Outthinker: Mavericks Who
Outthink the Competition
The complete 2010 blog post by Kaihan Krippendorff
All posts first appeared on www.fastcompany.com
Kaihan Krippendorff
January 1, 2011
www.kaihan.net
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Contents
Apple Plays “Cat and Mouse” with Competitors .................................................................................... 4
The Ego That Binds ................................................................................................................................... 5
A Whole New (Cognitive) World .............................................................................................................. 9
Avatar: Lessons On Realizing Your Vision ............................................................................................. 12
Valley Forge Fabrics Is Green – And We’re Not Talking About Fabric Color ........................................ 15
What the Super Bowl Means for Innovation ........................................................................................ 17
Super Bowl Lesson #2: Win By Using A Strategic Narrative ................................................................. 19
Super Bowl Lesson #3 - Find A Moral Force .......................................................................................... 21
Four Steps to Turn Stories into Competitive Advantages ..................................................................... 22
Two Questions to Make Your Product Irresistible ................................................................................ 25
Unbundle Your Business ........................................................................................................................ 28
View the world through your competitors eyes ................................................................................... 30
Three Ways To Sustain Your Innovation ............................................................................................... 32
Send A Secret Message To Your Competition ....................................................................................... 34
Serve Your Customers Three Most Urgent Needs ................................................................................ 36
Getting Your Mojo Back ......................................................................................................................... 39
Find An Expansive View ......................................................................................................................... 41
Find New Ways To Coordinate Your Business ....................................................................................... 43
Make Your Clients Depend On You ....................................................................................................... 45
Creating the Turnaround........................................................................................................................ 46
Big News in Pharma Outsourcing .......................................................................................................... 48
Use Your Business’ Reach For Financial Gain ........................................................................................ 49
Computers and the Crash: Human Intuition Cannot Be Replaced ....................................................... 51
Two Ways to Build for Change ............................................................................................................... 54
Learn From the WSJ – Attack Your Competitor’s Stronghold ............................................................... 57
Learn From the WSJ – Attack Your Competitor’s Stronghold ............................................................... 60
Where, Oh Where, Is My Tata Nano? .................................................................................................... 63
Use Reverse Innovation to Inspire Ethonomics .................................................................................... 65
What’s a Duck to Do?.............................................................................................................................. 67
Building a Brand: Aflac Takes a Gamble on a Long-Term Strategy....................................................... 70
Oil Spill May Force an Innovative Social Construction.......................................................................... 72
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Three Insights Into Doing Business in Venezuela .................................................................................. 74
A Lesson on Leadership - From Venezuela with Love ........................................................................... 76
The Death of Creativity = The Death of Innovation .............................................................................. 80
Three Steps for Changing Reality ........................................................................................................... 83
From Winning to Crazy: How to Assess Your Company's Ideas .............................................................. 86
Storytelling and Influence: Learn How to Get What You Want ............................................................ 88
Is Google Destined to Be Evil? ............................................................................................................... 91
Blue Nile Sparkles.................................................................................................................................... 93
The Blue Nile Difference ......................................................................................................................... 94
Selling Information, Not Diamonds ....................................................................................................... 96
Creating a Two-Horned Dilemma .......................................................................................................... 98
Five Laws of Conflict – Burning Korans Breaks them All ....................................................................... 100
Condense Your Strategy to Its Core ..................................................................................................... 103
Five Years of Stock Value: WebMD Beats Google................................................................................. 105
Passionately Pursue Customer Captivity ............................................................................................. 108
The Perfect Balance: Blending Flexibility and Consistency ................................................................... 110
Can Rosetta Stone Reach the Fourth Level of Advantage?................................................................. 111
A Shift in Perspective Can Create Millions .......................................................................................... 114
Four Lessons From Around the World ................................................................................................. 116
Three Tips for Building Something Great ............................................................................................ 118
What Cold Batteries Are You Holding Onto? ...................................................................................... 120
Great Leaders Provide Hope ................................................................................................................ 122
Four Points for Outthinking the Competition ..................................................................................... 123
Innovative Ideas Are Hiding in Internal Data ...................................................................................... 124
Michael Vick Lessons #1 and #2: Guard Your Story and Pick Your Plot ............................................. 126
Michael Vick Lesson #3: Get Noticed .................................................................................................... 128
A Torn Public: To Love or Loathe Michael Vick? ................................................................................. 128
Vick Lesson #4: Control Your Backdrop ............................................................................................... 131
Tue Jan 5, 2010
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Apple Plays “Cat and Mouse” with Competitors
BY FC Expert Blogger Kaihan Krippendorff
I was in Istanbul working with a group of technology executives from around the Middle-East/
Africa region and we were talking about the habits of breakthrough strategic thinkers. To get
the conversation going, I decided to show a video of the (then recently released) Amazon Kindle
2.
I’ve used the Amazon Kindle case and the eBook story in general in my leadership development
programs for years. It nicely exemplifies a strategic pattern that has for millennia distinguished
strategists from tacticians and laid the groundwork from some of history’s biggest successes
and flops.
Today, I believe we see this pattern maturing as evidenced by a January 3, 2010 New York
Times article by David Carr, which delves into the future of eBooks and readers. After reading
Carr’s piece, I immediately thought about an ancient Chinese principle that suggests, “to catch
something, first let it go.”
This strategy teaches that we must not confuse being first with winning. Just as the lead rider in
a bicycle race bears the brunt of the wind while followers coast in his wake, the first to market,
enjoying his place on the “most innovative” list, may be unknowingly clearing the paths for
followers.
People have been speculating for months that Apple is going get into the eBook business. In
October, for example, a New York Times executive, Bill Keller, supposedly inadvertently leaked
that Apple was planning an eBook reader.
But Carr’s article offers the most straightforward hint yet that Apple is planning to launch a
competitor to the Amazon Kindle, Sony Reader, and the Barnes & Noble Nook. If you know this
pattern, and tracked the eBook market’s growth, you would have recognized this two years
ago.
Here is how the play works:
1. Someone tests out a new innovation
2. This innovation should be attractive, but customers do not understand what it means and
various social and systemic ties prevent immediate adoption (e.g., few publishers offer
electronic books)
3. So the innovator invests in changing the system, building the technology, the laws, the
new norms that will enable the innovation to succeed
4. The system loosens and people start adopting
5. Then someone else, who owns critical strategic assets, steps in and tries to take the
innovation for himself
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This pattern helps explain why VHS beat out BetaMax, why Gatorade has an 80% market share
while UnderArmour (which was born under nearly identical circumstances) commands only
about 15%, and why most people say they “TiVo” things, but they have never actually owned
“TiVo” because they get free DVRs from their cable providers.
Just as every person adopts certain habits of behavior, every company tends to settle on and
repeat a few strategies that work. A few months ago, while my colleague and I analyzed Apple’s
growth and success, we identified Apple’s playbook – the patterns and strategies that have
been used to gain market share and profitable growth. And one of Apple’s key plays is this
pattern – to catch something, you must first let it go. That approach has become part of the
company’s DNA.
I spoke with an Apple executive who disagreed with my analysis, but I believe the pattern holds
true. Apple is not innovative in the way most people define the term. Their brilliance comes not
from introducing new cutting-edge technologies or in building new markets. Rather they let
others do that work. Then Apple steps in, expands existing technology, jumps into a market
space that is already growing, and then uses its marketing and business-building talent to
command a large share of what others have already started creating.
