GUEST POST from Paul Sloane

I recently ran a workshop for a group of CEOs of small companies from different sectors and industries.  We ran the following exercise.  Each person started with a blank sheet of paper on which they answered the following questions about their organization.

1. What are your main products or services? List three or four.
2. What are your main markets? These can be industry sectors, types of customer or geographical markets.
3. What are your greatest strengths? These can be technologies, skills, market strength etc.
4. What is your proudest achievement? What has your organization done that is really exceptional?

Each delegate spent about 5 or 6 minutes filling this in.  People then pass their sheet to the person on their left around the table.    Each person reads the sheet they receive and then turns the sheet over and has to write down two or more suggestions for new products or services and one or two new markets for existing products.  They then pass the sheet to their left.  You have to add something different from any earlier suggestions on the sheet.  We did this for four iterations and then the sheets were returned to their originators.

Each CEO now digested the suggestions.  Some ideas were routine, some were ridiculous but some were genuinely useful and innovative.  Every person had to select the best single idea from the ones they received and then had to develop a short plan for a minimum viable product.  How could they test this idea cheaply and quickly to see if it had real promise?  They then described this to the group for comment and feedback.

The whole exercise with ten participants took under 40 minutes.  People agreed that it was highly productive with some provocative and promising suggestions.  Running the exercise the way we did was quick and fruitful.  Some delegates suggested a longer session run in series rather than in parallel.  In this case each delegate in turn would answer the four questions orally to the group and people could quiz them on various points before making their suggestions.  The whole group would then move on to the next person’s situation and make suggestions for them.  This approach would take more time but allow a better understanding of the current business model for each company.

I am not sure that a deeper understanding would necessarily yield better results.  You can hire consultants who pore over your business for weeks.  They then submit a detailed and expensive report containing very reasonable proposals for strategy and innovations.  But a diverse group of experienced business men and women who have a superficial understanding of your business are less constrained by conventional assumptions.  They are far more likely to come up with radical and challenging suggestions.

Gather a cluster of strangers and share this method.  It is quick, lively and productive.  The more varied the group the better it works.

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GUEST POST from Paul Sloane

What is impeding innovation in your organization today? I’ve highlighted the Top Seven Impediments to Innovation in this list and included them in this short video with explanations and solutions:

1. No Clear Vision or Purpose
2. No Time to Try New Things
3. The Organization is Risk Averse
4. Long Approval Process
5. Departments Work in Silos
6. Innovation is Not in My Objectives
7. There is No Budget

Remove the impediments, and speed up innovation.

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GUEST POST from Paul Sloane

During the economic depression which followed the financial crash of 2009 car sales slumped across America.  Automobile makers tried all sorts of promotions, many featuring big price cuts, but they could not lure buyers onto their forecourts and persuade them to buy.  Rebates and other traditional incentives just were not working.  Hyundai USA took a different approach.  They kept asking why and went past the most obvious answers.  Why are sales down?  Because people are not buying.  Why are people not buying?  Because of the recession.  Why is that stopping people who can afford a new car and need one?  Because they are worried.  Why are they worried?  Because they fear they might lose their jobs and not be able to keep up the payments.

Once they gained this insight Hyundai decided on a daring marketing strategy.  They could eliminate the risk for the customer by transferring it to Hyundai.  They offered new buyers a reassurance that if they were laid off in the first year after buying the car, they could return it at no loss.  “In this uncertain economy, we are looking for ways to reassure shoppers that Hyundai still represents the best value in the auto industry,” said John Krafcik, President and Chief Executive of Hyundai Motor America. “If you find that you cannot make your payment because of a covered life changing event, we’ll allow you to return your vehicle and walk away from your loan obligation”.

The promotion was a success. In the two years for which the guarantee program was in in place, Hyundai sold over 1 million cars in the USA.  Only 350 customers returned their vehicles.  Hyundai saw its share of the US automobile market rise from 3.0 percent to 4.6 percent over that time. (Source Automotive News May 2011)

The lesson for marketers is to keep asking ‘why? ‘ in order to understand the real motivations and problems that your customers face.  And what if your prospective customers feel concerned about the risk because your new product is innovative and unproven?  Is there a way that you could you indemnify them by taking on the risk yourself? All major innovations should come with a money-back guarantee at very least!

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GUEST POST from Paul Sloane

Have you ever used a knife as a screwdriver or a shoe as a hammer?  If so you repurposed a product for an application that the producer did not foresee.  You put the product to another use.  This idea can be a fruitful source of innovations for your product or service if you only you can think laterally.

