Originally published by Fast Company, October 2011

When Steve Jobs unveiled the iPhone in January 2007, he famously described it as being a combination of just three things. “It’s a widescreen iPod, a revolutionary phone, and a breakthrough Internet communicator.” Though every journalist and Apple enthusiast in the audience (myself included) was won over by Jobs’s masterful presentation, by the time we stepped into the light of day, glaring holes were evident in the iPhone. Why didn’t it have 3G data? Where was real support for corporate email? And why couldn’t you write real applications for it?

On closer examination, it seemed Apple had blundered in its product strategy. Most famously, CBS MarketWatch’s John Dvorak claimed that Apple should cancel the iPhone before it shipped even one unit. How could a device with this many missing pieces ever succeed?

We know the rest of the iPhone story. Over the next four years, Apple has systematically added every single feature that it left out of the original iPhone while moving more than 100 million units. This slow and steady rollout of new features has been so successful that few remember that the App Store, now a central piece of the iPhone’s appeal and marketing campaigns, was not included in the original product.

What the media took for missing features or technical incompetence was actually a series of strategic choices that Apple made to scale down from all of the possible things a smartphone technically could do to the handful of things that the iPhone could do better than any other product on the market–media playback, visual voicemail, and multitouch web browsing.

Just because you can doesn’t mean you should.
There is no more exciting or rewarding activity a technology company can tackle than the development and launch of a new technology platform. There is also, however, no strategic move as risky. All too many new platforms, particularly in the technology industry, die out with their very first, unsuccessful product. It is therefore incumbent on great leaders to figure out what to include in that first product and what to leave out.

Oddly enough, seemingly under-powered and narrowly focused technology platforms tend to outperform their more broadly aimed peers. The Nintendo Wii dramatically outsold powerhouses like the PlayStation 3 and Xbox 360 for years. The Amazon Kindle is the market leader in e-readers. The original Flip handheld video camera began outselling much more full-featured camcorders shortly after its launch. And Apple’s “big iPhone that can’t make phone calls,” the iPad, quickly seized more than 80 percent of the share in a tablet category that also includes devices capable of running all of Windows.

In technology, simple beats complicated in almost every case. Apple’s disciplined approach to product development with the iPhone is a textbook example for how to launch new technologies strategically.

Why do so many companies give in to the lure of more?
Despite the astounding success of the iPhone, many companies choose to launch new technologies in a fashion that is diametrically opposed to it. Somewhere along the line, the idea takes hold that releasing a product that tries to do everything, even if it doesn’t do many of them well, is the best way to drive growth.

It is the desire to leave options open that ironically closes down options for many otherwise promising technologies. Companies fear that their new offerings will be labeled one-trick ponies if they carry too much focus. Yet trying to be known for too many things at the outset is likely to earn you the distinction of being a no-trick pony.

Research in Motion has, unfortunately, demonstrated precisely how not to launch a new platform with its PlayBook tablet. What could have constituted the future of the company will be remembered as a fiasco. Announced in the fall of 2010, the PlayBook was positioned as a more business-oriented competitive response to Apple’s iPad. RIM executives proudly touted the many features it possessed that Apple’s offering lacked: cameras, Adobe Flash compatibility, multitasking, support for business tools like Microsoft Office.

RIM’s devotion to outdoing the iPad in both consumer and business functionality led RIM to try to do too much, leaving dozens of critical features half-baked. Worse, by the time it shipped, Apple had added to the iPad the most important of the features RIM promised in the PlayBook. While the PlayBook is still technically on the market–as of this writing–it has failed to so much as make a dent in iPad sales. Sprint even canceled its plans to carry the device shortly after launch.

Launch with a focused product, then extend it.
When launching a new technology, it’s far better to constrain the capabilities of your big new idea–even if it’s an artificial constraint–than it is to over-promise and under-deliver. Being selective about features at the outset does not rule out later functionality or prospective customers.

The original iPhone was a very limited product–it only did three things. But it was built on top of iOS, a technology platform whose potential is still just beginning to be realized. Big platforms grow from little, focused products. Even if the geeks of the world think otherwise.

