My intent in this course is to be eminently practical and purpose-driven in honing our innovation toolset, and this week is no different. Similarly to our intent to understand very tactically and specifically what makes innovations work& and the spaces of opportunity, this week we will specifically overlay a framework created by Larry Keeley to understand if there are additional grounds for innovation in our concept.
I see Keeley's model as another of those seemingly simple -- but very powerful -- means by which we can understand and hone our thinking, especially when used in this general phase of creating our innovation concept.
What can be especially powerful about this overlay is that it has a tendency to expand thinking beyond 'concept-level' and more into 'platform-level.'
By the end of this lesson, you should be able to:
To Read | Chapters 16 and 17 (Keeley, et al.) Documents and assets as noted/linked in the Lesson (optional) |
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To Do | Identifying the Ten Types
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If you have any questions, please send them to my axj153@psu.edu [1] Faculty email. I will check daily to respond. If your question is one that is relevant to the entire class, I may respond to the entire class rather than individually.
In understanding innovation centered around how the organization creates, structures, or times revenue flows from the offering, consider how flexible this form of innovation can be to the organization. In many cases, profit model innovation can be achieved with the same product or service, but delivered with what may be a more beneficial model for the customer.
From The Ten Types of Innovation:
"Innovative profit models find a fresh way to convert a firm's offerings and other sources of value into cash. Great ones reflect a deep understanding of what customers and users actually cherish and where new revenue or pricing opportunities might lie. Innovative profit models often challenge an industry's tired old assumptions about what to offer, what to charge, or how to collect revenues. This is a big part of their power: in most industries the dominant profit model often goes unquestioned for decades."
Consider that profit model innovations are not always strictly limited to the accounting definition of "profit," but can extend to innovation in how funding is structured. Saint John's University has an interesting approach (Sustainable Revolving Loan Fund) [2] to how it funds sustainability projects at the University, one which balances the more immediate savings with a "snowball effect" for overall sustainability spending,
SJU has set aside a sum of money that will be used to grant zero interest loans to projects with cost savings. The cost savings will pay back the loan until 120% of the loan is paid off. As the fund grows, more and larger projects can be initiated. There are a multitude of ways we can decrease consumption of energy and products. The results are decreased operating costs and a more sustainable campus. Since part of sustainability is equity, anyone can submit a proposal and it will be reviewed. Projects will be audited and results will be posted to prove the viability and legitimacy of the fund. A committee of faculty, staff, administration, and students will govern the fund.
In the case of Solar City, what is now the largest residential solar in the country, the profit model innovation has a few different facets, as they offer four distinct options to homeowners, ranging from leases to power purchase agreements (their most popular option). In this case, they install panels for free on your home and you pay a low rate to Solar City based on the electricity you use. Interestingly, this option is made possible by the fact that Solar City, as a business, can depreciate the solar panel assets (where a homeowner can't), as well as collecting what is currently a 30% Federal investment tax credit for solar panels.
So, while Solar City may introduce some element of uncertainty into their business with what equates to a subsidy loophole (which could close for them at virtually any time), it would seem that the hope is that they use this boom period to take as much market share as possible. You could consider that this strategy is working, as they are rapidly approaching a juggernaut 40% market share number. [3]
From the customer side, all of this results in what can be significant savings, little to no upfront cost, and the pride of going solar. Wade Michels, a stock analyst, wrote an interesting article (What I learned..." [4] recounting his experience with Solar City, both as a customer and potential investor. Here is what the cost options looked like for him:
The main reason SolarCity owns its market (its share is equal to its next 14 competitors combined) is its various Power Purchase Agreement plans. I asked my consultant: Who came up with this great idea? She says it came from Elon Musk. I'm sure you've heard of him, he has some pretty cool ideas for batteries, electric cars, and space.
The first option was the "Pay as you go" plan. This plan is popular because it requires no money down and would reduce the price of my energy by about 41.5%. My new estimated average electric bill would be about $50 less per month and I would save nearly $24,000 over 20 years. Obviously, with no upfront costs, I would be cash flow positive from day one.
The second option was the "Pay only for what you produce" plan. This required a $3,125 investment, but cut the price of my energy by 51%. Over 20 years, I would have saved nearly $29,000 and I would have gotten my money back by the fourth year.
But in my opinion, the smartest way to go is the "Full pre-pay plan." In this scenario, you pay for the amount of power your system will produce up front. It would have cost me only $0.066 per kWh, compared to the $0.188 I currently pay my electric company. That's a savings of 66% and I would save about $125 per month. My initial investment of $10,000 would be recovered by year six, and over 20 years, I will have saved more than $36,000.
In one of the more disruptive innovations in the last decade (just ask a taxi driver [5]), Uber's innovations in bringing ridesharing to the masses have been not only to make it flexible, but to adjust the cost of a ride in real time, based on local supply and demand. Needless to say, the ability to increase the cost of a ride according to demand makes the Uber price model quite interesting, as Uber receives a share of the cost of every ride. Please watch the following 1:38 video.
In understanding innovation synthesized between multiple parties collaborating, consider the ability of network innovation to help widen your organization's capabilities, or to help launch a program quickly. In many circumstances, organizations may be hesitant to collaborate due to perceived risk, but consider that much of this may be mitigated with honest conversation and well-structured non-disclosure agreements.
From The Ten Types of Innovation:
"Network innovations provide a way for firms to take advantage of other companies' processes, technologies, offerings, channels, and brands–pretty much any and every component of a business. These innovations mean a firm can capitalize on its own strengths while harnessing the capabilities and assets of others. Network innovations also help executives share risk in developing new offers and ventures. These collaborations can be brief or enduring, and they can be formed between close allies or even staunch competitors."
