by Shaun Smith
Chapter Five
Continuous innovation
‘History has shown that many of the innovations that we have come to take for granted were a result of entrepreneurs, pioneers and early adopters willing to invest their own money, and sometimes lives, in a big idea.’ RICHARD BRANSON, FOUNDER, VIRGIN GALACTIC
Richard Branson wrote those words some years ago, little realizing that on 31 October 2014 his comments would, sadly, come true. His spaceship, VSS Enterprise, suffered a catastrophic malfunction leading to the total loss of the aircraft and the death of co-pilot Michael Alsbury and serious injury of pilot Peter Siebold.
Recognizing that his vision was putting other people’s lives at risk Branson wrote: ‘I found myself questioning seriously for the first time, whether in fact it was right to be backing the development of something that could result in such tragic circumstances. In short – was Virgin Galactic, and everything it has stood for and dreamt of achieving, really worth it?’
He goes on to report: ‘I got a very firm answer to that question immediately when I landed in Mojave. From the designers, the builders, the engineers, the pilots and the whole community who passionately believed – and still believe – that truly opening space and making it accessible and safe is of vital importance to all our futures.’
Bill Bernbach, founder of the celebrated ad agency Doyle Dane Bernbach (DDB) was fond of saying ‘A principle isn’t a principle until it costs you something.’ Similarly, we believe that the true test of purpose is if you stick with it in the face of adversity. All too often, organizations define some uplifting purpose, or conceive some great customer innovation, only to dump it as soon as they have to invest substantially in order to deliver it. The true test of Virgin Galactic and Sir Richard Branson’s dream is how they deal with the aftermath of the VSS Enterprise tragedy and whether they continuously innovate until they achieve their dream.
We often run workshops with executive groups to help them define their purpose and we test commitment to it by identifying what we call ‘the sticky moments’. What are those things that are likely to happen that may cause the executive group to gulp and waiver in their resolve?
We were running a workshop for Premier Inn, the hotel brand, to help them define their purpose of ‘Making guests feel brilliant through a great night’s sleep’. We invited the executives present to identify their ‘sticky moments’. One plucky regional operations manager piped up and said, ‘We have thousands of old rooms without adequate sound proofing or air conditioning. What will our people say when we announce this purpose and they are still dealing with guest complaints?’ The room went quiet and then Patrick Dempsey, the Premier Inn managing director, asked the question, ‘How much will it cost us to fix it?’ The answer was in the millions of pounds. Right there, the executive group decided to invest in upgrading those rooms. It was in that moment that the Premier Inn purpose moved from being a set of words to a mobilizing force in the organization.
Let’s face it, most companies wouldn’t innovate if they didn’t have to. It’s not that people hate new things, it’s just that innovation is often risky, expensive and fraught with failure. There is a well-known phrase: ‘if it ain’t broke, don’t fix it,’ which probably sums up many people’s views about innovation.
But the fact is that innovation is necessary. We would not have any of the technology we enjoy today without it. We would not be able to drive, fly or even catch the train, things we now consider commonplace. Yet way back when these technologies were being developed they were considered just as risky as space travel is today. It is bizarre to think that just over 100 years ago the ‘Locomotive Laws’ required a person to walk in front of the newly invented automobile carrying a red flag to warn pedestrians of the danger posed by a vehicle that was restricted to a maximum speed of 4 mph. In 2014 the UK government passed a law allowing the use of driverless cars from 2015; Google has been testing driverless cars for some time in California and Nissan has introduced driverless features into its vehicles, such as ‘park assist’, where the car literally parks itself at the touch of a button.
The need for innovation is accelerating. Increasingly, customers are demanding more from their brands. What was innovative yesterday is commonplace and expected today. The cycle of product replacement is ever shorter. The first Apple iPhone 1 was released on 29 June 2007. By 2014 they were on version 6. That’s six versions in seven years. When the first iPhone was released it was revolutionary; today, it seems like commonplace technology. This inflationary effect keeps raising the bar and fuelling the need for new, different and better approaches to business.
Digital, mobile and web technologies have increased the rate of consumer demands and the speed of response they expect from companies. Time has never been a friend to the business person but it is now openly hostile. New products have an increasingly limited window before being replaced or copied. In fact they are often superseded, imitated or hacked while they are still in development. Competition is everywhere and accelerating the rate at which people can find and buy almost whatever they want whenever they want it.
One problem for many organizations, when they think about innovation, is that typically they focus on the product. However, we know that customers form relationships with brands, not products. And we know that the areas of that relationship that are often given least attention but which mean most to the customer are in service, sales and support. According to Peter Fisk, founder of Genius Works (@GeniusWorks), whereas the vast majority of innovation efforts by companies have been linked to product, the biggest returns on investment have actually been in new business models (eg online shopping) and in the customer experience. Think of brands such as Google, Facebook and Alibaba: they are among the largest brands in the world in terms of capital value yet they didn’t exist 15 years ago. They do not manufacture products, they do not find scarce resources, they do not bring vital new drugs to market, they simply connect people digitally to things made by others and yet the returns for their founders are huge.