They did this with MP3s (stepping in for Sony) and smart phones. They are attempting to apply
this same pattern to the Flip, a small video recorder, by advertising the video function of the
iPod Nano. And, predictably, they seem to be poised to do the same thing to the Amazon
Kindle.
Experts believe Apple will not point its new device directly at eBooks, but instead Apple will
offer a tablet that can contrast the Kindle’s black and white display with full color and video.
That is another strategy that Apple has had success with, but I will have to delve into that in
another blog post.
But for now I invite you consider this - are you, today, being the wise cat or the naïve mouse?
Ask yourself the following questions to see how you might use this ancient strategy to your
advantage today.
1. What would happen if you let your competitors innovate ahead of you?
2. How close behind do you need to follow to ensure they cannot get completely away?
3. What strategic asset can you use to position yourself to take the market when it is ripe?
(Usually, the required asset is either customer captivity, scale, or preferential access to
resources.)
Wed Jan 13, 2010
The Ego That Binds
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BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Every couple of months I gather in New York a group of heads of strategy at large, noncompeting firms for an open, confidential discussion about challenges and opportunities.
Yesterday we invited Professor Srikumar Rao to facilitate our discussion. Given the personal
nature of the session, and our agreement to keep it confidential, I cannot share the specific
content of participants’ dialogue. However, I want to share a few tidbits of Dr. Rao’s talk.
Because, as you will see, he belongs to a growing group of business gurus who are making
tangible the link between being good and corporate success.
First, here is a quick overview on Dr. Rao. He earned his Ph.D. from Columbia University and has
been featured in The New York Times, BusinessWeek, the Financial Times, and other leading
business publications. He is the author of two books, Are You Ready to Succeed? and the soonto-be-launched Happiness at Work. He taught one of the most popular courses at Columbia’s
MBA program and now teaches this same course at London Business School and Haas. He also
offers it in a public format. See www.areyoureadytosucceed.com for more information.
Dr. Rao has a following of executives who span the globe. And getting a glimpse of his message
tells you why. This summary surely doesn’t do Dr. Rao’s work justice, but here it goes
nonetheless.
At the center of Rao’s approach is the belief that we think we live in a real world, but we are
actually living in a self-constructed, imaginary one.
No, I’m not saying we live in the “matrix” or that you need to choose between the red and blue
pills. But instead, this means that many of our beliefs about how the world works are mental
constructs that help us simplify things. But these constructions are not necessarily true. This
links to my theory that breakthrough companies beat their competition because they challenge
accepted, false beliefs that larger firms and industry experts have settled on as truth.
This “false reality” is a function of our “mental chatter” – the internal monologue you have
going on in your heads all the time. This mental chatter has become so much a part of your
normal state that you don't notice it anymore. And not recognizing it is a big mistake because
you start making assumptions and acting on those assumptions without thinking.
At a higher level, we build “mental models” – notions we have that "this is the way the world
works." These are like the strategic patterns that I teach to my clients and my readers. These
models work well, and they save us time and help us understand complexity. By not recognizing
these models or patterns, we are destined to make mistakes and miss opportunities.
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Next, Rao spoke about the “self-centered universe” most of us live in. We interpret everything
that happens around us in terms of "what is its impact on me?"
For instance, if my boss was in a bad mood this morning, it must be because I did something
wrong or because he doesn’t respect me. Our ego steps in and immediately tries to twist the
world around itself. It says, "This is me; I am important; make me feel good!" The result of
making it always about you is that you are more likely to feel frustration, anger,
disappointment.
These issues cause tangible problems for organizations. They lead to ineffective teams that are
unable to see new approaches, and unsatisfied workers who aren’t being fully productive.
The key to rising out of these issues – the inner dialogue, limited mental models, and the selfcentered universe – is to find a cause bigger than you. This is where ethonomics comes into
play. By finding a mission that motivates people beyond themselves, a company can get past
individual egos and stale strategic thinking.
This lesson came out during our session. One participant – a senior manager responsible for
strategy and innovation of a large corporation – realized that when he set aside his ego, when
he focused on helping his colleagues rather than worrying about his career, his frustration
suddenly disappeared.
Dr. Rao walked us through a small exercise that taught the group how to have a similarly
cathartic moment. Try it for yourself:
1. Find a few friends you trust
2. Share with them a frustration or complaint you have
3. Complain to them
4. Then ask them to offer an alternative interpretation to what is going on. This
interpretation must meet two conditions: it must (a) be better than your current
explanation and (b) be one you see as plausible
Immediately people realized that the only thing that limits their ability to see new options is
their own ego or already defined mental models. By asking for another point of view, the
individual is given a new perspective. By using that new outlook to his or her advantage, the
person can stifle that internal chatter and develop strategies that they originally couldn’t see.
This problem plagues big and small companies alike. For example, today I'm heading to
Redmond, WA to work with Microsoft on what I now recognize as a quite similar issue: how can
we help emerging leaders recognize and step outside of their mental models to see new,
innovative ways of doing things?
Ask yourself the questions below to see if you can set aside your ego to build a business
beyond your competitors' grasp and limited vision.
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1. What are my biggest concerns?
2. What do I see as our company’s largest obstacles?
3. Why do we see these as obstacles?
4. By removing egos from the equation, can we come up with approaches to tear
down these obstacles?
5. How can I use the exercise above to develop better explanations and approaches?
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Tue Jan 19, 2010
A Whole New (Cognitive) World
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Last week I gave a keynote speech for 830 financial consultants in New York at an IMCA event.
If you don’t have more than $20 million in the bank, then you may not have spent a lot of time
with people like this. They were primarily private wealth advisors for the world's wealthy. What
I learned there, through the formal program, the survey I conducted of participants, and the
numerous conversations I had afterward, points to a whole new world. Let me summarize:
1. 2010’s challenge is how to grow now that the cost-cutting has slowed
2. This is going to require a new way of thinking about the world
The 2010 growth challenge
About 100 participants completed my brief survey prior to my lecture, and the results
overwhelmingly echoed what I have been hearing over the past couple of months. While 2009
was about saving market share and protecting profitability, 2010 will be about designing
effective growth strategies. A full 76% of respondents cited either accelerating their growth
rate or developing their strategy as their top objective for the year.
Surprisingly, despite the media’s seemingly non-stop attention on regulation, these participants
were far more worried about changes in their clients’ needs and behaviors. This was true last
year, which we might expect as the credit crisis forced all of us to rethink our financial goals.
But it seems 2010 will offer no respite. Close to 50% of respondents said changes in client needs
or behaviors was the biggest challenge in both years.
The New View
After my talk, I stayed around to hear a lecture by Andrew W. Lo from MIT. He is an economist
that founded and promotes the concept of an “adaptive market.” I had read a bit about him
and his theories, but as I sat in the back of the massive ballroom, behind aisles and aisles of
people, I realized that he was talking about something we are starting to see pop up in
numerous, seemingly unrelated domains.
