 In
yesterday's post, I proposed a methodology for customer-driven
innovation that draws on the work of three groups (a) Christensen's and
Carr's work on the four types of innovation, (b) Doblin Group's ten
ways to innovate, and (c) Chan and Mauborgne's Blue Ocean Strategy
Canvases. Today I'm going to test it out on a company that I know well,
that went through a revolutionary innovation a generation ago. It's a
family-owned private company, and I'm not at liberty to divulge its
identity, but if you want to know who it is e-mail me and I'll whisper
in your ear. I'll call the company StandPat Printing.
Twenty years ago, StandPat faced a crisis, one that had plagued it for
most of the three generations since it had been founded. The commercial
printing business was cutthroat. There were too many players, and now
many new immigrants had come into the country and were using newer,
cheaper technology to provide a product almost as good as StandPat's
for much less. The company had not significantly changed in size or
nature in decades, and they were under enormous pressure to lower
prices again.
The company president decided this was a recipe for running the company
into the ground, and that something drastic needed to be done. He did
an analysis of StandPat's and competitors' offerings that would have
looked something like the Strategy Canvas shown above. Not
surprisingly, he discovered that StandPat's offerings were misaligned
with what the market wanted -- fast and cheap. There were some repeat,
blue-chip customers that demanded quality, customization and reliable,
knowledgeable service, but even they were frequently tempted away by
much lower prices of discounters. Worse, many large organizations were
doing more and more of their work in-house (small printing presses were
a disruptive innovation to established commercial printers), so even
the blue-chip customers were giving StandPat only their most demanding
jobs. And three well-established printers with strategy profiles just
like StandPat's were fighting furiously over this declining volume of
premium work.
The president looked at ways to innovate, and ways to compete more
effectively for the low-end work. He tried to identify customer needs
and wants that weren't on the canvas at all -- a myriad of 'what if'
options were presented to customers, including low-end customers and
non-customers. A number of 'wants' were suggested, but they were far
beyond the technology of the day.
So finally he decided he needed to look for entirely new markets for
the attributes that StandPat offered. He kept bumping up again
affordability and technology issues -- the people who wanted high
quality, convenience, and excellent service could not afford it. There
was only one attribute that StandPat offered that seemed to have a
market that could pay for it -- security. In security printing (the
printing of banknotes, stock and bond certificates, and postage stamps)
there were few competitors and those with the capability to provide it
were demanding and getting top dollar from customers with the
wherewithal to pay it.
 The
profile for this work, for this customer segment, looked more like the
one at right. It was much more closely aligned with the competencies
and strategy of StandPat, and although it would require a major
investment in new equipment and a lot of retraining of staff in
security measures.
The problem was, the few existing security printers already had close
relationships with the potential customers in this business, and their
offerings and strategy were quite similar to those of StandPat. What
would it take to get these customers away from their current suppliers?
For the next few years, it was touch-and-go for StandPat. Business was
slow and difficult to bring in. StandPat focused on convenience,
customization and service reliability, where they had a small
competitive advantage. So they got work close to where their offices
were (and they built some new ones close to where potential customers
were). They did unusual jobs and small-run pilot project printing --
too much set-up time and not enough volume for competitors. And they
jumped through hoops to outservice their competitors. But all that was
not enough. They needed to reinvent themselves further.
It was when they started doing some scratch-and-win prize games for a
gas station chain and a restaurant chain that they realized how they
could really differentiate themselves. Existing security printers
printed what they were told, how they were told. But what lottery
foundations and corporations were looking for was imagination,
innovation. These customers needed exactly what the mints and post
offices and securities dealers needed, but they also needed some
creative spark -- and most of these customers did not have this
creative spark in-house (and when they did have ideas for
scratch-and-win games, the ideas were impractical).
StandPat was helped by the fact that hackers had taken great pleasure
in figuring out how to 'read' what was under the scratch-off coating
without scratching it, using infrared or ultraviolet light or a variety
of other ingenious techniques. There was a media frenzy over some of
these, and several scratch-off lottery ticket and game competitors went
out of business as a result. StandPat had done their homework and their
tickets defied all the hackers' challengers, and they had developed and
patented a whole series of additional security measures as an extra
precaution. Customers were delighted to know their reputation wouldn't
be tarnished by a 'game that could be gamed' and orders flowed in. The
games came in many varieties and changed often, so that many security
printers were unable to adapt fast enough or price new games
competitively. StandPat revamped their security processes so they could
produce a new game with very short turnaround, and they hired a
creative team who knew the intricacies of security printing to design
new types of ticket and game options for the lottery corporations and
corporate marketing groups.
Since then, the company has grown fifty-fold, does business with and in
dozens of countries, and is vendor of choice because of their new and
innovative offerings, their fast turn-around with new concepts, and
their reliability and rock-steady security. So first they innovated
their customers -- who they sold to -- and then they innovated their
products.
StandPat effectively went through the six-step customer-driven innovation methodology I outlined yesterday:
- Research the strategy canvas for your industry;
- Find out from each segment of customers (including low-end
and current non-customers) what they value and what their unmet needs
are;
- Compare the strategy canvasses to the needs of each segment;
- Find the gaps;
- Brainstorm and 'imagineer' how you can effectively, competently and profitably fill them; and
- Experiment, test, qualify and then roll out the qualifying innovation opportunities.
I remain convinced that steps 2 and 5 are the hardest. StandPat
succeeded at them because they were intensely customer-focused but also
imaginative enough to consider completely different customer segments
from those they had traditionally served, and because they had the
innovation skills, agility and courage to create and enter a new market
space consistent with their culture and competencies, and do so in a
systematic and methodical way until they had established themselves as
market leaders. No easy accomplishment.
|
MADE IN CANADA
trust your
instincts 
