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With pressure at an all-time high and investors losing patience, it’s time for brands to take control of their destinies. Although there’s no single way forward, the mission remains clear: Disrupt your business before someone else does.

On the whole, the fast-moving consumer goods (FMCG) sector continues to face headwinds to growth. Many longstanding brands within the sector, while once prosperous, have found it challenging to repeat yesterday’s success. At the root of these challenges is the rapid pace of change in the world, which has forever altered the way consumers engage with brands. While this dynamic has certainly challenged traditional conventions, it has also presented many new opportunities. The brave brands that have capitalized on these opportunities are finding success and are seeing a clear path back to growth. Those who haven’t proactively embraced today’s pace are finding themselves vulnerable to a new generation of fearless entrants intent on bringing disruption.

It’s time to bring the fast back into fast-moving consumer goods. We offer four ways that brands can bravely seek to disrupt their businesses, as well as examples of brands that have taken the leap, in an effort to jumpstart their business, and returned the fast to FMCG.

1. Disrupt by Thinking Like a Startup

Innovation is the lifeblood of any brand. It always has been, and always will be. But innovating at scale has posed a challenge for large brands within large corporations. Applying established growth methods to established brands is, by definition, counter to the innovation they seek. To achieve mass disruption, brands need to think like a startup.

This is a strategy into which many FMCG companies—including Nestlé, Procter & Gamble, Coca-Cola, General Mills, and Mondelēz—have leaned, forming startup/venture funds or incubators to find their next innovation. These organizations are finding success by isolating themselves from the typical constraints and KPIs of their larger businesses and acting like entrepreneurs, working with lean innovation philosophies built to nurture a startup mentality and disruption.

Within this year’s Best Global Brands ranking, there are several standout examples of brands fostering mass disruption by thinking like a startup. All of these companies have demonstrated strong commitment and responsiveness:

  • Nestlé started an internal innovation project consisting of a digital acceleration for the company. Called DAT and inspired by Facebook and Google, the project is an entrepreneurial space, located in Nestlé’s global headquarters, where employees work for periods of eight to 12 months at a time. DAT members undertake immersive training and work on strategic business ideas, often participating in hackathons and intensive problem-solving activities. For Nestlé, the overarching goal is to “loosen the screws” of a large and hierarchical corporate company in order to permit flexibility and experimentation, e.g., the values of a successful startup.
  • Pampers found success in its Pure Protection line, which is an example of its lean innovation process, developed by a 10-person team over approximately 18 months—roughly half the amount of time and staffing resources of a typical rollout.
  • Lancôme launched Le Teint Particulier, a cosmetic foundation that was created by L’Oréal’s technology incubator. The foundation is customizable to specific skin tones: the Lancôme staff take a full scan of a customer’s skin and then use a diagnostic tool to calculate the precise formula that matches that skin. The foundation is then mixed in-store, before being placed in an identifiable bottle, with all the skin-type and color-preference information kept on file for the consumer’s next visit.

Want more inspiration on thinking like a startup? Explore the Breakthrough Brands that are driving disruption across sectors.

2. Disrupt through new business models

The rise of e-commerce has certainly transformed the landscape for FMCG brands forever. Brands that have relied on traditional business models, built on the shoulders of brick-and-mortar distribution, must continue to look for new ways to develop consumer-centric propositions—from product development to branding to distribution. Brands that haven’t sought new business models have found themselves being disrupted.

For instance, we’ve seen how FMCGs have been disrupted by the direct-to-consumer (DTC) challengers that are taking control of their value chain, capitalizing on shifting consumer purchasing behaviors. It wasn’t long ago that propositions like Dollar Shave Club, Warby Parker, and Allbirds were not considered serious competitors by the category’s elite. However, these brands recognized that the DTC business model has many benefits: the ability to be nimble, leveraging the opportunity to get much closer to consumers, innovating in real time in the marketplace, controlling the entire value chain, and pivoting with agility.

In response, some large FMCG brands are taking a page out of the disruptors’ playbooks and exploring alternative channels and business models as a means of innovating at mass scale. From this year’s Best Global Brands list, we highlight the following examples:

  • PepsiCo launched DTC product Drinkfinity, as the company responds to consumer preferences that are shifting from fizzy beverages to alternative territories. This innovation features a reusable water bottle with disposable flavor pods.
  • Kellogg’s launched a key innovation initiative, Joyböl, a “ready-in-seconds smoothie bowl,” targeting the hyper-convenience trend. In doing so, they also launched DTC, forgoing traditional distribution.
  • Gillette, fighting back against category disruptors, began receiving orders through the company’s new online DTC service, Gillette On Demand. This new service offers the traditional subscription-only option and an additional flexible on-demand purchase option, with an industry-first reorder process that is as simple as sending a one-word text message.

3. Disrupt through acquisition

With organic growth continuing to be a challenge, FMCGs should look to grow through acquisition, either to boldly enter new categories (to capitalize on shifts in consumer desires) or to bravely double down on categories where they already play.

Interbrand’s Brand Strength methodology comes into play when considering an M&A strategy, as data shows that this is a viable approach to jumpstart a stagnant category. M&A activity among the top FMCG companies, including P&G, L’Oréal, Nestlé, and Unilever, has seen an increase for 15 years running, driving the highest revenue jump for this group since 2011.

Examples from this year’s Best Global Brands:

  • Kellogg’s acquisition of RXBAR for USD $600 million was a bold move to capitalize on shifts by consumers to more health-conscious offerings with simpler ingredients.
  • L’Oréal acquired Modiface, a leading-edge VR technology player, signaling its commitment to evolving consumer experiences with cosmetic brands.
  • Colgate purchased two of the fastest-growing professional skincare brands, PCA SKIN and EltaMD, in an attempt to elevate the brand into the global skin-care category.
  • Danone completed its USD $10 billion acquisition of WhiteWave, bringing together businesses and brands to better meet consumers’ diverse preferences in high-growth categories.

4. Disrupt by bravely taking a stand

Disruption can take many forms, including casting your brand in a new light and creating new relevance and engagement opportunities with your audience. More and more, people are not merely buying your brand but rather buying into your brand, as they seek those that align with their values.

This is playing out as brands go beyond the traditional approach of simply pushing their product’s benefit messaging. Instead, brands that stand out engage in true brand activism, driving home a stance that bravely tackles topics that matter to consumers. Some examples of brand activism from this year’s Best Global Brands:

  • P&G announced a partnership with advocates, including journalist Katie Couric, aimed at driving gender equality. P&G announced the partnership during its #WeSeeEqual Forum and noted that some of P&G’s best-performing brands have the most gender-equal campaigns: Always’ #LikeAGirl, SK-II’s “Change Destiny,” and Olay’s “Live Fearlessly,” along with Tide, Ariel, Dawn, and Swiffer ads that show men sharing the load in household chores. Chief Brand Officer, Marc Pritchard, noted, “It’s clear that promoting gender equality is not only a force for good, it’s a force for growth.”

 

  • Danone is another brand firmly taking a stand when it comes to “One Planet. One Health.”—a campaign that reflects its vision that the health of people and the health of the planet are interconnected. What makes this successful is the internal commitment and external authenticity with which Danone leverages this brave brand stance.