Originally published by Fast Company, October 2011

Imagine it’s 1997 and you’re sitting in a small room in Los Gatos, California. You’ve decided that you are going to get into the movie rental business. That’s right, you want to dethrone a huge entrenched competitor that has been dominating the industry for years, Blockbuster. How would you design the next big idea to disrupt the industry?

Most conventional wisdom tells you the next step should be one of three possibilities. You can either do some brainstorming and come up with 100 new ways to improve the movie rental experience, do some research to understand movie renters’ deepest needs, or do some accounting and find out how to build a business that operates at a lower cost than Blockbuster.

However, an oft-overlooked way for a company to reinvent its business can be found buried deep in its business plan–the revenue model. A company’s revenue model, very simply, is the way it makes money. Does the company charge a subscription to its customers like a local gym does, or does it make its money through advertising like a blog? When choosing a revenue model, most companies wait until the very end of development and simply look to what market leaders are doing, altering it slightly. But when considered carefully, the revenue model can be a very powerful tool. By changing the revenue model, a company will change its entire business.

Imagine what our movie rental business would look like if instead of charging for each rental, we charged a monthly subscription. If customers are monthly subscribers, they should be able to keep movies for as long as they want, so late fees no longer make sense. But that causes logistical challenges, because if people are holding on to movies indefinitely, how will the company manage inventory? Perhaps it could entice people to provide their preferences in advance via an online list. Then, if customers provide their preferences ahead of time, why make them come to a store at all? Why not mail them their movies?!

And thus you have designed a highly profitable and wildly disruptive new video rental service, Netflix. To be fair, Reed Hastings and his team at Netflix didn’t go through these steps exactly as above, but it’s easy to see how thinking about the implications of a new revenue model has the potential to change the whole business. And revolutionize a market.

Eight Types of Revenue Models

Any business will benefit from rethinking the implications of changing their revenue model, and doing so early in the design process rather than as an afterthought. However, the task of doing so may seem daunting due to the enormity of ways that a company can make money. Professor Andy Hargadon at UC-Davis has come up with a useful framework for revenue models.

There may be an infinite number of variations a company can use to make money, but they really all boil down into eight types:

1. Unit sales: Sell a product or service to customers. GE uses this method when they sell microwaves.

2. Advertising fees: Sell others the opportunities to distribute their message on your space. Google uses this method with its search product.

3. Franchise fees: Sell the right for someone else to invest in, grow, and manage a version of your business. McDonald’s uses this method with its stores that are independently owned and operated as franchises.

4. Utility fees: Sell goods and services on a per-use or as-consumed basis. Most electric companies use this model when they charge customers only for the electricity they use.

5. Subscription fees: Charge a fixed price for access to services for a set period of time. Gold’s Gym charges a monthly or yearly subscription fee for people to access their gym.

6. Transaction fees: Charge a fee for referring, enabling, or executing a transaction between parties. Visa charges a transaction fee to retailers each time a customer purchases a product in their store.

7. Professional fees: Provide professional services on a time-and-materials contract. H&R Block makes money by charging customers for the time it takes to prepare their taxes.

8. License fees: Sell the rights to use intellectual property. Every time a customer buys a T-shirt or a hat with the logo of their favorite sports team on it, that team makes money from license fees.
Using Revenue Models to Design a Business

Any company leader can look at the eight revenue models and brainstorm new ways to reinvent their business. Doing so early on in the design of a new business concept will not only lead to different ways to make money, it will lead to different businesses. By bringing revenue model ideation into the design process, and thinking about the implications of those revenue model changes, a company can find their own versions of “no late-fees” and “online queue” to upend their industry.

Originally published by Fast Company, October 2011

As the Girl Scouts approach their 100-year anniversary in March, they are introducing a whole new lineup of badges. Way back in 1913, the organization had badges like Flyer and Electrician to represent those trailblazing professions. Today, girls live in vastly different times and have wider opportunities in business leadership. With that in mind, Jump worked with the Girl Scouts to develop a badge program to expose girls to cutting-edge fields such as web design and social innovation.

