The following tweet made me consider, initially thinking about the place of Manchester in innovation, but also the wider concept of personal transport versus climate.
It rains in Manchester. From personal experience, Manchester doesn’t feel the rainiest place in the United Kingdom, but it does have a reputation for significant rainfall. That doesn’t dampen the city’s spirits. We just do things differently (that’ the obligatory Tony Wilson reference done)
The type of personal transportation afforded by a bicycle, whether electric or not, isn’t ideal in a climate that features rain heavily on its calendar. The cyclist has to wear weatherproofs, need a change of clothes in the office, probably a shower, and then the reverse on the way home. Or they could just get wet.
That doesn’t prevent cycling in Manchester; it just makes us think more about our journeys. We can’t be as relaxed in planning them.
That creates inertia to change. Which prompted me to think about climates where single person vehicle commuting could be more suitable. Regardless of Britain’s position in the world ranking of innovation, does that mean that Britain will get overtaken by other countries with more suitable climates?
Britain’s transport infrastructure always feels more intensive compared to any other country I’ve travelled to. I’ve seen the quizzical expressions when explaining to US colleagues that we may have to set aside a day to travel 250 miles in the UK (it doesn’t always but it massively depends on which 250 miles you want to travel). But I’ve yet to experience Japan or similarly densely populated countries. With innovation being driven by warmer climates, especially in terms of Silicon Valley, or countries with larger infrastructure (e.g. China, Germany and again, the United States), you can imagine solutions being solved for those countries and climates, not the UK’s. To be clear, it’s no-one but the UK’s and EU’s role to alleviate transport issues in the UK, let innovation solve the problems of each country. Some will be applicable beyond the geographical boundaries in which they were developed, some won’t be. Which then creates an inequality. It’s not the inequality created by resources or the centralisation of power or empire. Instead, it’s an inequality created by provenance of ideas in relation to the location.
Which reminds me, I wonder how the doors on Tesla’s model X fare in Manchester. Our rain is usually accompanied by wind so it blows sideways, not falls down.
In “When is it innovation?“, I introduced the idea of a sector’s familiarity with an concept. I’ve just read Bloomberg’s Innovation Index and I find a few of the variables used to be old-school to say the least. It made me wonder what the index should actually include to be relevant to innovation.
Issue 1: Patents
The first item I noticed was the grading of countries based on the number of patents. I think of patents as being the enemy of innovation, especially when we consider the role of patent trolls in the marketplace. If someone can create an idea, patent it, but have no intention of delivering it. But only holds onto it in order to prevent the person who does actually figure out how to build it, isn’t that stifling innovation?
To some extent, I’m just shouting against a wall. The establishment and market of patents exists and I do not possess the influence to change it. I’m ok with that. However, considering the position of patents, why are they in the Innovation Index? Wouldn’t a better figure be, the ratio of patents created in that country against the number of patented, implemented products? That at least would account for ideas that have been translated into reality.
Issue 2: Non-innovation Metrics
There are several metrics in the table that do not fit with innovation, at least in any definition I’m aware of, and definitely not in the definition I’d proposed in “When is it innovation?“.
For instance, Manufacturing-Value Add is a good metric for assessing the transformation of materials in higher value, e.g. taking a raw material and refining it, taking sheet metal and producing a finished product, etc. But that’s not innovation. That’s just doing your job. It’s business as usual. You could innovate in that area, e.g. a novel way of refining, etc. But that metric doesn’t measure that.
Also, the Productivity metric based on GDP and GNI exhibits similar issues. It’s a measure of how much money is generated relative to the population. That isn’t innovation. True, a high productivity score could be attributed to high levels of innovation (in terms of increasing the output of each person), but not necessarily.
And since new technology is developed every month and every year, would we be looking at a Techtechtech sector in a decade?
It’s seems ludicrous to think of it that way and it is indeed ludicrous. The reason it sounds so odd to have a Techtech sector is that we’re allowing ourselves to be focussed on the technology that’s enabling us to replace the older business models.