Although it was lost in much of the continuing news coverage of the Gulf Oil Spill, a scant three months after the Deepwater Horizon accident began and the same month the well was stopped, XPrize launched a $1.4 million open competition to improve oil spill cleanup technology at sea. No matter how unconventional the means, it's hard to argue with the end: A little more than a year after it was launched, the Oil Cleanup XPRIZE resulted in "quadrupling what had been the current industry rate of surface oil recovery."
If you're unfamiliar with XPRIZE, their mission is as elegant as it is specific:
Founded in 1995, XPRIZE, a 501(c)(3) nonprofit, is the leading organization solving the world’s Grand Challenges by creating and managing large-scale, high-profile, incentivized prize competitions that stimulate investment in research and development worth far more than the prize itself. The organization motivates and inspires brilliant innovators from all disciplines to leverage their intellectual and financial capital for the benefit of humanity. XPRIZE conducts competitions in five Prize Groups: Learning; Exploration; Energy & Environment; Global Development; and Life Sciences. Active prizes include the $30 million Google Lunar XPRIZE, the $10 million Qualcomm Tricorder XPRIZE, and the $2.25 million Nokia Sensing XCHALLENGE.
Below is a brief look at the process and the Elastec/American Marine team that would go on to take the Oil Cleanup XPRIZE. Please watch the following 6:19 video.
While the project overall has been relatively quiet in the news, the proposed DeepWater Desalinization project is an interesting example of teaming two facilities with complimentary needs. The DeepWater Desal plant chose the location because of both demand and the fact that it would have easy access to the end of the Monterey Submarine Canyon just offshore. The ability to place the water intake more that 100 feet undersea is valuable to mitigate any impacts on what is one of the US's most valuable marine environments.
But, the access to deep water has the drawback that the water is very cold, which is not desirable for desalinization... so the goal is to co-locate a 150mW data center in the complex. Data centers have tremendous cooling needs, so the plant will first route the cold water to the data center to provide server and infrastructure cooling, and then the warmed water will then flow through for desalinization. Considering Monterey Bay is only about 75 miles to the heart of Silicon Valley's data center demands–and the area already is in need of its own data infrastructure–the project appears to be a win all around. Please watch the following 3:02 video.
While there have been some other "tractor trailer of the future" initiatives, the Freightliner joint venture is not a showpiece: It is what they believe to be the future of their company.
This effort represents the best of network innovation with almost 50 companies, suppliers, and universities coming together on the project, including MIT, Oak Ridge National Laboratory, Walmart, A123 Systems, and Michelin. Because they believed the truck, trailer, and all systems needed to work in full concert toward the unified goal of efficiency, the team had the foresight to fully involve those organizations and suppliers holding expertise in the respective areas. As could be expected for what would be a worldwide initiative, the needs for communication and open collaboration are considerable, and this is perhaps at the very heart of why this initiative was so important in the first place: Experts in respective areas need to be networked in meaningful ways if they are to solve the "big" problems. (This is not unlike the XPRIZE philosophy, as well.)
The result of taking a network innovation approach? A 115% fuel efficiency improvement while in actual use on public roads. The implications for transportation would be significant, to say the least.
If you'd like to see what HTML5 can do, give their Supertruck initiative site [9] a look (after allowing a few seconds to load). Quite a compelling use of the technology. Please watch the following 4:17 video.
Structural innovations can take many forms, but when you peel them all back, they tend to have one characteristic in common: commitment. While the book calls out some of the more tactical facets of structural innovation, the roots of structural innovation begin in an organization taking a stand to differentiate.
If you have a finance background, think of companies with the classic "wide moat" profile. At some point in their history, they aligned significant resources behind one vision, and, in the process of doing so, created a seemingly insurmountable separation between themselves and peers. Think of Caterpillar, for example, a classic wide moat business and structural innovator. As we will see, while you may not associate Whole Foods with a "wide moat" profile, some of their early decisions have indeed created structural innovations which would be difficult for competitors to replicate.
From The Ten Types of Innovation:
Structure innovations are focused on organizing company assets–hard, human, or intangible–in unique ways that create value. They can include everything from superior talent management systems to ingenious configurations of heavy capital equipment. An enterprise's fixed costs and corporate functions can also be improved through Structure innovations, including departments such as Human Resources, R & D, and IT. Ideally, such innovations also help attract talent to the organization by creating supremely productive working environments or fostering a level of performance that competitors can't match.
Here's about as structural an innovation an organization could have internally, so much so that one could imagine it would be virtually impossible to "retrofit" onto an existing organization: The salaries and bonuses of every employee at Whole Foods are available to be "looked up" by other employees. Co-founder John Mackey instituted the program very early in the life of the company, taking a stand to eliminate office politics and personal agendas in favor of making goals visible and attainable. I'd like us to focus on this very specific aspect of Whole Foods structural innovation, as opposed to taking the book's more broad view of their 'culture' as the structural innovation.
John Mackey's logic as stated to Business Insider [11] is quite elegant:
Whole Foods co-CEO John Mackey introduced the policy in 1986, just six years after he co-founded the company. In the book, he explains that his initial goal was to help employees understand why some people were paid more than others. If workers understood what types of performance and achievement earned certain people more money, he figured, perhaps they would be more motivated and successful, too.
"I'm challenged on salaries all the time," Mackey explained. "'How come you are paying this regional president this much, and I'm only making this much?' I have to say, 'because that person is more valuable. If you accomplish what this person has accomplished, I'll pay you that, too.'"
Watch the Inc. Live interview of John Mackey, entitled The Benefits of Radical Transparency [12], where he discusses his approach to compensation and disclosure. He covers it more passionately and succinctly in this interview than in most all writings.