In thinking about what we’ll need from our future leaders, executives have come to realize that the ability to innovate will be one of the foremost qualities–that is, the ability to quickly identify solutions for problems, many of which don’t even exist yet. To paraphrase President Barack Obama: Innovation is our ticket to success in the future. But in the U.S., women are still poorly represented in leadership teams. At last count, there were just 12 women CEOs in Fortune 500 companies. In addition, while technology is fueling a lot of new business growth, it’s an industry still maligned with very low numbers of women.

When we started to design the program, we realized that it would need to be much more than about designing cool stuff; it would have to involve developing empathy. It would also have to be age appropriate across four age levels, from second to tenth grade. The program caters to younger girls’ interests and capabilities, yet grows as older girls develop more critical-thinking skills. For this reason, the first level of Innovation, the Inventor badge, is about creating new things, while senior Girl Scouts work on building new businesses for the Social Innovator badge.

To better understand the full value Girl Scouts has had on women, and to learn what girls need today, Jump spent time talking with Girl Scouts alumnae (of which there are over 50 million today), current Girl Scouts of all ages and their parents, and executives within the organization.

Our findings led to some core principles that guided the definition and development of the Innovation badges. These principles are relevant for anyone developing ideas and businesses, not just children and young adults.

1. Leverage children’s existing creativity

Children are naturally curious and creative. The last thing one would want to do is stifle those tendencies by prescribing one path toward innovation. At the same time, there are best practices that the girls can benefit from learning. The trick in creating the Innovation badge curriculum was to strike a good balance between providing suggestions and letting the girls’ inner interests guide them. Rather than dictating the right way to develop new ideas and businesses, the Innovation badges let the girls choose among three options at each step, encouraging them to work on something they’re passionate about. This way, they can customize their own program to match their unique interests and style.

2. Train hybrid thinkers

Solving the ambiguous problems that plague our society, such as health care or access to clean water, will require working across multiple disciplines. Instilling the value of hybrid thinking–the mashing up of disparate disciplines–will ensure that we have leaders ready to tackle pressing issues. The Innovation badge program incorporates methods from many fields–such as anthropology, engineering, graphic design, and business strategy–to help the girls identify what’s needed, imagine what’s possible, and see how to make ideas a reality.

3. Build empathy before solutions

Making the world a better place for those who inhabit it is not about creating cool, shiny new objects. To have real impact on the world, to make the world a better place–the heart of the Girl Scout ethos–the girls should be able to identify what people really need. Each of the four levels of the Innovation badge has activities to help the girls gain empathy for the people for whom they’re designing solutions. To this end, the girls are trained, for example, to observe, take notes, and experience things first hand.

4. Enable great storytellers

One of the oft-overlooked softer skills that can decide whether an idea becomes a reality is good storytelling. Many great ideas never see the light of day because the creators neglected to craft compelling stories–no one ever got the full potential of the idea. The Innovation badge program builds good storytelling skills by instructing the girls on how to pitch an idea through a variety of means, from giving a presentation to using advertisement or even putting on a skit.

5. Get feedback early and often

Creating great products and services requires getting good feedback along the way. The Girl Scouts Innovation program reinforces the importance of asking people for feedback through a variety of means. The program also underscores the value of collaborating with friends and family members to make ideas better. As the world gets increasingly more complex, future leaders will have to be experts at enlisting others to help create solutions.

Given how complex and uncertain that future is sure to be, it’s assuring to have organizations like the Girl Scouts focusing on building the skills our future leaders will surely need. With the Innovation badge and the rest of the new badge lineup, the Girl Scouts are well positioned to develop the leaders of tomorrow.

Originally published by Fast Company, November 2011

Have you wondered why we linger in an Apple store, playing with shiny screens, but never set foot in a Sony Style store (which, incidentally, has its devices locked behind glass doors)? Why are one company’s stores a multi-billion dollar business while the other doesn’t even show up in their annual report?

