Back in the US, Bowerman teamed up with cardiologist Waldo Harris to write a twenty-page pamphlet titled Jogging. The pamphlet morphed into a book that sold over one million copies. It also gave impetus to a handshake deal between Bowerman and an ex-athlete he had once coached named Phil Knight. Their enterprise, Blue Ribbon Sports, was eventually renamed Nike, and the rest is history, as they say.
Let me highlight one milestone in that history, the 1978 signing of tennis bad boy John McEnroe to a Nike endorsement contract. Now those with long tennis memories might say that Nike would have gone after Björn Borg if he hadn't already been signed to Fila. But I doubt it. Picking a renegade from the mainstream like McEnroe has typified all of Nike's marketing, right up to the present, including its controversial 1987 use of the Beatles song 'Revolution' in an ad (Nike apparently had the permission of EMI/Capitol Records and John Lennon's widow Yoko Ono, but not that of Apple Records and the other Beatles), its 2004 Chinese martial arts–themed advertising featuring NBA superstar LeBron James (some thought it was racist), and the 2005 use of a slightly modified but easily identifiable Minor Threat album cover in a promotion for Nike skateboarding shoes (easily identifiable by Gen Y, that is).
Consistently innovative companies like 3M recognise the need for regular visits to the fringe. There is a longstanding mandate at 3M that research staff should spend 15 per cent of their time on whatever interests them. Most of what results from this are hare-brained failures, but it also gave 3M the Post-it note, structured abrasive belts, new lenses for computer monitor manufacturing and other products. Following much the same practice, although it credits Stanford University's PhD program in computer science as inspiration, Google got its Froogle shopping service, Google Earth and Gmail from this practice. 3M goes so far as to arbitrarily demand that a certain percentage of their revenues in a set number of years should come from products or services that currently do not exist at 3M.
UNIQUE
Learning to innovate on the fringe and then carry the fruit of your innovations to the mass market makes you unique. Though all of the companies we've looked at in this chapter are not without competition, they each have distinctive brand stories that can never be mistaken for those of competitors.
It is possible for several companies in a single industry to be unique in customers' eyes. Think of the luxury automobile market, where BMW, Ferrari, Lexus, Mercedes-Benz and Porsche each have unique brand identities and tell unique stories to customers.
I mentioned the example of Generation Y and my work at the start of this chapter. Very few people were talking about Generation Y when I decided to publish my research in this area. Sure there were sprinklings here and there, but nothing beefy. More than one person told me I would need to position myself more broadly than Generation Y, and even though I had some expertise in other areas, I knew this would be bad advice. To become unique you really have to go out on a limb.
I took action. By action I mean I spent three years (seriously) writing a book, even before I had a publisher. I knew this generational shift was a cause of many challenges facing businesses today, both from a staff and a customer point of view, and I knew over time businesses would come to recognise that.
They did, and the result for me was a very successful (meaning fun and profitable) consulting business that takes me all over the world and has allowed me to work with some of the most powerful businesses and people on the planet. Through my work in this 'focused' area I have been able to build my expertise in other areas, and here is my latest piece of work. That act of branding a new idea and making it very profitable will be the topic of a book I intend to write soon. But for now, back to this chapter's flip.
Of course I am not the only person in my category anymore, and there are plenty of me-too's in the market. The truth is I was not the first into the market either, but I was the first to be focused primarily on Gen Y and I was able to tell a story that people remembered and passed on, and this rising tide has raised all of our ships.
Peter Switzer, a well-known finance commentator in Australia, is changing the way financial planning is done. Switzer Financial Services offers investment advice but makes a point of taking no commission and having their consultants paid by the hour to ensure absolute impartiality. Any commissions paid by the institutions that receive investment at their advice are actually paid back to the client. This is a Virgin-like assault on the margins of the financial planning sector.
Even though Switzer is not the only advisory business with this fee-for-service model, it is certainly a fringe model in the industry. Gaining in popularity, it goes against the productcentric, commission-driven model that has built this industry to date. Imagine it was you. Think of how your adviser buddies would have felt about you 'undercutting' their pricing model as you went out on your limb.Might I suggest that not only were they not agreeing with you, but there was no love out on that fringe either.
Interestingly enough my own advisers, Ark Financial, have gone in the other direction. They not only charge a fee for service, they also charge commission plus a yearly retainer. They are staking their positioning on what they call 'Beyond Wealth'. They regularly coach and educate their clients on how to enjoy their wealth, and get more out of life while at the same time helping to grow their finances too. It is more like going to see a life coach than just a financial planner. The point is both approaches are unique and both are being endorsed by growing numbers of customers.
Two other Aussie examples of companies that bucked industry wisdom and started whole new trends are Boost Juice and McGrath Real Estate.
As described on the Boost website, here is how Boost came to be. While accompanying her husband Jeff on a trip to the US, Janine Allis saw a hole in the Australian market for a healthy fast food alternative. Upon returning to Australia she developed a business plan and raised $250,000 start-up money by recruiting her friends as investors.
