March 25, 2011

If Good is the Enemy of Great, is Great the Enemy of Disruption?

The list of leading companies that failed when confronted with disruptive changes in technology and market structure is a long one…One theme common to all of these failures…is that the decisions that led to failure were made when the leaders in question were widely regarded as among the best companies in the world.

-- The Innovator's Dilemma

Bottom line: When effective disruption takes place, then the entire value scale (for your product/service) is increased.

Doing one thing very well separates your product/service from your competition's while defining your brand for your customers. Take what you do very well (better than anyone) and do not be afraid to change it in order to create a disruptive product. If you do not, then you might one day suddenly realize you no longer have a relevant, great product/service.

Grade Your Product (Where are you now?)

Step 1:
What do you do well? Why do your customers buy from you?

Step 2:
Grade your product or service. Good or great? This gives you a starting point.

Step 3:
Depending on what grade you give your product, your next step is to move your product to the next level.

The push pin on the above graph represents where you might place your product or service.

The Difference between "Good to Great" and "Great to Disruption"

Once you move your product/service from good to great, how do you move your product/service from great to disruption?

The "pre-disruption" scale below represents a product (Product A_alpha) increasing in quality over time -- from good to great.

The "post-disruption" scale below represents a significantly altered version of Product A_alpha. Product A_beta is immediately more valuable than Product A_alpha and has potential to increase in quality over time -- from a good to great disruptive product.

A few important points to note regarding the two scales:

1. Both scales show the "quality" of the same core product over a number of months.

2. The second scale -- Product A_beta -- refers to what Product A_alpha looks like after the company made changes to their core product in order to create a disruptive product (Product A_beta).

3. When effective disruption takes place, then the entire value scale is increased. Therefore, the disruptive version of Product A (Product A_beta) is more valuable than Product A_alpha even when Product A_alpha was a great product! Why? Because Product A_beta's disruptive nature (if effective) significantly decreases the value of the greatness of Product A_alpha.

Conclusion: Identify what you do (or can do) very well -- better than your competitors -- and become good and then great. Then stop focusing on being marginally greater; instead, focus on changing what you do or offer so that it becomes a disruptive product/service. It will disrupt the entire market, which includes your formerly "great" product/service -- and you will benefit greatly because you will create a brand new, larger market that includes most of your current customers as well as new customers.

March 12, 2011

"Do You Have a Disruptive Product that Already Exists in Your Business? Ask These 3 Questions..." John Wolf: COO @ Knowlagent

Name: John Wolf
Company: Knowlagent
Position: COO

Situation: Knowlagent sells two products bundled in one package -- a training curriculum for call center employees and a proprietary technology that creates efficiencies by delivering this training to the employees during idle periods; essentially automatically managing "active wait time".

Challenge: What is disruptive about Knowlagent's product? What is Knowlagent's core competency?

Solution: Knowlagent recognized that its customers partner with them primarily for their patented "RightTime" technology. Moreover, many customers already have their own training curriculum that they prefer to use instead of adopting new material from Knowlagent.

Takeaway: Knowlagent's all-in-one, complete solution has in some ways distracted them from focusing on the disruptive value of their patented technology. You might have a disruptive product that already exists within your business, but you haven't identified it and/or parlayed it into a disruptive force. How can you determine if you do? Follow these steps:

1. What do you sell? Break out the product and/or service into its multiple facets.

2. Why do your customers buy your product or utilize your service?

3. How would your customers rank these reasons (from Question 2) in order of importance?

The #1 reason provided to you by your customers in response to Question 3 is likely your core competency and your best chance to deliver a disruptive product to the market.

You might be thinking that this will only work for a company with a patented technology like RightTime in its stable of products. Here are a few examples of non-tech companies who used the above questions to identify their core competency which also turned out to be a disruptive force in their industry:

McDonald's -- significantly reduced the cost and wait time for burgers, fries and shakes. Result: disrupted the market.

Wal-mart -- significantly reduced the cost of household products, and increased convenience to buy. Result: disrupted the market.

Pixar -- tells great stories. Don't think this is an appropriate example? Pixar has won the Oscar for Best Animated Feature 6 of the last 8 years, and 4 in a row since 2007. In addition, Pixar has 5 of the top 12 highest grossing animated films of all time, with Toy Story 3 #1 on the list. Result: disrupted the market.

What do you do best? What is your greatest value add to a customer? Don't only focus on being great at doing what you do best; focus on identifying ways to parlay that strength into a reinvented product or service that can disrupt a market. Don't settle for being the best; aim to disrupt!

March 6, 2011

"How to Identify & Successfully Bring to Market Disruptive Products" -- Part 2 w/ Michael Price: General Partner @ CEO Ventures

Name: Michael Price
Company: CEO Ventures
Position: Founder and General Partner

Situation: As General Partner at CEO Ventures, Michael's focus is on starting, growing and managing early stage technology companies.

