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With the launch of its banking-by-shoebox service, Amsterdam-based bank Insinger de Beaufort created an elegantly simple offering that overcomes the barriers of time and skill that limit consumption of financial services.  While Insinger’s shoebox service targets high-end consumers, could the model be altered to create a low-end disruption?

Here’s how the service works: After meeting with a private banker to discuss financial planning goals, Insinger’s customers receive a shoebox by mail into which they can drop everything from tax return forms, speeding tickets, insurance-related forms, bills to be paid, investment statements, and bank statements.

On a monthly basis, Insinger collects the box via courier service, processes all the paperwork inside, and sends the clients a notice of the resulting transactions within three business days.  Once every quarter, clients receive a full report outlining the status of their transactions, accounts, spending patterns, and overall financial position. This information serves as fodder for annual discussions between the client and his/her banker to assess changes in financial position and planning.

The shoebox service addresses functional jobs, such as “Pay my bills on time,” “Ensure I don’t miss any payments,” “Remove the hassle of handling my finances,” and “Have more time to do what I enjoy.” Just as critical are the emotional jobs addressed by the service, such as “Reassure me that my financial affairs are taken care of and nothing has slipped between the cracks,” and “Know that someone is keeping track of my spending and investments to help me make good financial decisions.”

In its current form, the shoebox service is a sustaining offering, given that it targets the most profitable, demanding banking customers with a high-cost service (rumored to run €415 to €850 per month, depending on service level).

However, many of the jobs and barriers addressed by the service are ones also found amongst low-end non-consumers of financial services.  While the low end of the market may not have as many jobs related to investment management, these potential customers are also constrained by time and skill when trying to satisfy jobs related to bill payment and financial management.

Could a similar service have disruptive potential at the low end of the market by using a different business model? At Innosight, we would ask the following types of questions to assess the feasibility of such a model:

• Which components of the service are critical for meeting the jobs most important to low-end customers and, therefore, need to be retained? Which components can be cut without diminishing the value to low-end customers? For example, could the personalized financial planning service be stripped out and replaced with templated trend reports of a customer’s spending and investments, along with automated recommendations based on those trends?
• Could the service be offered through a low-cost business model relative to Insinger’s labor-intensive, personalized approach? For example, could the transfer of documents, bill payment, or trend analysis be automated to avoid the costs of couriers and manual processing?
• Are there distinct jobs and barriers for low-end consumers that should be considered in designing the product? For example, is there an additional job of, “Make sure I don’t overdraft on my bank account” that is related to the cash-flow challenge faced by many low-end consumers and is important/unsatisfied for this market? Could this job drive development of a new feature to provide a credit cushion to customers or otherwise prevent overdrawing on accounts, or is the cash-flow challenge a big enough barrier to prevent such a service from taking hold with the masses?
• Are there potential partners with capabilities that could minimize the investment required for an initial service offering and that would be motivated to support the model? For example, would Intuit (maker of TurboTax) be interested and able to provide automated report generation capabilities or input on selling the service as a subscription or as a software product?

If the questions above can be answered favorably, a viable opportunity may well exist for a disruptive product that could enter the low-end market and eventually develop into a good-enough alternative to more traditional, expensive financial services.

By Rebecca Waber

Recently, I took a vacation to Europe with my little brother, a trip I was determined to keep inexpensive despite the weak dollar. This goal turned out to be particularly difficult in Stockholm, where a McDonald’s value meal will set you back $11. Because of the prices, I took a local friend’s suggestion and booked a private room in a youth hostel. Never having stayed in a hostel before, I was unsure about what this cheap alternative would be like.

Actually, it turned out to be a great experience. It was a comfortable, perfectly “good-enough” place to sleep. I began to reflect upon what one gets from staying in a hotel.

It occurred to me that I was perfectly happy without a maid’s “turn-down service” and a private bathroom, and that for a vacation like this, a traditional hotel overshot my needs. What’s more, I discovered that I valued the benefits along new dimensions of having access to a kitchen and being in a casual, friendly atmosphere.

I think the important lesson here is that until I became aware of and experienced a hostel as a potential “European trip lodging solution,” I didn’t realize that I was overshot by hotels, and I didn’t realize that I valued the new ancillary benefits offered by hostels.

I felt surprised and delighted to find a solution that was a better fit than I even knew existed, but I couldn’t have articulated this solution, or even the need for a new solution, beforehand. This is part of why it’s largely impossible to calculate the size of a market that doesn’t yet exist — it’s hard for an individual person to know, a priori, their precise requirements and desires when it comes to different aspects of performance.

And yet after finding that a particular solution is a perfect fit, a person can retrospectively see where in the market spectrum they fall. This is why the task of uncovering the fundamental jobs-to-be-done in a given market context tends to require sophistication and multiple research approaches.