If you get a nice interface to your banking account and that bank account has a different charging model to the older high street banks, does that make it fintech? According to the hyped world, then yes. But it’s stilll banking. It’s still finance. In reality, the newer entrants are just doing what the incumbents should have been investing in more heavily a few years ago.
In some cases, newer entrants who are smaller are working out how to make a profit without the expectations of having to pay the large salaries of traditional banking, without having to pay large, multiyear leases for high street premises, etc. The main lever they’re using is initially technology, but sometimes it’s other elements of the business model that are being altered. That’s a critical point to realise; it’s not always the technology that is being used as a lever for change.
Let’s take the example of First Direct, the HSBC bank that had no high street branches and regularly received excellent customer satisfactions scores compared to its high-street cousins. Mint, Smile and Egg all followed with variants of similar business models. They had changed one element of the business model. They had focussed on the channel of interaction, forcing a channel shift from face-to-face to telephone (at the time) and online (later when the technology caught up). Everything else (apart from perhaps some of the branding/marketing) was the same as the high-street.
What we’re seeing now is other entrants prepared to look at other components of the business model, such as where the revenue is generated (e.g. subscription versus visible transaction vs bundled transaction cost vs bundled products and so on).
Here’s a simple concept: Take the Business Model Canvas and apply SCAMPER to each section. It’s that easy to generate new ideas and that’s what seems to be happening in every sector.
But this isn’t really fintech. Yes, tech is opening up opportunities and provides the ability to change different elements of the business model that would have been more awkward or at least not cost-effective to change before. But, again, it’s still banking. So let’s just call it finance. The big question for incumbent banks is, rather than relying on their current business working in the future, they’ll have to accept that different models will emerge. And it’s their choice if they want to be delivering those models, enabling others to deliver them on their behalf, or simply be swept away as their market share is eroded by competitors.
Let’s get this straight. I’m not against the concept of Fintech. I’m against the fact that the concept exists separate to the Finance sector (or rather a subset of it). I believe that every sector has a duty to innovate, improve and invent. For sector x, we don’t need xtech.
There’s an additional angle to this which I’ll cover in the next article.
We should all look at the thinking behind this article in Business Of Fashion; there’s a lot we can take away from it. It shows a level of innovation and shines light on so many values that we take for granted.
The author writes about the shift of a fashion store to charging customers a fee to enter the store.
The argument is that the store is an entertainment experience and that we expect to pay for other places of entertainment, e.g. theatres, cinemas, etc, so shouldn’t we also expect to pay to go to fashion stores?
So instead, we could charge admission not for the store but for the experience which happens to be in a store. There’s a distinction there in that most stores will not have an experience worth charging. Indeed, as the author mentions “If you never contemplate charging admission, chances are you will never create an experience worth an admission fee”. Turn that around and ask yourself, what is it about the experience that you offer customers that is worth charging for? Not the product, but the experience?
Conditions for use
Charging an admission fee only seems to work under a few conditions;
When the admission fee is parallel to what would be paid for the product itself. Think of any pay-per-play/pay-per-use experience, they have to be close in price to the purchase of the product.
When there are other factors at play (such as scarcity) which enable the promoter to restrict the entrance to those who pay to attend
The example in the article is interesting in that the experience itself is created to be scarce. That is on top of any scarcity of the products involved. By creating a scarcer resource, we are influencing by way of Cialdini’s Scarcity Principle. In that way, we are creating an environment in which the customers is more likely to rely on the shortcut of knowing “it’s scarce” and hence more likely to buy.
The admission fee is also a conversion filter, in that it will weed out those people who are just browsing at products outside of the range that can afford (which brings to mind the window shoppers outside the Rolls-Royce showroom in Mayfair).
By charging an admission fee, we also see the use of another Cialdini’s Principles; Consistency. The customer has already purchased the right of admission, so they’re more likely to commit to purchasing a product from the store.
I love the process that the author, B. Joseph Pine II, and the stores he writes about have gone through to get to the solution they’ve arrived at.