De Beers is a diamond mining company founded in South Africa in 1888.  It specialised in industrial diamonds which were used as drill bits – because diamonds are the hardest things found in nature.  In a brilliant piece of marketing it repurposed diamonds as symbols of love and devotion.  De Beers created the concept of the diamond engagement ring – with the slogan ‘ a diamond is forever.’  It was voted the best advertising slogan of the 20th century.

Kleenex tissues were developed to remove make-up and cold cream.  The Kleenex company discovered that people were buying the tissues to blow their noses.  The entire marketing strategy was changed with the marketing slogan, ‘Don’t carry a cold in your pocket.’

Lucozade is an orange-flavoured carbonated drink invented by an English pharmacist in 1927.  It was promoted as a health drink and sold in pharmacies.  Its advertising tag line was ‘Lucozade aids recovery’.  Mothers bought it for their sick children.  In 2013 the brand was acquired by the Japanese company Suntory who successfully repositioned the product as a sports and energy drink.  They kept the same product but promoted it with different benefits to a different market.

Mobile phones are no longer primarily phones.  They are used as cameras, browsers and apps players – on which you can occasionally make or receive a call.  They have been put to other use.

SCAMPER is a powerful brainstorming technique in which seven verbs are used to generate fresh ideas for a product.  The P stands for Put to Other Use.  The team has to generate many ideas for entirely different applications.  I find that a good way to start the session is to ask, ‘If a law were passed which made the current use of our product illegal what completely different use could we find for it?’  If diamonds were banned from use as drill bits could we conceive of using them in engagement rings?

Observe your customers.  How are they using your product?  Are there any unusual or offbeat applications?  If some people are using your knife as a screwdriver or your shoe as a hammer then maybe that is a source of an innovative new application and new market.

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GUEST POST from Paul Sloane

Consider for a moment these self-contradictory innovations:

• The solar-powered flashlight
• The inflatable dartboard
• The underwater hairdryer
• The waterproof teabag
• The concrete liferaft

At first sight they look silly but each contains the germ of an interesting idea.

• You can charge up a solar-powered flashlight in daylight and then take it into a cave.
• The inflatable dartboard is easy to transport and works well with velcro darts.
• A hairdryer in a submarine is an underwater hairdryer.
• A teabag which stayed waterproof at room temperatures but let in boiling water would stay fresher for longer.
• You could make a concrete liferaft if it had large air pockets.

I recently heard about a contradictory innovation which has become popular – the silent disco.  It sounds ridiculous.  But the dancers wear headphones – each with their own favourite tracks – while onlookers can chat without being drowned out.  It is a clever innovation.

Try this brainstorm method; the Contradictory Innovation – also known as the Waterproof Teabag method.  Take your leading product or service and everyone has to describe a version which completely undermines or contradicts one of the main properties of the item.  The more ridiculous the better.  Then you take each useless idea and see if it leads anywhere useful.  Like a silent disco.

Everyone at Sony thought the chairman, Akio Morita, was crazy when he proposed a tape recorder which could not record.  It became the Sony Walkman – a world-beating consumer success.

Dulux make white paint.  They thought of a contradictory idea – white paint which is not white.  They came up with a paint which is pink when you apply it but which dries to a beautiful white.  So it is easier to see where you have applied the paint as you go over an older white background.

The contradictory innovation brainstorm method is lateral thinking in action.  It challenges your basic beliefs and assumptions and then takes you into unexplored possibilities.  Let’s develop some waterproof teabags and inflatable dartboards!

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GUEST POST from Paul Sloane

A patent can be taken out on almost any new implementable idea.  It is not just about protecting your idea.  Your patents are part of your Intellectual Property (IP) and can be valuable assets.  Often a start-up company will be bought for its IP rather than its products or sales revenues.  Here are some tips on patents.