The City of Pittsburgh has taken a rather unique structural innovation approach through their creation of a Department of Innovation and Performance in February 2014. While the creation of the Department itself is certainly a structural differentiator, consider that Debra Lam, the Chief Innovation & Performance Officer, is one of only six executive-level positions in the city. Add in the factor that CIOs still aren't terribly common in the corporate world, let alone government, and we have the makings of a structural innovation for the City of Pittsburgh.
The description of the Department of Innovation and Performance platform:
We live in an age of infinite possibilities. The Department of Innovation & Performance (I&P), created in February 2014, reflects Mayor Peduto's vision for the Next Pittsburgh and our team's role in fostering a culture of accountability and innovation at levels and sectors of society. I&P aims to transform Pittsburgh into a world-class city through not only managing information systems and delivering technology, but by pursuing data-driven decision-making, creating sustainable solutions, and driving quality performance.
While technology is an important component to this, it is not the only end goal. There is no silver bullet, fancy platform, or expensive software that can magically transform the City. The City's greatest asset is us, its people, and our commitment to collaboration and better serving the City government and its residents.
Beyond servicing the City and its departments and agencies internally with strategy and hardware, I&P has a wider external component. We work to better service all residents of Pittsburgh by closing the digital divide, fostering entrepreneurship and innovation, improving access and application of information, and empowering neighborhoods, especially vulnerable communities. We want citizens to better utilize their resources and have the information to make better decisions and take action.
To underscore the importance of enabling innovation in the Next Pittsburgh, the Department takes responsibility for keeping the concept of a fresh, innovative Pittsburgh at the forefront of minds, as well. It has created an Innovation Community Map as just one tactic to help reinforce what will be a long-term strategy.
Process innovations are arguably one of the most evolved forms of innovation, in that they have roots in literally hundreds of years of product and service development. From the cotton gin to the assembly line, process innovation is a classic form of innovation, as well as one which typically allows the organization intellectual property protection, and therefore, some level of defensible differentiation over time.
From The Ten Types of Innovation:
Process innovations involve the activities and operations that produce an enterprise's primary offerings. Innovating here requires a dramatic change from “business as usual” that enables the company to use unique capabilities, function efficiently, adapt quickly, and build market-leading margins. Process innovations often form the core competency of an enterprise, and may include patented or proprietary approaches that yield advantage for years or even decades. Ideally, they are the “special sauce” you use that competitors simply can't replicate.
“Lean production,” whereby managers reduce waste and cost throughout a system, is one famous example of a Process innovation. Other examples include process standardization, which uses common procedures to reduce cost and complexity, and predictive analytics, which model past performance data to predict future outcomes–helping companies to design, price, and guarantee their offerings accordingly.
The world of recycling and waste minimization is one which feels to continuously be on the edge of a revolutionary development but is many times fraught with frustration. Regardless of the constraints and struggles on the part of the recycler, all paths lead to the classic problem on the demand side of recycled plastics: There are relatively few applications for black, low quality, downcycled plastics, which are typically problematic in molding and processing. These are the types of plastics that are downcycled into parts like automotive wheel well liners and fairings (if you open the hood of your car and see a black, "swirly" finished plastic, this is low grade, downcycled plastic.) Like all supply and demand balances, if all plastics are recycled into black, low-quality plastics of limited marketable use, the price per ton is going to be suppressed.
Needless to say, if plastics can not only be recycled and repelletized by type, color, and other properties, it would represent a revolution in recycling and plastics. This is what MBA Polymers can do, and has roughly 60 patents to cover the process by which it does so.
From an excellent Pop Sci article [13] on Mike Biddle:
"But by the time he saw Puckett's film, Biddle had quietly achieved what most thought impossible: He had discovered how to separate certain mixed plastics completely. This was no mere down-cycling. Biddle could take the plastic from, say, a laptop, reduce it to its purest form, and sell it back to a computer company to make another laptop. What's more, at his facility in Richmond, California, Biddle could produce recycled plastic with as little as 10 percent of the energy required to make virgin. In a world where people use 240,000 plastic bags every 10 seconds, where passengers on U.S. airlines consume one million plastic cups every six hours, where consumers in total discard more than 100 million tons of plastic annually, closing the loop on production and recycling could reduce global dependence on oil, the source material for virgin plastic. It could conceivably influence not only the price of oil, but global flows of trade as well. And it could dramatically reduce the wholesale smothering of communities across Asia and Africa with hazardous e-waste. If Biddle could convince people to give him waste rather than dump it around the globe, he could conceivably change the world."
Please watch the following 10:51 video. If the video is not displaying on the page, please view the video on the external site [14]. The transcript is also available on the external site.
I had the pleasure of judging an entrepreneurship competition at Penn State when Vortic, as a business venture, was but a glimmer in the eye of a team of upperclassmen, but even then, their focus, determination, and innovation was quite evident.
Vortic's core business is taking a uniquely stylish (and patent pending) approach to watchmaking, by upcycling century-old pocketwatch movements into beautiful, Corning Gorilla Glass-faced watches. Because of the variation of these old pocketwatches, they created a proprietary case design and fit process for each individual movement, which is then 3D printed and machined individually.
Their decidedly high-end and high-tech approach to upcycling resulted in their Kickstarter reaching its $10,000 goal within 12 hours, eventually landing at $41,035. Since then, the popularity of their watches means that you now have only the opportunity to purchase a backorder slot for your own Vortic... starting at $1,395.
Please watch the following 8:35 video:
Product Performance innovation is another classic (and rather broad) form of innovation, as it covers those innovations that allow you to outperform competitors on the attribute or benefit level. As the authors briefly allude to, attributes in and of themselves are difficult to defend. As we have seen in our work with means end chains, strategy comes from chains of meaning and are therefore highly defensible. When unidimensional, "one-trick pony" brands are surpassed by competitors on that "one trick," it can be extremely hard to recover. In fact, it could be argued that a competitor can simply leverage all of your past marketing to slingshot past you on that attribute. Product performance is certainly a core type of innovation, but one which must be used judiciously.