Essentially, what he argues is that our old model of the world is broken because it assumes that
people and markets act rationally. The Adaptive Markets Hypothesis assumes that people adapt
their expectations, that their behaviors are driven by biology, not mathematics; by greed, not a
cold assessment of risk and reward. It assumes the agents who drive market dynamics are
humans, not machines.
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This theory fits very well with what we have been discussing here. The old model of business
strategy said that companies act rationally and so the way to win was to do something that
others cannot do. But this view conflicts starkly with everything we see. We’ve featured here
innumerable “outthinkers,” like Valley Forge Fabrics, Vistaprint, EyeBuyDirect, HSN, and
Tradestation, that have disrupted their markets not by doing what others can’t do, but rather
simply by doing what others will not do. Indeed, in every case the large incumbent could, if it
makes the right sacrifices, kill off the rising star with minimal effort. But the big defender
chooses not to defend itself.
In other words, the sources of advantage, the barriers that protect fast growing
companies, are cognitive. They are not the hard, sustainable advantages we read about in
business school.
George Lakoff, someone I hope to feature here sometime, has built an impressive mass of
research that shows that people’s behaviors are driven primarily by unconscious forces. Indeed
94% of human behavior may be unconscious. You might read The Political Mind or Don’t Think
of an Elephant to get a taste for the tangible implications of this in politics.
Another thinker who I will be featuring soon is Peter Paret, author of The Cognitive Challenge of
War, who shows that the reasons Napoleon seemed to be utterly unstoppable during the war
of 1812 was that the Prussians found themselves bound in a web of cognitive challenges. These
social and psychological barriers prevented the Prussians from adapting effectively to a new
form of competition.
And we have Raj Sisodia, David Wolfe and Jag Sheth, authors of Firms of Endearment, and their
fellow social-capitalists who are helping establish that there is a meaningful link between
appealing to people’s hearts and financial performance.
What all of these gurus are telling us is that in almost every domain of competition, we are
entering a new understanding. Our old model, which held that people act like machines and so
masses of people – markets, organizations, societies – must also act like machines and we need
only uncover their natural laws, is wrong. Cognitive and biological forces make this a more
perplexing, yet more exciting, world.
If you have not fully thought through how you are going to trigger new growth this year, invest
the time to look at it with fresh eyes now, because your competitors may be doing just that
now.
Ask yourself the questions below to see how you can outthink your competition by
implementing innovative strategies.
1. Where do I see potential need or growth?
2. Are my competitors preparing for this need or growth?
3. Are there companies in other industries that are using particular strategies that
might be effective in my niche?
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4. If I assume that my customers are not behaving logically, then how can I come up
with a seemingly illogical approach to reach them?
5. How can my company do something good for all stakeholders while creating a
stronger brand?
6. How can I publicize our ethonomic mantra so that all stakeholders are on board
and identify with our company because of its ethonomic mission?
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Tue Jan 26, 2010
Avatar: Lessons On Realizing Your Vision
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
This week Avatar, James Cameron’s 3D movie, broke an historic barrier by becoming the
highest grossing film of all time. It beat out Titanic, also a James Cameron movie. The story of
how Cameron engineered this feat offers a valuable lesson for anyone wishing to impact the
world. If you want to build a business, launch a product, or drive social change, Cameron’s
journey points to a tool-set that all successful innovators use to overcome the fundamental
challenge of innovation.
Niccolo Machiavelli was one of the first to point out innovation’s fundamental challenge when
he wrote:
“There is nothing more difficult to take in hand, more perilous to
conduct, than to take a lead in the introduction of a new order of
things, because the innovation has for enemies all those who
have done well under the old conditions and lukewarm defenders
in those who may do well under the new.”
While writing my last book, The Way of Innovation, I got a chance to interview several
innovators, from Nobel Peace Prize winner Mohammad Yunus to Dick Hayne, founder of Urban
Outfitters. Their experiences follow a shockingly similar pattern to that of Cameron’s journey.
You see, all innovations begin with a new vision that is inconsistent with reality. And successful
innovators are able to enroll a critical mass of people in that vision so that it actually becomes
reality. I call this the “formation” process. It is like painting a dot painting. You know what you
want to create (your vision) and to make it real you must carefully place dot and after dot on
the canvas until the world recognizes your vision. Each dot represents a stakeholder that you
must enroll in participating in this new “order of the world.”
A recent article in BusinessWeek nicely plots out Cameron’s journey. In summary, it shows that
for Cameron’s big vision to be real, he would need to enroll four stakeholders: (1) he’d have to
convince a massive number of moviegoers to pay 30% premiums over regular movie prices for
renting 3D glasses, (2) he’d have to convince movie theaters to upgrade their equipment, (3)
he’d have to convince camera companies to improve 3D video technology, and (4) he'd have to
convince a studio to fund it all. Each stakeholder had reasons to support his vision and reasons
to resist it. Great innovators know how to elevate the former and alleviate the latter.
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I don’t have space to walk through how Cameron skillfully untangled that which was causing
resistance in each stakeholder, but for illustrative purposes, I want to look at #4 - the movie
studios. Fox had the right of first refusal on Avatar’s rights so Cameron was determined to find
a way to get them to fund the project at an anticipated cost of $200 million. Fox was hesitant
because this would be one the most expensive movies ever made and they feared he would go
over this budget, just as he did with Titanic.
To bring Fox into the fold, Cameron employed a number of tactics. Of course he started with a
compelling vision and an eye-catching sample film clip. These are tools all good directors can
employ. But when these tactics did not distinguish Cameron’s innovative skill or convince Fox,
Cameron went further than the average director would think to.
First, he addressed Fox’s concern about technology by investing his own money, about $12
million, in developing a camera rig that could capture 2D and 3D imagery simultaneously.
Second, when Fox looked like it was going to say no, he approached Disney. Disney’s interest
brought Fox more firmly to the table. Third, to help reduce Fox’s financial risk, Cameron helped
arrange the support a London-based private equity firm, Ingenious Media, which in the last 10
years has raised $8 billion to invest in films such as Night at the Museum, Shaun of the Dead,
and Live Free or Die Hard.
With the technology in place, a credible threat in the wings, and someone willing to absorb
more than half the risk, Fox green-lighted Avatar.
Cameron’s journey was touch and go. He hit dead ends that would have discouraged many of
us and made us simply give in. But like all successful innovators I’ve interviewed, he persisted
confident in the value of his vision, painstakingly forcing the dots into place until the tapestry’s
vision became evident to everyone.
How do you pursue your vision confidently, even when others say you will fail? How do you
predict and handle the resistance your innovation will naturally evoke in your environment?
These are the questions that all great innovators must ask and they all realize that the most
important perspective is one that clearly illustrates all that will benefit from their vision.
My colleagues and I are now working on several exciting projects that can draw inspiration from
Cameron’s story. One of our clients is building what we hope will be the first online multi-player
game (think World of Warcraft) tied to a real-world, physical world, allowing you to actually
visit the world in which you have been virtually interacting. Another is seeking to transform
how heart surgeons treat patients, potentially saving thousands of hearts before needing
transplants.
The stakes are high and we must play smart. Ask yourself the following questions to see how
you can turn your vision into a new reality.
1. Who has the power to really influence my innovation’s success or failure?
2. How can I enliven the support of stakeholders who will benefit (for often even
those who will win do not recognize your idea’s merit)?