Imagine following-up the last question in the article “what would you do differently if you charged admission?” with a further more design-oriented question: “how may we create a purchase experience worth paying for?”
You may have come across the Kano model before. It’s an analytical technique for understanding what your customers want and, importantly, what they’ve come to expect as required.
I was travelling on a local train last week with a largely empty carriage. I had the choice of seats. I am familiar enough with these carriages to know that there are heating vents in blocks underneath every third row of seats, so I didn’t sit behind one of them. That way my feet would have somewhere to fit.
So I a seat two rows behind.
Then I noticed that my knees didn’t fit. Actually, couldn’t fit. I was seated as far back in the seat as I could go and still my legs could not fit straight in front of me. I had to resort to man-spreading (the shame of it!), not because I wanted to but because simple, basic geometry meant that I wasn’t going to fit in that seat any other way.
Since the carriage was empty, I looked around at the other seats to see if I’d chosen a particular tight space. Unfortunately they were all that size.
I’m pretty average in height, my legs aren’t especially long, so I pity those at 6’5″ who have no chance.
What the train operators have done is increased the number of seats by reducing the space allocated to each seat. This isn’t a new problem, nor is it a new solution. Airlines are famous for reducing the space available to travellers. But it is interesting to many customers transport operators are willing to put on the uncomfortable side of the line. Is it 5%, 10%, 50%?
Now let’s look at the travel experience through the lens afforded to us by the Kano model.
Application of the Kano model
The Kano model depends on asking customers what features they would be happy to have and which features they would be unhappy not to have. You ask the same question for each feature (but separating out the questions). The point being that customers can say they really want something, but wouldn’t complain if it’s not present. Or the converse, where the feature is just expected as part of the product.
Even to the point that they haven’t considered not having the feature. Imagine doors that open automatically in hotels. That could be classed as a delighter in that it makes a difference to the customer’s perception of the product. These are at the top of the chart above the red line. But if you ask if a door is required, then it’s likely to be considered a basic, in that it’s required and expected. These are at the bottom of the chart below the green line.
There is also a performance need running from bottom-left to top-right, in that the better you deliver these features, the happier the customer.
Usually the focus is on delighters becoming basics over time as technology makes it cheaper to deliver those features.
Entertainment on airplanes used to be a delighter. Then it became more standard and has been a basic requirement for a number of years now. We’re seeing a similar transition with wi-fi becoming a basic requirement throughout all stages of travel, whether in taxi, at the airport, on the plane, etc.
The reverse path
However the travel industry also seems to be offering a reverse path of taking features once regarded as basic and turning them into delighter. Unfortunately this path exhibits some discomfort as the basics are provided more cost-effectively each year, until the trend for them reverses.
Let’s consider the local train journey. At some point in the recent past:
Being able to sit down in comfort was a Performance Need (the more comfort, the better)
Being able to sit down, without someone else’s bag or umbrella in your face, was a Basic Need
Being able to travel from A-B on the train was a Basic Need
Being able to travel from A-B on the train on time was a Performance Need
Being able to travel from A-B on the train without having to change trains was a Performance Need
Having access to toilets on the train was a Performance Need
Having access to wi-fi was a Delighter
Yet, the service that I was provided gave me the impression that
Being able to travel from A-B on the train is a Basic Need (no change to this)
Being able to travel from A-B on the train on time is a Performance Need (no change to this)
Being able to travel from A-B on the train without having to change trains is a Performance Need (no change to this)
Being able to sit down, without someone else’s bag or umbrella in your face has become a Delighter (this has changed)
Being able to sit down in comfort has become a Delighter (this has changed)
Having access to toilets on the train is still a Performance Need
Having access to wi-fi is a Performance Need, becoming a Delighter
So at some point in the past, being able to sit down in moderate comfort was a basic requirement. This is where it gets interesting, in the eyes of most customers, that requirement still is a basic need. But we’re seeing a disconnect between the customer perspective and the train operator perspective. And that disconnect is increasing with more cohorts or segments of customers as the space per seat is reducing (i.e. more tall people are being made uncomfortable).