The future belongs to the brave

Brands need to take bold action to achieve growth. The path forward can take many shapes. Opportunities are out there, but to find them, brands need to have the bravery to disrupt themselves before someone else does. This isn’t a sector for the timid. The future belongs to the brave.

innovationbrandcell articlesBusiness Model Innovation
A successful company understands the need to reinvent itself every now and then to keep up with competition, market changes, technology and customer interest. Not doing so can mean a drop in stock price, a decrease in revenue, bankruptcy and even death. Does the name “Blockbuster” sound familiar?

Netflix Before

Today’s generation probably doesn’t remember that in the late 1990s and early 2000s, “Netflix and chill” wasn’t as easy as firing up the laptop and picking out a movie or TV show to binge-watch with no commercial interruptions. Instead, Netflix was kind of like an online Blockbuster.

In 1998, Netflix launched the first DVD rental and sales site with Netflix.com. One year later, the company debuted its subscription service, which allowed movie buffs to rent unlimited DVDs for a low monthly cost and receive them by mail.
 

Netflix After

It wasn’t until 2007 that Netflix transitioned to online streaming. Finally, viewers of all ages would have access to some of their favorite shows and movies, as well as original Netflix content.

Although the company has received some negative feedback from customers due to pricing changes, it’s experienced financial success over the long term. For example, Netflix stock was trading at $3.55 at the beginning of 2008. On Sept. 5, 2018, the stock closed at $341.18.

These days, it’s safe to say that Netflix is one of the best stocks to invest in. In July 2018, Netflix announced 5.15 million new subscribers during the previous quarter, bringing its total base to 130 million.

 

IBM Before

IBM knows a thing or two about reinventing itself and keeping pace with ever-evolving technology.

Since debuting as the Computing-Tabulating-Recording Company more than 100 years ago, IBM has undergone major transformations. Back then, CTR manufactured and sold various types of machinery, such as commercial scales, industrial time recorders, meat and cheese slicers and more. It wasn’t until 1924 that CTR became International Business Machines Corporation, although it had operated under the name since 1917 in Canada.

Fast-forward a few decades to the 1960s, after Thomas J. Watson Jr. became CEO and “led IBM’s transformation from a medium-sized maker of tabulating equipment and typewriters into a computer industry leader,” according to IBM’s website. In 1964, the company created System/360, which made it possible for machines in a product line to work with one another, creating a huge impact in the corporate world.

Less than 20 years later, in 1981, the IBM Personal Computer arrived. Although it wasn’t the first-ever PC, people began buying these computers to use in their daily lives.

However, the 1980s and 1990s were rough for the company. According to its website, “IBM was thrown into turmoil by back-to-back revolutions.” The PC revolution also brought competition from Microsoft and Apple, reported NPR in 2011. Further, IBM suffered annual net losses that reached the billions — a record of $8 billion in 1993, to be exact.
 

IBM After

The company had two options: reinvent or die. So, IBM shifted its focus to IT and consulting, according to NPR.

Still, the company has plans to further reinvent itself. In her most recent chairman’s letter, CEO Ginni Rometty wrote, “We have reinvented IBM for this moment — to fuel your dreams with Watson, with IBM Cloud, with deep expertise, with trust.”

According to the company, cloud and security revenue was up 20 percent in 2018. The increased trust in their cloud and security services led to a 4 percent total revenue increase from 2017, or $20 billion.


 

Amazon Before

More than 20 years ago, Amazon was a very different company. It’s hard to believe this go-to online retailer that sells everything you could possibly think of — from TVs and computers to groceries and household items — started off as an online book retailer.

In July 1995, CEO Jeff Bezos launched Amazon.com, which has changed drastically since the mid-90s. Back then, the website contained a lot of blue, hyperlinked text — quite different from the colorful photos and well-organized categories you’ll see on the site today.

Author Brad Stone — who wrote the book, “The Everything Store” about Amazon and Bezos — told NPR in 2013 that he thinks Bezos started off selling books because it was “a good place to start: [Books are] small, they ship easily in the mail, the selection that the internet enables was a great strategic advantage over the traditional chain booksellers of the time like Barnes & Noble and Borders.”

Indeed, buying books on Amazon was — and still is — easy and preferable to going to a physical bookstore for many people. Although Amazon experienced success with its book-selling strategy, in time Bezos reinvented Amazon to sell more than just books.


 

Amazon After

In 1996, the retailer introduced an affiliate program — known as the Amazon Associates Program — which helped the company expand its reach, according to CBS News. And after announcing its IPO in 1997, Amazon introduced “1-Click shopping” and began offering different products and services in various categories: music, DVD/video, home improvement, software, video games, gift ideas, kitchen and more.

These days, the company is making big money. For the second quarter of 2018, Amazon earnings reached $52.9 billion. In early September 2018, Amazon also became the second U.S. company after Apple to hit the $1 trillion mark in market value.


 

Old Spice Before

Old Spice is no longer associated with “old” men, thanks to successful rebranding attempts. The antiperspirant — which debuted in 1937 as Early American Old Spice for women and then in 1938 as Old Spice for men — is now a popular brand for all ages, but it wasn’t always that way.

After experiencing decades of success, Old Spice began to lose sales as competition increased. A 2014 case study by the University of Southern California found that by the early 2000s, the company suffered from “an outdated brand image.”

In 1990, Procter & Gamble — which owns brands from Pampers to Gillette — bought Old Spice from the Shulton Company. P&G attempted to rebrand the product, but it wasn’t until Old Spice launched its “Swagger” Campaign in 2008 that it started attracting the younger demographic it needed to compete with brands such as Axe, according to the study. Old Spice’s real moment of reinvention, however, came two years later.

 

Old Spice After

In 2010, NFL player Isaiah Mustafa starred in Old Spice’s “The Man Your Man Could Smell Like” campaign. You might remember it: Standing in front of a running shower with nothing but a towel on, Mustafa tells female viewers, “Hello, ladies. Look at your man, now back to me. Now back at your man, now back to me. Sadly, he isn’t me.” He goes on to suggest that if men switch to Old Spice, they can smell like him.

When the ad debuted on YouTube during Super Bowl weekend, it became a viral hit. And the campaign made an impact on sales, as well. AdWeek reported in July 2010 that overall sales for Old Spice body wash products jumped 107 percent after two new TV spots and online response videos debuted.

 

McDonald’s Before

In 2001, the book “Fast Food Nation: The Dark Side of the All-American Meal” came out — and it didn’t have that many nice things to say about fast food giant McDonald’s. Rob Walker wrote in a New York Times book review, “The aim of [author Eric Schlosser’s] book … is to force his readers to stop and consider the consequences of McDonald’s and its likes having become inescapable features of the American (and, increasingly, global) landscape — to contemplate ‘the dark side of the all-American meal.'”

Although it’s hard to tell if the book’s release directly — or indirectly — hurt McDonald’s reputation and brand in a monetary sense, the Wall Street Journal did report in 2003 that the restaurant posted its first quarterly loss in 38 years as a publicly traded company.
 

McDonald’s After

In the years since “Fast Food Nation,” McDonald’s has tweaked its menu offerings. McDonald’s currently offers healthy options including salads, milk, fruit and more, and makes its nutritional information available to consumers. In addition, McDonald’s has reinvented the fast food world by offering “All Day Breakfast.” No longer is McDonald’s only seen as the place to grab a Big Mac loaded with 500-plus calories.

