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After returning from a recent trip to Tokyo, friends were eager to hear about any culinary adventures I might have had. “Did you eat a lot of sushi?” They wanted to know. “Well, some,” I’d respond, “Mostly from 7-Eleven.”

That response tended to make people pause. The thing is, Japanese convenience stores (“combini”) are pretty fantastic. Although they are recognizably similar to their American counterparts, with snacks, drinks, and toiletries, there is a critical difference in the high-level job-to-be-done that the stores address.

In the United States, convenience stores seem to see themselves as solving a fundamental job-to-be-done like “Provide access to a mini-grocery store when the real grocery store is far away.” Under this rubric, convenience stores offer products like chips, tuna, and milk.

The overarching meta-job of a combini, however, is more like “Make inconvenient tasks more convenient.”  Under this theme, combinis sell delicious and cheap ready-to-go bento meals and mini-meals. They’re also the place to go to pay utility bills, buy concert tickets, or drop off luggage to be taken to the airport.

This strategy has proved extremely successful. 7-Eleven is actually Japan’s No. 1 food retailer and most profitable retailer overall, and the Japanese branch now owns its American parent.

A lesson here is that even companies that appear superficially similar to each other may be aimed at fundamentally different jobs targets, which dictate the strategic choices they make. The “make the inconvenient convenient” job has a lot of headroom to grow; plenty of things in life are inconvenient. This meta-job provides a platform for all manner of profitable offerings that would seem out of place in an American convenience store. 

On the other hand, the American meta-job of providing small grocery stores has pigeonholed the industry in a modern environment where access barriers to larger grocery stores are fairly low. Hopefully, American convenience store retailers can learn the lessons from their Japanese equivalents quickly — I could really go for some yakisoba.

• Retailers Cut Back on Variety, Once the Spice of Marketing by Ilan Brat, Ellen Byron and Ann Zimmerman | WSJ.com

  Will this affect the increased pace of incremental innovation in consumer packaged goods? "In the next year or so, these and a few of the other largest retailers are expected to slice the assortment of products in their stores by at least 15%, industry executives and analysts say. This is a challenge for manufacturers, who have grown accustomed to churning out incremental variations on popular products to maintain shelf space and keep their brands fresh in consumers' minds."

• IBM Aims for a Battery Breakthrough by Steve Hamm | BusinessWeek

  Article points out the GE, among others, is also making a play in batteries. "Industry leaders have called for just this kind of concerted effort amid concern that the U.S. will miss out on one of the most important technology shifts in history—the switch from gasoline to electricity as the primary power source for light vehicles. The worry is that the U.S. will trade its current dependency on the Middle East for oil with a new dependency on Asia for vehicle batteries. 'We lost control of battery technology in the 1970s,' laments Andy Grove, former chairman of chip giant Intel. 'Battery technology will define the future, and if we don't act quickly it will go to China and Japan.' "

• The 99-Cent iPhone App That Kills Print Journalism by Ray Richmond | The Wrap

  I have it. And it's good enough that it's hard to imagine how a publication could sell online access if it was also available via this iPhone app. Media disruption continues.

• MediaBugs Rethinks Corrections by Taking a Page from Programmers by Zachary M. Seward | Nieman Journalism Lab

  In a move borrowed from open source programming, startup MediaBugs purports to offer an improved, centralized method for media corrections. "Improved" partly because many media sites have no well-defined path for users to point out corrections, nor prominent place to publish corrections for readers to see.

There are very few things I rave about. But there is one thing on that very short list that I considered worthy of a take-you-by-the-shoulders-and-stare-you-dead-in-the-eye rave: Daily Candy.

For the uninitiated, Daily Candy is a daily email customized to the city in which you live (12 cities so far) that uses wonderfully witty and snarky prose to give you the latest info on fashion, beauty, food, entertainment, and culture.   Their recommendations are so unique that pretty much anything I own that elicits compliments was discovered through Daily Candy.