Constantly innovate in both large and small ways
Purposeful organizations are possessed by a relentless commitment to improvement, to seeking a better way. Sometimes it can be a huge game-changing innovation, as in the case of Virgin Galactic. But often it is just the everyday focus on innovation in many small ways throughout the business. Just so long as they make things better for customers.
A problem with innovation is that many business people are obsessed with ‘the big idea’; they want ‘game changers’ and are constantly poring over customer data to try to come up with the ‘killer app’. Of course, if you can come up with a game changer, then that is great. The reality, however, is that this may only buy you a short-term advantage because of the tendency for brands to rapidly first play ‘catch-up’ and then ‘leapfrog’ in terms of technology. It wasn’t so long ago that Nokia was the leader in mobile phones. Where are they in 2015? The brand has been acquired by Microsoft and has, for most practical purposes, ceased developing its own technology. So even more important than these big things are the little day-to-day things that make an enormous difference to consumers and employees – that earn their advocacy and loyalty, cost little but reap financial reward and demonstrate your commitment to creating value for customers.
Purposeful organizations understand that ‘little things have a big impact’. They are often obsessed by detail and are endlessly curious about even the smallest aspect. Whether it is digger manufacturer JCB’s chairman Sir Anthony Bamford personally adjusting the hub cap on a backhoe digger because he noticed it wasn’t quite right, or smoothie manufacturer Innocent’s annual ‘Big Knit’, they are all manifestations of the fact that a small action can have a big impact on the perception that customers have of you. Zappos, the online retailer, understands this perfectly. One of their core values is to ‘live and deliver WOW’. They believe that creating moments of ‘WOW’ have a huge impact on creati
ng a distinctive customer experience. These ‘magic moments’ form an essential ingredient in customer experience design.
Drive innovation from a deep understanding of what target customers value
As we already mentioned in Chapter 4, history tells us that most new products fail. So how do you ensure success when you are changing 30 per cent of your products each year? To restate Mark Constantine of Lush: ‘The key is making sure the customers clearly understand what you’re doing and debating with them beforehand to make sure the product does what they want it to do at a price they are willing to pay.’ Sometimes this approach leads to dropping a product, which makes every kind of sense – except to the customer. Again, to restate Constantine: ‘When you get yourself aligned with the customer, it isn’t about profit and loss or pushing your product. It’s about producing what your customers want to buy.’
This was a principle used to good effect when Sonu Shivdasani and his wife Eva were planning their luxury hotel brand, Six Senses, in the Maldives; they called up tour-operators and travel agents and asked them what customers complained about: ‘There were things like “the lack of fresh food: everything was imported and tinned”,’ he said. ‘So we developed our own organic garden, which means we could actually offer our guests much fresher and more nutritious salads than they get in London.’
It is also important to understand that what you sell is not necessarily what customers are buying. RayBan thought they were selling eye protection; Chilli Beans, the Brazilian retailer, realized that customers were buying a fashion accessory. This insight led them to create a business model that produced sunglasses of good quality, but exceptional variety – 10 new product designs are launched in over 500 stores and franchises every week! Because of this, a typical customer will own three or four pairs of Chilli Beans and visit the store weekly to see the latest models.
http://www.chillibeans.com/sunglasses.html
Use your purpose to drive growth
Umpqua Bank is a community bank based in the Midwest of the United States. It has created a reputation and enthusiastic following for its innovative approach to banking. By calling its branches ‘stores’, recruiting its people from retailers and using innovative marketing techniques that it calls ‘handshake marketing’ that is so personal you can almost shake the hand of the customer, the bank seeks to deliver on its promise of being the world’s best community bank. One example of this approach to ‘handshake marketing’ was its use of an Umpqua-branded ice-cream van, which drove around the streets of California to create brand awareness in this new and important market.
Ray Davis, the CEO of Umpqua Bank, says:
‘Innovation permeates our organization at all levels. To me, that’s the most important driver of our organic growth. The second route to growth, of course, is through acquisitions. The reason that we’ve been so successful with acquisitions is because we’ve created a very unique culture that aligns our people with the Umpqua strategy and brand.’
So having a clear sense of what you stand for not only helps you to stay ahead of competitors through being more innovative but also helps you to acquire other organizations and meld them into your own. It is interesting that so many companies conduct due diligence to explore the economic benefits of making an acquisition or merger; they investigate the pension plans for compatibility, they compare customer lists looking for revenue opportunities, they overlay distribution maps to identify supply chain synergies. But how often do they compare their organizational purposes or what their brands stand for in order to ensure a good cultural fit?
Use innovative technology and processes to support the delivery of a superior customer experience
Umpqua, LEGO, Chilli Beans and many other brands use social media and their websites to create customer communities. Burberry uses 3D high-tech broadcasting of their runway shows; and Chilli Beans uses music and events to involve customers in the Chilli Beans world. O2 drives innovation through continuous customer feedback by involving them in events and their participation in customer communities such as giffgaff, its ‘people powered network’. First Direct uses its online ‘Lab’ to generate customer feedback.