The difference is that Apple has created something very different from the cold, “hands-off” nature of traditional high-end stores, while avoiding the clutter of a warehouse store like Best Buy. In sociological terms, Apple has very deliberately changed the “script” of electronics shopping.

What do we mean by “scripts”? Sociologists have spent years studying experiences and have noticed that there are shared rules that govern how we act. These scripts are unwritten and unspoken, yet greatly influence our day-to-day behaviors and interactions.

Scripts are why we know what to do when we go to the DMV. Unfortunately for the DMV, that script includes complaining to the people in line with us, expecting a bad photo to be taken, and talking afterward about how inefficient the process was. On the other hand, a birthday party is supposed to be a happy experience. We appropriately sing and smile, often in spite of how much is on our minds.

In the mundane routines of our lives, experiences that stand out are often those that change the existing scripts. Mini Cooper, for example, replaced the “cheap small car” script with one that leverages the fun aspects of driving a rally car.

To truly design a great experience that’s right for your company, we need to look beyond the field of design to sociology, economics, organizational behavior, and even theater. These seven principles will help you be strategic about the experiences you design and choose the right script for your company.

1. Experience design is not about luxury.

As soon as the conversation turns to design and customer-centered activities, the knee-jerk reaction is to cast the product as a “premium” idea. The truth is that customer experience can be central to even “value-based” businesses. Consider Southwest Airlines. At its best, the combination of heart, humor, and efficiency makes for a distinctly Southwest script for air travel that’s different from the norm.

2. Start with empathy.

Understanding and challenging social scripts requires stepping into your customers’ shoes. Harley-Davidson has a strong community of riders as brand ambassadors precisely because its employees are the kinds of people who equate biking with life and freedom, and regularly hit the open roads.

3. Do your own thing.

Find authentic sources of connection with your customers and stick to them. People will value originality as long as you continue to serve their needs. Target was a discount retailer trying to outdo Walmart on price before it realized it could create a destination for the design-minded community, providing a lot more value.

4. Utilize all elements of theater.

Create an immersive world with consistent rules. To reinforce the script, think of the whole experience as a “play,” including the cast, costumes, set, and props. Starbucks employs all of these elements in their coffee-shop experience– everything from the interior design to the names of the drinks are considered in delivering the experience Howard Schultz envisioned when popularizing the “coffee-shop” script in the U.S.

5. Use different incentives to create different behaviors.

Align your people, including their incentives and motivations, with the desired experience. Saturn changed the car-buying script in the 1980s by employing salaried salespeople–and eliminating a stereotype of the sleazy car salesman who’s after commissions.

6. The devil is in the trade-offs.

The experience you offer should have a clear point of view. What you leave out often says more than what you leave in. Chipotle refuses to use freezers, in the fast food industry no less. And Whole Foods won’t accept over-processed foods in its aisles. Managing trade-offs tightly is essential to creating a script with a character that inspires people and separates a brand from the pack.

7. Evolve to stay relevant.

Never stop prototyping and testing changes to make the experience better and to change in step with people’s needs. McDonald’s has proved surprisingly resilient through market ups and downs. It constantly experiments with its experience at its Innovation Center in Illinois, making sure new elements–like its wildly successful coffee offerings–support and augment its business goals.

Designing great experiences is a blind spot for many corporate leaders. It’s an area of expertise that needs just as much attention, rigor, and patience as the other aspects of business excellence taught in our B-schools. And with folks like Apple raising the stakes, ignore it at your own peril.

Originally published by Fast Company, October 2011

Whether they’re dealing in cars or cookies or computers, companies typically struggle with how to effectively and reliably create innovative products and services. Often, they discover that the greatest challenges aren’t in coming up with big ideas but in the organizational and management issues that these new ideas present.

Clayton Christensen at Harvard Business School has done some phenomenal work on disruptive innovations and how they differ from sustaining offerings. At Jump, we have built on this foundation, developing a framework to help folks figure out how to bring new ideas to market, create more realistic testing and growth expectations, and better manage their innovation pipelines. This requires identifying what types of innovations you have, what you need, and how to nurture and grow them all.