From The Ten Types of Innovation:
Product Performance innovations address the value, features, and quality of a company's offering. This type of innovation involves both entirely new products as well as updates and line extensions that add substantial value. Too often, people mistake Product Performance for the sum of innovation. It's certainly important, but it's always worth remembering that it is only one of the Ten Types of Innovation, and it's often the easiest for competitors to copy. Think about any product or feature war you've witnessed–whether torque and toughness in trucks, toothbrushes that are easier to hold and use, even with baby strollers. Too quickly, it all devolves into an expensive mad dash to parity. Product Performance innovations that deliver long-term competitive advantage are the exception rather than the rule.
Still, Product Performance innovations can delight customers and drive growth. Common examples of this type of innovation include: simplification to make it easy to use an offering; sustainability to provide offerings that do no harm to the environment; or customization to tailor a product to an individual's specifications.
As evidenced throughout this Lesson, we might tend to disagree with Keeley and the other authors who take a narrow view of sustainability and represent it as only a part of product performance. Sustainability can infuse strategy everywhere, open entirely new opportunities, and represent new spaces for innovation in many cases.
It may seem like almost a lifetime ago, but there was a time when hybrid drive technology, first commercialized by the Toyota Prius, was downright revolutionary. Toyota had enough of a product performance advantage, and perhaps more importantly, committed to the Prius' success, that the Prius model continues to account for about half of all hybrids sold in the US, with Toyota owning nearly 64% of the US hybrid market. [17]
Please watch the following :50 Prius commercial.
FLIR has dominated the worldwide thermal imaging market for decades, typically selling highly specialized imaging solutions for thousands or tens of thousands of dollars each. FLIR describes their approach to core markets [19] as such:
Pioneers in thermal imaging, we were founded in 1978, originally providing infrared imaging systems that were installed on vehicles for use in conducting energy audits. Today our advanced systems and components are used for a wide variety of thermal imaging, situational awareness, and security applications, including airborne and ground-based surveillance, condition monitoring, navigation, recreation, research and development, manufacturing process control, search and rescue, drug interdiction, transportation safety and efficiency, border and maritime patrol, environmental monitoring, and chemical, biological, radiological, nuclear, and explosives threat detection.
What FLIR accomplished with the FLIR One was taking technology that was overwhelmingly inaccessible to the average consumer and making it available (first) as an add-on hardware component for the iPhone for around $200. While there was an initial early adopter "gadget geek" audience that knew FLIR, it eventually began to gain traction as a wider audience that recognized that the FLIR One could have far greater and more practical applications.
One of those applications is the ability to bring thermal imaging's application in energy auditing to the forefront. While professional energy audits might rely on thermal images of the interior and exterior of the home generated from one of FLIR's $10,000 units, more DIY-inclined homeowners began to realize that they could do ongoing energy audits using the FLIR One as they build, retrofit, or remodel their homes.
Please watch the following 9:51 video. Energy use application begins at 5:24 in the video.
Product system innovations are those which have a unique way of retaining customers over time, as they create deep and tightly interwoven connections with the user.
Even in creating product system innovation, we can consider creating open product systems (think Google's android, or IFTTT, which we will examine in a moment) or closed product systems (think Apple's elegant connectivity between its devices... and only its devices).
From The Ten Types of Innovation:
Product System innovations are rooted in how individual products and services connect or bundle together to create a robust and scalable system. This is fostered through interoperability, modularity, integration, and other ways of creating valuable connections between otherwise distinct and disparate offerings. Product System innovations help you build ecosystems that captivate and delight customers and defend against competitors.
Product bundling, or taking several related products and selling them in a single package, is a common example of a Product System innovation. In the twenty-first century, technology companies in particular have used this type of innovation to build platforms that spur others to develop products and services for them–including app stores, developer kits, and APIs. Other Product System innovations include extensions to existing products, product and service combinations, and complementary offerings–which individually work just fine on their own, but are far better together (even ones as humble as peanut butter and jelly).
First off, please know IFTTT is pronounced "ift" as if you are saying "gift" without the "g"... hopefully, this will save you improvising pronunciations that may sound somewhat like an angry cat.
If you're not familiar with IFTTT, it stands for "if this, then that," and is at the core of "the internet of things" you hear about. In essence, IFTTT is an open platform that allows connecting different apps and devices to each other to be used as triggers. These "if this, then that" statements are called "recipes," as they allow you to combine different devices, trigger and action ingredients, at will. Many of these recipes can be used in smart homes, and there are many ways IFTTT can be used to make smart devices in your home even smarter and more efficient.
For example:
IF my iPhone is farther than 20 miles from my home, THEN automatically turn the Nest thermostat in my home to Away Mode, thereby saving energy.IF my Adam soil sensor shows soil moisture below a certain point, THEN to send my neighbor a text to check on my garden, as she is an expert gardener and can tell if it needs some water while I am away (instead of automatically triggering my drip irrigation from the soil sensor).
IF the summer evening forecast is to be less than 70 degrees, THEN change the color of my Philips Hue smart led bulb to a certain shade of blue to remind me to open the windows.
IFTTT is now the connecting logic hub for devices from Apple, Amazon (Alexa), Google (Nest, et al.), Samsung (Smartthings) and hundreds of others, so it is a massive system with amazing potential for making many facets of life more efficient and sustainable.
While this video covers the "Works with Nest" platform, all of the interactions they cover can be accomplished with IFTTT today. Please watch the following 4:12 video.
