INNOBLOG

A brewing discussion about Starbucks’ new coffee flavor highlights a challenge facing innovation-seeking incumbents: Which customers should we listen to?

As part of a broader effort to reinvigorate the company, Starbucks recently rolled out a mild-tasting coffee called “Pike Place Roast.” It has quietly moved away from offering bolder-tasting coffees, such as its Sumatra brand, particularly in the afternoon.

Starbucks brought Pike Place Roast to market in response to complaints from Consumer Reports and others that its coffee tasted bitter or burnt. A small group commercialized the brew in six months—an astonishingly short period of time in the food industry.

While Consumer Reports and the mass-market has cheered, a vocal group of core Starbucks loyalists panned the coffee—one reviewer on a Starbucks Web site designed to solicit customer feedback called it a “fundamental, grievous error”—as watered-down and away from what makes Starbucks distinct.

Incumbents seeking to create new growth often face a version of this dilemma. Should we listen to our best, most loyal customers, or should we turn our ears towards customers we’re not serving well, or even to customers we are not serving at all?

Read the rest on Scott's Harvard Business blog, Innovation Insights.

Believe it or not, gardening is the number one outdoor activity, ahead of both walking and golf. There are several barriers locking the average consumer out of gardening as a hobby – it is time consuming and can be overwhelming for the newcomer who doesn’t know an annual from a perennial. So how did an activity with so many potential barriers to consumption become so popular?

A primary driver of the increase of the popularity of gardening is the advent of innovative packaging and products that break down these "barriers to consumption" by making it simpler and more fun to spend time in the yard. Scott’s MiracleGrow Liquafeed is a great example of such a product; it is a hose-and-bottle system that automatically combines water and plant food (see picture).It is not a better version of plant food, but it is a packaging innovation. It makes it simple and idiot-proof for the novice gardener to easily feed and water their outdoor plants. My bet is this product is mainly enjoyed by people who previously wouldn’t use fertilizers or even spend much time doing yard work. This is described nicely in this quote from Scott’s Miracle-Grow's CEO, Jim Hagedorn: "Our biggest competitor is people's time. We have to make it easy and fun for people to work in the garden."

A little bit of research turned up what I had suspected to be true. Liquafeed was the most successful new product launch in the history of Scott’s. It increased sales in the fertilizer category by 11 percent. First-year sales were $50 million, making it the most successful new product launch for the company ever (while projected sales were $20 million). The key to the innovation is the packaging, which was developed in partnership with Calmar, a MeadWestvaco company.

The key thing to remember here is that innovation requires looking beyond improving a product along the traditional dimensions of performance (in the case of plant food these might be things like increase in chlorophyll production or improved heat and cold tolerance) and using other innovation levers to break down the barriers locking out potential consumers from using your product!

 

Lillian Zhao

When I first was told that Mocospace was getting VC backing in early 2007, I skeptically thought: “Who’s going to use another social networking site?!”

Eighteen months later Mocospace has grown to become the leading mobile social networking site in North America. With more than one billion mobile page views per month, it’s holding its own against incumbents like Facebook (which has more than 300,000 mobile page views per month).How did Mocospace become so popular?

What I didn’t realize when I first heard about Mocospace was that it has a powerful, disruptive business model that has successfully targeted a new distribution channel (the mobile phone) and a new customer base (non-consumers of existing social networking sites). This disruptive business model has propelled it to a leadership position in mobile social networking.

New Channel

Mocospace was one of the first to create a social networking site specifically designed the mobile phone. There is a subtle though distinct difference in how people use social networks on the PC vs. the mobile phone that stems from the basic differences between the PC and the mobile phone –- the PC is a static, multi-function device, whereas the mobile phone is an always-on, always-connected, communication device.

Mocospace realized this early on, and optimized its features for the jobs-to-be-done of a mobile phone user: instant communication, quick entertainment, killing time, and staying socially connected. Mocospace offers every type of communication (chat, IM, mail, messaging, micro-blogging and even voice-messaging) in one place. Other entertainment options include games, rating other people’s photos, watching videos, contributing to forums (my personal favorite are the ‘yo mama jokes’ in the jokes forum). Mocospace’s “friend finder” application also serves members’ job-to-be-done of meeting new friends and staying connected with existing friends.

Mocospace’s strategy is different from the incumbents, Facebook and MySpace, which emphasize content rich user pages and graphic-intensive applications –- all awesome features that work great on a PC’s screen, but are too cumbersome to navigate on the phone. As such, they’ve naturally chosen to use the mobile to extend a subset of their online features. However, MySpace’s initial strategy was to charge users an annual monthly subscription, shared with the carriers, to use their mobile site. That strategy was not overly successful and has now been de-emphasized.