This is why I was both interested and surprised this week when Daily Candy and Target announced a partnership in which Target would advertise in Daily Candy’s emails and Daily Candy editors would provide content for a new section on Target.com that highlights up-and-coming designers. As I read the WSJ.com article I had 3 nearly immediate reactions:

1. I didn’t know Daily Candy was owned by Comcast.
2. This is GREAT! I love Target and if Daily Candy will help me find the coolest stuff there that’s even better!
3. Wait a minute, are Daily Candy emails going to start “recommending” Target products? I don’t want that. Anyone can buy Target stuff.

Once I recovered from my retail roller-coaster, I was struck by the fact that the combination of two things I truly enjoy (Target and Daily Candy) could combine to become LESS than the sum of their parts. Both satisfy my jobs-to-be-done better than alternatives — Target because it provides access to interesting products and very cool design at a low cost and Daily Candy because it helps me find unique statement pieces well worth their premium. But the partnership between the two increases the attractiveness of one (Target) while compromising the attractiveness of the other (Daily Candy).

As a business person, I completely understand the business rationale that drove the partnership — Daily Candy gets guaranteed ad revenue from Target and Target attracts more visitors increasing the ad rates they can command. But as a raving fan of Daily Candy, I feel like their pursuit of new revenue streams may compromise their ability to satisfy my important jobs around unbiased recommendations for unique products.

This tension highlights two principles we often stress with our clients — focus on your consumers and build a solution that satisfies their important jobs better than existing solutions then build a business model that supports the solution.   Making choices that change the solution or the business model in a way that compromises your ability to satisfy your consumers’ important jobs (in a real or perceived way) creates space for competition.

Daily Candy continues to have a relatively unique approach and style that keeps it on my list of raves. But I’ve stopped physically accosting people and proclaiming its virtues. And, depending on whether the partnership impacts its current solution, the once-inconceivable may become possible — relegating the daily email to the Spam box.

Any time a barrier prevents consumers from satisfying an important job, the market is ripe for disruption. Consider the significant barriers keeping physicians from adopting electronic medical record (EMR) systems, or expanding on those systems they do have. In a study published in the New England Journal of Medicine, 88 percent of physicians without electronic medical record (EMR) systems and 80 percent of physicians who already have EMR systems cite “cost of capital” as a barrier to adoption or expansion.

Who can blame them? Widely published estimates cite the costs of electronic medical record (EMR) systems as ranging from $15,000 - $50,000. However, this does not take into account the costs of hardware, implementation, training, and ongoing support, which can easily take the full costs of an EMR system to $250,000 - $300,000 for the first year.

So who will enable the disruption for which this market is ripe? Enter WalMart. Long known as a purveyor of cheap toothpaste, toilet paper, and televisions, WalMart announced this week that it has partnered with Dell and EClinicalWorks to offer physicians a package of hardware, software, installation, maintenance, and training for the everyday low price of $25,000 for the first physician and $10,000 for each additional physician in the first year.  While WalMart’s announcement is significant (especially to incumbents in the healthcare IT space), it is also significant, and important, to note that they are entering healthcare IT in a classically disruptive manner: 

1. Understand the important and unsatisfied jobs of key stakeholders: Physicians today are not just caregivers, they are businesspeople forced to deal with the bureaucracy of managed care and the headaches of managing an office. Any solution that enables them to spend more time with clients and less time on paperwork without a significant impact on the bottom line will be quickly embraced.
2. Create an innovative business model: With its understanding of physicians’ important and unsatisfied jobs, it was likely easy for WalMart to create a solution with an appealing value proposition. However, they likely realized that additional resources would be needed (or at least helpful) to execute the strategy. Enter Dell and EClinicalWorks. Each brings its unique experience and reputation to the solution creating something greater than the sum of its parts: 
   • WalMart claims that its role is one of an integrator. While this is true, largely because of their purchasing scale, it does offer three other key resources: widely recognized expertise in logistics and coordination, an existing physician customer base of approximately 200,000 physicians, and an existing distribution network through its 600 Sam’s Club stores. 
   • Dell supplies the hardware – either a desktop or tablet PC – and the installation services. While WalMart could likely have partnered with another hardware vendor, Dell’s experience in supply chain management and reputation for good customer service likely gave it an edge over cheaper but less well-known hardware companies.
   • EClinicalWorks supplies the Internet-based electronic medical record and practice management software, training, and maintenance. Already used by 25,000 physicians, EClinicalWork brings credibility in the healthcare IT space.
3. Use an emergent strategy: This is neither the beginning nor likely the end of WalMart’s foray into healthcare. In 2007, it partnered with the University of Arkansas and Blue Cross Blue Shield to conduct research on how to improve healthcare IT in the US.  In February 2008, it opened co-branded clinics with a common EMR platform operated by EClinicalWorks (surprised? You shouldn’t be), and in September it promised to provide all employees with access to electronic health records. It’s reasonable to assume that each of these activities were small steps to resolve assumptions related to IF and HOW WalMart should enter the EMR space. 