In the second quarter of 2018, McDonald’s earned $5.4 billion in revenue. It was trading at $161.72 per share on Sept. 4, 2018. McDonald’s plans to spend more than it’s second-quarter earnings by shelling out $6 billion to make cosmetic upgrades for its restaurants. By 2020 McDonald’s will have new counters to enable table service, expanded McCafe counters and self-order kiosks.
 

Lego Before

Lego has been around since 1932 and for years has been a hallmark toy in many children’s lives. At one point in 2014, Lego was even the top toy company in the world, surpassing Mattel’s Barbie doll, reported the Wall Street Journal. But the Danish toy company wasn’t always a star performer.

According to a 2015 Fast Company article titled “How Lego Became the Apple of Toys,” the company was reportedly on the brink of bankruptcy about 10 years ago. The growth of video games and the internet threatened the toy company. In reaction, Lego reportedly made a few mistakes. Eventually, by cutting costs, improving processes and managing cash flow, the company started to bounce back.
 

Lego After

Next came a Lego line called Lego Friends, which appealed to young girls and fought the perception that only boys could play with the building blocks. But in 2014, when “The Lego Movie” hit theaters, things really started to change. The movie and its products helped Lego get the revenue boost it needed to overshadow Mattel in 2014, according to the Journal. Thanks to innovative products and a successful string of movies, Lego is more than just a toy now — it’s also a cool franchise.

According to Box Office Mojo, “The Lego Movie” grossed more than $469 million worldwide. Its sequel, “The Lego Batman Movie,” grossed $311 million worldwide. And according to the company’s 2017 annual report, net company profit was $7.8 billion.

 

Apple Before

It’s hard to imagine, but in the late 1990s, Apple was on the verge of bankruptcy. Fortunately for the company, one of Apple’s biggest competitors — Microsoft — rescued Apple from collapse by forking over millions.

According to Bloomberg, Microsoft’s $150 million investment helped Apple get the money it needed to change the technology space. In fact, it might be fair to say that, thanks to Microsoft, Apple is one of the world’s most valuable and innovative brands. With a brand value of $182.8 billion, Apple is currently the No. 1 company on Forbes’ most valuable list for the eighth year in a row.
 

Apple After

But give Apple some credit for its success; the company reinvented itself as more than just a Mac maker. Its handheld devices — from the Apple Watch to iPhones to iPads — have brought the company to an entirely new level.

Apple’s ability to reinvent itself helps explain why it’s consistently considered one of today’s best brands, and why Apple loyalists are always wondering, “What’s next?”

innovationbrandcell articlesBusiness Model Innovation
For consumers the future of customer service cannot come soon enough. The customer experience landscape is ripe for disruption. Companies are slowly making progress toward more seamless and simpler customer experiences.
Today only a select few companies leverage all the technology at their fingertips to enable customers to use the technology they use daily in their personal lives when dealing with the brand. A company on the forefront includes Amazon. Amazon has made progress building a compelling customer journey. It's not just the vast and efficient marketplace they've built--Amazon is innovating on all sides of the consumer equation. They have connected their Amazon virtual assistant the Echo (affectionately called Alexa) with purchases customers make. A customer can order more of a product by just verbally asking the Amazon Echo for it. Want to know how many grams in a kilo? Ask Alexa. Want to play your Spotify list in your kitchen? Alexa will gladly do that for you. Outside of technology innovation, Amazon has the most hassle-free customer service and return process I have seen. Another great company is Sephora. Sephora is using messenger apps like Kik to provide personalized content and buyer experiences to customers. They seek to create interactions that feel tailored to the customer, and one on one. Most companies still haven’t mastered social media, yet alone mobile messaging.

Today the technology for most customer service operations is still not savvy enough for customers to avoid the burden of the old phone call. Customers prefer self-service, but will call when it’s a more complicated matter says Kate Leggett, Analyst at Forrester. That includes account closure or booking a complex airline ticket with multi-city travel. It’s only a matter of time until the game changes entirely because of improved technology. Let's face it, the younger generations do not want to call brands--and those younger generations will soon be the bulk of your customers (not to be morbid or anything, but it's the truth). We’re at an awkward inflection point where some companies are doing an amazing job of being on the forefront of customer experience technology, and others are still struggling with the basics. In the future customer experiences will be much more simple. I have created an infographic with nine predictions for you on the future of technology versus the past (and where most of our brands are still today). Please see the infographic below and feel free to share the image.


Prediction #1: Technology Makes Experience Better

For the consumer it can feel like the brand is hiding behind bad customer service technology. Examples? On the phone tree pressing zero does nothing—there is no human to save you from the bad interactive voice response system. Even though it’s 2016 sometimes customer service technology makes things worse.
In a recent article in CIO Magazine an Accenture study was highlighted. Conducted with over 25,000 consumers, it became clear that "Companies have lost sight of the importance of human interaction and often make it too difficult for consumers to get the right level of help and service that they need," says Robert Wollan, a senior managing director at Accenture Strategy.


Prediction #2: Customer Service Is Open 24/7

Customer problems do not only happen five days a week eight hours a day. We live in the global economy where companies must serve customers during many time zones. At the same time customers expect fast responses at night and on weekends. According to influencer and author Jay Baer, 32% of consumers expect a response within 30 minutes through social media channels.

The same report found 57% of consumers expect the same response time at night and on weekends as during normal business hours. Companies tomorrow must operate in a 24/7 world. Otherwise they risk losing business.


Prediction #3: Customer Is In Control Of Where Interaction Happens

Remember when everyone was talking about how brands have lost control? It was kind of a big deal. Brands felt nervous about how customers now controlled the conversation. Social media turned everything on its head. Customer service became part of many very public conversations. This was great for the contact center, it catapulted this department into the limelight, giving more responsibility to knowledgeable employees—improving customer service’s relationship with marketing. However, brands took their strategies and attitudes about customer service and continued to try to control the conversation on social media. We set up customer service outposts on social media. For example on Twitter, along with the main brand’s Twitter account, we set up customer service  Twitter accounts. If the brand is @XYZ on Twitter the help account would be @XYZ_help. Many Facebook accounts were set up the same way, with even a separate Facebook page to help customers.

The problem with this approach is the proliferation of service channels. Where as today often customers have to tag customer service accounts or write on a brand's Facebook wall for the brand to find them, in the future you will see less and less of the tagging of service accounts. With the proliferation of channels there is no way for brands to operate with the same approach they have in the last few years. Every week there is a new latest channel customers talk to each other on. They are sending Snaps to friends, Kik, WhatsApp messages, Weibo, WeChat, texts, tweets and Facebook messages. The proliferation of channels is upon us.

The challenge for big companies is speed and scale. Brands need to explore technologies that will allow agents a unified workflow solution that moves seamlessly from channel to channel. The technology should allow the brand to focus more on finding the customer, regardless of channel—and allowing the agent to easily pop in and offer service.


Prediction #4: Company Knows Information From Every Channel

The No. 1 customer frustration according to Harvard Business Review is the customer having to repeat themselves. Internal dysfunction, old CRM technologies and lack of a customer oriented culture all contribute to poor customer experiences like this one. In the old days you could differentiate your product by delivering it cheaper, or maybe faster, but now it’s a different game. It’s not just about solving the customer problem quickly and effectively. Brands need to ensure they are doing all the work, so customers don't need to remember every single piece of information to provide to the company. What happens when a customer contacts the company from a rural highway in the middle of nowhere? That customer might not have their account information or verbal password. The company will need to make it easier for the customer.