The first store opened in Adelaide in 2000, and since then more than 170 stores have opened throughout Australia, with the first international franchises in Chile, Indonesia, Kuwait and Singapore. With global revenue expected to exceed $100,000,000 in 2007 this is a pretty good achievement in just six years. So much of what Janine has done at Boost has been against the crowd. The staff are the most obvious. Unlike so many retailers, the staff at Boost more often than not are having fun. Boost deliberately hire some of the wackiest and weirdest people that apply. They want that kind of edginess in their stores.
Their PR activities have included giving away a franchise at Sydney's Manly Beach through popular local radio station 2Day FM. Not to mention Janine being the charismatic leader and voice behind so much of this PR activity. Instead of running a typical radio ad, Janine would instead give motivational advice to listeners, building the Boost story of a healthy lifestyle through proper nutrition. Although there has been some debate as to how healthy Boost juices really are, few could argue with their phenomenal success. It is cool almost just because it is different.
McGrath Real Estate is another of my favourite examples. During the property boom of the late 1990s and early 2000s John McGrath turned McGrath Partners into a force in the Sydney real estate market. They were amongst the very first agencies – along with Ray White Double Bay, Di Jones and others – to raise the bar in the industry. Their advertising was clean, modern and of the very best quality. Their signs used colour and images and matched the high standard of their print advertising. They moved away from private treaty sales and helped spur the auction culture that drove Sydney property prices to dizzying heights. They motivated vendors to do significant improvements on their homes before listing them for sale, including renovations and hiring furniture to make a better presentation.
This market leadership enabled McGrath Partners to charge a commission 1 per cent higher than the industry average, which on sales exceeding $1 billion is a handy, fullprofit premium. Today, many agencies have raised their standards, and with a flat market McGrath will need to be
come faster, better and cheaper, as well as easier and more inspiring to deal with if they want to continue to be a leader in their industry. Innovation never ends!
On the flip side, a longtime friend of mine in the real estate business, flipstar Pete Gilchrist, is going in the other direction. He recently established a real estate agency in New Zealand called The Joneses. It sets out to totally reinvent the way real estate is sold. Their biggest changes from the usual mode? A flat fee rather than commission, and team members with dedicated tasks rather than a single agent who does the whole thing end-to-end.
The absence of commission has been calculated to save up to $6000 on a $300,000 sale, $10,000 on a $500,000 sale, and over $21,000 on a million-dollar sale. The team structure makes it possible to assign a dedicated professional to each task, instead of having a 'jack of all trades' managing the whole thing – doing everything from taking photographs to booking advertising space – because their commission rides on it.
This turns the real estate model on its head, and it's being met with very positive reactions from consumers who have long felt that the traditional model wasn't giving them very good value for their money.
For companies and individuals the flip that there is no wisdom in crowds has two implications. Either differentiate yourself from competitors within an existing market or differentiate the market you operate in by creating a new market. Or for best results, do both – but in any case, start exploring.
Ten Things To Do Now
I know I have been finishing each chapter with five things to do, but in the spirit of being a little different, here are ten:
1. Start an innovators' club. Pull together a group (or multiple groups) of high performers in your company and host a meeting with them once a month where you look at fringe activities, new market opportunities and your current competitive strategy.
2. Keep a journal of fringe stuff. Not just fringe stuff in your market but any market. If your bank does something new and unique, write it down, give it some thought and then present it at your innovators' club.
3. Do something random at least four times per year. Visit an art gallery. Buy a different magazine to what you normally read. Or maybe even do a new course in something that does not relate to your job.
4. Surf the net.
5. Check out what teenagers are doing at the local shopping centre. What are they wearing? How are they talking? What are they talking about? Don't be weird, though, or you might get locked up.
6. Block out three hours at least four times per year and ask yourself: if I was going to build this company from the ground up, what would I do? Or if I was going to redesign this product, or develop a different product for this same need, what would it look like? What else could this product or service be used for?
7. Hire someone a little wacky. If you are big enough and have the resources, employ someone in marketing with an industrial design background. Or as Google does, hire an actuary to work in HR.
8. Don't attend your industry conference this year. Attend some other industry's conference instead. Or at least attend both.
9. Apply the 3M test. For example, demand that 20 per cent of your revenue in three years comes from a product or service (or many of them) you don't yet have.
10. Stop being such a wimp! Do something new, different and cool with your product or service. Something that has never been done before.
6 TO GET CONTROL, GIVE IT UP
You don't own your brand, you don't own your customers and you don't own your staff. These days you have less control and influence over them than ever before. If you are smart you will flip this negative into a positive, and use it as a catalyst to tell a better story, add more value and to become an awesome place to work. This is the only way you will get significant control. And even then it won't really be control, just influence.