Supported by the Obama administration’s $19 billion investment in healthcare IT via the Recovery Act, WalMart’s foray into EMR is likely to be yet another successful step in its journey into the healthcare space. In the short term, WalMart is likely to benefit from sales of the system and the ability to influence patients and physicians to fill their prescriptions at WalMart’s pharmacies or to buy medical supplies and durable medical equipment at Sam’s Club. In the long term, its savvy use of the principles of disruptive innovation positions it well to successfully disrupt incumbents.

In the January 14 issue of Strategy & Innovation, we offer up our annual Year in Preview story (free reg. reqd.) by Scott D. Anthony. This year we've added a new feature to this feature — we asked Innosight partners to write short industry specific predictions of the industries in which they have expertise.

Some overall themes:

• The darkening economic climate is good news for innovation — after all, abundance is at the root of many corporate struggles with innovation.
• It has never been easier to develop and scale an idea. Innovators can draw on high-quality, low-cost tools to develop, test, and begin to commercialize ideas without tens of millions of dollars of investment.
• Innovation has never been more important. Success in what we are calling the Great Disruption requires mastering perpetual transformation.
• Companies that are partially disrupted (such as print media) and those that are innovation novices will have a tougher go of it, as the current economic climate isn't favorable for their challenges.
• On-the-brink disruptive attackers and companies that have progressed in their efforts to make innovation systematic will be more likely to find their efforts paying off.
• Companies that demonstrate an ability to love the low end will find that strategy effective if they are able to master business model innovation and gain a deep understanding of how the low-end consumer measures value and develop unique offerings tailored to key value drivers.

Those industries for which uncertainty in the markets and uncertainty regarding potential governmental policy and regulations changes will struggle this year until the economy settles down and the policies of the new U.S. presidential administration begin to take shape. Finance and healthcare are two such industries.

Here are some of our partners' industry-specific predictions:

• Media: A strong likelihood of continued bankruptcies among media companies.
• Defense: A push toward decentralization and away from aircraft- and ship-specific platforms.
• Manufacturing: A shift toward innovation and away from strict reliance upon Six Sigma and cost-cutting.
• Automotive: No automakers will fold, but we will see consolidation of vehicle models in the saturated marketplace as a better linkage develops between customer requirements and available models.
• Retail: Growth among retailers targeting the low-end as well as those that can add high-level services that high-end consumers will pay for.
• Consumer products: CPG companies that do well will be those that strive to push the boundaries of their innovations, looking beyond just new products to new categories, new business models, and new channels.
• Finance: Reduced scope and size among financial global financial services firms, and an opportunity for low-cost tools and data providers.
• Healthcare: Widespread implementation of Electronic Medical Records, as proposed in the forthcoming economic stimulus package, could radically shift the balance of power between physicians, healthcare provider organizations, and insurers. 

On Tuesday Starbucks launched a nationwide promotion to boost its business during slow afternoons. The company is offering $2 Grande-sized cold beverages after 2 pm to people who bought something in the morning.