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3. How can I win over neutral stakeholders (those who will neither benefit nor lose
too much)?
4. How can I enroll or diminish the influence of those who will lose out by my
innovation?
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Wed Feb 3, 2010
Valley Forge Fabrics Is Green – And We’re Not Talking About Fabric
Color
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
A little over a year ago I introduced a fabric company that is revolutionizing the hospitality
fabric industry. Valley Forge Fabrics, once a small mom-and-pop business, now sells more
decorative upholstery fabrics to the hospitality industry than any other company in the world. I
recently got a chance to catch up with Valley Forge’s leadership when I held an executive
briefing webinar on the secrets of Valley Forge’s success, and you can review the presentation
by clicking here. What I learned was fascinating: over the past year the company has seen its
green initiatives evolve into a breakthrough new product with the potential to deliver a
disruptive competitive advantage. Read on to see how Valley Forge is harnessing the true
potential of ethonomics.
Not only is Valley Forge the leader in its market, but it is also focused on making sure its
products and processes are green. This focus on sustainability is more than just lip service – it is
a directive from upper management and a mission of the entire company.
Valley Forge has made an effort to recycle everything it can. It is the first to produce a fabric
made entirely of post consumer waste (e.g., used paper and cotton). It encourages other ways
to recycle by staff to bring in wine corks on Mondays, offering a place for employees to bring in
their old pairs of Croc shoes, reducing its carbon footprint and cutting back on the amount of
trash it produces. These might seem like small steps, but Valley Forge has also taken some huge
leaps.
For instance, Valley Forge has developed a program to reuse hospitality bedding. Most of the
time when a hotel is done with its sheets (usually because they are starting to slightly fray after
so many washes), it just throws them away. That’s hundreds of millions of pounds of sheets
heading into landfills. So Valley Forge has set up a program in which it picks up old bedding
(after it has been washed one last time) and then delivers those sheets to homeless shelters or
rehabilitation centers within 200 miles of that particular hotel.
Beyond recycling, Valley Forge has spent the last two years developing a new line of sheets
made with a renewable resource. First it looked at cotton, but after a lot of research, it realized
that cotton makes up 2 percent of the world’s crops and uses 25 percent of the world’s
pesticides. So right away Valley Forge’s management knew that wasn’t the environmental
solution it was looking for.
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Then management focused on bamboo. But again, they were disappointed to learn that it takes
between 11 and 13 chemical processes to convert bamboo into a fiber that can be used to
make a yard of fabric. All of those chemicals changed the product so drastically that it really
wasn’t an environmentally sound investment.
Finally, the company settled on working with eucalyptus. You see, eucalyptus pulp can be
created into a fiber by combining it with only one organic solvent. The product is called Tencel,
and it seemed like the answer to Valley Forge’s prayers.
However, it wasn’t that simple. Hospitality bedding has to go through heavy, industrial washing,
and the Tencel wasn’t strong enough. So after more than a year of working with Lenzing, an
Austrian company that makes Tencel, the two companies developed Tencel Plus. This “plus”
version of Tencel was strong enough to cope with industrial washers and soft enough to satisfy
the most luxurious hotels.
And since Valley Forge was the partner that helped develop the Tencel Plus, it worked out a
world-wide exclusive deal with Lenzing.
So now Valley Forge has created sheets made with Tencel Plus that not only feel great but also
take advantage of the natural benefits of eucalyptus. Eucalyptus is almost like a bug repellent,
and therefore it reduces dust mites in the bed. It also wicks away moisture and heat from the
body, and so it cools individuals down while they sleep.
People love the idea of wrapping themselves in eucalyptus as they sleep. The fact that it
reduces dust mites and provides a cooler sleep are extra benefits. But eucalyptus is also a very
smooth fiber, so Valley Forge’s 200-thread-count sheets actually feel like 350-thread-count
cotton, and their 300 thread count feels like a 500 or 600 thread count.
So focused on a mission to be more green, Valley Forge not only developed a new product that
is better than anything else out there, but it also has the exclusive rights to use that product.
That is the definition of ethonomics.
Ask yourself the questions below to see how you can follow your dream to create something
that your competitors cannot compete with.
1. What do I really want to do?
2. How can it benefit society?
3. Who can I partner with to develop this new product or service?
4. Is there a way to set up exclusivity to benefit my bottom line?
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Wed Feb 10, 2010
What the Super Bowl Means for Innovation
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
My wife can pronounce “Tchoupitoulas.” She loves red beans and rice. She peels crawfish faster
than you can toss popcorn in your mouth, and last Sunday night, when the New Orleans Saints
(the American football team) won the Super Bowl, she and a million other New Orlineans saw a
long-held dream realized.
Nearly half of my readers live outside the U.S. and have little interest in the tactical intricacies
of American football. But this game has many lessons to teach everyone. So over the next
couple of days, I thought I’d distill the four-hour event into three critical lessons that are
immediately relevant to successfully leading any innovations – new ventures, products, social
movements – that matter to you today.
Perfect past breakthroughs
"A new scientific truth does not triumph by convincing its opponents and making them see
the light, but rather because its opponents eventually die, and a new generation grows up
that is familiar with it."
- Max Planck
Sunday’s game pitted the two most accurate quarterbacks in the world against each other. One
side was led by Peyton Manning, to whom the media has been affixing labels like “greatest
ever” and “grand master” for his ability to place a football precisely where it needs to be on the
field, even as muscular 250-pound opponents are pouncing. On the other side, the lessappreciated Drew Brees, who has surprised experts over the past four years as he has perfected
the inhuman precision of his ball delivery.
Quarterbacks, as Sunday’s game exemplifies, have become the center, the generals, the heart
of the American football team.
But before 1913, we had no quarterbacks. Instead, football players played a game that looked
more like rugby with protective body pads. They ran and made short, underhanded pass-offs to
each other.
In 1913, in a game that would transform American football forever, the football team from
Notre Dame University took on Army. The lesser-known Notre Dame arrived to the grand Army
field wide-eyed, seeming in awe at the chance to play with one of the nation's best. Army
expected Notre Dame to serve as easy practice for their less-skilled players.
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But no one expected that Notre Dame would come armed with a disruptive strategy. Instead of
passing the ball underhanded, as all football players did, a small band of Notre Dame players
had practiced passing the ball overhead: winding up, arm stretched in the air, and tossing it
high into the air, to be caught many yards ahead by a teammate. For an engaging history of this
game and its implication, read “Notre Dame and the Game that Changed Football: How Jesse
Harper Made the Forward Pass a Weapon and Knute Rockne a Legend” by Frank Maggio
(http://www.amazon.com/Notre-Dame-Game-Changed-Football/dp/078672014X#noop).
This small tactical change – from underhand to overhand – opened up an entirely new
dimension of competition to American football that over the next 100 years became an
obsession. Millions of young players started practicing, tossing the ball overhead with their
fathers on their front lawns. High school teams started changing their formations and plays to
leverage this newly discovered approach. And after a century, players and coaches worked to
perfect the overhead pass, their work captured in the precision of Manning and Brees.
