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Successful innovationespecially breakthrough innovation that drives sustainable, long-term growthrequires getting a lot of things right along the whole innovation journey, from concept development to commercial launch. Some of the key steps along this path are well understood and generate lots of attention, among them understanding and building product/market fit, soliciting customer feedback early, and gauging customer willingness to pay. But even the best companies and the most innovation-minded, C-suites can get innovation wrong. In our book Predictable Winners, we leveraged the experience of hundreds of projects, analyzed company case studies, and examined a lookback study of 100 innovations. As a result, we determined that several mistakes are quite commonand can put the overall success of an innovation at risk. There are three deadly sins that stifle innovation. Most innovators make them. They are: Sin #1: Picking the wrong early adopters A key decision in any businessand a critical one for innovatorsis determining who your target customers are and arent. The right answer is a byproduct of effective customer segmentation. For innovators, its especially critical to identify early adopters. But doing that correctly is not as simple as it seems. Many innovators assume that early adopters are simply those customers who are willing to use their products first. Not so. Anyone can sell a handful of products to friends, family, and tech junkies. The right question to ask during the initial market-testing phase is, which customers seem most excited and passionate about the product? Who is clamoring for the opportunity to try it? Early adopters are not just customers willing to buy your product before anyone elsethey are the customers who love your product. Their passion and loyalty help you build a sustainable base of customers who serve as a reference and can unlock network effects for later adopters. In other words, early adopters need to care disproportionately about your value proposition. Often, they are a subset or micro-segment within a broader group you have identified through your segmentation processoften the bull’s-eye of that customer segment. Lululemons initial strategy was to target young women with active lifestyles for their line of fashionable but action-friendly apparel. Within that segment, female yoga teachers became the early adopter group. Intuitive Surgical found that the early adopters for their da Vinci robotic-assisted surgery systems were not, as expected, cardiac surgeons but rather urologists who loved da Vinci because it gave them their first-ever option for removing prostates via a minimally invasive surgical procedure. As an innovator, you need to intentionally define the early adopters. Then, determine what the subsequent target customer segments will be. The right group of early adopters can build a lasting foundation and help unlock the customer runway. Intentionality makes this a strategic and conscious choice. Dont let your early adopters just happen to you. Sin #2: Playing chess with yourself A great innovation will generate swift, fierce competition. Many innovators are surprised at the speed and intensity of competitive response. In fact, one of the most common mistakes innovators make is to underestimate their competitors and underinvest in understanding how their competitors will respond. Theyre too focused on their own product and their own customers. They do insufficient research on their expected competitorsand on the individuals who lead those companies. They subconsciously bias their moves based on what they want the other side to do. They assess competitive responses far too optimistically and fail to anticipate the full range of competitors actions. As a result, they often underestimate how quickly competitors come to market and how much impact that speed to market can havethis holds true in markets as different as pharmaceuticals and automotive (e.g., Teslas launch of the Model 3). What these innovators are doing is playing chess with themselves instead of the competition. When you do that, youre always tempted to have your opponent play the game you want them to play. This is just human nature, right? A better move is to conduct a wargame. An effective wargame forces you and your team to role-play as if you were the competitor. If you can do that successfully, you will be well positioned to understand how and why your competitors go to market. That means you will be able to predict their behaviorwhich in turn, will enable you to pursue the right strategy to win in the marketplace. Wargaming demands that you gather data on your competitors. These days, theres typically no shortage of data available. But many innovators do this homework incompletely. Keep this in mind: you cant know your competitors too well. Data gathering will help you understand their true competitive advantages. The exercise will help you understand the range of competitive actions but also keep them in bounds. In effective wargaming, many ideas for possible actions can come up, but in most cases only a few paths will appear to be rational and likely. The focus should be on competitive advantage. Lets keep it simple: A competitive advantage is the reason a competitor wins. Often, there arent that many entries on that list, and theyre not necessarily the most inspiring attributes. They may be strong relationships with hard-to-reach customers, control of a channel, expertise with manipulating a raw material, brand longevity, size of an installed base, and so onall examples of real, tangible competitive advantages, which are both hard to replicate and contribute significantly to a winning strategy. Again, your competitive homework needs to help you to understand whats on the short list for each of your key competitors. This cuts both ways, though. Sometimes, your competitive advantage may simply be the flexibility to do things your competitors cant. Among U.K. supermarkets in the early 1990s, Tesco