It may seem simple, but the Canadian refillable beer bottle product and service system begins with the Canadian beer industry agreeing in 1992 to unify on an Industry Standard Bottle (ISB 341ml AT2 [22]), a specific design, which can be refilled up to 16 times before being recycled. Although the Canadian brewers had partnered on refill programs since 1927, the AT2 can be given much of the credit for making the system efficient and modern.
This seemingly simple unified system approach to collecting and refilling beer bottles has resulted in Canada having a tremendously successful and beneficial program.
From the wonderfully detailed article by Isabel Teotonio [23] at the Toronto Star:
The Beer Store, co-owned by Labatt Brewing Company, Molson Coors Canada and Sleeman Breweries, will take back anything it sells at its 447 Ontario locations: bottles, caps, cans, cases, kegs, plastic bags. About 94 per cent of all containers and 99 percent of all refillable beer bottles are returned.
The Beer Store's deposit return system began in 1927. Since then, it has recovered 75 billion beer bottles.
In 2007, the province introduced the Ontario Deposit Return Program and The Beer Store expanded its recycling program to accept containers purchased at the LCBO and wineries for a refundable deposit of 10 or 20 cents.
That first year, 63 per cent of containers were recovered. By 2012, the return rate was 81 per cent.
The fact that all of these beverage containers aren't being created from scratch is a boon to the environment — and wallet.
According to a TBS report, in 2011 both The Beer Store and the Ontario Deposit Return Program diverted 454,478 tonnes of beverage alcohol containers from Ontario landfills, saving 2.9 million gigajoules of energy, and avoiding 205,090 tonnes of greenhouse gas emissions, the equivalent of removing 40,210 cars off the road for a year.
Keeping those containers out of garbage bins and blue boxes saved Ontario taxpayers about $40 million in waste management costs. Please watch the following 1:26 video.
While the article notes some of the reasons why refillable bottles fell out of favor in the US–transportation to increasingly distant breweries being one–we can hope that the surging market share of craft and local breweries may bring back a renaissance of the refillable glass bottle.
In considering how organizations can innovate in the support and supplemental servicing of their primary offer, remember that the definition of "service" may actually be quite wide. Because of the potential breadth of this innovation, it is one which we many times see tightly overlapping other innovations, especially Customer Engagement.
Consider also the case of "halo services," those services which may be infrequently used by customers, but are invaluable to the brand and word of mouth of a company. One classic example of the halo service? Herrod's Department Store in London, which has a motto of "Omnia Omnibus Ubique"–"All Things for All People, Everywhere"–and which has cemented that reputation with myriad stories of being able to source anything for its customers. One of their latest offerings is being able to buy gold "off the shelf," up to and including a 12.5kg bar (Harrod's bank) (value of about 500,000 Euros).
From The Ten Types of Innovation:
Service innovations ensure and enhance the utility, performance, and apparent value of an offering. They make a product easier to try, use, and enjoy; they reveal features and functionality customers might otherwise overlook; and they fix problems and smooth rough patches in the customer journey. Done well, they elevate even bland and average products into compelling experiences that customers come back for again and again.
Common examples of Service innovations include product use enhancements, maintenance plans, customer support, information and education, warranties, and guarantees. While human beings are still often at the heart here, this type of innovation is increasingly delivered through electronic interfaces, remote communications, automated technologies, and other surprisingly impersonal means. Service can be the most striking and prominent part of the customer experience, or an invisible safety net that customers sense but never see.
A bit of an unexpected bonus in the service department is the AmazonSmile program, which donates .5% of all of your purchases made through smile.amazon.com to the charity of your choice. It really is that simple, as all of the products, prices, and navigation of the site is identical, the only difference is that the Amazon logo changes to the AmazonSmile logo, and "Supporting: [your chosen charity]" appears below the search box.
From the program's About page (Amazon Smile) [25]:
"AmazonSmile is a simple and automatic way for you to support your favorite charitable organization every time you shop, at no cost to you. When you shop at smile.amazon.com, you'll find the exact same low prices, vast selection and convenient shopping experience as Amazon.com, with the added bonus that Amazon will donate a portion of the purchase price to your favorite charitable organization. You can choose from nearly one million organizations to support.
[...]
The AmazonSmile Foundation will donate 0.5% of the purchase price from your eligible AmazonSmile purchases. The purchase price is the amount paid for the item minus any rebates and excluding shipping & handling, gift-wrapping fees, taxes, or service charges. From time to time, we may offer special, limited time promotions that increase the donation amount on one or more products or services or provide for additional donations to charitable organizations."
For those already making a significant amount of purchases through Amazon, it is a seamless way to donate to their favorite charity. Please watch the following 1:26 video.
Click for Transcript of Amazon Smile Video
Not every service has to be directly linked to the product offering and can instead be a service acting to reinforce what the brand stands for. In the case of Heineken's partnering with Subway Symphony, we could consider it more as a 'service to all subway goers'... and one which could also generate tremendous goodwill (and PR value) for Heineken. Imagine the conversations generated on the first day when subway travelers heard the change.
It is an attempt for Heineken, a brand overwhelmingly associated with youth, cities, and technological hipness, to partner with an organization to reinforce their identity and generate goodwill.* Please watch the following 2:35 video.
*The feasibility of the program at all may be quite slim, as the MTA notes [27] about James Murphy and the Subway Symphony program:
"We have heard from him, and as we've told him many times, we cannot do it. The tones are an ADA element for the visually impaired, and we won't mess with them — much less take turnstiles out of service and risk disabling them for an art project. (It would be a very cool project, don't get me wrong, but we can't mess with turnstiles that handle 6 million customers a day for it.)[…] As a condition of filming [the promo ad] in the subway, we made them acknowledge that we can't and won't do it."