In contrast, Mocospace’s site is extremely mobile-phone user-friendly, as all functions have been optimized for the small screen and numeric keypad input. For example, it leverages icon-based navigation and limits the amount of words and excess visual distractions per page. The results are clean, easy-to-navigate pages.

Meeting the needs of nonconsumers

Mocospace’s functionality serves the jobs-to-be-done of a previously untapped market: nonconsumers of existing social networking sites designed to be accessed on the PC. A large portion of the US population doesn’t have constant, private access to a PC with a broadband connection, for a variety of reasons that could include on-the-go lifestyles, economic limitations, and/or remote locations. However, most of these users have a mobile phone. Some use unlimited data plans from carriers like Leap Wireless and MetroPCS, in lieu of a PC. This eclectic group of urban youth and mobile workers were the early adopters of Mocospace. They didn’t have PC access 24/7; but they had mobile access 24/7.

While Mocospace has clearly done extremely well to date as a mobile social networking site, I still wonder if it can sustain its leadership position. Despite impressive monthly growth, will it be able to continuously grow its user base to solidify its dominance in the mobile social networking sector? Or will incumbents Facebook and MySpace, or even a new start-up, take the mobile lead away from Mocospace? If so, how will Mocospace’s strategy’s change?

Time will tell. And, I am scheduling an interview with the founders of Mocospace soon, and I'll be sure to ask about these issues.

Watch for the “Voices of Disruption” interview with Mocospace co-founder, Justin Siegel, in the July/August edition of Strategy & Innovation. 

As summer approaches, soon you will no longer have to venture off to the ice cream store for a treat. Taunton, MA-based MooBella offers a vending machine that creates a fresh scoop of ice cream for under $3 in under one minute.  Moo-bella is essentially “competing against non-consumption” as they expand the opportunities for consumers to enjoy fresh ice cream, and enable restaurateurs and cafeteria operators to expand their sales with a new offering without sacrificing the floor space or labor that is traditionally needed.

As MooBella has delayed its roll-out, I suspect the company is struggling with its launch plans for this new product. We would urge them to initially launch an offering that is “good-enough” by focusing their launch on bringing a tasty offering with limited flavor selection to market in a controlled environment. Their current plan to launch within existing food-service locations fits such a strategy; the operators can perform minor maintenance and collect payments while providing MooBella with feedback on how to adjust their future vending machines and product offerings. Armed with the knowledge from these market tests, MooBella can then look to improve its product on other dimensions by launching new flavors or developing a truly self-service machine that requires no maintenance and can accept payments.

There's also an important lesson here for traditional ice-cream retailers who may not initially view MooBella as a competitor. To find new opportunities for market growth, you need to continually go beyond new product introductions and look at the circumstances in which consumers can consume your product. While ice cream shops offer a unique family experience, MooBella can become a more potent disruptive force by partnering with restaurateurs and foodservice operators to offer different experiences in various circumstances.

In May, Nintendo will seek to expand its successful strategy of expanding the video game market by launching the U.S. version of “Wii Fit.” All signs suggest that Nintendo’s strategy of “competing against nonconsumption” will continue to thrive.

Nintendo’s strategy has long been one of our favorites. While Microsoft (who makes the Xbox 360) and Sony (who makes the Playstation 3) are locked in an arm’s race to provide cutting-edge game play to demanding customers, Nintendo is trying to reach new customers.

Arguably Nintendo’s first breakthrough success with this market expansion strategy was “Brain Age.” The handheld game targeted Baby Boomers who wanted an easy way to combat the effects of aging on their mental acuity—hardly the typical gamer market!

In 2006 Nintendo launched the Wii. The console’s innovative, intuitive controller makes video game playing so simple that my two-year old son can play the baseball game (admittedly not particular well).

Nintendo’s strategy is not accidental. CEO Satoru Iwata said “Some people put their money on the screen, but we decided to spend ours on the gaming experience. It’s an investment … not simply to improve the market—but to disrupt it.” 

We call this sort of strategy “competing against nonconsumption” …

Read the rest at Scott's Harvard Management blog, Innovation Insights

In her previous post, my colleague Kathleen considered the implications of disruptive innovation as it applies to the business of charity. In making her point, she mentioned CK Pralahad's 2004 book, The Fortune at the Bottom of the Pyramid, and one of the success stories cited within, that of the Hindustan Lever Limited (HLL).

HLL's success is a great story of a company creating a business model customized to the local market; it is also a great story of an incumbent reacting to a disruptive startup. However, HLL almost failed to spot the disruption until it was too late, and the story of their success partially obscures the achievements by the true innovator -- a company called Nirma.

Nirma was founded in 1969 by Dr. Karsanbhai Patel, a science graduate and government chemist. Patel had been experimenting with ingredients in his back yard to make a detergent. After discovering a simple recipe, he founded Nirma to sell his product door-to-door in the neighborhood. In interviews, Patel has discussed the company's origins saying, "It all started to earn a side income, and at that stage, I had never imagined this kind of success."