We may see a reverse-reverse change, where comfort becomes a delighter yet again. And following that further on, we could see a pendulum effect as features:
initially start out as Delighters, probably aligned with the Early Adopters
become Basic Needs as the technology and environment to produce them becomes cheaper and more prevalent
then become further down the basic needs as companies ratchet down costs by focussing on the bare minimum of Basic Needs
then swing back to being Delighters as new entrants to the market focus on these features as differentiators
then swing back to Basic Needs as the incumbents either adopt a better quality of Basic Need to combat the new entrants or the new entrants become the new incumbents and start the cycle of focussing on cost and delivering the bare minimum for Basic Needs
I finished the previous part of this article with a four box model that had two quadrants with the same outcome.
With that article, I’d stated that the outcome you may want to choose would probably depend on the lifestyle you want to lead.
That still applies, but I want to show what I do with similar four-box models
I don’t like when four-box models show opposite quadrants with the same outcome. The reason is that the quadrants are an approximation so we’ve blurred what we do with data points that fall around the centre (like around a bullseye) of the model. Imagine a point of x=49 and y=51, why should that be treated different to x=51 and y=51? or x=49 and y=49?
How to interpret
What we recognise is that if the diagonally-opposite quadrants are more a diagonal stripe. Depending on how we want to approach the corners, this could be a straight swipe or arcs. I tend to find arcs better reflect the decisions being made.
I regular make decisions about where I’m going to spend most of my working effort.
A few years ago, I was sharing my ideas and potential options with a few friends and ex-colleagues. I used an extension to the typical four-box models. This simplified the thinking and forced me to recognise a few major questions that I’d been skirting around.
I wasn’t short of ideas for businesses; some proven, some not. But I recognised I didn’t have enough time to do everything, nor enough available funding to pay others to do everything. Importantly, I didn’t have sufficient time or energy to chase funding to make all the ideas happen (and chasing too many would disqualify the ideas from most potential funders).
Horizontal axis – annual revenue forecast
I didn’t initially approach this in a mercenary way, but after trying a few variables, I found that using predicted revenue as the horizontal axis opened up a number of questions. While I wasn’t focussed on the money, it did make me evaluate how much effort I’d want to put into a venture in order to gain that revenue.
Vertical Axis – Confidence
For the vertical axis, I plotted my confidence in being able to achieve the revenue I’d stated. For the 3 or 4 revenue targets per business idea, I also evaluated my confidence in that target. Obviously, something being earned in the current year is 100%. And most ramped down towards the right as I my confidence decreased, the higher the revenue. The difference is that some business ideas had a steeper slope than others.
I picked the most likely ideas I had at the time and plotted them on the chart. It was obvious that there were some with a good chance of high, recurring revenue, but that they bored me senseless. And unfortunately, the one I was most interested in, had a significant dependency on me and had no way of recruiting others to make it work. I chose to progress with one that interested me and had a decent chance of high revenue, with my consultancy as a backup.
Since it was important to me to realise what was important to me, I had planned to use “passion” or “interest” for the vertical axis. However, when I did this, it was quickly evident to me how I felt about the idea in question. I didn’t need to have that value on a graph; I could feel it when I discussed the ideas.
For the horizontal access, I also considered:
effort required to achieve that revenue
familiarity with the domain in question
I also considered using the inverse of the effort required as a variable for the size of the data point, with easier ideas being bigger than more difficult ideas.
You’ll notice that in the Excel chart, I’ve also put the dividing lines for half of the max revenue and at 50% confidence so that we can start to see a four box model.
That leaves us with the first interpretation.
The bottom left of low-confidence and low-revenue is easy to understand. It’s not the area to concentrate on.
The top right of high-confidence and high-revenue looks like the holy grail, but these usually require intense effort and significant funding and resources.
That leaves the top-left and bottom-right of high confidence, low revenue and low confidence and high revenue. The choice here is more on of lifestyle. What type of lifestyle are you after? Then choose the most appropriate box. This is where effort may have been a more useful axis than confidence.