The Three Types of Innovations

Sustaining products and services are the kinds of innovations companies often need to develop just to stay in the game. These incremental innovations can be thought of as variations on a theme. For example, in the category of household cleansers, a sustaining innovation might involve making the cleaning agent 10% stronger or pairing it with a new scent.

Breakout offerings are those that significantly up the level of play within an existing category. The sleek Motorola Razr, with its boundary-pushing design, was a runaway success for Motorola. Seeing it, customers couldn’t help but want it–over time making it the best-selling line of clamshell phones ever. That said, it was still a clamshell phone, sold and used in much the same way as previous cell phones.

Disruptive innovations are the sort of big ideas that many of us have in mind when we think about an innovation. They are called disruptive because they disrupt the current market behavior, rendering existing solutions obsolete, transforming value propositions, and bringing previously marginal customers and companies into the center of attention. The iPod, which radically changed the way we listen to and buy music, is one such innovation.

To help explain the difference between these three types of innovations, let’s look at the coffee industry. When Maxwell House came out with a dark roast version, it introduced a sustaining innovation. While a new flavor, it was only a variation on their existing products that customers could instantly understand. A breakout innovation was General Foods’ line of International Coffees, which added gourmet flavors to the instant coffee category and elevated the at-home coffee experience. And Starbucks has obviously been a disruptive innovation, turning coffee into a destination experience worth paying a lot more for.

Note that in a given category, disruptive innovations often come first and are then followed by a series of incremental innovations, with sporadic breakout hits interspersed. Eventually, the market is disrupted once again, starting the cycle anew.

Not All Innovations Perform the Same.

Because disruptive innovations have the potential to yield the greatest benefit to a company, firms often make the mistake of thinking that disruptive products should lead to immediate market success. Even worse, some firms unwittingly begin to classify their products purely on the basis of their immediate market forecast, calling likely big hits “disruptive.” In fact, the opposite is true. Because disruptive offerings differ significantly from the status quo, they often test poorly and require time to gain market acceptance. Indeed, one should actually be suspicious of so-called disruptive innovations that show immediate widespread success.

The typical profile of revenue performance is:

• Sustaining: Immediately moderate, then tapering off.
• Breakout: Rapidly strong, then quickly dropping to a lower level.
• Disruptive: Longer gestation period leading to exponential growth.

Managing Different Forms of Innovation

Too often, work on a disruptive innovation gets bogged down in a system that is optimized for the creation of sustaining offerings. The success of the project comes to depend less on the quality of the innovation and more on the quality of the deals the team can cut. Such projects demonstrate the importance of establishing different metrics and procedures in advance of each project so that teams know the goalposts they’re aiming for and can tailor their approaches accordingly.

For disruptive endeavors, success typically requires different development processes, different approval and funding mechanisms, and different performance expectations.

Diversifying Your Portfolio: Managing Risk and Reward

By tailoring the product development process for different types of innovations, a firm can give itself the opportunity to generate immediate new product revenues while still nurturing future opportunities. To support that goal, companies should classify each of its new product concepts within the framework of sustaining, breakout, or disruptive. This allows a company to manage risk and reward at a portfolio level.

For instance, some companies seek to develop a healthy balance of all three in order to meet the needs of today and tomorrow. In other cases, companies are able to focus their innovation efforts by clearly stating that they are prioritizing the development of breakout products and consciously minimizing the exploration of disruptive opportunities.

Categorizing innovations using this framework is an effective way to help ensure that target outcomes are in line with early expectations, and that any firm seeking to innovate has an effective system for doing so.

Originally published by Fast Company, Septempber 2011

Large companies looking to jump-start growth tend to be more successful when reinventing an existing brand than creating one from whole cloth. However, not all brands have the same potential for growth through revitalization. All too often, at the sight of declining sales, the knee-jerk reaction is to try to reinvent a brand without asking if it’s worth the investment in the first place.

Asking these five questions will help companies determine which businesses are worth investing in–and which ones to leave behind.

A clear value proposition can make a brand refresh harder.