But the technology does not have to be digital to support an innovative idea. Six Senses refuse to fly in any branded bottled waters to any of their properties. Instead they invest in their own water filtration and mineralization plants at their resorts to bottle and sell their own water; 50 per cent of the proceeds of these sales go to a water charity to provide clean water in places such as India. The environment benefits, as do the customers. As Sonu Shivdasani, founder of Six Senses, says:
‘You need to stay true to your purpose – it becomes the compass that guides you.’
Six Senses’ purpose is ‘intelligent luxury’, by which they mean environmentally sustainable.
Encourage your people to demonstrate superior skills and capabilities
Sir John Hegarty, the founding creative director of advertising agency BBH, says:
‘When you are in a [creative] environment such as ours, it is fundamentally important that the creatives feel that what they do is the most important thing in the company; that they are being encouraged to do what they want to do. If you don’t have that, you won’t get them pushing themselves to create the kind of work that they want to create. So it is fundamentally important that I encourage an environment of constant innovation, and that they know that when they do creative work, I am going to take it seriously and I am going to sell it as best I can.’
This should remind us of the final point that all these companies realize about innovation: in the end, it is only important if it is going to make a difference to delivering your organizational purpose and, ultimately, value to customers. Moreover, if it is going to make a difference, it has to be sold to customers or consumers with passion and with the conviction and commitment that it will be delivered. That is where having a purpose really helps. It keeps you focused on the things that really matter.
Focus innovation on the things that make you different
In Chapter 4 we looked at how to differentiate the customer experience through creating brand hallmarks. We advised over-indexing on those things that drive value for customers and the brand, and accepting that it is okay to meet basic satisfaction levels on the things that do not. If you do this, it presents you with a very focused agenda for innovation because you know exactly where investment is required to accentuate what your brand stands for and increase your differentiation. A good example is Amazon Prime Air. This is the innovative service that Amazon is developing that is designed to get a package into the hands of the customer in less than 30 minutes. The high-profile manifestation of this service is a drone that delivers your package to your door. The regulatory challenges, the logistics and the costs are significant, so why bother? Because state-of-the-art convenience and rapid deliveries lie at the very heart of the Amazon DNA and their differentiation. The drone dramatizes what the brand is all about.
Image 5.1 Amazon’s drone delivery
Source: http://www.amazon.com/b?node=8037720011
So let’s look at some inspiring examples of innovation in customer experience.
Umpqua Bank
Umpqua Bank has a promise of ‘being the world’s best community bank’. This means not only being deeply rooted in the community, but also going above and beyond customer service and transforming the mundane task of banking into an unexpected, engaging experience.
An example of their approach in thinking of innovative ways to help people switch banks is in their choice of three different media venues that are a more interactive, tactile and stirring delivery method than the usual banking choice of TV and advertising. Here’s a quick introduction into what they are doing.
Bank account-moving day
Umpqua think of themselves as the community’s best friend. And what would a best friend do? Help you move. Umpqua transformed an old mo
ving truck into a one-of-a-kind bank account-moving truck. To take the hassle out of switching, the team drove all around the US north-western states taking all the heavy lifting out of moving customers’ accounts to Umpqua. The truck comes equipped with ready internet-access laptops, enabling customers simply to step into the truck and switch banks there and then using an e-switch kit.
Switch-kit-in-a-can
One of Umpqua Bank’s goals was to engage potential customers into switching their bank accounts in a fun and unique way. So they introduced completely customized vending machines and stocked them with free bank switch-kits-in-a-can, symbols of a refreshing change, and placed them in all types of locations in the north-western states.
Locally grown community kit
For Umpqua to be seen as the world’s best community bank, it recognized the need to be informed, take action to inspire, protect and develop members of their community. So Umpqua developed the Locally Grown Bank Accounts programme that focuses on empowering the local community. Umpqua showed their support by appearing at all sorts of community events, from farmers’ markets to fairs. Their farmer market stands are fully stocked with fresh Umpqua blend coffee, wildflower seed packets, authentic market bags and the handy switch-kit-in-a-can.
In keeping with this, they issued guidance to all staff to act as people, not as bankers (easier said than done)!
LEGO
LEGO has pioneered innovation driven by its customers. It has not just listened to its customers, it has actively encouraged them to collaborate, co-create and customize the experience of ‘play’.
In 1997, the LEGO Users Group was formed by a couple of enthusiasts on the internet and quickly grew. It enabled LEGO to make the simple observation that its customers were not only children; a large part of its fan base was adults. Moreover, the adults were often the most passionate users of the brand. The company eventually gave these super users a name: ‘Adult Fans of LEGO’ or ‘AFOLs’. The company began to tap into the insights and experiences of these AFOLs. Through basic digital channels such as e-mail, they were able to share insights as to what made a great LEGO experience and ideas for new ranges. They discovered that among their users were doctors, architects and designers. These were people who could not only suggest an idea for a range (ambulances, for example) but also give valuable insight and practical detail as to how to make the suggested range as authentic as possible.