This pattern – the underdog innovates, others copy and perfect – has always defined the pulse
of industries, areas of science, and sports. During the 1928 Olympics, Dick Fosbury shocked the
“experts” by jumping over the high bar backward, winning the gold. Michael Jordan invented
the fade-away. Dell decided to sell computers directly to consumers. Toys “R” Us built a toy
store with wide aisles. Someone challenges the accepted way, creates an innovation, and the
world then undergoes a long period to perfect the new approach.
Ask yourself the questions below to see how you can break accepted rules and get in front of
your competitors:
1. Do you have a new way of doing things?
2. Can you perfect that approach faster than your competition?
3. What accepted tactics are ripe for innovation now?
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Thu Feb 11, 2010
Super Bowl Lesson #2: Win By Using A Strategic Narrative
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
On May 22, 1453, the moon rose in eclipse over Constantinople, today Istanbul, and arguably
redirected the course of world history. By that day Ottoman soldiers had spent nearly a month
bombarding the massive walls protecting the last vestiges of the Byzantine Empire with no clear
end in sight. But when the moon rose in eclipse it was taken as a sign that Constantinople
would soon fall.
When people believe they are going to win, they are more likely to win. When they fear they
will fail, they fail. Great leaders have understood for millennia that in order to guide armies and
organizations, one must control where they think they are going, and that means to shape the
strategic narrative (the story) they are living in. You can do that in part through words –
retelling the past – but such efforts are more effective if you can support them with physical
signs of the story you want people to live in. This could be an eclipsed moon or, in the case of
football, the numbers on a scoreboard.
In last Sunday’s Super Bowl game, the New Orleans Saints’ coach understood this. As the
game’s first half was coming to a close the Saints' coach faced a choice he had already made
once before. His team could choose between taking a safe bet on getting 3 points with a field
goal or taking a risky shot at getting 6 with a touchdown. Earlier in the game the coach had
chose the riskier bet … and lost.
But this time the consequences would be more prolonged. If he took the risky bet and lost, the
Saints would go into halftime with 3 points vs. their opponent’s 10. They’d have 30 minutes to
ponder their 3 to 10 score and would naturally start creating stories about what this meant.
"We are losing," they’d probably think.
But instead, the coach this time went for the safer option. His team took the easier 3 points and
went into halftime with a score of 6 to 10. This score looks dramatically different than 3 to 10. It
fits an entirely different narrative. It does not fit “we are losing”; it fits “we are just a few points
behind.” The “losing” narrative has one logical ending: we will lose. But the “few points behind”
narrative fits a more helpful narrative: “we will catch up.”
You want to think carefully about what narrative your people are “living in” and present, or
create, evidence to support the narrative that you want them to hold.
1. What narrative are your people telling themselves now?
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2. What narrative do you WANT them to “live in”?
3. What evidence will help them jump to the new narrative?
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Fri Feb 12, 2010
Super Bowl Lesson #3 - Find A Moral Force
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Von Clausewitz, the great Prussian military strategist, introduced us to the concept of “moral
force.” He believed that armies that wanted to win with great conviction enjoyed a tangible
advantage over less-motivated adversaries.
This “moral force” is the fuel that drives the success of the “ethonomic” companies we have
covered here. They are pursuing a bigger goal, one that appeals to a larger class of
stakeholders: to the community, the country, the world. Everyone, as a result, is cheering for
them, including their customers, suppliers, and investors. When you have everyone on your
side, it becomes easier to win.
In last Sunday’s Super Bowl game, the New Orleans Saints were playing for more than their
team. They were playing for the city of New Orleans, which just four and a half years ago faced
near devastation in the aftermath of Hurricane Katrina. The city the U.S. government failed to
lift up out of the floods has been lifting itself up. And their journey was exemplified by the
Saints, a football team that since its founding in 1967 has never made it into the Super Bowl.
As the game day approached we heard Saints players using words like “destiny” and “true
calling.” They were there to do more than win a football game. They were there to show their
city, state, and “maybe even a country,” as the Staints' quarterback Drew Brees said, that “New
Orleans is back.”
As I bump into friends on the streets of New York, our conversations naturally land on the
Super Bowl. When they ask who I cheered for, I tell them the Saints, and then I tell them my
reason: my wife, raised in New Orleans, whose family survived Katrina, has desired this for her
whole life. And then I get a pause, followed by “That's great, man. No one deserves it more
than them.”
Fill your sails with the power of “moral force.” Find a purpose that will turn everyone into a
fan.
1. What is your company’s purpose?
2. How can you exist for something bigger, something that everybody wants to
succeed?
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Thu Feb 18, 2010
Four Steps to Turn Stories into Competitive Advantages
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Aida Barragan spent one of her first days on the job telling stories. In a big room, with other
new recruits, in a session led by the CEO of Outpatient Services for Baptist Health of South
Florida, Aida drafted, discussed, and practiced delivering real and fictional stories about her
new company.
Thankfully, her husband shot me an email to let me know what was going on.
You see, for the past year or so I’ve been looking into the tangible link between stories and
competitive advantage. A vast body of research supports the view that the “corporate values”
that companies invest millions in crafting are actually less important than the stories they tell.
All of this has to do with short-term-working memory, pattern recognition, and mirror neurons,
which I won’t go into now. The finding is that 94% of your behavior is driven by unconscious
forces and one of the most influential forces is the programming you acquired by the stories
you grew up with.
Stories permeate your subconscious. You are telling yourself stories all day, when you cross the
street, when you step into a meeting with your boss. Stories about “Trojan horses,” or “cherry
trees,” or “walking uphill both ways,” or “the boy who cried wolf” pop up and guide your
actions before you even become aware they are tugging your reigns.
So when Aida’s husband heard about that Baptist Health of South Florida, the largest non-profit
health organization in South Florida, had been executing a systematic program to shape their
storytelling, he knew immediately that this was an example of what I have been searching for.
He was right and I had to learn more.
Last week I had a chance to interview Patricia Rosello, CEO of Outpatient Services, about the
program she came up with. I wish I had time and space to dig into all the details, but I will
summarize what her organization is doing to turn storytelling into a strategic tool for building a
sustainable competitive advantage.
Patricia’s organization is growing. It will probably double in size in the next 24 months. This has
the potential to create a fracture in the organization’s culture. All service businesses depend,
ultimately, on the behavior of their front-line personnel for survival. Starbucks has proven itself
good at managing this behavior. Most companies – think about airlines, credit card companies,
banks – are not.
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So to maintain her organization’s advantage, Patricia has launched an aggressive plan, heavily
rooted in narratives. Here is what they are doing.
1. Decide what makes you distinctive. Baptist Health started out by comparing the
experience it delivers patients with what those patients could get elsewhere. They
created a long list of differences and whittled it down to what really mattered. Everyone
says they are “compassionate,” so being compassionate, while important, does not
differentiate you. Take that off this list. At the end of this process, they had identified
seven key characteristics that made Baptist Health of South Florida unique.
2. Create stories about your distinctive points. For each characteristic that makes you
unique, that you want to reinforce, ask your people to make up a story that illustrates
the point. Patricia’s team decided to create a “day of culture” – a full, seven-hour day
held for all new recruits, attended by Patricia herself, during which new hires learned
about and created personal stories about the seven distinctions. While corporate-wide
stories are helpful – when I was at McKinsey we learned numerous stories about the
Firm’s creator, Marvin Bower – personal stories create more resonance. This is why you
want to encourage people to create their own stories.