was always a little behind the market leader, Sainsbury’s: lower share, lower margins, and a more down-market positioning. Ten years later, Tesco was twice the size of Sainsbury’s. How did that happen? While its true that Tesco innovated, for example with its loyalty program, the big reason they were able to gain share was simply that they built more stores. Sainsbury’swith the founding family still owning a significant stake targeted a hefty 21% return on equity. Tesco, by contrast, was happy with 18%. This helped fund expansion and gave them more freedom to respond to low-price discounters. Investors were happy, too, because they could see the company was growing and gaining share. The disciplined competitive analysis that results from wargaming can reveal similar trajectories. In our experience, we have seen aha moments arise when previously hypothesized actions or scenarios are proven to be off-base and are replaced by more likely and more nuanced expectations for competitive responses. Butand this is an important caveatnot all competitive responses and not all business strategies are rational. This is where knowing individual leaders pays off. Factoring in the styles, track record, and biases of competitors leaders is essential if you are going to anticipate their moves. No matter how you proceed, keep in mind that the essential point of wargamingand indeed, of most steps along the path of innovationis to never assume that yu are smarter than your competitors. Dont underestimate them.Its almost always better to overestimate themand then be pleasantly surprised when they play into your chess game. Sin #3: Discovering barriers to adoption only when you launch All of the innovation planning in the world comes to nothing if the new product or service fails at launch. There is one goal at launchcustomer adoption. Here is where planning can and must pay off. Perhaps the most impactful mistake innovators make is failing to develop a deep enough understanding of their customers before launch. In particular: Before launch is when you must proactively identify and mitigate barriers to adoption that can spell the death of your innovation. The last thing you want is to find out that there is something that keeps your customers away from your productand that you only found out about it when youve started commercialization. True, you can still take action at that point. But your options are severely limited. At best, you can adapt and find a way to overcome them. At worst, you can scuttle your launchand hope you dont scuttle the company along with it. Best practitioners understand the whole scope of the customers purchasing journey and all the possible barriers that arise at each step. It is also essential to understand the relative importance of these barriers. How severe are they? And how many of your potential customers do they impact? Once you have a thorough handle on your customer purchasing dynamics, you then canand mustmake it your key prelaunch objective to identify and mitigate those adoption barriers. Those barriers are simply reasons not to adopt. They vary by customer segment, by stakeholder, and by where they occur along the purchasing journey. You wont necessarily be able to impact all of thembut if you anticipate them, you can at least know which ones you may be able to impact. Take a systematic approachuse the customer purchase journey as an organizing principle. This journey can be generalized into several phases: Awareness, Consideration, and Conversion. Many other versions of the customer journey (or marketing funnel) exist. You can tailor them to your specific needs. Uber succeeded in identifying three barriersnot having the legal right to operate locally, not having enough drivers, and not attracting enough customers. With that knowledge in hand, Uber was able to formulate a plan of attack. Without the resources to lobby each local market, Uber chose to ignore the established regulatory framework, first establishing itself as a gig economy alternative for drivers and a less expensive, more convenient option for customers. Only then did it address policymakersusing its drivers and riders as a political force. The company had specific plans to overcome the adoption barriers for each target community. Incentives and bonuses helped build driver ranks. Careful analysis quantified how many consumers might leak out at each stage of the customer journey and indicated how to mitigate those barriers (and which to prioritize). Extensive (and localized) advertising and marketing along with safety features like GPS tracking served to allay consumer concerns and turn them into Uber riders. Many of Ubers tactics were questionablenot all were praiseworthy. For example, their decision to ignore local regulations in some communities was rightly subject to sharp criticism. But Ubers story does serve to illustrate how a systematic approach to barriers drives strategic choicesand how those choices in turn drive adoption. Uber also illustrates that not all adoption barriers are created equal. It turns out that in many situations, its possible to quantitatively assess the impact of each adoption barrier, and this assessment can help you prioritize the order in which to tackle them. An effective way to do this is to conduct a leakage analysis along the customer journeysimply stated, how many customers leak out from the purchasing journey at each step? Understanding why such leakage occurs, where it is most significant, and what steps you as the innovator can take to minimize leakage can be very powerful. Sin no more While there is no doubt that the innovation sins can be deadly, they can also be overcome. A systematic approach is the key. By anticipating competitors actions and establishing a deep understanding of the customer journeyand by establishing gates and safeguards at each critical stepits possible to greatly reduce the risks of innovation and ensure that the process of developing breakthrough products and services will be predictablewith much greater odds of success.