1. You do not need a working prototype before a patent application is filed.  The application has to explain in detail how the new idea would work.  It must be clear what is fresh and inventive in the proposal.  Drawings or diagrams often help.
2.  Consider and include all potential applications of the idea – not just the ones in the area in which you are focused.  You want the grant to be as broad as possible.
3.  Keep your ideas secret.  Do not disclose any details publicly before you file your patent application.
4.  Patent landscaping is a process of determining which patents are in place or pending in a particular area.  It is carried out by experts and is essential before you commit signficant efforts of new research.  It can identify competitors and opportunities as well as help you to avoid an expensive mistake.
5.  Use the patent landscape study to find patents you can licence for the technology you require.
6.  Patents can take a long time to grant – up to six years in some countries.  However, the patent gains its power from the date it is filed, not the date it is granted.  A pending patent is valuable.
7.  Some matters are excluded from patents – for example business methods are excluded in the UK – but not in the US.  If you are not sure discuss your idea with a patent attorney.
8.  File first in the USA.  In the USA you have the option of non-publication which keeps your idea secret until the patent granted. No other country offers this.  The European patent office and those of other major countries view a US patent filing as a valid priory filing for their own purposes.
9.  It can be a good idea to hold your IP in a separate company from your main business.  That way if you encounter financial difficulties your IP is protected from the claims of creditors.
10.  You can take out IP defence insurance to indemnify you from damages and legal expenses from alleged infringement of IP.

Based on tips and ideas in the book, The Innovation Handbook, Editor Adam Jolly, Publisher Kogan Page.

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GUEST POST from Paul Sloane

Sony and Philips developed the Compact Disc (CD) which they launched in 1982.  It was originally designed to store and play music. It offered much higher quality of recording than vinyl records.  It later became used for data storage; it held far more data than most personal computer hard drives.

Mickey Schulhof had joined Sony in 1974 as an engineer.  He rose rapidly up the ranks becoming vice-chairman of Sony USA and then the first American to become a board member of a major Japanese company.  Schulhof wanted to sell the idea of using CDs for music distribution to the major record companies in the USA but his efforts met with resistance and scepticism.  The companies had enormous investment in vinyl disc factories and were unwilling to consider changing formats.

Schulhof asked himself, ‘Who wants much higher quality recordings?’  The answer was the music recording artists themselves.  He approached major bands and stars and showed them the benefits of having their music on CDs.  When the top recording artists became enthusiastic about the new medium the record companies reluctantly agreed to release some music on CD.  The first band to sell a million copies on CD was Dire Straits, with their 1985 album, Brothers in Arms.  Ironically, the record companies made handsome profits from the many fans who bought CD versions of albums they already owned in vinyl.

If the main route to market for your great innovation is blocked by naysayers committed to current products and methods, you should ask – who benefits most from this?  And then approach them directly.

The song Bohemian Rhapsody was written by Freddie Mercury for Queen’s 1975 album A Night at the Opera. It broke all the rules for a popular music single release. At a time when most pop songs were simple and formulaic Mercury’s song was a complex mixture of different styles and tempos. It had six separate sections – a close harmony acapella introduction, a ballad, a guitar solo, an opera parody, a rock anthem and a melodic finale. It contained enigmatic and fatalistic lyrics about killing a man. And it was very long.

When it was proposed to Queen’s record producers EMI that they release the song as a single they flatly rejected the idea. It was 5 minutes 55 seconds in duration and the general rule of the day was that radio stations only played items that lasted no more than three and a half minutes.

So Queen bypassed EMI and went straight to the DJ Kenny Everett. They gave him a copy on condition that he only play sections of it. He did this and the reaction was so strong that he played the whole six minutes several times on his weekend show on Capital Radio. On Monday morning hordes of fans went into music stores to buy the record only to be told that it was not available. EMI was forced to release it and the song that they claimed was unplayable went on to become one of their greatest hits. It was the first song to reach number one twice with the same version – in 1975 on its first release and in 1991 following Mercury’s death. It went gold in the USA with over 1 million copies sold. It had a worldwide resurgence in 1992 when it featured in the film Wayne’s World.

Fifty Shades of Grey is a 2011 erotic romance novel by British author E. L. James.  Reviewers were generally very critical of the standard of writing in the book and of the way it described explicitly erotic scenes featuring bondage and sadism.  Salman Rushdie later said of the book: “I’ve never read anything so badly written that got published. It made Twilight look like War and Peace.”  With no publisher interested, James self-published the work as an e-book.  When it became wildly popular on the internet it was published by Vintage Books.   Fifty Shades of Grey went on to top best-seller lists around the world, selling over 130 million copies worldwide. It has been translated into 52 languages and set a record in the United Kingdom as the fastest-selling paperback of all time.