3. Practice the art of storytelling. They launched a program to train their people to
become more effective storytellers so that when they told their stories, people listened.
4. Spread the stories. They are now launching an ambitious program to systematically
share these stories. In September they will ask all of their staff – from across 27
locations – to come together. They will set up video booths and invite staff to share the
stories of where they saw their values and distinctive behaviors coming to life.
I almost hate to use the word “storytelling” here because the word evokes for many ideas of
entertainment and fluff. If you view stories this way, replace the word with “strategic
narratives” and consider that it is through the learning of “strategic narratives” that great
strategists are born.
For example, the case method used by top business schools is a way to learn narratives about
companies who succeeded or failed and what worked and did not work. The Mongols, led by
Genghis Khan, told stories. They had no written language and so memorized poems and songs
that embedded military directions – when you get to the big tree, climb the mountain, stay to
the left, etc. This is why military campaigns are often given names that evoke stories stored in
our subconscious. What does a “desert storm” do?
As I continue my research into this area, I’ll share interesting findings. From Baptist Health I
think we can learn to do four things:
1. Decide what makes you distinctive
2. Create stories for each
3. Practice telling them effectively
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4. Propagate them broadly
Ask yourself the questions below to see how you can develop effective narratives that give
your business a competitive advantage. And if you know of any companies using narratives
strategically to shape culture and strategy, please let me know. I’m desperately searching for
this rare breed of forward thinking corporation.
1. What makes our company, people or products unique?
2. How do my employees express this uniqueness?
3. What is the best way to spread our distinctive new message?
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Wed Feb 24, 2010
Two Questions to Make Your Product Irresistible
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
I could not sleep the night before my birthday. My mind was buzzing, not with dreams of
birthday cake but with thoughts of what I had experienced earlier in the day. I was flying home
overnight from Ecuador where I had just conducted a seminar for a group of CEOs. The more
than 70 executives in the room collectively represented about 30% of Ecuador’s GDP. Harvard
Business Review had gathered them together to network and learn, and they asked me to
facilitate the session.
Ecuador’s corporate leaders assembled in a banquet room brainstorming creative strategies for
solving a critical challenge for their capital: how can we turn Quito, Ecuador’s capital, into a
major tourist destination?
We can draw exciting answers to this question through the ancient Chinese saying “create
something out of nothing.” This is not to say that Ecuador has “nothing” now; it has some of the
richest natural and historical attractions in the world. But this strategy seems to lie at the heart
of the successes of the world’s great tourist destinations, as well as the world’s most wellknown products. Understanding this principle could lead to new visitors, customers, and sales.
Construct your destination
"Some categories really are social constructions: they exist only because people tacitly agree to
act as if they exist. Examples include money, tenure, citizenship, decorations for bravery, and
the presidency of the United States."
- Steven Pinker, “The Blank State”
The world is opening in ways unimagined. Tourists are pouring into China, India, and Dubai,
places that ten years ago only the most daring visited. And yet, the number one tourist country
continues to be France. It attracts 70 to 80 million visitors per year, almost 50% more than the
two countries tied for second place.
China’s Great Wall, Australia’s Great Barrier Reef, and India’s 5,000 years of history cannot
compete with “France.” But what is “France?” Why do more tourists visit Paris than any other
city in the world? Ask a few who have and you will confront a bewildering network of objects –
cafés, baguettes, croissants, the Eiffel Tower, the Arc de Triomphe, wine, ornate architecture,
windy streets – that together create what the world knows to be “Paris.”
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This “Paris” is dramatically different from the one Parisians live in. When my wife (who lived in
Paris for a while) and I visited one of my best friends from business school, we saw that few of
the things Paris conjures up for tourists are part of a Parisian’s everyday life. That seems to be a
common theme for most tourist destinations. For instance, I live in New York and only went to
the Statue of Liberty when my in-laws visited.
Your customers are probably less attracted by what your product actually is than by the
imaginary image they have constructed in their minds. Destinations that hold great brand value
have been smart in how they shaped their mental destination: Costa Rica means parrots,
jungles and surfing; Jamaica means Bob Marley and beaches; Disney means Mickey Mouse,
family and castles; Las Vegas means crazy things happening in hotel rooms; New Orleans means
jazz and Bourbon Street.
Managing the symbols and associations your customers have with your product or service is an
art. Be strategic about it and you can wire a web in their brains that captures their interest and
gives them warm feelings that makes them want more.
In our workshop we broke into groups of about five and each explored, among other things,
what Quito’s mental destination could be. It was one of the first cities designated as a World
Heritage Site by UNESCO (in the 1970s), it lies just a few hours away from the ecologically
diverse Galapagos Islands, it was one of the capitals of the Inca Empire, and it’s also known for
artwork. By enhancing the right symbols and strategically shaping the story, the hope is Quito
could craft an irresistible mental destination.
Create an occasion
At 11pm in a bar, after a few drinks with a group of friends (assuming you are of the right age
range), someone eventually and naturally comes up with an idea: “Let’s get a round of tequila
shots!” Who put this idea in your head? Tequila makers, of course. They have for years been
strategically building and reinforcing the “tequila occasion.”
Procter & Gamble nearly pulled the plug on one of its most successful new product launches.
No one was buying Febreze. But to the luck of millions of musty bed sheets, P&G gave it one
more shot. They changed the imagery of their advertising from those women unpacking
sweaters pulled down from the attic to images of women making beds. Their goal was to create
a “Febreze” occasion.
By linking your product/services to your customers’ environments, you can trigger the proper
response. The idea of “pulling out sweaters at the end of the summer” happens too rarely (just
once per year) to offer a useful product hook. So P&G had to give it a new identity and a
repeating image – make Bed, spray Febreze; make Bed, spray Febreze; make Bed, spray
Febreze. Then P&G was able to establish a trigger for the product. They created the Febreze
occasion.
Great tourist destinations, it seems to me, leverage this principle as well. Disney’s “I’m going to
Disney World” campaign linked a visit to its theme parks to a major life celebration (graduation,
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winning the Super Bowl, etc.). Despite the fact that Marti Gras started in Alabama, New Orleans
was able to develop the celebration as a major engine for its tourist visits. And each year, tens
of thousands of people gather in a Nevada dessert for Burning Man, a week of building art,
trading goods, partying, burning a giant statue, and then leaving with no trace of them having
been there. Burning Man has become an occasion on its own out of nothing.
So to create a tourist destination, or create any product/service into an irresistible destination
of its own, consider the ancient Chinese stratagem “Create something out of nothing.” Ask
yourself:
1. What symbols – characters, historical events, of existing structures/images – can I
use to construct a mental identify for my product/service?
2. What occasions – making a bed, graduating from school – can I link my
product/service to?
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Thu Mar 4, 2010
Unbundle Your Business
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
If you’ve never made the flight to Bentonville, Ark., you are missing something extraordinary.
The smallness of your plane, the vista of an endless patchwork of farmland connected by
country roads, hides the fact that you are entering Wal-Mart country. The passengers to your
right and left, now fumbling with their seatbelts and grabbing warm coats, fall into one of two
categories. They are either there to pitch something to the world’s largest retailer, going
through their negotiation lines silently. Or they are there to extract the greatest value for their
company and their loyal Wal-Mart customers.