There are three things about this innovative approach that we like:

• It's creative and focuses on a non-consuming occasion: Starbucks is focusing on a non-consuming time of the day. The Job of "provide me with an afternoon treat and break from work" competes with snacks in the office, a walk outside, or a call to a friend on your cell phone, not just the Dunkin' Donuts next door
• It's relatively low-risk and easy to implement: Having people bring a receipt back in the afternoon for a discounted beverage is a less risky strategy then putting lots of money into new product development and equipment (which Starbucks did with their breakfast sandwiches and special ovens). The marketing costs are insignificant because they are focused on existing customers who walk through the door; this is less costly than attracting brand new customers through expensive television and radio advertisements
• It started with a small experiment: This particular promotion started on a small scale in three cities (Seattle, Miami, and Chicago) before going national

While we overall like the approach, we hope that Starbucks explicitly laid out the assumptions underpinning the success of this promotion and is keeping track of them, namely: 

• Customers will change their behavior and come back to a Starbucks the very same day for a cold (probably more calorie-laden) beverage
• Customers remember to use coupons and like to use coupons; there is no stigma associated with bringing back your receipt as a coupon at Starbucks
• Baristas will consistently tell people about the offer (this just reminds me of the “save 10 percent on your purchase credit card offers,” which I decline before the salesperson can even finish their sentence)
• The offer will create positive (not negative) buzz for Starbucks
• The promotion will grow the volume of business in both the morning and the afternoon, and neither group will be turned off by the long lines

The most important assumption in the list above is that neither the morning or afternoon group of customers is turned off by the long lines. Starbucks was not built as a volume business. How does a business built on “the Italian coffee house experience” manage the transition to meeting growth through volume? Could this be the start of a conscious shift in the Starbucks strategy from providing high-priced treats in a delightful experience to a lower-priced, higher volume business? What do you think? We’ll be looking to see how this pans out.

There’s little doubt that today’s economic environment is tough for just about every company. Hardly a day goes by without news of layoffs, plant closings, or even companies shutting down.

One of the latest companies to file for Chapter 11 bankruptcy protection is Steve & Barry’s, a retailer whose low prices had driven substantial growth over recent years.

The company’s leaders pinned the blame squarely on the economy. “The generally poor environment for apparel retailers has reduced funding to our suppliers, landlords, and to our company,” said founders and co-Chief Executives Steve Shore and Barry Prevor. “It has become increasingly difficult for us to continue operating normally under these circumstances.”

Did the current economic climate hurt the company? Of course. Is it the reason the company needed to seek bankruptcy protection? In my opinion, no. The company’s struggles indicate a failure to develop a fundamentally solid economic model.

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

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.

The market reacted with surprise today when it emerged that Blockbuster has offered about $1 billion to purchase electronics retailer Circuit City. The potential deal threatens to distract both companies from the unenviable task of wrestling with disruptive forces affecting their respective core business models. Over the past few years, online video rental pioneer Netflix has used its no-late-fees model to pummel Blockbuster. After dragging its heels for a few years, Blockbuster started fighting back in 2004. It now has a reasonable share of the online market but has never figured out how to be as profitable as Netflix. And Netflix is moving on to the next act -- developing a strategy to win in the video on demand market. Circuit City has had to contend with Best Buy, whose larger stores and lower prices have allowed it to dominate the electronics retailing market. Circuit City is also trying to play catch up in the emerging market for services to small businesses and individual consumers, where its Firedog service trails Best Buy's Geek Squad service. Behind Blockbuster's bid is a bold plan to expand its retail footprint and transition its business from video retailing to become in the words of CEO James Keyes a "one-stop shop with solutions for the consumers". Keyes said the combined entity could model itself after Apple's popular stores. Consumers could rent videos from Circuit City locations, or buy hardware from Blockbuster locations. Combining Blockbuster and Circuit City seems like a pretty bad idea to me (Circuit City doesn't seem to be convinced either -- the company is refusing to give Blockbuster access to its books).... Read the rest at Innovation Insights

Leading the headlines on the affordable Medicare debate, Wal-Mart has been speeding up its roll-out of $4 generic drugs disrupting pharmacies across the country. Consumers whose prescriptions are on the list of 331 drugs are now eligible to buy them for less than the cost of a Medicare co-pay at the worlds largest retailer (Target has also pledged to match Wal-Marts every move).