In a previous article, I wrote about TC Electronic and what we can see from the outside regarding their innovation process. Today, I’m introducing Fender’s approach to reducing churn.
Fender Musical Instruments have released a new training service called Fender Play, which has a different aim to the current Riffstation.
The central idea behind Fender Play is to keep guitarists motivated to learn, by providing shorter lessons based around their favourite songs.
Fast Company have a good introduction to the service, so I won’t repeat what they’ve already written. Instead, I want to highlight a few features that are of significance from a corporate innovation perspective.
Two phrases from Andy Mooney, CEO of Fender Musical Instruments Corporation really struck home:
“About 45% of the guitars that we sell every year are bought by an absolute beginner”
“Somebody who has never touched the instrument before, 90% of those players abandon it within one year”
Taking the 90% that abandon within one year, that means of the people that start in any one year, of those that are going to give up, only 10% make it through to another year. Fortunately that cohort is complemented by those that have already not give up from previous years.
So at least 40.5% of customers will not return to buy again (90% x 45%). That’s a massive attrition rate. For any business. That also doesn’t include experienced guitarist who switch to another brand or give up at a later date.
So the focus has traditionally been on the longer-term guitarists, those of the 10% that continue beyond the first year. Now let’s look at the effect of that change and the rationale behind the new service.
The first guitar sold is usually a cheaper guitar, let’s say a Squier Affinity, possibly in a starter pack so costing between £150 and £250 depending on the pack. A few routes are then available:
If the guitarist quits, then that guitar will stay in a closet, under the bed, in a corner or be sold on as used (which then reduces the number being bought new). That customer will not be a customer again unless circumstances change – and they do – I know a number of people who have given up and then start again, usually picking up a better guitar to learn on due to more leisure income.
The guitarist learns slowly. Then they may stick with this guitar for a few years or it may be the onyl guitar they ever purchase, since their talent doesn’t outgrow the guitar.
The guitarist learns at a quicker pace and then realises they would benefit from a better guitar.
An intermediate guitar such as Fender Standard Stratocaster is £500 upwards. This is where most people who call themselves guitarists stop. These are perfectly giggable guitars and it’s at this stage where the talent of the guitarist makes more of a difference than the guitar itself. However there are still returns to be had by upgrading, even those are diminishing returns.
A more advanced guitar would be Fender USA Strat , starting at £900+, commonly £1500-£2000. These are the guitars that you’d expect a pro guitarist to be playing on stage or in a recording session.
Orders of magnitude
In a lot of organisations, the concept of a regular purchase is based on the repeating purchase being the same product or service over time, potentially with some minor upgrade. So you just multiply the value of the original purchase by the number of repeat purchases and you have your lifetime value of the customer.
Guitars are more similar to cars in that customers are likely to upgrade at the repeat purchase, until they plateau. The difference between cars and guitars is that the price difference in the Fender range is 10X between the initial beginner customer and the experienced guitarist. If we start to discuss the Customer Shop offerings, then we can be into a 20X or 30X price difference.
So the dynamics of keeping someone playing for longer and progressing to the next level becomes incredibly important
The aligned cross-sell
Guitarists need additional equipment to be able to make the sound. An electric guitarist requires an amplifier, cable, strap, picks, tuner as a basic package. For every price point of the guitar, there’s an amplifier at a similar price.
This again reinforces the interest in keeping a customer playing for longer and progressing to the next level sooner.
I regularly listen to podcasts. If I’m travelling between clients, I’ll usually be listening to a stream of podcasts. Even when taking a shower or eating breakfast, I can have a podcast playing in the background.
I used to listen to a lot of podcasts as I drove between client sites. The podcast format was ideal for the time behind the wheel and expand my thinking for the few hours that I was on the road. So I had a variety of subjects and presenters. Over time, I’ve narrowed the list down to :
1. Podcasts with a focus on sales
I’m not from a sales background, although I have worked on bid teams, and pre and post sales teams. Yet I fully believe that a significant part of a consultant’s job, especially those such involved in innovation, business architecture, business analysis and change management, is to sell the ideas to stakeholders. I don’t think of this as used-car dealer selling, but more ethical selling. More akin to Rob Jolles’ concept that selling is helping a potential client to arrive a decision quicker than they would have without your involvement, even if they decide not to purchase from you. I’ve seen numerous good ideas fail because the consultant didn’t spend enough effort on selling to the stakeholders. So I include 3 sales podcasts in my list.