Prediction #5: Mobile Messaging Volume Is High

As mentioned earlier, phone use for customer service has steadily decreased over the past six years. Analyst Kate Leggett said, “we predict it will dip even further as customers increasingly adopt digital channels.” People spend an average of three hours and eight minutes on their smartphone every day doing non-voice activities (Source: Yahoo! David Iudica). The bigger the phone, the more usage. That said, customers are enjoying the ease of communication via messaging in their personal lives—whether it’s through text or even Snapchat, Kik, WhatsApp, WeChat or Facebook Messenger. A few brands (Sephora mentioned earlier) are doing great work on messaging apps—but most companies are slow to take advantage of mobile messaging. In fact it seems that the sharing economy is one of the biggest superuser industries of mobile messaging. Examples include Uber, Airbnb, Etsy and TaskRabbit to name a few. Customers enjoy the ease of use and not having to call the call center. It feels as easy and seamless as an interaction with a friend or family member. This is the future of customer service.


Prediction #6: The Content Finds The Customer

Today a customer’s first attempt to fix a broken product (on their own) is through Google. Google will lead the customer to the most closely related community thread or article. But this isn't ideal, sifting through customer service content can be messy and time consuming. In the future companies will take advantage of data through the internet of things, where content is sent to the customer as soon as the product realizes something is wrong for the customer. Another scenario includes sending helpful just-in time content such as recipes. For example, Absolut is working on making its vodka bottle smart—meaning the bottle will talk to the consumer offering useful content in real-time. Mattel’s “Hello Barbie” listens to consumers and engages back to that consumer based on what she heard. Eventually customers will not have to search through tons of community threads and articles, but the company will ensure content is automatically sent to the customer at the right time.


Prediction #7: The Product Fixes The Product

Today when something breaks customers must take the proper steps to fix it. That includes contacting the company that sold them the product. However in the future as our products get “smarter” the products will be able to fix themselves. An example of this comes from Tesla. Tesla is the only car that’s completely run on software. You can update and service your car while you’re taking the dog for a walk. In the future more of our intelligent products will be able to fix themselves. This is the beauty of the internet of things.


Prediction #8: The Agent Works Through One System

Today agents are plagued with system overload. They’re working in ten different systems that include CRM systems from 30 and even 40 years ago. Not only is this terrible for the employee experience but it’s terrible for the customer experience. Having to wade through 10 systems makes the employee want to pull their hair out—additionally it adds a ton of time to the customer experience. In the future our CRM technology will allow agents to seamlessly move in and out of different customer service channels while staying in one customer service tool. While it will look very different for the customer, it won’t look different for the agent—it will be one easy, seamless experience.


Prediction #9: Customer Service Gets Marketing’s Budget

You rarely hear about the Chief Service Officer. Sometimes you might find a Chief Customer Officer or Chief Experience Officer but rarely is there a c-level officer devoted to service specifically. However you would never see a company without a senior marketing leader such as a Chief Marketing Officer or EVP. But now we know that being helpful can be the best form of marketing. In fact most of the messaging that happens from the customer toward company has to do with customer service—consumers that need help. Customers are not on your website looking for the latest marketing asset. Let's talk about social media for a second. Social media programs are launched by marketing or PR and handed over to customer service after it becomes apparent that service is the only group qualified to answer these questions. But budgets are still not granted to customer service like they are to marketing (or even sales). There’s a reason today you can’t get through to a human on the phone. There is also a reason things are often broken when it comes to customer service programs. Customer service often does not have any money. The budgets go to marketing and sales—but in the future customer service will be the darling of the organization with the money it needs to do right by the customer.

What would you add to this list?
customer experiencecustomer serviceconsumer trendsservice designbusinessstrategy

If the issues of the sharing economy can be overcome, it could transform the business models on which the economy has relied for years

The emergence of peer-to-peer sites such as Airbnb, Lyft and EatWith has been one of the more intriguing web developments of the last few years. These companies are overhauling the traditional concept of business versus consumer by enabling anyone to offer up their apartments, cars or culinary skills in return for cash.

What began as a niche sector, brushed aside by sceptics, has blossomed into a whole industry. There are over 9,000 companies in on the game, according to Mesh, a directory for the sharing economy. With everything from peer-to-peer money lending to lift sharing now available, consumers have a whole new world at their fingertips and it’s sending shock waves across the globe.

PwC estimates five sharing economy sectors alone could generate a whopping $335bn in revenues between them by 2025. And, according to Nielsen, there’s high demand for the collaborative economy – especially in emerging markets, where it’s tipped to accelerate growth by giving consumers access to services they couldn’t traditionally afford.

The sharing economy has created markets out of things that wouldn’t have been considered monetisable assets before

Advocates claim the sharing economy is creating a stronger sense of community while cutting back on waste. Among the supporters is Shervin Pishevar, venture capitalist and peer-to-peer investor: “This is a movement as important as when the web browser came out”, he told Forbes. Timemeanwhile ranked the sharing economy among its “10 Ideas that Will Change the World”. The benefits are several, and could spell trouble for traditional businesses and economic models.


Rupturing tradition

The biggest change from traditional structures is the breakdown in the distinction between companies and customers, with peer-to-peer models giving consumers the opportunity to become businesspeople on a part-time, temporary and flexible level; whether by renting a pet-friendly room to a pooch-lover via DogVacay or offering up a neglected driveway via Parking Panda. Knocking down that consumer-producer wall is something social media has already, in part, achieved (with customers playing a more important role in marketing than ever before, for example) and the sharing economy seems a logical culmination of that gradual shift.

But it could mean bad news for traditional businesses that fail to adapt, according to Josh Goldman, Global Leader for Shopping Measurement at Nielsen. “These companies are creating new economic value and disrupting current established industry players”, he says. Lisa Gansky, author of The Mesh: Why the Future of Business is Sharing, agrees: “There is a massive shift occurring and I believe all industries will be or are already being affected.”

The impact of Uber on the traditional taxi industry is already evident: in San Francisco, for example, taxi usage has plummeted by around 65 percent, according to Kate Toran of the city’s Municipal Transportation Agency (Engadget reported), while, in New York, shares in Medallion Financial Corp – which lends money to the famous yellow New York taxi operators – have tumbled almost 30 percent in a year as demand for the traditional taxis has plunged, according to Andrew Murstein.


Cheaper, more efficient markets

The potential impact of peer-to-peer accommodation sites such as Airbnb on the hospitality sector has meanwhile sparked further attention. In a report, researchers at Boston University estimated that every 10 percent rise in Airbnb supply in Texas caused a 0.35 percent drop in monthly hotel revenue – equivalent to a fall in revenue of over 13 percent in Austin. They also found hotels had cut their room rates as a result of pressure from the lower peer-to-peer prices appealing to cash-conscious consumers.

As well as offering more affordable services to consumers, collaborative models are also arguably more resilient. While hotel supply is limited and any increase involves large-scale work, peer-to-peer accommodation is agile, its space limited only by the willingness of people to offer up their empty rooms. As Gansky points out, the world’s largest hotel chain, Intercontinental, offers only 65 percent of Airbnb’s current capacity. It’s clearly working: according to the UK Economic Impact Study, Airbnb generated £502m in economic activity in the space of a year in the UK, and over 30 million people across the world have rented a room through the site.