This is the hardest flip to master. It is human nature to want to expand the territory we control, whether as companies or as individuals, and at the very least hold onto the power that we already have. But some of the biggest success stories of our day are being written by the companies and entrepreneurs who have learned to give up control.
This chapter will give some examples of companies that are struggling to let go of the business models that have made them successful. This is understandable. Take for example the music industry, which – it is no secret – is struggling with the onset of digital music downloads, peerto- peer file sharing and a host of technologies that are completely changing the way music is made, distributed and listened to. You can hardly blame the music executives who have made their careers, and their companies' profits, with a tightly controlled selection and distribution model if they cling to the only way of doing business they have known.
I don't say this because I think a music executive reading this chapter will be surprised to hear that their business model is under threat. Nor will a CMO be shocked to learn that the customer owns their brand. What I do hope is that these executives, and you, feel inspired by the possibilities these changes present to you and your business rather than feeling crippled by them. Specifically, this chapter will suggest you do the following things:
Stop resisting and learn to embrace the changes that are forced upon your business model and distribution networks.
Connect and interact with your customers, not just so you can build valuable relationships with them, but so you can access their expertise for better product development and profit from the interaction too.
Let go of your desire to control the research and development process, and tap into the pockets of individual brilliance that can be found when you open your doors to a wider community.
Resist the urge to own and hold onto everything. Explore new business models where money can be made in relationship with suppliers, and even competitors, that your organisation cannot or will not exploit in isolation.
Empower your staff to do their job.
THE POWER SHIFT
The four forces of change have shifted power from the organisation to the individual. Technology like the internet, increasingly affluent customers, oversupply in customer markets and extremely tight labour markets are putting the individual in the box seat. This new-found power is not only forcing businesses to be more accountable for what they do, but also undermining some of the most successful business models on the planet. Read on to learn how, and more importantly what, flipstars are doing about this new centre of power.
WINNIN1G THROUGH LOSING
Change is like a wave. You either ride the change wave, get pummelled by it, or sit on the beach and watch it run its course. For a while in the early 1990s Microsoft decided to watch the internet wave from the beach. That was until two programmers still wet behind the ears released separate memos to senior managers at Microsoft in the space of a fortnight in early 1994. Those twenty-somethings were programmer J. Allard and technical adviser to Gates himself Steven Sinofsky. The thrust of their separate memos: get off the beach and get into the water, the internet is huge and it is here to stay.
In effect they were saying that the internet was no ordinary wave, it was a tsunami that would consume even those sitting on the beach. These memos were enough to get Microsoft off the sand and into the water. A little over twelve months later Bill Gates himself released a memo aptly titled 'The Internet Tidal Wave'. In the memo he exclaimed, rightly, that the net was the 'most important single development' in the computer industry since the IBM PC. 'I have gone through several stages of increasing my views of its importance. Now, I assign the internet the highest level,' he wrote.1 The battle began to develop the ubiquitous browser for the internet. Microsoft among a few others wanted to be the gateway to the world wide web. Or more technically the facilitator of people's web experience. The battle, mostly with Netscape in the late 1990s, was won by Microsoft. Firstly, because they built a better browser, and secondly because they engaged in extreme competitive behaviour that has since landed them in hot water.
The cool thing is that the internet wave is still coming in, and some would argue it has not even gotten started yet. Are you riding the wave, getting pummelled by it or standing on the beach? No one is immune. The internet is completely redefining distribution networks and consumer power, at the same time compromising the 'trust' and property rights that the capitalist system is built on. And it is not just the internet either. For Microsoft the next tidal wave, apart from perhaps Google and online applications, is probably China. The battle there is twofold, with the software pirates and with Linux, a free open-source operating system.
In the US, Europe and of course in Australia the battle for the computer desktop is well and truly won by Microsoft with more than 90 per cent of all PCs using Windows as their operating system. While piracy is still alive and well in these markets, it is nothing compared to the levels of piracy in China. According to the Business Software Alliance, piracy in the US hovers around 22 per cent, the UK 29 per cent and Australia surprisingly a little higher at 31 per cent. This sounds high, but it is estimated that 90 per cent of all software in China is pirated.
In China piracy seems to be a way of life. It is in everything from pharmaceuticals (making Viagra rip-offs using ancient Chinese herbal ingredients) to airplane and automobile parts.2 There was around US$2.2 billion worth of software, movies and music piracy in China in 2006. China accounts for roughly two-thirds of the world's pirated goods and is the point of origin of around 80 per cent of counterfeit goods seized at US borders.3
Add to this equation that Linux is basically a free operating system which can be customised to your company's needs. Despite being a model of 'open source', which I will discuss later in this chapter, Linux has done little to dent the phenomenal market share that Microsoft has in the developed markets mentioned above. In China it is a different story. Although it is believed that Microsoft are ahead, Linux is not far behind in what is obviously a much more immature and rapidly growing market, including deals with the Chinese government and education system.
Flip Page 17