chance?

I'll be curious to see how good it is once all the updates are rolled out. Search is the type of data and hardware intensive application that Microsoft excels at. I think they'll have much greater success than they will ever have with the Zune.

Does anyone out there think that Microsoft can catch Yahoo! or maybe some day even catch Google?


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Wednesday, September 26, 2007

People powered search as an innovation?

An article in Fast Company recently waxed on about mahalo.com and Jason Calacanis as if they were the greatest thing since sliced bread.

We live in an amazing world. Where else but on the web could you create a half baked product, launch it, and get someone else to pay you to provide the functionality necessary to provide a complete product to the market.

This is what mahalo.com has done. Mahalo's employees are hard at work building out search results by hand, cherry-picking the most common search terms on the web. That is their product, similar to the old days of the Yahoo! directory, before algorithmic search engines like AltaVista and then Google came along. Mahalo is not a search engine, but an FAQ of sorts, and the beauty is that Google pays them 35% of PPC revenue generated by visitors to Mahalo who click on Google ads for the privilege of filling all the holes and turning Mahalo into a search engine.

Mahalo is useful for people looking for very mainstream things, and they provide very nice pages on the topics that they choose to tackle. Much more useful than either Microsoft, Google, Yahoo!, or Ask. The reason I'm writing about them is because they are in the search engine business, but they didn't build a search engine. Taken to the physical world this would be like Ikea only making the bolts and getting someone else to pay them for the privilege of providing all the wood slabs to make a bookcase.

The problem they face is that they don't have anything inherently unique to create a sustainable business upon. Even the Mechanical Turk element they have where they pay $10 to anyone who creates an acceptable page of results, could be easily copied. Mahalo's best chance of survival is actually to stay small. If they carve out a nice little business for themselves and manage to maintain it at a small enough size, they could still do quite well for themselves. But, if their model proves too successful then Microsoft, Yahoo!, Google, and Ask will quickly copy them, destroying their differentiated position, and possibly refusing to provide them with the search results they need to remain viable.

So, the challenge I lay down is for you to think about opportunities in your business where you could actually convince someone to pay you for the privilege of providing part of your core product functionality. I didn't say it would be easy.

Kudos to Mahalo!


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Tuesday, September 25, 2007

Innovation at the Bottom

Came across an article on a BusinessWeek blog talking about the One Laptop Per Child project announcing their plan to offer a line of accessories.

The article talks about a $10 DVD Player and a $100 Projector, and how they might be a boon to entrepreneurs in developing countries when paired with the low cost XO laptop.

Innovation at the bottom may lift some enterprising individuals up to a higher standard living in developing countries, but things like a $100 projector could be a boon for entrepreneurs in this country too. Many enterprising entrepreneurs trying to bootstrap their companies here in the United States might find them an attractive alternative to the $800 price for an average projector here. A $100 projector might allow a dislocated U.S. worker trying to pitch their way out of a dead-end low-wage job to now go into important pitches looking just as professional as the big guys.

These tools will undoubtedly have a big impact in developing countries, but what might the impact of these low price tools be in the developed world?

Might innovation at the top be a side effect to the goal of providing one laptop per child?


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Monday, September 24, 2007

Business Strategy Innovation Diamond (BSID)

I would like to introduce a visual metaphor that the consultants use at Business Strategy Innovation. It's called, predictably enough, the Business Strategy Innovation Diamond, or the BSID. There is another reason we use it, to "ID" the "BS" in an organization. Now a lot of people would represent strategy as the top of a pyramid, processes in the middle, and systems as the base of a pyramid, but that ignores two of the most important tools in any organization - policies and reporting. Business Strategy Innovation instead starts with a diamond that looks like this:

Business Strategy Innovation Diamond
Here is an example of how the Business Strategy Innovation Diamond can help you structure an organizational analysis project:

  1. Strategy
    • We want to be the leading Internet retailer

  2. Policy
    • Free shipping on orders over $25

  3. Processes
    • Create marketing program to promote this benefit

  4. Systems
    • Modify shopping cart application
    • Build on-page messaging to alert customers of additional purchase $$$ required to reach the $25 threshold for free shipping

  5. Reporting
    • Establish any infrastructure required to measure orders above/below $25
    • Measure benchmark period
    • Create report measuring % of orders greater than $25 in current period versus benchmark period to measure effect

The BSID focuses your organization on making sure that the policies support the strategy, that the processes facilitate the policies, that the systems enable the processes, and the reporting measures the execution of the strategy. Not focusing on the BSID, may result in just BS instead of strategic innovation.