“People are attracted to this peer-to-peer model for economic, environmental, lifestyle and personal reasons”, says James McClure, General Manager UK & Ireland at Airbnb. “More broadly speaking, the sharing economy has created markets out of things that wouldn’t have been considered monetisable assets before.” That means making efficient use of excess resources and minimising waste, especially relevant as consumers become evermore conscious of its damaging consequences. Goldman certainly agrees: “This model is creating more efficient markets, period”, he says, adding it could help establish a better supply-demand equilibrium.


Hostile opposition

But there are several issues associated with this new model, and they’re sparking widespread controversy. While Uber has provoked protests and bans across the world, peer-to-peer accommodation has kicked off a debate in New York, with public advocate Letitia James arguing: “Airbnb and the illegal hotel operators it enables are contributing to the affordable housing crisis.”



Others have concluded the lax regulation of the sharing model could do more damage than good to economies. Dean Baker, Co-Director of the Centre for Economic and Policy Research, believes peer-to-peer businesses are providing a loophole for “a small number of people… to cheat the system”. He wrote in The Guardian: “Insofar as Airbnb is allowing people to evade taxes and regulations, the company is not a net plus to the economy and society – it is simply facilitating a bunch of rip-offs.” He argued Airbnb apartments should be taxed in the same way as hotels and that they, like Uber, should be made subject to the same safety standards as regular players.

But increased regulation and taxes are likely to mean higher prices for consumers, in part defeating the object of peer-to-peer companies designed to cut costs and move business away from the hands of overbearing authority. It’s perhaps for that reason that a number of sharing economy advocates argue against regulating this new model; among them are senior research fellow Adam Thierer and his colleagues. “The key contribution of the sharing economy is that it has overcome market imperfections without recourse to traditional forms of regulation”, they wrote in a paper. “Continued application of these outmoded regulatory regimes is likely to harm consumers.”

Whether regulating peer-to-peer services is a good idea or not, these disputes need to be overcome if the sharing economy is to grow to the extent to which some have predicted it is capable. If it does – and it would seem a logical progression in a society characterized by constant connectivity – this model could eventually replace the traditional consumer-versus-provider structure. Key players must find a way to adapt effectively if they are to capitalize on its potential benefits.
customer experienceexperience designdigital strategycustomer serviceconsumer trendsglobal trendsservice designbusinessconsumer behaviour
There are companies that are known for good customer service, and then there are companies that are obsessed with their customers. These brands take it to the next level by offering personalized experiences, amazing perks, and quality products. They also listen to their customers, take advantage of data and technology, and create a seamless experience that provides great service and support no matter how customers interact with the brand.
Here are the 10 most customer-obsessed companies of 2018 that are setting the gold standard for what it means to put customers first. These companies were the most cited in reviews and the business press and were included because of their industry-leading focus on customer experience 


Ritz-Carlton 

The name Ritz-Carlton oozes sophistication, and the staff makes sure the service matches the brand’s reputation. Ritz-Carlton is known for putting guests first and for creating incredibly personalized experiences. The company’s main focus is to build an emotional connection between guests and employees for the best hotel stay possible. 


BufferApp

Customers are such a focus at social media management app Buffer that the support team is known as the Happiness Team. By constantly staying in contact with its customers, Buffer can answer questions and address problems as quickly as possible. Customers come first in everything the company does, and every employee is always on the lookout for ways to “wow” customers. 


Trader Joe’s

Customers at Trader Joe’s are fiercely loyal to the brand, but it has to do with more than just those delicious Joe Joe’s cookies. The store ranks top in customer satisfaction for grocery stores because employees are hyper-focused on customers. From fast checkout to friendly service and product recommendations, Trader Joe’s puts customers first to create a personalized experience at each store and with each shopper. 


Harley Davidson 

Once a customer purchases a Harley Davidson motorcycle, they become part of the Harley family for life. Customers are encouraged to join the 325,000-plus member of Harley Owners Group, or HOG. The group connects riders with each other and with the brand and helps with maintenance and other bike issues. Harley Davidson knows that buying a bike is a big purchase, and it puts it customers first to create a brand they can stand behind forever. 


Amazon 

From free two-day shipping to streaming movies and grocery delivery, Amazon Prime aims to make customers’ lives easier in just about every area. The company is always innovating and finding new ways to solve customer problems. It also has a responsive service team that is empowered to provide gift vouchers and free months of Prime service if anything goes wrong. 


Costco 

By treating its employees well, Costco can create a customer-focused experience for everyone who enters the door. The store famously will take back nearly any return without a limit to when it was purchased or the state it is in. Costco also listens to customer feedback about items people would like in the store, makes it easy to save with automatically loaded coupons, and has been known to reach out to customers who purchased items that may have been recalled. The store offers bulk discounts, but it doesn’t come at the cost of customer experience. 


Zappos 

Zappos is consistently on the top of customer experience brands, and 2018 is no different. The company goes above and beyond to show its appreciation for its customers. It follows the model of surprising and delighting customers by always looking for ways to build a connection. Employees are known to do things like send baby blankets to customers when they hear a crying baby in the background of a service call. It also hosts a series of events across the country with live music and a happy hour to build relationships and reach out to customers.


Dollar Shave Club 

There is a lot of competition in the subscription beauty industry, but Dollar Shave Club stands out because of its focus on customers. The company uses a number of technology tools to understand its customers and what drives them to make purchases. All employees are focused on engaging with customers in any way possible and follow the company’s motto of “We don’t respond to situations; we respond to people”. 


Disney 

Disney isn’t necessarily an inexpensive brand, but customers are willing to pay higher prices for its merchandise, shows, and vacations because of the experience the brand provides. Disney employees are trained to refer to guests by name, especially with children. They go above and beyond to share the magic of Disney with customers of all ages and create unique experiences. 


Netflix 

The streaming giant’s obsession with customers is based on knowing them very well. Netflix collects a huge amount of data on customers to create hyper-personalized recommendations. It uses that data to help customers find their new favorite shows and to create award-winning original content that is exactly what customers want to see. By understanding customers and putting them first, Netflix can build on its knowledge and provide them entertainment they love.

 

 

 

 

customer experienceexperience designcustomer serviceconsumer brandscompany culturebusinessconsumer behaviour
According to a Global Deloitte survey, over 80% of Deloitte Knowledge users indicate that sharing knowledge leads to competitive advantage and adds a real client value.
What are the advantages of adopting a knowledge management strategy?

Knowledge management prevents staff from constantly reinventing the wheel, provides a baseline for progress measurement, reduces the burden on expert attrition, makes visual thinking tangible, and manages effectively large volumes of information to help employees serve their clients better and faster.

 

Being a fundamental business enabler, knowledge management will help organisations:

  • Protect their intellectual capital
  • Focus on their most important assets: their human capital
  • Re-orient their culture by opting for an optimal knowledge sharing strategy
  • Link people to people by setting up collaborative methods
 

Knowledge management opens the doors to a new era of collaboration and sharing
Nowadays, with corporate mergers, employee turnover and global expansion, people must work differently: they need to collaborate with peers that are overseas, exchange ideas, keep current on global matters and have quick answers to their questions.

The power of Social Media plays an important role in knowledge management as it enables employees to collaborate, connect and rapidly access to experts and information.

Social networks also allow people to collaborate, to be human and to express themselves in the electronic environment. They have a solid foundation of trust and popularity among employees and they are part of the knowledge sharing culture.

