In part 1 of the reinventing your business series, I outlined 1 general approach to business reinvention, and 7 ways to invent new markets and customer segments, what I call “Market Innovation”.
This post will focus on your value proposition and I will describe 9 ways to “Value Innovation” and provide inspiration on how to enhance the value you offer.
Remember, reinventing your business is a matter of switching perspectives and challenging your mental models and the “way we do things around here”. It could well be that you employ #9 already, but then pick another one that suits you better. It’s not about implementing all 25 ways at the end. But it’s about choosing those that will bring you further. Also don’t go for the easiest one. Look at the list and think about which idea irritates you the most. Why is that so? What is your mental model in that area? Why don’t you believe that something like this can work? Why do you believe that others do work? Use the ideas not only to inspire yourself and your team, but also as a way of exploring your cognitive maps.
Let’s get started.
#9 Offer complementary products and services
Sounds like a fairly easy one, doesn’t it? Indeed venturing off into the vicinity of your current offerings might be a sound first step on your innovation and business reinvention journey. It allows for first wins, is not too risky and will probably not upset others within your organization. And you could indeed be creative regarding the kind of products and services you offer. Think about the McCafé: one could argue that coffee and cake are complimentary products to the main course. W Hotels teamed up with Bliss to offer spa facilities in its hotels and Bliss products to take home. Which complementary services would make your customers’ life easier and the buying experience a lot more satisfying? We recently bought new furniture, and I can’t tell you how happy I was the company not only delivered it, but also set it up. Anything similar you can do for your customers? Which other products do your customers typically buy along yours? Think fries and ketchup. Cars and insurance. Etc. What good would the iPod be without iTunes? Indeed Apple puts them together on its website. What products can you offer along your services? What services along your products? Offering complementary (why not make them complimentary?) might also lead to the next stage: offering bundles.
#10 Offer bundles
The difference between complementary products and bundles is that with bundles there’s no choice. You get the bundle and not the separate products. (Be aware that this can be annoying to some customers.) All the above examples would also work as bundles and maybe even make it easier for customers, as they don’t need to think about whether they should buy the complementary product or not. Again Apple’, recent success with its products and increase sales might be due to the fact that the typical software one needs comes pre-installed, as a bundle. Indeed computers and software often come as bundles. Just like the meals at McDonald’s do (fries + drink + burger or salad or whatever). Yes, it can be that easy!
#11 Offer solutions and experiences
The next step is going beyond selling products and services to offering solutions and experiences. Let’s start with solutions. Why do people buy your product? To own it, or because they want to solve a problem or satisfy a need? You might buy a watch to know what time it is, but you typically buy a Rolex for another purpose: to show that you can afford it, to make a statement, to feel proud, whatever. This in turn will require a different approach, a different product as such. There was this example (I think Clayton Christensen wrote about it in one of his books) about people buying milkshakes not because they wanted a drink, but to kill time on a long commute. UPS went from shipping boxes to offering supply chain management solutions. Emirates offers business class passengers the service of being picked up and driven to the airport. It’s not only the flight that counts, but getting to the plane is part of the solution. You might again want to look at your customers’ total buying experience from purchase to disposal to find out what it is that they are trying to accomplish and offer the according solutions.
Experiences are the holy grail! Here you’re really moving from the selling stuff to offering your customer a total experience! Think first class flights: it’s not about getting from A to B, but it is the experience that counts. Airlines are trying hard to make that kind of experience available to business and economy class passengers as well at the moment (OK…at least some do!). To make it an experience you might have to integrate the customer. It’s about offering “co-creation” experiences. Like Lego started to do some time ago. As a Lego customer you can put together your own very special box of Lego bricks. It might also require you to shift from a functional appeal to an emotional one (see #14). The iPhone is not simply a phone, it’s an experience.
#12 Look at substitutes (from other strategic groups and industries)
This might be a potential spot to get inspiration for additional products and services, solutions and experiences. The questions is why people might trade your products for substitutes from other industries or strategic groups. Why do you prefer the car to the train or a flight? Maybe it’s the frequent point-to-point departure? This was inspiration for Southwest airlines for example. Austrian railways have recently looked at business class travel to bring the experience onto the train.
#13 Focus on the job to be done
We touched this one already with the solutions. Clayton Christensen has brought this to our attention again. Levitt did introduce it with his famous example of the the railroads: are you in the railroad business or in the getting people and stuff from A to B business. This shift in perspective opens a whole new range of possibilities. Hilti, the Liechtenstein based producer of power tools, has recently shifted from merely selling products to focusing on the jobs its customers try to get done. In Hilti’s case this means that you no longer have to buy the tools you need, but instead you can rent them to perform the job you need to get done and return them afterwards. Rental cars is based on the same idea I would argue.
#14 Switch your appeal: functional versus emotional
This is one of my favorites. Think Apple. People don’t buy the iPhone simply because of it’s functions. Indeed the first version was not even state of the art! But that’s not what Apple was selling with the first version. It was much more about being cool! Recently RIM has started trying to do the same thing with it’s “Love what you do” campaign for the Blackberry 9700 bold. It’s a perfect example from positioning a product no longer based on its functions but trying to appeal to people’s emotions.
#15 Selectively eliminate, reduce, raise and create
This one was introduced by Kim and Mauborgne as a key to Blue Ocean Strategy. Instead of adding new features all the time, you might want to think about what elements you can eliminate, because nobody needs them anyway, which ones you can reduce below industry standards, which ones to raise and which ones to create. Have a look at the Nintendo Wii. Compared to the Xbox or the Playstation you can’t play DVDs or Blurays, no storage (eliminate), graphics are a lot less powerful (reduce), fun was raised and the new motion control technology was created.
#16 Expand the use of your assets and capabilities
Which unique assets do you have and how can you use them differently? This is another way for looking at the McCafé. How could McDonald’s use its prime locations to attract additional business? By offering a new solution: the McCafé. The idea is kind of the one for using core competencies. Some people think that you should start with a clean sheet of paper and forget about everything your business does at the moment. While it that can be an interesting exercise, I found that it is also a very difficult one.
#17 Look at the customer buying experience cycle
This is a bit of a summary of all of the above. The key is to look at your customers’ buying experience from the first time they become aware of your product until they have to dispose of it:
- Awareness
- Evaluation
- Purchase
- Delivery
- Use
- Supplements
- Maintenance
- Disposal
Kim and Mauborgne added six utility levers across these steps:
- Customer simplicity: in which of the above stages are the biggest blocks to customer productivity?
- Simplicity: in which stage are the biggest blocks to simplicity?
- Convenience: in which stage are the biggest blocks to convenience?
- Risk: in which stage is the highest risk?
- Fun and image: in which stage is there the least fun and the worst image?
- Environmental friendliness: in which stage are the biggest blocks to environmental friendliness?
So what can you do today to offer your customers a better experience and value proposition to make their life easier and really help them to get the job done?
The next and final post in this series will look at 8 ways to reinvent your business model…so stay tuned!
Continue reading part 3.