When Peter H. Leiman and Cameron Odgen, two Harvard Business School MBA students, made
the trip, they were probably rehearsing their lines. They were there to pitch a “proof of
concept” they had been working on in school, an idea that could save Wal-Mart 25% on its
airline travel expenses. The pitch was simple: if Wal-Mart used small, inexpensive jets to shuttle
its people around, and filled each jet with 4 people, it could travel with greater flexibility at a
lower cost.
The pitch worked, but not in the direction one might expect. It served to build the conviction of
these two young entrepreneurs that, despite their having no real business-building experience
between them, they should launch an airline. They have since raised $30 million and launched
Europe’s first air taxi company, Blink, based in London with hubs in Geneva and the Channel
Islands. Their vision: to redefine the world of short-haul travel.
I had a chance to interview Peter and Blink’s chief information officer, Jake Peters. As they laid
out their strategy and business model, I caught clear signs that they are thinking like
outthinkers. They are executing strategies across multiple dimensions of their business that, if
successful, will make it difficult for competitors to wrestle with them. Here I lay out a few the
most important elements so that you may borrow them for yourself.
Unbundle your competitors
For a workshop I did with Wal-Mart on my first ever trip to Bentonville, we analyzed a
fascinating Indian business case: a jeans manufacturer found it could offer jeans at a far lower
price by selling the fabric, pattern, and thread rather than finished jeans. Consumers buy the
parts and have their local tailors assemble them. This is an example of unbundling what your
competitors bundle. When all your competitors are selling apple pies, sell apples and pie crust.
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Blink is attempting to do just that in two ways. First, Blink charges per airplane trip, just as a taxi
does, rather than per ticket. Whether you are flying one person or up to four, the price is the
same because you are only using one plane.
This allows them to help you find new ways to economize your travel. As Peter says, “The
competitors bundle their prices; they sell you a ticket based on the average fleet cost.” Blink
unbundles things for you and thereby enables you to make smarter choices.
Secondly, Blink gets the consumer involved in booking his or her trip. When you dial Blink, the
customer service representative asks you, “Where would you like to go?” If you say, “Charles
de Gaul Airport,” the representative might suggest you consider a different, less-expensive
Parisian alternative. If you say you want to fly at 3pm, they may inquire whether you are willing
to fly earlier so that they can time an outbound flight with an inbound pickup and thereby
reduce your cost further.
Getting that involved in your flight bookings may not be for all of us. But just as eTrade carves
out a segment of self-directed investors in a market filled with savers who prefer to leave the
decision making to Fidelity, Blink’s approach will appeal to price conscious frequent flyers. And
traditional airlines will find this approach too expensive to copy.
When your competitors have bundled pricing, ask yourself the questions below to see how
you undermine their approach and create new value.
1. How are your competitors bundling services?
2. Is there a way to unbundle our offerings to save customers money?
3. How can we present an "a la carte" menu when your competitors are offering a
"prix fixe"?
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Thu Mar 11, 2010
View the world through your competitors eyes
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Be a fish, let them be birds
I think I’ve mentioned this Zen Koan before, but it’s worth reminding ourselves of it: the bird
and the fish both pursue the same goal in winter – to stay warm – but they take opposite
approaches. The bird flies up while the fish swims down.
Similarly, two companies can take radically different approaches to achieving identical goals.
Both are pursuing market share and profits, but because of their nature, the best way to pursue
these may be quite different.
You can play on this fact by asking yourself how a “fish” would approach this problem and how
a “bird” would do it; how a “retailer” would jump into this business and how a “software
company” would.
Just today I was having lunch with two executives from Chartis, formerly part of AIG, and we
were discussing the value of asking leaders questions like “how would my competitor approach
this problem?” or “how would a company from a seemingly unrelated industry get into this
business?”
Blink is approaching the corporate jet opportunity from a fundamentally different angle than
most corporate jet companies. The leaders in the space – NetJets, Bombardier FlexJet, etc. –
are seeking to match the luxury of owning a corporate jet with the economy that comes from
shared ownership. They are to jet ownership what luxury timeshares are to real estate.
Blink, in contrast, is seeking to be the Southwest Airlines of corporate jets. Its DNA, as Blink's
cofounder Peter Leiman put it, this is about “achieving high asset utilization” to achieve a
significantly lower cost basis than its competitors. By asking the question, “How would
Southwest Airlines approach this business,” Peter and Jake make thousands of strategic choices
that seem obvious from their perspective, but would seem crazy from a traditional airline
company’s perspective.
It is these thousands of small decisions – from how they recruit and train to what type of seats
to install in planes – that weave a web of advantages that competitors have trouble replicating.
Blink, for example, only uses one type of plane: the Cessna Mustang, just as Southwest
operates a single-plane fleet. Blink is the largest owner of Mustangs in the world. This choice
runs counter to the strategy of competitors who want to offer their customers choice.
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Try this exercise yourself. Pick a successful competitor who is not in your immediate business
space right now and ask yourself the following questions:
1. How would this company enter my business today?
2. What new technology or service could it try to attach to my business offerings?
3. How could my competitor’s background in another field help him make strides in
mine?
4. What new products or services can I offer my customers?
5. How can I encourage my employees to be thinking innovatively about future
offerings?
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Thu Mar 18, 2010
Three Ways To Sustain Your Innovation
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
In my research following the paths of successful innovations, I repeatedly see that the strategy
that gets you there is not the strategy that keeps you there. It was Wal-Mart's focus on rural
markets that got it to become the largest retailer in the U.S., but it was its economies of scale
that enabled it to maintain this advantage. While Dell’s “go direct” strategy pushed it above HP
and IBM, it was its efficient, customizable supply chain with which it maintained its top position
for so many years.
Typically, fast-growing companies beat their competitors by doing something their competitors
choose not to copy, even though they could. Over time, however, competitors grow weary of
losing and they get over the cognitive and social barriers that are stopping them from
competing. Eventually the competition wakes up to your success and you need to shift your
advantage. One of my favorite business school professors, Bruce Greenwald, suggests in his
book “Competition Demystified” that there are just three proven ways to sustain your
innovation:
1. Achieve customer captivity
2. Build meaningful economies of scale
3. Secure preferential access to resources
Innovative, fast-growing companies know that they probably can’t use these sources right at
the beginning of their new business or product. But from the start, they explore how they can
put these barriers in place for future advantages. Blink, the young airline I've been covering,
seems to be pursuing at least two of these.
First, Blink is pursuing economies of scale by building its fleet and strategically partnering with
non-competing, similar companies. The idea is this: every time they carry a group of people
from point A to point B and another group from point B to point A, they save money. Instead of
having an empty plane fly back to point A, which incurs nearly the same fuel costs and landing
fees, they can charge for the return leg.
This “economy of serendipity” is the key to achieving high profitability. The more expansive
your network, the more likely you are to generate “economies of serendipity.” Look at it this
way. If every time a taxi cab dropped off a passenger it had to drive all the way back to base to
get the next pick-up’s address, that cab might lose money. But if that cab can pick up another
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passenger where it dropped of the first, and then another passenger where it drops off the
second, it can rake in profits.
Blink is seeking to create a network – through its own planes and those of similarly minded
companies – to share customers and thereby achieve economies of scale.
