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There was recently a small article in The Economist highlighting the growth of Airbnb, the residential room-sharing service, that like Lyft and Uber, is disrupting a traditional industry.  The short piece explores how Airbnb is growing, and discusses how much of a threat this may become to hotel chains.  The signals to date are mixed, naturally – some see strong evidence that Airbnb may become a major disruptor, while others see nothing at all.

The article also mentions a vice president at the Ritz-Carlton group, who claimed that she had never even heard of Airbnb. That’s a bit surprising.

It reminds us of Nokia, which, as you know, was the global king of cell phones as recently as 2007. In those wonderful days Nokia has by far the largest market share, an enormous market cap in the stock market, tremendous confidence in the future, and everything looked sunny, even in the dead of winter in Finland when the sun was only shining for a few hours a day!

But then, disaster. The iPhone was introduced in 2007, and that was the end of Nokia. This is not a prediction of what will happen to Ritz-Carlton, but there are parallels. A friend of ours who worked at Nokia in 2007 mentioned recently that as long as six months after the iPhone came out, there were still senior executives at Nokia who had not even seen or touched one. This was in fact a point of pride among some executives, who felt invulnerable. Alas, events proved them disastrously wrong.

So when an executive of a leading firm like Ritz-Carlton proclaims ignorance of the disruptive competitor that could (but is not guaranteed to) alter the market landscape, the ominous winds of change seem to blow louder throughout the forest. Please don’t be the one who has no interest in the iPhone, nor the one who doesn’t know Airbnb from Air Brussels.

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In other news of note, The Baron Funds, a mutual fund management company based in New York, has taken a very proactive position regarding the information it shares with the public. They publish a quarterly report which we often read with great interest, and the most recent issue, dated March 31, 2014, contains a brilliant and yet quite concise description of “risk,” which we recommend.

Risk is of course one of the most fundamental issues that all innovators must deal with, and as the Baron article cogently points out, risk has many different dimensions, and each dimension must be managed in a different way. We found the explanation quite helpful.

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You are probably aware that Stanford University, which lies at the very heart of Silicon Valley, has been the birth home of a great many significant technology companies of the last century, including Hewlett-Packard, Varian, and then in more recent times Sun Microsystems (now part of Oracle), SGI, Yahoo, Cisco, and Google. It is not a coincidence that Silicon Valley’s venture capital industry is centered just a few minutes from campus.

A recent report suggests that Stanford’s aggregate economic impact has reached a staggering $3 trillion  annually, and has created more than 5 million jobs. Thousands more of today’s Stanford graduates will go on to very successful careers in the high tech industry and just about every other industry. But quite a few of them will not wait until they graduate to become entrepreneurs. In fact, there is an undercurrent of entrepreneurism that runs through the entire university, and a significant percentage of all students, undergraduate and graduate alike, are involved in one or more startups.

Consequently, there is now a cottage industry serving these students. I was on campus recently and someone handed me a small piece of paper which said “Great idea but don’t know how to plan, hire, and manage your tech team?” It went on to invite me to two day training to fill in the gaps in my knowledge.

We take this as an example of the positive spiral that takes success and builds upon it. The good attract more innovation resources, which they use to get better at innovation, which enables them to attract more resources, etc.

It’s a sweet spot to be in, and Stanford is surely sitting square in the middle of it. So, once upon a time, was Nokia. But through bad luck and arrogance their magnificent advantage was squandered. So the three themes of this blog post come together here: Pay attention to potential disruptions, don’t ignore them; understand risk and manage it well; and search for resources to make your innovation process better and better. These are three of the most important lessons for innovators, and aspiring ones as well!

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And the last point we will make here … our newest book, Agile Innovation, is due out in September. Happily, you can pre-order it now! Please click here to get your copy!

Photo:  Stanford’s d school, where students learn how to create market-changing innovations.

 

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The Secret that Victoria Didn’t Know

by Langdon on May 24, 2014

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What the best way to move into an adjacent market?