Category:
E-Commerce
Zohran Mamdanis victory in the New York City Democratic mayoral primary is sending shockwaves through the real estate market. But even though the 33-year-old won at the polls, some influential New Yorkers aren’t sold on his democratic socialist policiesincluding a promise to freeze rents. The mayoral candidate campaigned on a promise to immediately freeze the rent for all 2 million-plus New Yorkers living in rent-stabilized apartments, and to triple the citys stock of affordable housing by constructing 200,000 new units over the next 10 years. That plan is certainly ruffling some feathers. Mamdani’s mayoral primary victory in June was followed by a one-day sell-off in shares of companies with significant exposure to the New York real estate market, as well as threats of a mass exodus by some of the citys wealthiest denizens. Such policies might sound attractive (and clearly appealed to voters), but there are those in the real estate industry who are skeptical. In particular, some experts caution that while Mamdani is well-intentioned, he may be naive about the realities of New Yorks housing situation. And even if a rent freeze could be enacted rather quickly, it takes many years to get an adequate supply of new housing on the market. The concern among the real estate community is that while a rent freeze might provide short-term relief for tenants, it also risks raising market rents and causing long-term damage to building maintenance, rental supply, and investment interest, John Walkup, cofounder of New York-based UrbanDigs, tells Fast Company, noting that a rent freeze could accelerate the bifurcation between rental rates for regulated versus market-rate housing. According to Walkup, if landlords with mixed portfolios of housing units aggressively increase the rents for market-rate apartments to offset the losses for regulated units, the people who ultimately stand to pay the price of well-intentioned policies are other renters. And there are other potential consequences: Landlords could defer maintenance or upgrades, while there might be a rise in warehoused units that landlords intentionally keep off the market. (Mamdanis campaign did not respond to several requests to offer comment on the arguments described in this story.) Maintenance woes Landlords of smaller properties are going to face the most challenges, argues Peter Bafitis, managing principal at RKTB Architects in New York. Many buildings with subsidized and rent-stabilized housing are older, and older buildings typically require more maintenance. Meanwhile, Bafitis says, the cost of materials and labor have skyrocketed in recent years. These owners are struggling to keep up with regular building maintenance and needed repairs, he says. Whats been happening is that these smaller landlords have not been renovating apartments and theyre letting them be vacant because the finances dont make sense. These landlords rely on moderate rent increases to maintain their buildings, Bafitis says, noting that if thats taken off the tableand theres no commensurate relief for landlords, say in the form of reduced taxes or utilities coststhey will face a legitimate burden that will ultimately affect renters. Supply issues Like Walkup, Bafitis says any holistic solution to New Yorks housing problem must address supply: If you only deal with one side of the equation, its not going to work. The construction of regulated housing depends on private investment, but a rent freeze could deter outside investments in buildings that are often valued based on potential rent increases, Walkup says, noting that if theres no carrot for investorsbe it in the form of rent increases, subsidies, or tax incentivesthey could find it less appealing to invest in regulated buildings and more attractive to invest in market-rate buildings instead. Because of the public-private partnership thats required to build this type of housing, if elected, Mamdani would have to find a way to partner with the private sector. There has to be something in it for them, thats the only way for it to work, Bafitis says. And even with partners on board, there are logistical hurdles to overcome. Building a large supply of new houses quickly? Fuggedaboudit, Bafitis says. “Not in New York City.” Thats a reality he deals with on a daily basis as an architect. Whereas it once took one to three years to bring a small-scale project to completion, the timeline has now stretched to more like five to seven years. Its just because of the red tape, he says. Its mind-boggling. Finding middle ground While both Walkup and Bafitis commend Mamdani for focusing his campaign on issues of housing affordability, they say a holistic solution is necessary to truly address this problem. And, to be fair, there are a lot of ifs to be sorted out between now, the general election in November, and Mamdani potentially taking office. Like many politicians before him, Mamdani, if elected mayor, may walk back some of the promises he made as a candidate. While a rent freeze is a great slogan, Mamdani would have to be a consensus-builder as mayor and find ways to work with the various well-entrenched forces in the industry, Bafitis says, adding, Housing is an incredibly complicated business in New York. Finally, all the bluster this month about Mamdanis potential impact on the housing market might be a bit much, particularly with more than three months until the general electionand plenty of time for him to refine his agenda. Usually, the initial reaction is a knee jerk that leans in the direction of the worst-case scenario, Walkup says.