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Devil in the Details - Strategic Innovation

There is more talk about strategic innovation every day. As more and more industries enter their commodity phase, companies are looking to differentiate themselves and increasingly they are turning to strategic innovation to do so. The art of strategic innovation has been the subject of many books including: Dealing with Darwin, Blue Ocean Strategy, and Fast Second. Books on the topic detail the virtues of creating a strategy that separates you from your competitors' strategies.

The devil is in the details though as execution is far more important than strategy, even when it comes to innovation. The reason is that when your industry is commoditizing, you are unlikely to be the only company trying to create a strategic innovation, and so multiple companies may end up pursuing the same strategic innovation. It is not the selection of a new strategy that creates innovation. It is the ability of an organization to execute upon that strategy better than anyone else and in a way that creates unique policies, processes, systems, and organizational dynamics that are difficult to imitate which creates the competitive separation necessary to sustain a strategic innovation.

So, if you decide to pursue strategic innovation, ask yourself these questions:
  1. Does my organization have the skills to execute upon the chosen strategy?
  2. Do we have the ability to change in necessary ways to achieve the desired strategic innovation?
  3. Does my organization have the vision to identify the policies, processes, systems, and reporting necessary to create true competitive separation?
  4. Do we have the will to fight our way over our internal barriers to change?
  5. Can my organization successfully complete the transformation into the end result envisioned for the strategic innovation?


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Saturday, September 22, 2007

Why Municipal WiFi is a Bad Idea

I saw a headline today in USA Today about Municipal WiFi and how many cities are pulling the plug on planned Municipal WiFi setups. After thinking about it, I must say that I am glad because Municipal WiFi is not money well spent.

Let's think about this for a moment. What is the goal of a Municipal WiFi system?
  • Is it for the city to be seen as on the leading edge to attract businesses to locate there?
  • Is it to help close the digital divide?
  • Is it to boost the egos of the city councilors or the mayor?

You don't build it just because you can or because it sounds cool, but to solve a specific, addressable societal problem.

But what societal problem is it solving?
Is Internet access not available to everyone already?

All of these questions are particularly important because in most of these Municipal WiFi deals, the city has to invest money, money that could be spent on alternative projects. Chances are that those alternative projects would benefit the citizens more than having an advertising or fee-supported Municipal WiFi network available.

Here are some of the major reasons why cities should not spend money on Municipal WiFi networks:

  1. Everyone has access to at least dial-up Internet access in their home if they can afford the phone line and the monthly subscription.
  2. Most people have access to either DSL or Cable broadband in their homes
  3. Those people without access to DSL or Cable broadband often have access to Satellite or WiMax broadband (Clearwire)
  4. Most cities are already blanketed with wireless data networks already (EDGE, 3G, and possibly WiMax)
  5. Clearwire and Sprint have announced that they are going blanket something like 75% of population areas with WiMax networks
  6. Most public libraries and many other businesses (including coffee shops) offer free WiFi access
  7. Some cities are installing free WiFi access on buses and trains
  8. In the spirit of open source software, some organizations are building out free WiFi networks (shared access - you share with me and I'll share with you)
  9. Some apartment and condominium dwellers are chipping in to purchase a broadband connection and sharing it over WiFi

As you can see, access is already available to nearly ever citizen, and residents of many cities already have access to mobile broadband. Of course people have to pay for access if they want it in their home or they want the convenience of mobile broadband, but it is available.