A recent Bloomberg Businessweek* article highlighted how not to do it, reporting briefly on the difficulties that Victoria’s Secret has had in moving from lingerie into the markets for sports bras, sweaters, jeans, and dresses. None of these new ventures has fared as well as planned, and in the words of CFO Stuart Burgdorfer, “we bought a lot of sports bras,” meaning far more than the chain of 1000 stores has sold.

What Victoria is trying to do is to stretch in two directions at once, from the core lingerie space into sport apparel in one direction, and general apparel in the other.

So what’s the problem?

An innovation pro might tell her that if she wants to move into a market adjacent to the one she’s presently occupying, she’ll have to build credibility with consumers and convince them that she’s knowledgeable in the new space. Somehow she’s got to show them that her brand’s core values translate, and that hasn’t happened yet.  Market feedback tells us that “bras” do not equal “sports bras.”

Many firms do through careful research – often ethnographic research – that explores the values, attitudes, and associations that people have, seeking to identify how to extend the brand successfully by leveraging and expanding on some core capability or message.  Based on the lack of success, it would appear that this is what Victoria did not do.  Indeed, the company should not have assumed that just because they sell a lot of bras, people would suddenly expect to buy sports bras from them also.  Instead, they’ve got to build credibility on the “sports” side of it before the product will work, but as of today, their web site shows absolutely no attempt to tell a new or different story, no athlete as a spokesmodel, no WNBA or tennis pro or Olympic athlete endorsement deals, just the more pictures of women in bras with the same seductive stare at the camera (except they’re a little sweatier), and hence no sports cred.

An obvious question to probe this line of thinking is, “When was the last time anyone went into one of their stores, or browsed their web site, looking for sports apparel?”  And the answer could be, “Never happened.”

Hence, the lesson – just because you can make the product and push it out to the market doesn’t mean people will want to buy it from you. We know from 3 decades of tech industry push that the “pull” approach is far stronger and achieves much better results.

Pull happens when the product fulfills latent needs, and the maker has credibility as a legitimate vendor.  Perhaps a distribution deal with a major sports apparel retailer would have worked better; or a PR campaign about the company’s extensive research into consumer needs; or a few seconds of sports bra cred tucked into a Super Bowl commercial; maybe anything!

The “field of dreams” era of marketing is over. Consumers have so much choice today – too much – and if you don’t reach them with a story that gives you credibility and speaks to their values, you probably won’t reach them at all. Apparently Victoria hasn’t done that, yet.

 

* Bloomberg Businessweek, May 12 -18, 2014. Lindsey Rupp. “Victoria’s Secret Gets No Lift from Sports Bras.”

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Innovation Around the World: Palau, China, Brazil & Kenya

March 3, 2014

Innovation is happening everywhere, and there’s a lot to admire about some of the insights behind these excellent ideas: Palau:  Sharks, Better Alive than Dead The southwestern Pacific nation of Palau consists of 250 islands, and is home to about 21,000 people.  Many sharks live there also, and in the past the sharks were killed […]

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Sustaining Success and Coping with Fundamental Change

December 28, 2013

The acceleration of change and its impact on business and society is a theme that we touch on constantly here in this blog.  This post covers four recent events that individually and together reflect how various organizations are coping (or not) with the changing world, and how they apply innovation and creativity to sustain themselves […]

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Warren Buffet’s Money Problems, and the Future of Energy

November 20, 2013

Warren Buffet has a money problem.  It’s not the sort of problem that an average person like you or I might have, but it is a problem nonetheless:  He has too much cash. Specifically, Mr. Buffet’s company, Berkshire Hathaway, is throwing off cash by the billions, and so he is obliged to find homes for […]

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Your Organization is at Risk

October 9, 2013

This is the first of a multi-part series on the trends creating significant impacts on society and creating a digital revolution which may turn out to be the ‘new industrial revolution.’ Every organization is at risk of not adapting to these trends as many industries are already being disrupted and key players are losing their foothold.

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