Ultimately, my hostel experience makes me wonder what other, potentially disruptive solutions out there might be a better fit for me than the one I’m using, that I just haven’t experienced yet! Companies that are able to intuit what consumers value, but are unable to articulate, hold the keys to innovation success. 

One of the trickiest bits of the disruptive innovation puzzle comes once a company launches or acquires a disruptive business: How to integrate the new venture into the parent company while protecting what made it work in the first place. We refer to it as “avoiding institutional antibodies” — making sure that entrenched rules or nit-picking comments (“…But we don’t do it that way!”) don’t prematurely kill innovation efforts.

An article in the New York Times a couple weeks ago gave a surprising example of successful institutional antibody avoidance. Disney and Pixar: The Power of the Prenup outlined the various ways those two wildly divergent companies have worked to maintain the spirit of Pixar since their 2006 merger.

“When Disney bought its rival, Pixar, in 2006 for $7.4 billion, many people assumed the deal would play out like most big media takeovers: abysmally,” wrote Brooks Barnes in the June 1 article. “The worries were twofold: that either Disney would trample Pixar’s esprit de corps (turning Mr. Lasseter into a drone, chanting “Hi Ho” en route to Mickey’s animation mines) or that Pixar animators would act like spoiled brats and rebuke their new owner.”

In fact, so far the companies seem to be getting on well, and Disney’s stock has made welcome gains in recent months. Some of the successful tactics Barnes described include drafting an explicit statement of what would not change at Pixar, including the retention of superior benefits packages, no contracts and no move from Emeryville to Burbank. Meanwhile, the company has conceded to Disney’s push for sequels to popular movies like Cars, ramping up its production schedule and outsourcing some animation.

It should give others who are facing the institutional antibodies challenge hope: If Disney and Pixar — who spent years before the merger embroiled in personality clashes and combat over partnership deals — can make it work, anyone can.

We (and many others) have been tracking Googles steadily expanding low-end disruptive challenge to Microsoft Office. A year ago Google acquired online document server Writely, then it launched an online spreadsheet app, and then combined the two into a free software bundle that lacked many of the advanced features of Word and Excel, but enabled universal access, online collaboration, free storage, platform independence, and automatic version control. Now, unsurprisingly, comes word that Google is readying low-end, online, collaborative presentation softwareputting PowerPoint in the cross-hairs.

Microsoft, clearly, faces an Innovator's Dilemma. What can it do to respond? Has anyone here used the new collaboration tools embedded into Office 2007? Are they good enough to obviate some of the advantages of Google Apps? Or are they clunky, complex, slow...?

Lifecasting was born on March 19, 2007 when 23-year-old Yale-graduate Justin Kan launched his new website Justin.tv, a 24/7 live streaming broadcast of his life. With a mobile webcam strapped to a baseball hat, a high-speech cellular uplink and a battery pack in tow, Kan broadcasts his daily activities which can range from checking his email at an internet caf, going on dates with Justin.tv fans, or discussing the business strategy with Justin.tv co-founders.

Justin.tv was conceived six months ago as a new business venture and has entered the budding internet video space with a low-end disruptive strategy. After a brief scan over comments left by Justin.tv fans, it appears as though Justins lifecast addresses the consumer "job -- "make my workday more interesting and website designer Emmett Shear has equipped the website to get this job done. The audio/video quality is far from perfect and often stutters and freezes, but the quality is "good enough for those who are interested in getting a peek inside a day in the life of a stranger. When Justins activities are particularly mundane, viewers can discuss Justins life in one of the 23 embedded chatrooms, watch clips from earlier broadcasts, check out Justins daily schedule, or post suggestions on what Justin should do next. At any point in the workday, Justin.tv fans have multiple options for engaging with Justin and other fans.

Ultimately, Kan and friends will package and sell the mobile webcam technology and personal website to consumers who want to stream their own live video diary. In time Justin hopes to create a community of lifecasters whose websites will mimic television channels. With multiple simultaneous lifecasts, viewers can "tune in to their favorite personality, chat with others about the content, or directly interact with the lifecaster via text or instant message.

After appearances on the Today Show and ABCs Nightline, Justin.tv has gained its share of fans as well as critics. Many predict Justins lifecast will end once the novelty wears off. But what appears to be an exercise in vanity is in fact the collaborative effort of a few twenty-somethings to democratize the media. In an interview with the San Francisco Chronicle, Kan identifies the potential applications for live video broadcasting in different contexts, "Imagine what you could do if you had the ability to broadcast live video from anywhere, anytime. It changes the way news is gathered. It makes a whole new kind of travel show possible. It allows the broadcast for sports that arent large enough for ESPN. With this statement in mind, Id like to hear about some of your ideas about the other potential applications of this technology. Is there a future for lifecasting?

See:
"Asian Pop: Man with a Cam. SFGate.com. March 27, 2007.
"Justin Kan Vlogs 24/7 at Justin.tv. Washingtonpost.com. March 27, 2007.
Justin.tv