Perhaps the ADA compliance could be met by other means, but it may be difficult to satisfy the requirements if the tone is an aural identifier.
Channel innovation is another type which is far-reaching and frequently triggered with other types of innovation. When we examine channel innovations, consider not just the core offering, but also complimentary products or offerings which may undergo channel innovation as a byproduct of other innovations. A very basic example could be that the advent of the automobile allowed myriad channel innovation in the delivery and fulfillment of non-automobile related products, such as milk, ice, or beer. In a more modern example, we may someday see channel innovation in the delivery of emergency medical supplies as a byproduct of the advent of the modern drone. [28]
From The Ten Types of Innovation:
Channel innovations encompass all the ways that you connect your company's offerings with your customers and users. While e-commerce has emerged as a dominant force in recent years, traditional channels such as physical stores are still important— particularly when it comes to creating immersive experiences. Skilled innovators in this type often find multiple but complementary ways to bring their products and services to customers. Their goal is to ensure that users can buy what they want, when and how they want it, with minimal friction and cost and maximum delight.
Channel innovations are particularly sensitive to industry context and customer habits. Flagship stores can be an extremely valuable Channel innovation, creating signature venues that showcase a firm's brand and offerings, while pop-up stores may be useful for a short, sharp splash at the holidays. In contrast, selling directly through e-channels or other means can reduce overhead costs, maximizing margins and cost advantage. Or you might pursue indirect distribution or multi-level marketing, either of which recruits others to shoulder the burden of promoting and/ or delivering an offering to the end customer.
While a block press may sound terrifyingly uninteresting to the majority of us, Vermeer has created a tool born from the sustainability efforts of the Vermeer Charitable Foundation which allows those in need to create incredibly strong bricks on site using soil and a small amount of water and cement. This makes structurally-reliable buildings a possibility in places where the transportation of building materials–let alone brick–would have been virtually impossible in the past.
So we could consider the true innovation of the Vermeer BP714 to be that it changes the channel through which building materials can be acquired by those in remote or desolate villages.
From an Equipment World profile [29] on the machine:
"The BP714 takes these materials and presses them into 4″x14″x7″ blocks that when cured nearly rival the strength of traditional concrete block. It cranks out three blocks a minute which are stacked and cured for 28 days. The blocks have an interlocking design so you don't need mortar to secure them. There are also cavities designed into the blocks for running rebar, roof tie downs, electrical conduit and plumbing. The blocks don't have to be fired to cure, so kilns and all the energy they require are not needed.
According to Terry Butler, operations manager for Vermeer, the Vermeer Charitable Foundation provided the impetus behind the project and currently has four projects going on around the globe. The foundation also supported the creation of a separate entity called Dwell Earth, which provides technical support and ancillary equipment necessary to set up and run a portable block plant."
Please watch the following 5:40 video.
In developing countries, small business loans can be scarce, and those available may have obscenely high interest rates of 90% and higher annually. Needless to say, this can put small business owners in developing countries under the influence of what amounts to predatory loan rates. The goal of Kiva, and most microfinance, is to circumvent that predatory lending channel of finance altogether and allow small business in developing countries to thrive with reasonable loans.
While in existence for decades, microfinance, or the practice of small peer to peer lending, gained significant traction in 2006 when the founder of Grameen Bank, Muhammad Yunus, won the Nobel Peace Prize "for their efforts to create economic and social development from below."
Kiva is one of the most popular peer-to-peer, not-for-profit microfinance operations now, though it may seem that there could be a shift in coming years as for-profit microfinance has begun to appear in Mexico and other countries. [31]
Please watch the following 5:05 video.
Think of a brand not as a static "thing" (and please, especially not a logo), but as a living, breathing persona which builds character, associations, and friends over time.
Compelling brands, like people, have a way of building this positive karma over time, and also, like people, attract those who share their interests or admire some quality in them. There are those people who you have a transactional relationship with, and those with which you proudly choose to associate. For a wide variety of reasons, from hiring top talent to corporate culture to long-term profitability, you want to be in that latter group.
Within innovating brands, the tactics can be virtually anything, and we may find an increase in brand equity (a la "karma") as a byproduct of virtually any positive innovation, and especially those which also happen in the sustainability space. In fact, it can be extremely difficult to separate what a brand stands for and its sustainability efforts, and I would argue that you shouldn't be able to.
From The Ten Types of Innovation:
"Brand innovations help to ensure that customers and users recognize, remember, and prefer your offerings to those of competitors or substitutes. Great ones distil a “promise” that attracts buyers and conveys a distinct identity. They are typically the result of carefully crafted strategies that are implemented across many touchpoints between your company and your customers, including communications, advertising, service interactions, channel environments, and employee and business partner conduct. Brand innovations can transform commodities into prized products, and confer meaning, intent, and value to your offerings and your enterprise.
Brand innovations include extensions that offer a new product or service under the umbrella of an existing brand. Alternatively, they might make a company stand for a big idea or a set of values, expressing those beliefs transparently and consistently. In business-to-business contexts, Brand innovations aren't limited to the final manufacturer or the consumer-facing producer of a product; branding your components and making customers aware of their value can build both preference and bargaining power."
In the midst of Detroit's long bankruptcy, Shinola helped to reinvigorate a trade which has been long dormant in the United States: watchmaking.
The sustainability slant in this profile comes from the fact that Shinola did not just create a homebase in Detroit, it built full operations including marketing and operations, and, more importantly, had its watchmakers Swiss-trained in how to assemble watches. To say this is an investment in worker training would be an understatement, and you could consider that after receiving that training, you have a group of employees who are trained in a very valuable skilled trade, not just for Shinola, but for themselves.