So if investing in Municipal WiFi is a bad idea, cities and other governments should instead think about alternative ways of addressing their goals. If their goal is to help close the digital divide or what is now becoming the digital broadband divide, then maybe they should:

  1. Require companies building or operating mobile broadband networks to offer a lower cost or free option for lower income families (possibly advertising support or maybe supported by similar programs run by utility companies)
  2. Extend the concept pursued in the telephone industry of a fee collected in all markets with broadband access to expand broadband access into markets without it (especially rural or less affluent areas)
  3. Partner with mobile broadband companies to leverage older mobile broadband networks as they are surpassed by newer technology, to provide free or lower cost alternatives for people of lesser means
  4. Work with broadband providers to implement broadband access point recycling programs, to offer free broadband access points to lower income customers (along with lower rates)
  5. Other innovative ideas of leveraging existing or imminent mobile broadband networks to make them available at a lower cost to people with lesser means

What are your thoughts? Are municipal WiFi networks an innovative approach to bridging the digital divide or an expensive way to gain incremental improvements in Internet availability?


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Wednesday, September 19, 2007

Innovate Yourself - Becoming Overpaid

I came across this article from MarketWatch on the Ten most overpaid jobs in the U.S. and thought it was worthy of discussing. I don't want to focus on whether these occupations are overpaid or not (I'm sure the people working in these roles would disagree with the author), but instead on what we can all learn from this article. First here is a list of the ten occupations:

  1. Wedding photographers
  2. Major airline pilots
  3. West Coast longshoremen
  4. Skycaps at major airports
  5. Real estate agents selling high end homes
  6. Motivational speakers and ex-politicians on the lecture circuit
  7. Orthodontists
  8. CEOs of poorly performing companies
  9. Washed-up pro athletes in long-term contracts
  10. Mutual-fund managers

Next, here is my list of some of the common threads amongst the ten occupations chosen by Chris Pummer of CBS MarketWatch with the input from anonymous compensation experts, and an academic examination of how someone might approach the "problem" of increasing their income by looking at these common threads:

  1. Power
    • Create a situation where meeting your demands becomes an extremely attractive alternative to not meeting them. Some people would refer to this as identifying points of leverage.
    • Banding together with other highly skilled co-workers into a union is one approach that people take.
    • Another is to take create sufficient revenue for an organization so that the company doesn't want to risk interruption of that cashflow.
  2. Fear
    • People are afraid of someone messing up their wedding photos, their investments, or their safe journey.
    • Put yourself in a position to directly protect a customer's memories, finances, or their life itself.
  3. Establish a "tradition"
    • Pro-actively create the perception that it is the usual way of doing things for a customer to tip you or pay you a percentage of their bill (regardless how big).
    • The people at the airport taking your bags at the check-in counter do the same job as curbside check-in (they give you a ticket and check your bag), but we all believe it is accepted practice to tip the curbside check-in person and not the person at the check-in counter inside. We tip a "waiter" for taking our order and giving us food and drink, but we don't do the same for the "cashier" at McDonald's do we?
  4. Create a shortage
    • Organize the people in your "profession" and work to create barriers to entry that can be used to control supply.
    • Trade unions do this to some extent with apprenticeship programs and the like.
    • In addition to Orthodonists, Pharmacists and Veterinarians have been accused of this.
  5. Turning garbage into gold
    • Identifying a job that most people wouldn't want to take, but where a highly qualified person is desired, can result in a job that might pay quite well.
    • If you are a supervisor, try to position yourself to supervise the group of people in your organization that makes more money than the group you supervise now (usually a supervisor will make more than the people he/she supervises).
    • Most talented managers won't take on a position at a struggling company, and as a result the company will either have to over-pay to get good talent to join or be satisfied with hiring people who want to stay in the local area or couldn't get hired by a better performing company in the industry. If you have a tolerance for risk, seek out opportunities at underperforming companies in your industry and play up the career risk about moving from your successful company to their unsuccessful one in the compensation discussions.

Would it be wrong for an individual or a group of employees to look to game these common threads consciously?

Organizations are constantly looking for ways to put downward pressure on wages, so would it be wrong for individuals to look after their own self-interests and attempt to maximize their ability to take care of their family?

I would argue that it is the responsibility of the individual to protect their own self-interests and look to maximize their wages in the same way it is the responsibility of the organization to look to minimize wages for the self-interest of the shareholders.