If you really believe in your new product then back it yourself and take it direct to those who need it.  Going back to Mickey Schulhof, he said this, “At Sony, the financial review came last, not first. When we launched CDs, we did no market surveys and hired no consultants. We invested $100 million developing the technology and building a factory before the first CD player was put on the market. Nobody gave us any assurance that there would be a market, but we believed it was a good product.”

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GUEST POST from Paul Sloane

Consider for a moment the shopping experience for a housewife in the 1920s.  She would go from one small store to another – meat from the butcher’s, bread from the bakery, fish from the fish monger, cans and vegetables from the grocer’s, household items from the hardware store and so on.  At each shop she would have to wait in line behind other customers as the shopkeeper fetched each item the customer wanted from the shelves behind the counter.  It was a long and costly experience.

A man called Michael Cullen asked a simple question, ‘What would happen if we turned the shop around and let people collect all the items they wanted themselves?’  Many in retail would have thought this a crazy idea – surely customers want service rather than wandering around the store searching for things.  But Cullen was undeterred.  He went on to create the world’s first supermarket, the King Kullen store in Queens, New York.

Cullen was born in 1884 as the child of Irish immigrants. He worked in retail stores for many years and developed a plan for a better customer experience with greater efficiencies.   He wrote a letter to the president of the firm he worked for, Kroger Stores. In it he suggested a new concept – a large self-service shop with a big selection of all the items that people commonly wanted at much lower prices.  He forecast that this type of store would dramatically increase Kroger’s sales and profits.

Cullen’s letter was ignored so he left his job and launched his own store, King Kullen in 1930.  The store carried what was for the time a vast range – over 1,000 items, everything from paint to groceries. Prices were low and there was ample parking.  Word spread quickly and people came from miles around.

The King Kullen chain grew rapidly.  Cullen rented space in old factories and warehouses which had closed in the Great Depression.   Customers loved the wide choice and low prices.  By 1936 there were 17 King Kullen supermarkets and turnover had reached $6m.  But in that year, at age 52, Michael Cullen died suddenly after an operation on his appendix.  His lateral approach to selling groceries was copied around the world and the supermarket has become ubiquitous.  He had turned the shop around.

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GUEST POST from Paul Sloane

It has been said many times that founding a startup is similar to launching a rock band.  For example:

• You gather a small, talented team with different skills but a common passion.
• You practise for long hours to improve your product.
• You create a demo tape or prototype product to show people.
• You network like crazy to get exposure to the right people.
• You choose a target audience who likes the kind of stuff you produce.
• You need finance so you approach a major record label, which is like a VC, or a small indie producer who is like an angel investor.
• You keep adapting your product – you are in constant beta.
• You start small but think big. You want your song, or video or app to go viral.
• You experience growing pains, ‘creative conflicts’ and disagreements among the team on the best way forward.

In a recent article in the Economist, writer Ian Leslie takes the analogy a step further by describing four models for startup businesses with leading rock groups as examples.

1. Friends – The Beatles

The Beatles were four friends who worked intensely closely.  They dressed, spoke and looked alike.  As Leslie puts it, ‘Working with friends is exhilarating when things go swimmingly but it can be hell when things go wrong.’  During the 1960s the Beatles had fun and produced a fantastic songbook of great hits.  But by 1970 the band was riven with disputes. John Lennon was obsessed with involving his new wife, Yoko Ono.  Paul McCartney wanted to launch a solo album. George Harrison felt constrained in his role in the group.  They broke up.  When friends fall out the disagreements can become bitter and personal.

Friends can build successful long-term businesses if they can manage their egos and creative differences.  Larry Page and Sergey Brin were pals at Stanford University before founding Google in 1996.  They were following in the footsteps of two other friends who were Stanford graduates.   Bill Hewlett and David Packard started their company in a garage in Palo Alto in 1938.

2. Democracies – REM and Coldplay

REM was founded in 1979.  All four members of the band had an equal say in all decisions. Everyone had a veto and each received an equal share regardless of who wrote or contributed to each song.  The band collaborated well and enjoyed widespread success. They split amicably after 32 years.

Coldplay are a hugely successful band (and business) which operates on similar principles.  All members of the band have an equal say in decisions and an equal share of income.

However, most bands contain some very big egos and many have split up because of disagreements about contributions and remunerations.  A democracy is hard to maintain when success brings big rewards and when bad times mean rethinking and hard work.

3. Autocracy – Bruce Springsteen

In his autobiography Springsteen says, ‘Democracy in a band is often a ticking time bomb.  If I am going to carry the workload and responsibility, I might as well assume the power.’  When it comes to the E Street Band, Springsteen is unquestionably the boss.