Shinola is partially owned by Bedrock Manufacturing Company, LLC [33] (co-founded by the founder of Fossil Watches) which also purchased storied outdoor outfitter Filson a few years ago, so we can certainly see that there is long-term strategy underlying the Shinola brand.
Please watch the following 3:06 video.
In the case of the Seaqualizer, it is starting its brand's life in a fairly fortuitous place at the intersection of government, NGOs, and sportsmen, and was actually hatched as part of a WWF crowdsourcing competition.
From Millie Kerr's article, "The Seaqualizer Gives Doomed Fish a Fighting Chance [35]":
Hoping to find innovative solutions to the problem, the World Wildlife Fund launched the International Smart Gear Competition in partnership with industry leaders, scientists, and fishermen. As sophisticated as the competition sounds, its solutions aren't being made in a James Bond-esque lab: According to WWF, most are being pioneered by the people closest to the problem—fishermen themselves.
One of the most innovative tools to come out the competition is the SeaQualizer. Created by two fishing buddies from South Florida, this hydrostatic descending device returns victims of bycatch to their native depths. Unlike fish caught in shallow lakes, many deep-water dwellers won't survive if you simply toss them back, because as they ascend toward the surface, changes in pressure wreak havoc on their internal organs. By the time you reel them in, they're experiencing barotrauma and will only pull through with assistance.
Fishermen historically helped bycatch recompress by venting, a process that involves puncturing the fish's swim bladder to release the gas that built up during ascension. It's as barbaric as it sounds and often leads to injury or death, but until around four years ago fishermen had no alternative—in some places, venting was even required by law.
Jeffrey Liedermen and Patrick Brown, the duo behind the SeaQualizer, had heard about an interesting alternative: descending devices that lower fish to appropriate depths—no stabbing required. But early descenders lacked precision. Some were crates fishermen manually lowered to the seafloor; others required the user to constantly tug on the line. Liedermen and Brown saw an opportunity and took to Brown's parents' garage to build a solution.
The Seaqualizer is so effective that its use has drawn endorsements from both the World Wildlife Fund and NOAA, which "reopened portions of the Pacific after testing the efficacy of descending devices in partnership with the Sportfishing Association of California and WWF."
While the product may have opened the door, the brand has a tremendous opportunity to capitalize on the opportunity to become a responsible brand and a staple on boats worldwide. Perhaps, we will see a day not far in the future when day charter deep sea fishing tours will not only use this product, but proudly tout "We use SeaQualizer" on its materials.
Please note the first couple minutes of this NOAA video on the joint effort show fish with barotrauma, and so have bulging eyes and the occasional stomach swell. Just to be aware. Please watch the following 3:57 video.
Customer Engagement is another type of innovation which can be quite far-reaching strategically and overlap with many other innovations. From driving relationships between customers by creating sharing communities to creating engaging store atmospherics that make shopping a more active experience, Customer Engagement innovation takes many forms.
Themes which you may tend to see within Customer Engagement are authenticity and knowledge. Authenticity is a highly desired, but somewhat scarce, resource for any organization, and having authentic interactions with customers can be valuable to the brand and the business. Knowledge can also be a core ingredient in these interactions, as those most valuable customer engagements tend to involve the exchange of information or ideas... and don't be surprised if the organization is on the receiving end of knowledge from customers, in many cases.
From The Ten Types of Innovation:
Customer Engagement innovations are all about understanding the deep-seated aspirations of customers and users, and using those insights to develop meaningful connections between them and your company. Great Customer Engagement innovations provide broad avenues for exploration, and help people find ways to make parts of their lives more memorable, fulfilling, delightful–even magical.
Increasingly, we see these innovations taking place in the social media space, as many companies move away from “broadcast” communications toward delivering more organic, authentic, and mutual interactions. We also see companies using technology to deliver graceful simplicity in incredibly complex areas, making life easier for customers and becoming trusted partners in the process. However, as ever, technology is only a tool. Even simple gestures like elegant and intuitive packaging can extend and elevate the experience customers have with a company— long after the point of purchase.
Created from a joint initiative between MIT, Waste Management, Qualcomm, Sprint, and The Architectural League NY, Trash | Track sought to understand and visualize the paths 3000 items took from Seattle to their final destinations. The results have been used in classrooms and as conversation starters on hundreds, if not thousands of sites over the years, engaging people in discussions which may have never had a topic statement or stimulus in the past. The Trash | Track project certainly delivered in that aspect.
Where the Trash | Track project may have stopped short was in understanding the paths and the implications of those travels or pushing the discussion further... in essence, taking the next step to understand what can be improved in what they call the "removal chain" and undergoing, quite literally, the accounting of those items. For example, are there closer accumulation points for e-waste than Florida? When accounting for its travels cross country, is e-cycling that item still an intelligent decision? Please watch the following 2:18 video. Note that there is no narration in the following video.
Fu-Tung Cheng has been a renowned architect in Berkeley, California for decades, and had been using concrete countertops in his designs for years. In 2004, he built on his architectural and design experiences with concrete to create Cheng Concrete in 2004, a combined training/product company for concrete countertops. In doing so, his core model was one that would serve contractors, designers, and DIY equally by making the necessary components and most importantly, knowledge, well-packaged and available to the masses.
Instead of relying on private-labeled, pallet-sized shipments of specialized concrete mix (which would have been a nightmare on multiple fronts), Cheng Concrete packages and ships only the colorants and added components necessary to add to your locally-sourced concrete. Combined with the knowledge support of others, you will have a countertop or surface which will outlive your kitchen, if not your home, but is readily recyclable locally.
Where Cheng Concrete engaged customers was not only in opening this emerging interior material to the masses of homeowners, but also in highlighting designs and how they are created, both online and in print. If you search "concrete counter" on YouTube, you have more than 43,000 results, and much of this popularity is due to Fu-Tung Cheng's engagement of homeowners more than a decade ago. Please watch the following 4:10 video.