Increasing company benefits with an effective knowledge management strategy

Knowledge management helps solve most of the common business problems and helps companies increase their benefits by:

  • Improving business decisions thanks to facilitated access to expertise and to leading practices

  • Increasing efficiency, productivity and work smarter by reducing cases of “reinventing the wheel”

  • Improving innovation through wider and borderless collaboration

  • Reducing loss of know-how by capturing explicit and tacit knowledge

  • Speeding productivity with on-board trainings and timely access to knowledge

  • Increasing client satisfaction by delivering value insights

  • Enhancing quality and ability to collaborate by standardising ways of working and enabling discussions with leading experts

innovationbusiness designbusiness strategydesignKnowledgeKnowledge Management
The best leaders understand that the current success of their business, and any future innovation, depends upon the “deep smarts” of their employees — the business-critical, experience-based knowledge that employees carry with them. Leaders with a passion for developing employees’ skills, and those who understand the need to transfer knowledge among generations of workers, know how important it is to link in-house education to strategic planning.

Take architectural and engineering firm EYP as an example. Leila Kamal, vice president for design and expertise, not only reports to the CEO but also is a member of the board. An architect herself, she brings great credibility and visibility to programs of learning and knowledge exchange. An early in-house program called A16 treated 16 junior architects to 16 weeks of intensive training, including knowledge mentorship from highly experienced architects. The educational concepts developed in that program have since evolved into a larger learning program called EYP University, which provides an average of 20 courses a year for architects, engineers, and a combination of the two. Instructors combine traditional lectures with hands-on activities, including challenging participants to solve a difficult problem before they are presented with the solution. This mode of learning embodies what educational researcher Robert Bjork call “desirable difficulty,” compelling learners to fully engage mentally to discover nonobvious answers to problems. Senior thought leaders who are mentors at EYP have to submit a learning plan for their mentees, describing not only goals but also specific tasks the learner will undertake, such as a client presentation. The learners, in turn, provide performance evaluations on their mentors’ skills as a mentor or on their ability to teach and share knowledge through the EYP U curriculum. Moreover, the mentoring flows “up and down” — from juniors to seniors, as well as vice versa. For example, new hires tend to come in knowing building information modeling from school, and can tutor experienced designers and architects in how to incorporate their deep practical knowledge into the software.

Despite its relatively small size (about 600 employees), EYP also supports in-house research projects proposed by employees, which are selected through a competitive process. These knowledge-generation projects, always aimed at solving a challenge faced by clients, are intended to help differentiate EYP from competitors. For example, one such project focuses on the interaction between a building’s functionality and the well-being and productiveness of its occupants. Another aims to create flexible environments that can be adjusted in response to information gathered by sensors placed around the building that record how people are using a given space. For example, temperature and lighting in a room could lower or raise depending on how many people are present and whether they are viewing a presentation or reading.

Contrast the example above with an organization where one manager noted: “I think we are very good at managing information, but not very good at managing knowledge.” It’s an astute observation. Knowledge differs from information in that the former is at least partially based on experience. Organizations that are proactive about managing the flow of knowledge focus on several potentially essential ingredients to future success, such as:

Retaining experience-based know-how, including not only technical knowledge but also so-called “softer” skills, such as project management and maintaining critical relationships inside and outside the organization that have been built up over years. For example, many top sales people know clients personally; subject matter experts know others in their field. Such trusted relationships facilitate communications and speed decision making.
Helping mentors pass along their expertise more effectively and helping mentees learn more efficiently. Mentors can teach through practical problem sets and hands-on diagnoses instead of lectures and presentations. Newcomers can learn more efficiently by keeping “learning logs” that chronicle their experiences and through scheduled feedback sessions with their mentors.
Encouraging reverse mentoring from newcomers to elders, such as having newcomers tutor experienced personnel in social media.
Generating new knowledge by conducting research, benchmarking, or bringing in “resident” artists or scientists whose interactions with employees can spark creativity.
Nurturing this kind of know-how is essential to maintaining the firm’s core capabilities, those unique innovations — whether in marketing, operations, finance, technology, or other areas — that are not easily replicated by competitors. At multiple levels in the organization, key personnel are responsible for such capabilities and hold much of the know-how in their heads. That’s why managing knowledge can be even more challenging than managing information.

The single largest obstacle to managing human knowledge is a lack of time. The more essential the know-how held in the head of an expert or highly experienced manager, the less time he or she has to pass it along to potential successors. Such valuable individuals are pulled into every important client meeting, problem-solving session, and innovation project. The only way that their deep smarts will be retained is if leaders recognize and address that limitation. Specifically, leaders need to:

Tie preservation of critical know-how to corporate strategy
Behave as if developing and retaining knowledge is truly important. Leaders who take time to teach in education programs, or at least start them off, provide visible evidence of seriousness.
Support incentives within the organization that both recognize current expertise and encourage it to be shared
If leaders do not show that knowledge development and preservation is a priority, then they cannot expect that managers lower in the organization will provide the necessary incentives, time, and resources to share, and thus preserve, knowledge across generations, geographies, and corporate silos.

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The luxury watch brand Rolex is the most reputable company in the world, according to the Reputation Institute's annual rankings
The Reputation Institute sorts companies according to the public's perception of their performance in seven areas: products and services, innovation, workplace, governance, citizenship, leadership, and performance.
The chocolate maker The Hershey Company is the most reputable brand in the US, but the brand is much less well known internationally, so it did not make it onto the list. Facebook did not even make it into the top 100. 

After the emissions scandal that engulfed the company last year, Volkswagen dropped from being the 14th most reputable company in the world in 2015 to the 123rd spot this year. 

To compile the rankings, the Reputation Institute collected more than 240,000 ratings from 15 countries.


 

10. Apple. RepTrack Points: 76.6.

A screenshot from the 2004 remake of Apple's iconic 1984 ad.
 Apple
Apple's reputation is getting worse, according to the study. The company has dropped from seventh place in 2014's rankings to eighth in 2015's, and it now sits at 10th. The tech company, however, came out on top in both the innovation and the leadership categories. 

Here's everything Apple announced at its Keynote on Monday, including its new, cheaper-than-ever iPhone. 

9. Sony. RepTrack points: 76.7.

REUTERS/Alessandro Garofalo
Sony proved to be a truly global brand. The company was among the 10 most reputable brands in 10 of the 15 countries surveyed. On this metric, it was beaten only by Rolex. 

This year Sony faced criticism over its failure to release singer Kesha from a six-album contract with one of its record labels, Dr. Luke's Kemosabe Records. Kesha alleged that her producer at the label, Lukasz Gottwald, sexually abused her. 

Aside from music, the Japanese conglomerate makes electronics and produces movies and video games. The company was founded in 1946 by Masaru Ibuka. 

 

8. Canon. RepTrack points: 76.9.

REUTERS/Toshiyuki Aizawa
Canon is the third most reputable brand in Europe, the Middle East, and Africa. 

The world's biggest maker of cameras and printers has been expanding further this year. It just announced that it would buy Toshiba's medical devices unit for nearly $6 billion. 

7. Microsoft. RepTrack points: 77.0.

Satya Nadella, CEO of Microsoft.
 Robert Galbraith/Reuters
Microsoft has returned to the list after it dropped out in 2015. It came out as the third most reputable brand in Asia. Microsoft is performing particularly well in the detachable tablet market, outperforming Apple. 

