Discovery Driven Planning: Good new book on Innovation
It’s always a welcome moment when a new perspective on innovation is offered from the folks over at Clayton Christensen’s Innosight consulting firm. They’ve just recently published a new book, The Innovator’s Guide to Growth that looks to be a very welcome read. I’ve just ordered it and will give it a review here when I get the chance!
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- Posted Rita McGrath on October 08, 2008
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Even law firms can use new business models - Quinn Emanuel Urquhart Oliver & Hedges
An article in Fast Company’s September issue features a Los Angeles law firm that is making big bucks with a business model that is foreign to traditional firms. For some years, I’ve worked with the strategy groups of law firms, and discovered, as one of my colleagues points out, that the basic business model of the law firm has not changed since the times of Charles Dickens!
Among the interesting aspects of the firm’s strategy are an unrelenting focus—they just do business litigation. And, even more interesting, they don’t shy away from jury trials, which most large established firms don’t pursue, preferring settlement as a safer, more comfortable option. A little arrogant? Well, maybe. According to the magazine article, their web site notes that “Justice may be blind, but she sees it our way 90% of the time.” By sometimes offering contingency-only deals to clients with potential awards, the firm is able to generate outsize profits per partner, the gold standard measure in the law business.
As observers of the law have noted that a decline in the number of jury trials means, among other things, that few public trials to set precedents are available, this company’s approach might provide an interesting counterweight. An intense, hard-working pace characterizes the company which is about as far away from the ‘billable, safe, hourly’ mindset of your average law firm as I can imagine. Their success is particularly poignant when even the Wall Street Journal notes that for most young lawyers, times are nothing but tough with law school no longer representing the ticket to success that it once perhaps did.
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Turning the insurance business model on its head: FM Global
Fast Company, a magazine that often uncovers little gems, reports on a unique business model being pursued by insurance giant FM Global. Instead of deploying armies of actuaries to predict the risk of certain types of disasters (fires, physical plant injuries, and soon), FM Global actually tests the risks of certain kinds of events occurring, and makes recommendations to its clients for how to avoid disasters in the first place. Brilliant!
What I particularly liked about their approach is that they have figured out a way to align interests in the pursuit of prevention. In most situations, there are plenty of resources to address problems after they occur, but a reluctance to spend money on preventing the bad stuff from happening in the first place. FM Global has an innovative way of getting around this.
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- Posted Rita McGrath on April 27, 2008
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Jigsaw - creating a market for contact information
Anne Ferguson, my assistant, drew this one to my attention. The company in question, Jigsaw, is trying to create a market for contact information, using a variant of the ‘free labor’ theme I’ve written about before. Here’s the idea: Each member adds contact information (the more detailed, the better) into the Jigsaw database. For doing this, members get points added to their accounts. Members can then search for all the contacts in the database and access them for a charge of points. When you enter a new contact, or significantly update a contact, you “own” the contract. Whenever anybody “buys” the contact, you get a percent of the proceeds in terms of points. For points (or payment, I presume) the company will also help create customized lists for marketing purposes.
It’s an interesting idea—you swap your rolodex for the chance to have a peek at the information in someone else’s. Contacts, by the way, have no choice about being entered. I checked on my own information and found that someone had put me into the database, and I hadn’t even known it. I’m intrigued by the combination of incentives to share private information and the benefits promised if others leverage your private information. The “sell” on Jigsaw’s overview page says:
How Jigsaw Helps
Bypass gatekeepers. Go straight to decision makers and influencers. If you’re a salesperson, recruiter, marketer or business owner, Jigsaw will save you precious time.
Interesting that the company’s main selling point is to help people bypass gatekeepers whose job it is to protect the target contact from unsolicited communications. One wonders how long before those who would prefer their information to remain private initiate action to get Jigsaw to remove those private contact details.
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Michelin PAX Run-Flat: A stillborn revolution
This weekend’s New York Times carried the sad headline, “Michelin Giving Up on PAX Run-Flat Tire.”. So much for an innovation that was supposed to revolutionize the tire industry, in much the same way that Michelin’s introduction of steel-belted radial tires did nearly 60 years ago. My colleagues and I were so taken with the concept - a tire that could run for 120 miles even with a flat, eliminating the need to store a spare tire - that we’ve even used it in class. The example is how a company can innovate by eliminating features that some customer segments view as either negative (having to store a spare takes up space and costs more fuel) or a neutral (we don’t notice it and don’t care about it).
What could have gone so wrong with a new technology that promised to change the world? Indeed, Michelin’s own web site (at least as I’m writing this now) announces that “We haven’t been this proud since we invented the radial tire”. This was a big-bet innovation, intended to overturn the industry.
What went wrong?
While it certainly isn’t fair to retrospectively criticize the approach Michelin took to introducing this innovation, there were some trouble signs even early on. A Business Week article appearing on August 16, 2004, notes that the PAX tires don’t fit into conventionally designed vehicles. To use them, cars must be equipped with specially designed chassis and wheels. A PAX-friedly auto can’t take regular tires. What that means is that to get the tires replaced, customers must find an authorized PAX service center to repair or replace the tires. The lack of compatibility with pre-existing infrastructure proved to be a contributor to the products’ undoing. Although the company enjoyed some success, having the PAX tires as the standard on Honda’s 2005 Odyssey Touring minivan, other firms failed to adopt. PAX, as it turned out, was not a huge advance over other run-flat technologies, required specialized equipment and systemic changes, and was launched into a category that turned out to be a niche. This situation was a far cry from the promise of a tire that would revolutionize driving habits and totally change the industry.
Frameworks that might have helped anticipate the obstacles
We always advise companies launching innovations to consider not just the technical performance of the product (or service) but the whole chain of experiences customers go through in the course of being customers. With a tool called the consumption chain (described originally in a best-selling Harvard Business Review article), we suggest that companies work all the way through the total experience a customer has with their offering—from awareness of need all the way through search, selection of a provider, payment and so on through final disposal. Clearly, the PAX system let customers down at some of these vital “links” in their consumption chains. They faced difficulty getting the tires replaced and repaired and evidently the competitive separation between the PAX and other run-flat tire designs didn’t overcome those problems.
Another tool we frequently employ when we’re thinking about the launch of new offerings is to consider all the factors that may cause delay or resistance to the offer. We featured it in our book MarketBusters and it basically consists of systematically thinking through all the reasons that a customer might not be willing to adopt an innovation. Among the most serious, we argue, occurs when adoption requires changing expensive, embedded systems. Indeed, a product that is backwardly incompatible with other products and that requires specialized handling to repair or replace would have to be earth-shattering in its benefits (think iPod) to overcome people’s reluctance to change away from the conventional.
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- Posted Rita McGrath on April 21, 2008
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