"And I can't work without a model. I'm not saying that I don't flatly turn my back on reality to turn a study into a painting — by arranging the colour, by enlarging, by simplifying — but I have such a fear of separating myself from what's possible and what's right as far as form is concerned. [...] But in the meantime I'm still living off the real world. I exaggerate, I sometimes make changes to the subject, but still I don't invent the whole of the painting; on the contrary, I find it ready-made — but to be untangled — in the real world." - Vincent van Gogh to Theo van Gogh, October 5, 1888 [40].
As we have addressed throughout our time together, some fatal flaws in innovation efforts are those which work without a "model," that is to say those efforts which are artificially synthesized as opposed to being found and untangled in the real world.
The Ten Types of Innovation is a readily accessible framework to help us better refine and hone our strategies by further forcing us to apply a strategic lens. If we think of the Cognitive Map as representing the context in which our innovation will function–'the real world model'–then the Ten Types allow us to further refine and untangle our strategy.
Through taking on and truly engaging in the process of researching, mapping, testing, and crafting our initial strategies, we may begin to 'untangle the real world.' Perhaps most importantly, we will take what is, for some, a random and sporadic process of innovation, and instead understand where we are taking risks and where we are not. This may seem like a trivial detail, but it allows us a far more detailed and strategic view of our landscape.
For example, we may elect to choose what is a relatively gray space, and what is already a well-established path on the Map, and approach the initiative using a completely unique set of innovation types (e.g., Amazon's early days as an online bookstore). We may choose to take on what is a white space, build a substantially new path on the Map, and apply more time-tested and proven innovations (e.g., selling and marketing a product innovation through an existing model).
In each case, because we are able to layer the models, we know where we are being aggressive and taking risks, and where we are being a bit more conservative. Knowing that our innovation will likely go through rounds of refinement in the market, knowing how we can "twist the dials," so to speak, allows us paths for intelligent refinement.
To refresh ourselves, our goals for this week's Lesson are to:
To these ends, this week's assignment will build on our last two weeks' efforts to create another view by which we may 'untangle the real world.'
Links
[1] mailto:axj153@psu.edu
[2] http://www.csbsju.edu/Documents/Sustainability/Revolving%20Loan%20Fund%20SJU.pdf
[3] http://seekingalpha.com/article/2756605-solarcity-market-share-dominance-and-entry-into-promising-off-grid-markets
[4] http://www.fool.com/investing/general/2014/04/18/what-i-learned-about-solarcitys-business-model-by.aspx
[5] http://time.com/3482420/taxis-uber-lyft-washington-dc/
[6] https://www.youtube.com/watch?v=VdgzisQ6Scc
[7] https://www.youtube.com/watch?v=oEoDGzBcxoI
[8] https://www.youtube.com/watch?v=xgd25LbFlY8
[9] https://www.freightliner.com/why-freightliner/supertruck-ii/
[10] https://www.youtube.com/watch?v=jgXh9Vxbx1s&t=1s
[11] http://www.businessinsider.com/whole-foods-employees-have-open-salaries-2014-3
[12] http://www.inc.com/lewis-schiff/john-mackey-whole-foods-transparent-compensation.html
[13] http://www.popsci.com/article/science/garbage-man
[14] http://www.ted.com/talks/mike_biddle?language=en
[15] https://www.ted.com/talks/mike_biddle_we_can_recycle_plastic
[16] https://www.youtube.com/watch?v=sV67oXCJ1F8
[17] https://pressroom.toyota.com/toyota-to-debut-three-new-electrified-vehicles-for-u-s-market/
[18] https://www.youtube.com/watch?v=gyiSDeZiN1I
[19] http://www.flir.com/aboutFLIR/
[20] https://www.youtube.com/watch?v=AOZOjSBO3wg
[21] https://www.youtube.com/watch?v=bPdltu-93pM
[22] https://unitedbottles.com/?s=ISB&lang=en&post_type=product
[23] http://www.thestar.com/life/food_wine/2013/06/28/the_average_beer_bottle_is_refilled_15_times_in_its_environmentallyfriendly_life_cycle.html
[24] https://www.youtube.com/watch?v=Ge_41IZAv6Q
[25] https://www.amazon.com/amazon-smile/s?k=amazon.smile
[26] https://www.youtube.com/watch?v=z6nNsqY-qYM
[27] http://www.stereogum.com/1808880/james-murphy-partners-with-heineken-on-unrealistic-subway-symphony-project/video/#comments
[28] http://www.theguardian.com/world/2014/mar/30/humanitarian-drones-medical-supplies-no-roads-technology
[29] http://www.equipmentworld.com/vermeers-third-world-building-solution/
[30] https://www.youtube.com/watch?v=5muWPmd2oq0
[31] http://www.nytimes.com/2008/04/05/business/worldbusiness/05micro.html?pagewanted=all&_r=0
[32] https://www.youtube.com/watch?v=TLQX_5kQHyo
[33] http://www.reuters.com/article/2013/08/02/us-usa-detroit-manufacturing-idUSBRE97106Z20130802
[34] https://www.youtube.com/watch?v=aupnlLpQBWw
[35] http://www.wired.com/2015/06/seaqualizer-gives-doomed-fish-fighting-chance/
[36] https://www.youtube.com/watch?v=BceJh1OW8ic
[37] https://www.youtube.com/watch?v=fvTZc5hWBNY
[38] https://www.youtube.com/embed/WkZTWD8qXc4
[39] https://es.m.wikipedia.org/wiki/Archivo:Van_Gogh_-_Ein_Paar_Schuhe4.jpeg
[40] http://vangoghletters.org/vg/letters/let698/letter.html