Microsoft is predicted to take a 74.6% share of the detachable tablet market by 2020. 

The company's biggest businesses in 2016 include the Windows operating system, the Xbox, and Microsoft Office. 

 

6. Lego Group. RepTrack points: 77.4.

Joe Shlabotnik/Flickr
Lego remains the most reputable brand in Europe, the Middle East, and Africa. 

This year Lego faced a serious backlash after the company refused to sell artist Ai Weiwei a bulk order of its plastic bricks. The Chinese artist had planned on using them to make a political point, which went against the company's rules. The toymaker later reversed this policy. 

According to a report by Brand Finance, Lego is the world's second most powerful brand after Disney. 

5. Daimler (Mercedes-Benz). RepTrack points: 77.7

The Mercedes 300SL Gullwing.
 Mercedes-Benz
Daimler dropped from third place to fifth in the global reputation rankings this year. 

Daimler sold 2.9 million cars in 2015, up 12% from the previous year, it was announced at the company's annual press conference. 

The Daimler-owned Mercedes could soon become the car brand most closely associated with Uber, as the taxi app just announced an order for 100,000 Mercedes S-Class cars, according to Fortune. 

 

4. BMW Group. RepTrack points: 77.9.

REUTERS/Denis Balibouse
BMW dropped from first place in 2015, but it retains its lead on its fellow German carmaker Daimler. 

BMW celebrated its 100th birthday this year. To celebrate, it released the concept car it predicts everyone will be driving in 100 years. 

As well as producing BMWs, the company makes Mini cars and oversees productions of Rolls-Royce vehicles. 

3. Google. RepTrak points: 78.1.

Scott Brownrigg
Google came top in the performance and workplace categories this year, but it slipped from second place — which it had held in 2015 and 2014. 

The search-ad business has had another important year; in October it reshaped its corporate structure to form a new parent company, Alphabet. 

 

2. The Walt Disney Company. RepTrak points: 78.2.

EURODISNEY-SHAREHOLDERS/ REUTERS/Gonzalo Fuentes
The Walt Disney Company came in the top 10 in each of the seven categories. The huge media and entertainment company came first in the citizenship and governance categories, making it unlucky to miss out on the top spot. 

The company is not afraid to stand up to things it disagrees with. On Wednesday, Disney Film Studios announced that it would boycott Georgia if the state brings into law a bill allowing officials to refuse to conduct same-sex marriages, The Guardian reports. 

The California-based company employs about 185,000 people across various divisions, according to its website. 

1. Rolex. RepTrak points: 78.4

Flickr/Alexandre Prévot
Rolex's position as the most reputable brand in the world is due to its incredibly high reputation for products and services. It was in the top 10 for every category. 

Luxury watch brands have suffered over the past year after facing a declining market in China. Consumers in the country bought 40% fewer Swiss watches — including Rolex, Swatch, and TAG Heuer brands — than they did in 2014, Sky News reported. 

The luxury watch brand was founded in London in 1905 before moving operations to Switzerland at the end of World War I.
innovationbusiness designbusiness strategydesignbusinessKnowledgeKnowledge Management
The ingredient that brought 3M and Apple from the brink of failure to achieve such an amazing record of success

In its early years, Minnesota Mining and Manufacturing Company, now known as 3M, was a dismal failure. After years of mining losses and red ink, company founders and investors came to a crossroads. They could close the business, or change course. 3M executives did what most successful executives do when faced with failure. They used it as an opportunity to find a path to success. We're glad they did. Today, the company generates nearly $30 billion in revenue selling over 55,000 products and employing roughly 84,000 people.

When Steve Jobs returned to Apple after his twelve years of wandering, the company needed a controversial $150 million investment from "arch rival" Microsoft to stay afloat. Even worse, when asked what he would do if he were in Jobs's shoes, Michael Dell said, "I'd shut it (the company) down, and give the money back to shareholders." Rather than give up, Jobs was able to use these "indignities" to fuel an amazing comeback. In a very short period of time, Apple grew to the most valuable company ever.

What is the ingredient that brought 3M and Apple from the brink of failure to achieve such an amazing record of success? While there are several candidates, the one that both companies clearly had in common is innovation.

If innovation has this potential, how can you use it as a tool to power your company's success?

Create an Innovation Culture

To create an innovative culture, managers need to make sure that all employees know that innovation is a job requirement. It should be woven into the fabric of the business and given a prominent place in job descriptions, procedures, and performance evaluations. Innovation should be defined to include incremental as well as revolutionary improvements. In a Harvard Business Review interview, Katsuaki Watanabe of Toyota said, "There is no genius in our company. We just do whatever we believe is right, trying every day to improve every little bit and piece. But when 70 years of very small improvements accumulate, they become a revolution." Over a 35-year period, Toyota's innovation culture increased the number of annual suggestions per employee 480-fold from 0.1 to 48.

Create a New Product Development System that rewards Innovation

At 3M, employees are paid for spending 15% of their time creating whatever they want. Once employees believe they have a worthy invention, they can "run it up the flagpole" using 3M's "Champion" new product development system. The Post-It-Note was created by a couple of employees that used their 15% time to generate the idea and champion it through the 3M System. Google has adopted a similar system as part of their innovation framework since it pays employees for spending 20% of their time on whatever projects they want.

Embrace Failure

Innovative companies recognize that failure is an important step in the process of success. They understand that with each failure, the company moves one step closer to success. In this way, failure is given a positive value. For example, if a successful product brings in $1 billion in sales, and it takes 9 failures to achieve each success, each step in the process (including the 9 failures) can be viewed as bringing the company $100 million in additional business - a positive way to look at failure.

Look forward

Kodak invented the digital camera. It didn't commercialize this invention because it wanted to protect its film business. The Company had what I call the "FDH" syndrome. It was Fat, Dumb, and Happy with its success in film. It looked backward instead of forward. As Bill Gates is fond ofsaying, "Success is a lousy teacher. It seduces smart people into thinking they can't lose." To be innovative, you cannot be afraid to obsolete your own products. If you are, others will obsolete them for you. That is what happened to Kodak and many others.

Marketing Information System

The marketplace is constantly evolving and changing. To be successful, you need a system that continuously monitors the marketplace, collects feedback in real time, analyzes the feedback, reports the unvarnished truth to decision makers, and takes corrective action. What worked yesterday, may not work tomorrow, and the information about tomorrow is often available today. Companies need the right telescopes and microscopes to see what is going on and react swiftly once the information is properly analyzed and triangulated.

Passionate Pursuit of Improvement

The Lexus slogan the Passionate Pursuit of Perfection embodies the TQM (total quality management) mantra of continual improvement, or kaizen. This guiding philosophy has propelled Toyota to regaining its lead in global automotive sales in spite of self-destructive missteps and problems caused by the devastating Tsunami of 2011.

While Dell is not recognized as a product innovator, the company was very innovative in its factory processes, supply-chain management, and make-to-order e-commerce systems. Its efficiency strategies worked quite well for a number of years - giving Dell cost and quality advantages over its "IBM-PC compatible" rivals and Fortune 500 status. Dell got FDH, Michael Dell left for a while, and innovation went by the wayside. So did sales.