Individuals can definitely be innovative in how they pursue higher wages. Any strategy in trying to raise your wages must always be backed by demonstration of the value you provide as an employee.

That is where the real opportunity for innovation lies in getting higher wages, in identifying new ways to deliver value to the organization and creative ways to demonstrate the value that you bring to the organization. Happy Innovating!


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Wednesday, September 12, 2007

Time Kills Innovative Magazine

From an article in the NY Times:

"The latest dot-com casualty comes from the newsstand, not the Internet.

Ten editorial staff members from Business 2.0 will join Time Inc.'s Fortune magazine. Business 2.0, a monthly magazine about the new economy, will be shut down rather than sold, its owners at Time Inc. have decided. The publication, which has been suffering from a decline in advertising revenue, will cease publication after its October issue, which will have a cover article on where to invest in a real estate downturn.

According to people familiar with Time Inc.'s handling of the matter, Time turned down offers from Mansueto Ventures, owners of the rival magazine Fast Company, and other prospective buyers to acquire the Business 2.0 brand and its circulation list of 600,000 subscribers."

Read the NY Times article

Business 2.0 is one of only three magazines I currently find worth subscribing to and I always read it cover to cover. It will be missed!


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Monday, September 10, 2007

Will iPod Touch Drive iPhone Innovation?

The iPod Touch has the potential to be the most under-appreciated product launch of 2007. Largely viewed as underwhelming in the wake of the June launch of the iPhone, the iPod Touch has the potential to be the Trojan Horse for future iPhone enhancements. This could instead position it as one of the most important product launches of 2007.

The iPod Touch is essentially an iPhone without cellular capabilities. It ships with the same applications and MacOS operating system as the iPhone, the same touch interface, plays music/video/games, and has WiFi capability but no phone capabilities.

Given this, Apple would be smart to leave the "back door" open on the iPod Touch to allow developers to build applications to install on it in a way that won't neccessarily work with the iPhone. This would allow developers to build all kinds of "unauthorized" applications for the iPod Touch for users to use. Apple could then sit back and see which rise to the top, maybe build some of their own, and then lobby for AT&T to accept the shining stars for "official" use on the iPhone and their network after they've proven themselves.

Does anyone really think that Apple doesn't have the capability or intention to add other applications to the iPhone down the road?

Given that they have locked the platform down to only allow web application development, allowing iPod Touch application development would serve as the perfect beta testing environment for these future applications.

Final question, does anyone think that Apple will bid in the upcoming wireless spectrum auction to reduce its reliance on AT&T going forward?

Please feel free to let me know your thoughts. ;-)


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Thursday, September 06, 2007

Learning Innovations from Microsoft

Want to read up on the latest technologies or innovative business thinking?

If you're committed to continuous learning to maintain your edge in your career, then no doubt you are frequently making trips to Borders or Barnes & Noble, or perhaps online to Amazon to purchase the latest business, technology, or self improvement books. If you are really green and want to save a tree or two, maybe you even go to your local public library.

Many companies say they are committed to employee learning, some even send employees to training courses or conduct internal training classes, but Microsoft takes employee education one step further. They've built up their own library at their Redmond, WA campus headquarters that facilitates the acquisition and lending of the latest business and technology titles.

Even vendors can check out a book like The Strategy Paradox by Michael Raynor for three weeks. Audio books on CD, no problem. E-books? The Microsoft library has those too, along with access to online research sources.

If an employee or vendor doesn't return something their boss gets charged, so that keeps people honest and the library stocked.

Why is this so innovative?

Innovation sometimes requires a commitment that few others are willing to make. How many companies are willing to bear the cost of running their own library?

But yet how many companies constantly complain about the shortage of qualified technology workers?

Making the resources easily available to employees to increase their body of knowledge not only contributes to increased job satisfaction, but also to increased productivity. Making the library available to vendors working on the Microsoft business as well is where one of the key strategic innovations plays out. What a concept!

Microsoft makes use of a large number of contractors and consultants to drive their business and by opening the library to these resources, they increase the return on investment in non-employee resources as well.

What is your company doing to improve productivity and success from supporting continuous learning?


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