Tom Petty and Heartbreakers started as a democracy with everyone getting an equal share but as they became successful that changed.  Petty exerted his authority and took a greater share of the responsibility and the rewards.

Autocracy works well when the leader is inspired, say Steve Jobs when he rescued Apple. But it can lead to disaster when a dictatorial boss goes off the rails as Fred Goodwin did leading Royal Bank of Scotland.

4. Frenemies – The Rolling Stones

Frenemies argue.  They agree to disagree.  The Rolling Stones were never great friends but they found a way to work together that has served them well for over 50 years.  Mick Jagger is a great front man and singer.  He is also a shrewd businessman whereas Keith Richards was never interested in the financial side of the enterprise.  One of their most creative early forces, Brian Jones, was forced out of the group.  Other band members came and went.

Wrapping it Up

The Beatles were highly creative and innovative but they burned out after seven years at the top.  The Stones have become a touring band whose greatest hits and most inventive years are well behind them but they carry on filling stadiums and playing to adoring fans.  Leslie compares them to Microsoft.

Most startups, like most new rock bands, fail.  They might make a great product but they are unable to sell it to enough people to reach a sustainable business.  Those that succeed can be wildly successful and then flare out like Nokia, Blackberry or the Beatles.  Those that find a way to work together and meet the needs of their loyal fan base can prosper for years – like Samsung, Microsoft, Coldplay or the Rolling Stones.

It is not enough to have great creativity and endeavour in your highly talented team.  You also need to find a corporate philosophy that suits your personalities and enables you to work together through thick and thin.

archive.org

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GUEST POST from Paul Sloane

Managing the Sales pipeline is a well-developed executive skill in any company selling large ticket items to business customers.  Each sales person has to gather data and input their reports and forecasts.  Some of the key actions in managing the pipeline include:

1. Qualification questions have to be answered.  Does the customer need our product?  Do they have a budget?  Are we in contact with the decision maker? Who is the competition?  Etc.
2. What is the dollar value of each item in the pipeline?  What is the likelihood of closing the deal?  What is the timescale?  Estimates for each of these questions enable a total sales forecast to be assembled and reviewed.
3. What are the barriers to each sale?  What are the key actions planned?  What additional resources are needed to win the deal?
4. We look back at the history of the pipeline.  What are the conversion rates from prospects to sales?  Why did we lose the deals we lost?  What is the sales velocity i.e. how long does it take to convert prospects into sales?  What could we have done better?
5. Every member of the executive team is involved and aware of the key issues.  They contribute ideas and resources to help close sales.

The pipeline is regularly reviewed at executive level.  It is an essential tool in running the business.  Lessons are learned, and changes are made to constantly improve the sales process.

The pipeline of innovation projects for new and improved products and services is also strategically vital for the business but typically it is not treated with the same attention or importance.   Let’s use a similar approach to the one above.

1. Qualify. Is there a customer need for each innovation?  Will they pay for it?  Are we in touch with customers who can evaluate the prototype and give us feedback?  What will this innovation compete with?  Will customers like it?  Can we crack the technology?
2. For each item in the pipeline we need an estimate of its cost to develop and projected payback.  This is reasonably straightforward for incremental innovations but particularly hard for radical innovations.  Nonetheless estimates are essential.  We can then evaluate the total projected impact of our innovation pipeline.
3. What are the barriers for each project? What are the key actions planned?  What additional resources are needed to bring this initiative to completion?  What technology challenges do we face?  Do we need external help?
4. Again, we look back at the history of the pipeline.  What are the conversion rates from promising ideas to implemented innovations?  Why did so many projects not make it to market?  What is the innovation velocity i.e. how long does it take to convert an approved initial idea into a new product or service?  What is the failure rate at each stage in the gating process?  What could we have done better?
5. Every member of the executive team should be involved and aware of the key issues.  But often they are not – they leave it to the Chief Innovation Officer or equivalent responsible person.

The innovation pipeline should be regularly reviewed at executive level but how often does this happen?  Because the revenue impacts are hard to assess and the technical barriers are tricky the innovation pipeline review tends to slip down the priority list.  We need to appraise it with the same rigour that we apply to the sales pipeline.  We can then use the insights gained to constantly improve and speed up our development programmes.

Based on a presentation by Charlie de Russet, Founder of Idea Drop.

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