Challenge: Most startups fail. What does CEO Ventures do to increase the possibility of success?

Solution: There are a number of strategies that CEO Ventures has implemented to increase their success rate of identifying and successfully bringing to market startup firms. These strategies should also be useful for established companies looking to identify and then successfully bring to market disruptive products:

1. Focus on products with low startup costs within the fastest growing sectors of the industry. SaaS products are an area of focus for CEO Ventures. It makes sense that web-based services -- whether B2B, B2C or social media platforms -- represent lower risk w/ high potential reward because of the low cost structure and the fact that this industry continues to produce exciting & successful disruptive products.

2. Do the market research. It's surprising how many businesses fail to test their ideas before bringing them to market. Just because you think you have the next great product does not mean your customers think the same way. There is an issue of balance which must be considered with this point -- there is no sure thing, so understand your customers, do your best to design a disruptive product based on these understandings, get it to market and then continually adjust (more on this below).

3. Structure product design and production processes that allow you to make quick, constant changes to your product. This builds off the lessons learned from Aviad Gefen (CEO @ Microwave Networks) -- a nimble business is better positioned to produce disruptive products because it can more quickly respond to learnings from the market.

In addition, Eric Lefkofsky -- one of my professors at Kellogg SOM and a Groupon co-founder -- preaches that the key to accelerating disruption is to create a culture in which customer feedback is constantly collected and the feedback is almost instantly implemented into product design. This process has to continually occur in order to produce a disruptive product and -- just as important -- ensure the product continues to be disruptive.

4. Accountability and support at/from the highest levels. If the leaders of the company are not driving the development and successful launch of disruptive products, then disruptive products will very likely never be developed and/or never gain market traction. Innovation can be tracked and measured just like anything else -- set expectations, track performance, and provide constant and specific feedback.

5. It doesn't matter that you have created a disruptive product if you can't sell it. When I was speaking with Michael Price, he said that one of the key things he looks for in a potential president of one of his startup companies is extensive sales experience in the industry. In order to create a successful disruptive product a company must: understand what customers want, design a product that meets these needs, and then gain market adoption.

What is interesting about a disruptive product is that even though it can revolutionalize an industry by repositioning customers (see February 27 post), it will typically not initially sell itself. Why? Because a disruptive product is so different from the norm that it needs a very talented group of marketers and salespeople to educate customers as to why they need the product. A great example of this is when TiVo was introduced to the market -- the product was capable of disruption, but only caused disrupted when it was successfully marketed to and then adopted by customers.

My favorite takeaway: if you can't sell then it doesn't matter that you have a disruptive product. You have to be able to communicate the value of something that no one has ever thought of needing. You know they need your product because you have done the research, but they don't know because they don't realize that this new disruptive product can meet their needs in a way no other product ever has before. Once you help them see the disruption, then you will reposition the market.

March 3, 2011

Michael Price: General Partner @ CEO Ventures

Name: Michael Price
Company: CEO Ventures
Position: Founder and General Partner

Situation: Michael is a very successful and well respected leader in the Atlanta venture community. His wide range of contacts include key leaders at Barnes & Noble, so I asked him to share his thoughts on why B&N missed the opportunity to bring a disruptive product like "Kindle" to the market (see February 27, 2011 blog post for Kindle analysis).

Challenge: It's all about incentives. B&N's focus was "retail excellence" and its employees were clearly incentivized toward this goal. (Side note: Incentives don't only refer to a tangible reward. Incentives are always present because there is always a reason a person does something.) Because of the focus on the existing, traditional business and the incentive to spend time, creative energy, and capital on providing a best-in-class retail experience, B&N's eyes were "down" instead of or in addition to looking for the next disruptive product.

Solution: Michael shared a few thoughts:

1. "Innovation usually comes from the outside." I think this can mean two things: 1. We have to "source" innovation from our customers, competitors and the general market and 2. Internally, we need to think "outside" of our traditional processes, foci, and culture.

2. "Too focused on the current mantra." Isn't it interesting that as leaders we can be too focused on the goal? We daily drive our businesses to measurable goals and the feeling is that successfully reaching those goals equals success. That's not necessarily true. Barnes & Noble created an excellent retail experience; they hit that goal every day. But they also missed being first to market with a disruptive product.

3. "At a big company, they tend to incent solely on what makes a difference to the P&L." A disruptive product initially only has a negative impact on the P&L, at least directly and measurably.

A key takeaway for me is this: focusing on the goal can be dangerous. Why? Simply because "we don't know what we don't know." Of course, we must focus on P&L-centric goals and drive our businesses, but if we want to create and deliver disruptive products then we also have to frequently ask this question: What could be introduced to my currently very satisfied customers that would cause them to be suddenly very unsatisfied with the product we are offering them? If you come up with an answer, then you might have come up with the next disruptive product in your industry.