1. Can its value proposition be redefined?

Increasing a brand’s relevance to a greater number of people is one way to grow the business. But some propositions are more easily redefined than others. In fact, sometimes a clear proposition can actually make it harder for a brand to refresh its image. One approach is to take a brand focused on a functional benefit, and redefine it around an emotional benefit.

For example, prior to Dove’s 2006 “Campaign for Real Beauty,” Dove’s point of differentiation was a functional one: with moisturizing cream, its products were uniquely suited to cleanse skin without drying it out. With the brand refresh, Dove’s new proposition of supporting authentic beauty appealed to a broader swath of women at an emotional level. The new positioning increased sales of Dove products in the U.S. and abroad by 700%.

2. Is the category growing, or does it demonstrate growth potential?

Often, businesses undergo a reinvention in order to make strides into a growing category. Any new category won’t do, however. The brand must already demonstrate a right to play based on existing competencies or equities.

K-Y Jelly began as a surgical lubricant preferred by doctors because of its water- soluble base. Although Johnson & Johnson began marketing a consumer (nonsterile) version of the product in the 1980s, it took another two decades for the company to realize how lucrative a brand K-Y could become if they would just embrace K-Y’s role as a sexual lubricant. In order to do so, the company completely shut down its medical business, rebranded its identity in 2004, and added climax-enhancing gels and massage oils to its product line.

3. Is it on trend?

Brands on the wrong side of history, like Hummer in an age of environmental consciousness, are difficult to align with growing trends. The investment that’s potentially required to change perceptions of a strong brand may not be worth it. Companies are often better off acquiring or creating a new brand to tap into the trend.

In the case of Sierra Mist, however, parent company PepsiCo saw the writing on the wall in the political and social clamor around healthy eating. Sierra Mist–a lemon-lime-flavored carbonated soft drink–was an obvious brand to kick off PepsiCo’s new commitment to health. PepsiCo re-launched it in 2010 as Sierra Mist Natural, a caffeine-free and all-natural formulation sweetened with real cane sugar instead of high-fructose corn syrup. In its first six months on the market, sales of Sierra Mist Natural experienced double-digit growth and made up for previous years’ decline in sales.

4. Is its revenue sizable?

Although past performance does not guarantee future success, sizable sales figures may suggest underutilized consumer love. A brand that demonstrates the ability to generate strong sales should be built into a more robust business.

It’s hard to grow any brand, like Hummer, that’s on the wrong side of history.

P&G did this after having initial success with the launch of Febreze Fabric Refresher in 1998. Market research confirmed that Febreze fulfilled an unmet consumer need. More surprising, though, was the discovery that consumers were using the product not just in the laundry room but in every other room in their homes. P&G followed up with several new products, such as odor-eliminating air fresheners and candles, and line extensions, including a variety of fragrances to accommodate different tolerance levels for scent. Today, Febreze is one of P&G’s billion-dollar brands.

5. Is it strategically useful for developing the company’s competencies?

Brands that signify broader opportunities that a company wants to take advantage of across the portfolio can help build internal capabilities.

For P&G, Oil of Olay was a key leverage point in gaining a more robust market position in health and beauty. Between 1984 (when P&G acquired Oil of Olay’s parent company, Richard-Vicks) and 1997, P&G almost exclusively acquired health and beauty brands, signaling its interest in the category. The process of reinventing Olay in the late 1990s helped P&G improve its skin-care and packaging technology as well as develop a more sophisticated understanding of how to appeal to women.

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And what about the brands that don’t meet any of these criteria? The toughest part of following any strategy is divesting from businesses that were once successful and may still have loyal consumers. P&G took this step with Crisco in 2001, when prevailing health science blasted hydrogenated oils for contributing to this nation’s heart disease epidemic. Luckily for the brand, it still retained enough equity to attract a merger with J. M. Smucker, a food company whose competencies were arguably more appropriate for transforming the brand into a 21st-century kitchen staple.

As it turns out, not all brands are worth reinventing. Asking these five critical questions can help companies make the right decision for their brand, even if that means letting it die.