Nirma retailed at only a fraction of the price of competing products, costing only Rs.3 per kg instead of Rs.13 per kg charged by the competing brands. The product was a great success not only because of its low cost and high quality, but also due to the unique door-to-door distribution model pursued by Patel.

Initially, Patel had a great deal of difficulty in persuading the local shop owners to stock his product. It was only when he recruited local housewives to help sell and create demand for the Nirma product that he stumbled upon a compelling and scalable business model.

By the early 1970's Nirma had appeared on the radar screen of executives at Hindustan Lever Limited. HHL was the manufacturer of Surf, one of the best-selling detergents in the country. However, their reaction was dismissive, saying, "That is not our market”,and “We need not be concerned."

Their perspective was that Nirma was an inferior quality product being sold to people who weren't currently purchasing Surf, and that their sales would be unaffected by any growth in Nirma's popularity.

Luckily for HHL, they soon recognized the disruptive threat posed by Nirma, and were able to adapt their own strategy to compete, launching Wheel detergent to try and stem the (ahem...) tide of Nirma into the low end of the market.

In developing their strategy to fend off Nirma, HHL’s wheel product was created specifically for low-end consumers. HHL noted that the primary source of water for washing was river water, and so created Wheel with a high percentage of oil relative to water. HHL also created entirely new production, distribution and marketing capabilities in order to deliver and sell Wheel, investing heavily in creating entrepreneurial door-to-door programs aimed at driving sales at the village level by tapping into the networks of local rural women, just as Nirma had done.

So, what lessons can we draw from this case?

1. Target disruptive products at non-consumers: By targeting non-consumers of existing laundry detergents, Nirma was able to stay 'below the radar' of Hindustan Lever, giving them time to experiment with their sales strategy, refine their business model and then grow rapidly - all while avoiding competition.
    
2. Create a compelling solution by considering Gives and Gets relative to existing solutions: Nirma offered a compelling solution allowing consumers to make a simple trade-off relative to existing products. Get a far cheaper alternative to Surf, but Give up a fraction of the cleaning power, which was already more than sufficient for most laundry occasions.
    
3. Think expansively about how you define your market. Rather than categorizing it along traditional dimensions, consider definitions using a jobs-based segmentation. Had HHL thought of their market in this way, it would have been far clearer that Nirma was a disruptive threat at an earlier point in time.

Alasdair Trotter is a venture leader at Innosight Ventures.

One of the most interesting and occasionally amusing aspects of the good-enough theory is what is does to product reviewers. The good-enough theory is, of course, the theory that disruptive new products succeed because they are only good enough to get the job done that the customer is trying to do -- not too feature-laden, complex, and/or too expensive. Good-enough products inspire the non-consumers to come off the sidelines and into the game, and that's often where such products' explosive success begins.

Understanding what's good enough requires a deep insight into the minds of consumers. It is a level of insight that frankly is often beyond those who make their living reviewing products, as well as those who review movies, books, and music (speaking here as someone who has worked as such a critic). The very act of becoming an expert almost guarantees the development of a certain out-of-touch-ness with the "normal" consumer, not to mention the non-consumers.

For example, the job a consumer would like a movie to do is often simply "entertain me," while the job the critic wishes to do is more like "see a movie that offers me something I haven't seen 25 times before." It's no wonder that people who regularly read movie critics learn to align their taste with the critic's taste, so that by reading between the lines they can understand if a movie is one they would actually like to see.

Reviewers of products, particularly technology products, also have great difficulty putting themselves in the shoes of the non- to low-consuming public. So it was with great amusement that I read in yesterday's column by New York Times technology columnist David Pogue, "Well, this is a little embarrassing. One of the most significant electronics products of the year slipped into the market, became a mega-hit, changed its industry -- and I haven't reviewed it yet."

"It" is the Flip, a small, stripped-down recorder that was released last year and now has captured 13 percent of the camcorder market, according to its maker, Pure Digital. "Stripped-down" apparently does not accurately cover the Flip's good-enough-ness -- in Pogue's words, "understanding the appeal of this machine will require you not just to open your mind, but to practically empty it. Because on paper, the Flip looks like a cheesy toy that no self-respecting geek would fool with, let alone a technology columnist."

The review makes clear, though, that the Flip has managed to hit the sweet spot where it offers better quality and more ease-of-use than cell-phone video cameras yet hasn't compromised ease-of-use with too many features. Users can film video and either watch it on TV or download it to a computer via a built-in USB jack. The Flip even has basic editing software that pops up for use each time you download video to the computer. Says Pogue, "it's the video equivalent of a Kodak point-and-shoot camera....the size, shape, ruggedness, low price and one-button simplicity take it places where no real camcorder would go. Purses, coat pockets, beach bags. Skiing, playgrounds, house walk-throughs, museums, casual interviews, YouTube stunts, classrooms, airplanes -- and, with the $50 acrylic sealed case, even underwater."