1.1 The Salesman Podcast
Will Barron’s daily interview podcast, largely focussed on B2B sales. Although the guests are international, there’s often a UK perspective which isn’t present in many other podcasts. You do hear a number of guests that are doing the podcast circuit, but you definitely get a B2B sales focus and usually a different angle to what you may hear on other podcasts.
The Sales Podcast with Wes Schaeffer. These are shorter episodes but with a slower, more considered approach. I find the content in this more cerebral than in the Salesman Podcast. More importantly, this has a wider focus, not restricted to B2B sales.
These are usually short sessions with a few common themes across the podcasts. The Podcast series is hosted by Donald C Kelly, with short 5 minutes episodes, mixed with more in-depth interview episodes. The mix is refreshing and motivational. The only problem I have is keeping up with them so invariably I miss a few.
This is the only pure innovation podcast that’s remained in my list. I introduced it to my list as I found that the rest of the podcasts had a skewed bias and I still wanted to keep up-to-date with innovation within larger corporations. I like that the interviews are with the people who are introducing innovation within larger organisations, rather than just the standard series of podcast guests appearing on other podcasts.
Not purely about innovation, but about investment, specifically venture capital. This ties together the themes for me of innovation and startups. It’s short (designed to be short enough for a commute) and full of information with a high calibre of guests. In listening to it, I gain further insight into the world of less-mature organisations and advice given to them.
This was the first podcast I listened to, well actually I’d heard about Jocko Willink and listened to his interview of Steve Austin’s podcast (so that was the first one), but Jocko is the first host that made me click ‘subscribe’.
Jocko Willink is an ex-Navy Seal commander, now martial arts gym owner, public speaker, author, business consultant and seller of tea. His episodes typically include him reading excerpts from military books (usually military history and first-hand writing where possible), commenting on them and then a question and answer slot at the end. More commonly the Q&A is appearing in a following episode. These are long episodes, easily over an hour.
I continue to listen to these because I agree with 80-90% of his business perspective and I find that he has a clear insight into how to resolve problems. Often that takes the form of reframing the problem from the original question. It’s a similar approach to what I take and it’s good to hear someone from a massively different background doing similar.
I’ve got some time in between clients where I’d like to contribute back or pay-it-forward. I’d like to donate my time for free and raise a bit for charity while I’m doing it.
What’s the offer?
You get a Business Architect for free*
*What does free mean? You don’t pay for my time. Instead, you pay expenses (we can agree up front and they could end up being zero) + you make a donation to a registered charity (I’ll leave the amount up to you).
You’ll get me for up to a day, plus time beforehand over email/messenger to discuss how to use that time.
Alternatively, if you just want a chat in person/over Skype, I’m happy to get involved.
This is open until Fri 25th August 2017 to one more company or organisation initially. I have one already booked in, so there’s one more space.
Business Architecture is an odd profession. The common route in is through strategic application of many different business analysis methods, but it is possible to come in through other routes. Which means that no two Business Architects have the same skills, experience or expertise.
I specialise in three areas:
Innovation: specifically bringing activities more commonly related to startups into larger organisations, kick-starting innovation if you’re just starting, have stalled or hit a brick-wall
Customer Focus + Lean: evaluation of your current operations, plus how to transform them into something more efficient and relevant to what your customers require
Motivation: specifically Business Motivation rather than individual motivation, although the two are closely related.
The trick would be finding something that we could achieve in one day. I’m up for that challenge. Are you?
If this works out well, then there’s a good chance that I’ll do this on a regular basis. So please, get in touch. Even if we don’t meet this next time, I’ll remember you for the next round.