RESEARCH
« Business Plan Innovation »: creating the conditions for success Interview with Langdon Morris, partner at InnovationLabs and research professor at the University of Pennsylvania
All companies pride themselves on being innovative. Some keep pace with competitors, while others will stop at nothing to retain a position among the leaders. But according to Langdon Morris, a third path exists. Wider and with fewer pitfalls, it is this path that will ultimately stand the test of time. Many companies claim to be innovative. But where does true innovation begin? For some companies, innovating means making small improvements to their current products and services. This results, for example, in lowering a product's production by 1% or reducing the time needed to register a new customer. If we pay even the slightest attention to what customers say, there is ample opportunity to make our companies run more efficiently. The other type of innovation aims to create completely new products, to the point of imposing a new standard. We are talking here about disruption. Innovations of this nature arise from a deliberate desire to break established patterns and create a completely different vision of what is currently in existence. However, these innovations rarely materialize through a simple improvement in day-to-day business activity. They require a considerably greater effort and very few companies manage to succeed.
LANGDON MORRIS is a partner with InnovationLabs, an international consulting firm specializing in
Why this inability to take action? The answer is simple: companies are looking in the wrong place. Yet their most valuable asset is staring them in the face every day: their customers! These are the people who are best placed to know what it would take to make products even better. Companies need to understand their customers and analyze the subtle aspects of their behavior and the invisible parameters that influence their use of products and services. The main factors here are inferred. Knowing how to innovate means centralizing data and reinterpreting it; it means using current practice as a starting point for deducing what could be done in the future.
innovation. He is also a Senior Practice Scholar at the University of Pennsylvania, where he leads research projects on new business models. His latest published article, "Business Model Warfare", is available on www.innovationlabs.com. He is a member of the Scientific Committee of Business Digest and regularly contributes his expertise to major
Isn't it an oversimplification to rely on customers to dream up the products of tomorrow? It would indeed be dangerous to confine ourselves to what consumers tell us they would like to do or have in the months to come. We run the risk of ending up with me-too products, which copy one another without offering anything really new. Customer imagination has its limitations. Not many of us would have dreamt of electronic mail before it was invented. This is where the very essence of innovation comes into play: understanding customers, observing how they use a product or service, then transforming this knowledge into a totally new idea that will appeal to them – even if this means making a fundamental break with what exists. Recent examples show that managers are often wrong when they say they know what customers want; they would be better advised to carry out research to be absolutely sure. It was this failure to understand customers that had a damaging effect on Vivendi. The famous convergence – holding both the conduits and the content – looked great on paper. But did anyone ask consumers if they really wanted to read their newspaper on the Web or watch a film on their mobile phones? Jean-René Fourtou, current CEO of Vivendi, gave this explanation in the San Francisco Chronicle on April 30, 2003: "Contrary to what was desired and asserted, there is no
French groups.
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DOSSIER
INNOVATION
"Knowing how to innovate means centralizing data and reinterpreting it."
obvious synergy between Vivendi components." AOL Time Warner has found itself faced with the same illusion. The desire to create synergies in order to invent new products and services is very commendable per se, provided consumers want them. How does a disruption come about in a company? Innovation is often shared between several departments: R&D, Strategy, Marketing, etc. Each has its own take on the future and it is difficult to bring to the fore the idea that is going to create the disruption. My experience has taught me that there are two scenarios where this can occur: either it's a real company project, initiated by a member of the management team, and the whole workforce mobilizes without a second thought; or it's a single initiative by one person somewhere in the company who possesses the vision and drive to carry the idea through to a successful conclusion, come hell or high water. Are brand alliances a way forward for accelerating these disruptions? Everything depends on how legitimate the offer looks to customers. Does the product respond to a genuine need? Does it provide real value? If the answer is yes, that's great. But beyond that, a great deal of work is required to end up with something useful and profitable. Toyota is a good example. For its Lexus range, which contains numerous plastic components, the carmaker needed to make its production line more efficient. 3M arrived on the scene with a new and highly innovative plastic material and a partnership was born. 3M contributes to investments made by Toyota and in return, it has secured a large market to capitalize on its innovation.
"Managers are often wrong when they say they know what customers want."
What steps do you recommend to help companies to be innovative? An ever-increasing number of Silicon Valley investors and innovative companies are becoming less interested in possible innovations than in the idea of a Business Model. This involves redefining the relationship between a company and its customers. Take the example of large-volume distribution. France gave the world its first hypermarket, but do you know how it all began? It took a real visionary, in the France of the sixties, with its profusion of bakeries, butcher's shops and village grocery stores, to imagine a new way of shopping that would appeal to housewives. On the invitation of NCR, the leading American group for relational technological solutions, those who were later to become the bosses of Auchan and Carrefour – Gérard Mulliez, and the Fournier and Defforey families – discovered a little gem while attending a conference in Ohio: the cash register. On their return to France, they created the very first discount hypermarkets and established a revolutionary new way to shop: everything self-service and under one roof. The rest is history. What does a Business Model need to make an impact? Change has to be brought about in the very structure of the company. Of course, it is also important and necessary to create change by regularly launching a product or service on the market. However, leading companies such as Dell, Visa and Nike study the market as a whole and are continually redefining their customer relations. A Business Model should be a combination of three factors, as in the case of distribution in France: 1. A technological advance – NCR's cash register. 2. An understanding of customer experience and expectations. 3. The vision of a handful of individuals who, as a result of the two preceding factors, envisage a new way of consuming. Those who create Business Models study the market from a different standpoint – by perceiving opportunities that others haven't seen and transforming them into competitive advantages and profit. A well-managed, well-targeted innovation creates immediate value. ■
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