Pogue surmises that one of the reasons for the Flip's success is that if people are successful with a technology product immediately, they'll fall in love with it. Which is another way to say, this product is simple enough, cheap enough, and compelling enough, to make non-consumers into consumers.

"Somebody at Pure Digital must have sat through countless meetings, steadfastly refusing to cede any ground to the forces of feature creep," writes Pogue. Whoever that person is, they get the Good-Enough Award.

The annual family newsletter has been typed. The photos of your kids making snowmen are just too cute. Youre about to hit the "send button to get the e-mail to your whole family, when you remember that Grandpa doesnt own a computer. You could print everything and send it to him via snail-mail, but youve waited until the last minute and know he wont get it until after the holidays. What do you do?

If you or someone else has set Grandpa up with Presto, the answer is easy; you e-mail it to him. Presto couples an HP Printing Mailbox with Presto Service, a low cost, flat-rate monthly service to automatically print hard-copies of e-mails and photos sent by authorized users. Presto allows people to conveniently send messages and images, while simultaneously reducing the hardware and skill needed by the recipient.

Prestos offering is innovative. It overcomes barriers by offering a simple, at-home solution for the less tech-savvy. You can handle all the account details remotely, even monitoring ink levels. Grandpa just needs to plug the Printing Mailbox into a power outlet and phone jack, and add the included paper and ink cartridge. Then he can instantly receive hard-copy e-mails and photos. Grandpa doesnt need to own a computer or know how to use the internet to get that newsletter right away, and he doesnt need to go to the local pharmacy to pick up the photos that you would have needed to order.

Surprisingly, this offering has been around for a year. The concept is innovative and the reviews on Amazon.com are great, but if not for a commercial on television recently, I probably wouldnt have known it exists. Why hasnt there been wider adoption? Possible reasons include that in an effort to simplify the experience for the end-user, there is reduced functionality and the involvement of another party is also needed. This product offering relies on someone purchasing the Printing Mailbox and setting up the Presto Service account for another. HP has rendered the Printing Mailbox useless for purposes other than use with the Presto Service; it cannot be connected to a computer. Additionally, someone with a computer and access to the internet must be the account administrator; they are responsible for adding authorized users.

Despite these drawbacks, Presto has potential. Presto targets end-users who are traditionally non-consumers of computers and printers, offering a simpler product to help them join the age of instant electronic communication. The product offering also expands the HP brand to individuals who would typically not use its products. Simplifying technology to draw in non-consumers is something weve seen successfully implemented before, and perhaps with Presto, we will see it again. After all, now Grandpa can get e-mail without a computer.

Congratulations to WebEx and its shareholders Cisco announced yesterday that it is buying the company, the leading online meeting service provider, for $3.2 billion. This is yet another indication of the value inherent in disruptive innovation. WebEx is in many ways a classic new market disruptor. It democratized and decentralized a critical function remote business communication and in so doing enabled loads of new consumption. WebEx's online applications empower nonconsumers, enabling small and medium-sized businesses that could not otherwise afford remote collaboration systems to hold meetings on the web, and also make online collaboration so simple that they unlock nonconsuming occasions as well. Instead of having to decide whether or not to fly people in for meetings from disparate locations, companies can now simply rely on WebEx. Meanwhile, WebEx marched to market dominance (it controls some 64% of the space, serving 2.2 million customers at 28,000 companies in 85 countries worldwide) via a disruptive path. Its core technology is less sophisticated and in many ways less good than competing products like video conferencing. But WebEx simplified complex operations it was the first to make it easy to display files across formats, for example and therefore became the application of choice. Meanwhile, kudos to Cisco, which has an impressive track record of buying and developing disruptive businesses. It seems to have a rare talent for knowing when to integrate acquisitions and when to keep them separate and relatively autonomous (Ciscos acquisition of wireless home networking pioneer Linksys, for example, is a textbook example of an incumbent mitigating a disruptive threat while tapping into new growth by buying and leaving separate the would-be-disruptor). It will be interesting to see how closely Cisco integrates WebEx with its high-end online collaboration offering, TelePresence. Given Ciscos track record, Microsoft (LiveMeeting) and Citrix (GoToMeeting) had better watch out

Recognizing that their traditional high-end interior design services were overshooting the vast majority of the market, both in price and level of service, Burnham Design created a low-end service offering called "Instant Space."

With some digital photos, some basic measurements, and a set of magazine clippings to determine taste and color preferences, Burnham goes to work, delivering a design-in-a-box, complete with swatches, paint chips, furniture plan and a professional-looking concept board in 4-6 weeks.

It's fascinating that this classic disruptive strategy emerged from a high-end player in a highly disaggregated market. What's next? Decorating Garanimals from IKEA?