Historically, Wal-Mart has built its business by disrupting its industry leaving mom and pop retailers in its wake as it introduces low prices to communities across America. This recent price-cut not only benefits non-insured Americans, ever desperate to keep their rising medical costs low, but also insurers who have to shoulder less of their subscribers prescription drug costs. This low-end disruption is built on Wal-Marts strong suit: its ability to lower prices and make more products available to Americans who would otherwise be unable to afford them.Critics argue Wal-Marts recent $4 generic drug plan is nothing more than a superb high-level marketing blitz with no substance; they highlight that the promotion applies to older generics that amount to only 10% of a traditional pharmacys generic inventory.

Meanwhile, CVS and Walgreens, the nations largest pharmacy chains, are built on the premise that consumers want friendly local pharmacists in convenient locations. Over 90% of their pharmacy revenue is from insured patients and they choose not to compete withthe low cash prices offered by warehouse stores and large retailers such as Wal-Mart and Target.

CVS recently has made moves to sustain its core business by purchasing Caremark, a leading Pharmacy Benefits Manager (PBM), and developing ProCare, a specialty pharmacy for patients with difficult-to-treat conditions. With Caremark, CVS will now promote its convenience stores to insured consumers over Caremarks mail-order. Its specialty pharmacy, ProCare, with over forty locations nationwide, caters to Americans whose needs are underserved by the traditional pharmacy. These patients seek hard-to-find expensive drugs and over-the-counter supplements as well as specialized education for very serious medical conditions.

While Wal-Mart is serving nonconsumers by publicly forging a low-price path, CVS is moving to sustain its core business by developing convenient and specialized offerings to meet the underserved needs of the insured. Both firms may prove to be successful as there likely exists both a sizeable market of uninsured consumers who can not afford generic drugs and a group of underserved insured patients who need advanced care and improved convenience from their pharmacy.

Making business headlines today was the announcement that Paul Charron, a 17-year veteran of the $5B fashion apparel and accessories company Liz Claiborne will retire as CEO. Intrigued by the fashion world thanks to Project Runway and reading this recent news made me realize what a fascinating company Liz Claiborne is. It was the first company founded by a woman to be listed on the Fortune 500. The company has more than 40 brands in its portfolio (including hip fashion brands like Juicy Couture and Lucky Brand) that are available at over 30,000 points of sale worldwide. Lastly, Liz Claiborne is an innovative company that started as a low-end disruptor to established women fashion brands.

Liz Claiborne was founded by a group of designers who identified an important unmet Job to be done in the marketplace - helping women conveniently find fashionable ensemble driven clothes that are appropriate for wearing to work. Fashion brands such as Calvin Klein and Bill Blass were getting this Job done but their ensembles were too expensive for the average working woman. Recognizing the importance of keeping the clothes affordable, Claiborne established a low-cost model in the 1980s (at this time they challenged norms in the fashion industry by testing the concept of manufacturing overseas in Asia). They also recognized the importance making the shopping experience of the working woman more convenient and simpler. They were faced with a major stumbling block addressing this challenge. At this time department stores were classified according to items; pants in one department, skirts in another and blouses in yet another. This made it challenging for women to put together a decent outfit, forcing them to move around from one section of the store to another. Furthermore, the buyers at the department stores were not equipped to make purchases from one manufacturer across product lines. Liz Claiborne worked together with retailers to test a model wherein a section of the store was dedicated to a type of occasion (e.g., sportswear, suits that work, etc.). This model laid down the foundation for the brand and lifestyle "store-within-a-store" concept that is very popular today.

Over the last decade, Liz Claiborne has also had success riding out the waves of disruption in retailing. If you are interested in learning more about these patterns of retailing throughout history from specialty stores, to department stores, to category stores, catalogs and now the Internet, we recommend the HBR article Patterns of Disruption in Retailing authored by Clayton Christensen and Richard S. Tedlow.