Necessity is not the only mother of invention

Companies such as 3M and Apple chose innovation at a point in their histories when they did not have much choice. For them, necessity was the mother of invention. 3M institutionalized their innovative ways. Time will tell if Apple will continue to innovate now that Steve Jobs has passed.

We should be most concerned about companies that are currently successful that do not have innovation ingrained in the fabric of their businesses. They are the ones that need to avoid the FDH (fat, dumb, and happy) syndrome, try new things and not rest on their laurels. They have to risk failure to continue to achieve great success. They should know that survival today requires more than treading water, and that many of the companies that were once great are now gone oron their way out largely because they stopped innovating. In fact, according to Forbes, the average lifespan of a successful S&P 500 Company was 67 years in the 1920's. Today it is 15 years. More companies need to innovate to improve these declining numbers.

The innovations do not have to be revolutionary or the exclusive domain of new or improved products. The improvements can be incremental as they are at Toyota, or they can be in business systems and processes as they were at Dell. Innovations can (and should) be in marketing as they have been at Procter & Gamble. Some may recall that the company invented the "soap opera" to sell its soap.

Wherever innovations come from, however they are done, and in whatever part of the business they occur, companies need to continuously innovate or risk dying.

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Adapting your approach to innovation to the problem at hand in an attempt to optimize the process.

One of the best innovation stories I’ve ever heard came to me from a senior executive at a leading tech firm. Apparently, his company had won a million-dollar contract to design a sensor that could detect pollutants at very small concentrations underwater. It was an unusually complex problem, so the firm set up a team of crack microchip designers, and they started putting their heads together.

About 45 minutes into their first working session, the marine biologist assigned to their team walked in with a bag of clams and set them on the table. Seeing the confused looks of the chip designers, he explained that clams can detect pollutants at just a few parts per million, and when that happens, they open their shells.

As it turned out, they didn’t really need a fancy chip to detect pollutants — just a simple one that could alert the system to clams opening their shells. “They saved $999,000 and ate the clams for dinner,” the executive told me.

That, in essence, is the value of open innovation. When you have a really tough problem, it often helps to expand skill domains beyond specialists in a single field. Many believe it is just these kinds of unlikely combinations that are key to coming up with breakthroughs. In fact, a study analyzing 17.9 million scientific papers found that the most highly cited work tended to be mostly rooted within a traditional field, with just a smidgen of insight taken from some unconventional place.

But what if the task had been simply to make a chip that was 30% more efficient? In that case, a marine biologist dropping clams on the table would have been nothing more than a distraction. Or, what if the company needed to identify a new business model? Or what if — as is the case today — current chip technology is nearing its theoretical limits, and a completely new architecture needs to be dreamed up?

In researching my book, Mapping Innovation, I found that every innovation strategy fails eventually, because innovation is, at its core, about solving problems — and there are as many ways to innovate as there are types of problems to solve. There is no one “true” path to innovation.

Yet all too often, organizations act as if there is. They lock themselves into one type of strategy and say, “This is how we innovate.” It works for a while, but eventually it catches up with them. They find themselves locked into a set of solutions that don’t fit the problems they need to solve. Essentially, they become square-peg companies in a round-hole world and lose relevance.

We need to start treating innovation like other business disciplines — as a set of tools that are designed to accomplish specific objectives. Just as we wouldn’t rely on a single marketing tactic or a single source of financing for the entire life of an organization, we need to build up a portfolio of innovation strategies designed for specific tasks.

It was with this in mind that I created the Innovation Matrix to help leaders identify the right type of strategy to solve a problem, by asking two questions: How well can we define the problem? and How well can we define the skill domain(s) needed to solve it?

Sustaining innovation. Most innovation happens here, because most of the time we are seeking to get better at what we’re already doing. We want to improve existing capabilities in existing markets, and we have a pretty clear idea of what problems need to be solved and what skill domains are required to solve them.

For these types of problems, conventional strategies like strategic roadmapping, traditional R&D labs, and using acquisitions to bring new resources and skill sets into the organization are usually effective. Design thinking methods, such as those championed by David Kelley, founder of the design firm IDEOand Stanford’s d.school, can also be enormously helpful if both the problem and the skills needed to solve it are well understood.

Breakthrough innovation. Sometimes, as was the case with the example of detecting pollutants underwater, we run into a well-defined problem that’s just devilishly hard to solve. In cases like these, we need to explore unconventional skill domains, such as adding a marine biologist to a team of chip designers. Open innovation strategies can be highly effective in this regard, because they help to expose the problem to diverse skill domains.

As Thomas Kuhn explained in the The Structure of Scientific Revolutions, we advance in specific fields by creating paradigms, which sometimes can make it very difficult to solve a problem within the domain in which it arose — but the problem may be resolved fairly easily within the paradigm of an adjacent domain.

 

Disruptive innovation. When HBS professor Clayton Christensen introduced the concept of disruptive innovation in his book The Innovator’s Dilemma, it was a revelation. In his study of why good firms fail, he found that what is normally considered best practice — listening to customers, investing in continuous improvement, and focusing on the bottom line — can be lethal in some situations.

In a nutshell, what he discovered is that when the basis of competition changes, because of technological shifts or other changes in the marketplace, companies can find themselves getting better and better at things people want less and less. When that happens, innovating your products won’t help — you have to innovate your business model.

More recently, Steve Blank has developed lean startup methods and Alex Osterwalder has created tools like the business model canvas and value proposition canvas. These are all essential assets for anyone who finds themselves in the situation Christensen described, and they are proving to be effective in a wide variety of contexts.

Basic research. Pathbreaking innovations never arrive fully formed. They always begin with the discovery of some new phenomenon. No one could guess how Einstein’s discoveries would shape the world, or that Alan Turing’s universal computer would someday become a real thing. As Neil deGrasse Tyson said when asked about the impact of a major discovery, “I don’t know, but we’ll probably tax it.” To his point, Einstein’s discoveries now play essential roles in technologies ranging from nuclear energy to computer technologies and GPS satellites.

Some large enterprises, like IBM and Procter & Gamble, have the resources to invest in labs to pursue basic research. Others, like Experian’s DataLabs, encourage researchers and engineers to go to conferences and hold internal seminars on what they learn. Google invites about 30 top researchers to spend a sabbatical year at the company and funds 250 academic projects annually.

Yet one of the best-kept secrets is how even small and medium-size enterprises can access world-class research. The federal government funds a variety of programs, such as the Hollings Manufacturing Extension Partnership, a series of manufacturing hubs to help develop advanced technologies, and Argonne Design Works. Local universities, which have a wealth of scientific talent, can also be a valuable resource.

Taking steps to participate in these types of programs can help small business compete in competitive markets. For example, Mike Wixom of Navitas, a four-year-old battery company that joined the Joint Center for Energy Storage Research (JCESR) as an affiliate, told me, “As a small company, we’re fighting for our survival on a daily basis. Becoming a JCESR affiliate gives us an early peek at technology, and you get to give feedback about what kinds manufacturing issues are likely to come up with any particular chemistry.”

So, clearly, being able to reach out to scientists on the cutting edge can help a business plan for the future, just as the other approaches, such as design thinking, open innovation, business model innovation, and others, can help propel a business forward if applied in the right context. But no one solution fits all problems.

If your innovation strategy is struggling or failing, consider whether it’s because you’ve locked yourself into a single approach. There are always new problems to solve; learn to apply the solution that best fits your current problem.

source hbr.org

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