Category:
E-Commerce
Ty Haney is wearing a blinged-out zip hoodie, with the words “Doing Things” emblazoned in diamanté. This was the motto of Outdoor Voices, the activewear brand she founded in 2013 at the age of 23. Five years ago, Haney left Outdoor Voices in the midst of crisis. Reports swirled that Haney was experiencing conflict with retail magnate Mickey Drexler, who had been brought in as chairman, and that the company was losing money. Last year, Outdoor Voices shuttered all retail stores and was acquired by the private equity group Consortium Brand Partners. And in a twist, Consortium reached out to Haney to see if she would want to come back to lead the company again. Haney said no. In her time away from Outdoor Voices, she had launched two other companies: Joggy, an energy drink brand that is now sold at Target, and Try Your Best (TYB), a consumer loyalty platform with 200 brands on it. “I was, like, ‘No, I’m busy,” she recalls. “I enjoy what I’m doing.” [Photo: Outdoor Voices] It wasn’t just that Haney had a lot on her plate, running two startups as a mother of two. It was also that her departure had been so traumatic. Haney was part of a broader wave of female founders who left their companies over the last five years, sometimes in a shroud of disgrace, in what has been described as the end of the girlboss era. Steph Korey, cofounder of Away, stepped down after being accused of creating a toxic work environment. Yael Aflalo, founder of Reformation, stepped aside because of allegations of racism. Gregg Renfrew, founder of Beautycounter, was ousted from her company after she sold it to private equity group Carlyle. In Haney’s case, the problems were largely focused on profitability. The company had raised more than $60 million from investors like Forerunner and General Catalyst, who bet that Outdoor Voices could one day grow to the size of Nike or Lululemon. But six years in, it was losing $2 million a month, with annual sales of $40 million. Drexler was brought in to help steer the ship, but his strategies and leadership style were at odds with Haney’s. And she saw no other path but to leave her fledgling brand. But even after turning down Consortium’s offer, the private equity firm kept coming back. And it struck Haney that she had an opportunity to revive the brand she had poured so much of her life into building, and to make it relevant to the next generation of consumers. “They saw a brand without a founder and a brand without vision, and that’s not a good scenario,” she says. “I began to think this could be a really awesome creative outlet.” [Photo: Outdoor Voices] Haney quietly returned to Outdoor Voices a year ago. But she’s announcing her return this week in conjunction with the brand’s relaunch. Today, the website comes back online with a new collection of clothes thoughtfully designed to appeal both to the brand’s original millennial audience, but also to Gen Z. The products will be exclusively available to the TYB community, but will be shoppable to the wider public on August 5. “We want to reactivate the original millennial loyalists,” Haney says. “But we’re introducing the ‘Doing Things’ philosophy to the next generation. The collection is boldly fashion-forward and fits into your lifestyle. I’m seeing Gen Z mixing in vintage and natural materials into their looks.” I sat down with Haney to discuss why so many female founders came under attack, and how she plans to run Outdoor Voices differently this time around. Looking back, why do you think so many female founders left their businesses? What do you make of the narrative of “the fall of the girlboss”? There were a lot of dynamics at play. Firstly, the direct-to-consumer venture-funded model wasn’t a home run success. All of these sexy businesses and founders got a lot of capitalin my case, when I was quite young. The expectations to grow were massive. We were growing, but we were not a technology business. When you get inventory involved, growth becomes very challenging. But challenges in business are normal. You face a hundred of them a day. It was unfortunate that the culture at the time was to take down women who had a lot of success. What I’m most concerned about is the effects these massive takedowns of female founders have had on women’s appetite to start their own businesses, raise money, and go for big things. Right now, I want to model that a female founder can return. And that women should want to build big companies. [Photo: Outdoor Voices] As I’ve written before, many of the female founders who were the face of their brands experienced the most misogyny. And female founders who were behind the scenes often avoided the worst of these attacks. Unfortunately, I think this has made many women in business more camera-shy. How do you feel now, coming back? It’s still very important for me to own the message. Even for this relaunch, there’s a video in which I’m narrating and breaking the news. In my experience, using PR and social media to amplify the story has been very helpful. And I’ve learned that it is important for me to be the first to speak. I’m not first-time founder anymore. When I was 23, I was scared of allegations and articles that would end my career, or my life as I knew it. I keep coming back to the fact that this is par for the course if you’re going to build a business in the public eye. I want to show that you can get through negative press. There are always going to be mistakes and unfortunate incidents in business, but we can solve them. That’s what I care about most. Given how traumatic it was to leave the company, why did you choose to come back? Why not launch something entirely new? I’m irrationally optimistic. It’s almost like childbirth; you kind of forget the bad things. I am very grateful for that first chapter. When I look back, I feel like 90% of building Outdoor Voices was awesome, and 10% was hard. But that’s life. But also, there is still a lot of brand equity with Outdoor Voices. There’s an emotional connection to Outdoor Voices because of its mission, which is to move. We have a strong foundation, so I am eager to see how we can reactivate that. [Photo: Outdoor Voices] With this new chapter of Outdoor Voices, you’re integrating your other companiesJoggy and Try Your Best. Were you surprised that Consortium was so eager for you to bring all these businesses together? All of these companies are synergistic. TYB has more than 200 of the top consumer brands on the platform. The tool is really working to help brands engage with their community and make them more valuable over time. So it’s a tool that was made for Outdoor Voices in many ways. And for Joggy, it has a similar mission to maximize happiness through movement. So having a can in hand while you’re “doing things” just makes sense. It’s not that deep, but you’ll see how the brands continue to work together. I think it’s very meaningful that Consortium really sees me, and came to me first. I believe in my ability to set a vision and execute against it. Being here feels right, and I think it’s a recipe for success.
Category:
E-Commerce
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