Second, Blink is working toward achieving customer captivity. Just as Starbucks has achieved
valuable customer captivity by training customers to follow a unique “Starbucks” process (you
learn, for example, to call non-fat milk “skim” and ask for a “tall latte” rather and that “latte …
tall”), Blink is working to train loyal customers in a unique Blink process. They want people to
call and say, “I want to get to Paris,” rather than, “I want to fly into Orly.” They want people to
enjoy the process of finding the cheapest way to get from their office to a meeting and back.
If Blink achieves these two things – customer captivity and economies of scale – history says
they have good chance of surviving any competitor that tries to take them on directly.
Ask yourself what you can do now to start building one or more of the three proven sources
of sustainable competitive advantages:
1. How can I achieve a higher level of customer captivity?
2. Who can I partner with to create economies of scale?
3. Where can we control the access to a needed resource or technology?
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Thu Mar 25, 2010
Send A Secret Message To Your Competition
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Our actions have innumerable unintended consequences. We often don’t realize or
acknowledge these consequences, but within them, we have an opportunity to act invisibly and
influentially. If we think about our actions, then we can send out hidden messages and cause
other players in our game to adjust their behavior.
This as stratagem 28: point at the mulberry but curse the locust.
Here’s how the stratagem works: Rather than attack your adversary directly, focus your
attention on a different target. This action sends a covert message to your adversary, one
that displays your power and communicates your intention. Your adversary, appreciating
your power and intention, alters his behavior.
This ancient stratagem even applies today. Corporations use this tactic to bring competitors
into alignment. Right now Apple is using this approach with its recent lawsuit against HTC, the
Taiwanese company that is the largest maker of smartphones running Google’s Android
operating system.
On the surface, it seems Apple is suing HTC because of patent infringements. But many believe
this lawsuit has more to do with sending a message to Google.
For years Apple has been the leader in smartphones with its iPhone. Google’s operating system,
Android, has similar functions and capabilities to Apple’s iPhone, and Google gives away the
Android system to phone manufactures. That depletes the uniqueness of Apple’s products and
cuts into Apple’s market share.
Last year, HTC, among other phone makers, started making phones using the Android system.
This has offered consumers quite a good substitute to the pricey iPhone and AT&T service
contract.
By attacking HTC, Apple warns Google to stay off its turf. This may only be the first attack in a
long conflict between the two companies. Only time, and lawsuit outcomes, will tell if this
stratagem will be successful for Apple. But it’s a great example of how to secretly send a
message to competitors.
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Knowing that our actions send different signals to different players, we can choose our actions
for the broader messages they send. This gives us a powerful tool with which to influence our
environments. Ask yourself the questions below to see if you can use this approach to send
the right messages.
1.
Who is our biggest competitor?
2. Who do we want to convince that we are serious about pursuing our vision or defending
our market share?
3. Instead of approaching this player directly, who can we focus our attention on to spread
our message?
4. Is there a smaller competitor or new service that we can partner with to show our other
competitor our intentions?
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Thu Apr 1, 2010
Serve Your Customers Three Most Urgent Needs
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
A couple of years ago, I was having a beer in London pub with an executive from the Royal Mail
of the United Kingdom. We were discussing the reorganization of the UK’s mail system and the
challenges it faced. With the recent announcements from the US Postal Service (USPS), I can’t
help investigate why these systems are failing.
The USPS has been struggling with a decline in mail and recently announced that it is facing
$238 billion in losses in the next 10 years. It would like to close some branches, reduce delivery
days, lay off workers and increase rates as a way to fight this downward spiral.
This could be an effective approach and is a good example of stratagem 16: sometimes
running away is the best strategy.
This stratagem says that retreating can preserve our strength and maintain the possibility of
exerting our power at a later time or place. Nearly 10 percent of the decade’s most competitive
companies began their rise with some kind of retreat. Chinese military history is filled with
stories of armies that came back from retreat, often after tens of years, to claim ultimate
victory.
But it’s not that simple. As an independent government agency, the USPS has to answer to
Congress. Even though the USPS does not receive taxpayer dollars and is funded entirely by its
own revenue, it is required to follow government rules and regulations.
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The Postal Reorganization Act of 1970 prohibits the USPS from closing small branches based
solely on economic factors. The act also keeps the agency from expanding its services beyond
postal delivery.
We often compare USPS to UPS and FedEx, but how can we? UPS and FedEx are private
businesses pursuing profit. They have fewer locations, less overhead and fewer restrictions.
The USPS, on the other hand, has 32,000 post offices throughout the country. It has more
locations than McDonald’s, Starbucks, Walmart and Walgreens combined. The USPS can’t cut
costs, can’t add services and yet is expected to be profitable.
Despite the fact that the USPS urgently needs to adjust to changing market conditions and
reduce costs, there has been massive opposition to cuts in service. Even the President and
members of Congress have opposed plans to cut delivery to five days.
Like any business, the USPS needs to adjust to its market and start making money or change its
mission. As we’ve seen by many of the successful “ethonomical” entrepreneurs we’ve covered,
its possible to pursue a social mission while making profit. But pretending that you are purely a
for-profit entity or purely a social one, leads only to conflict. Congress needs to allow the USPS
to reorganize and restructure its business model to be profitable, or its needs to recognize its
social purpose and allow it to find a new path.
Companies that successfully extricated themselves from situations like the USPS offer us insight
into how the USPS, and you, can win. Start by asking customers to identify their three most
important needs. If the USPS can meet those needs, while reducing costs by cutting everything
else, it may just find a valuable patch of soil on which to retreat. It is, for example, the only
organization that touches every house in the country every day. Maybe there is a better way to
extract value from this unique position.
During these rough economic times, ask yourself how you can streamline your business
without reducing the most important services your clients rely on.
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1. What would my customers say are their three most important needs?
2. What other products or services are we offering that we could live without?
3. How could reducing these products or services affect our bottom line?
4. Are there extra perks that we offer customers or employees that they do not need?
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Fri Apr 9, 2010
Getting Your Mojo Back
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Their unprecedented winning streak was about to end. After 77 wins, the most by any women’s
college basketball team, the women of the University of Connecticut Huskies walked off the
court with a 20-12 deficit against Stanford at half time. It seemed clear the Huskies had lost
their mojo.
How would your organization respond to such a situation? After years and year of continual
growth, beating the market and the competition every quarter, you find yourself faced with a
quarter that closes with an inevitable and stunning loss. What would your corporate DNA lead
people to talk about around the water cooler? Would they come to accept the inevitable end of
the company’s supremacy or would they swing into action to save it?
The answer, unfortunately, is already programmed for us by the stories we heard as children
and now tell as adults. These stories, at least in the West, lead us to view time as linear. We
believe the past directs the future. We believe in linear cause and effect. We believe the
moment will persist. If a ship leaves the dock and we miss it, then it is gone.
But an alternative view is worth considering. In the East, a fundamentally different concept
prevails. This cyclical view of change argues that the wind will shift, the rudder will turn, and
our ship will return to us even if this means that the ship circumnavigates the globe before it
comes back.
Over the past two months I’ve interviewed around 10 CEOs, many entrepreneurs, and have
noticed a common theme emerging: it is helpful, particularly in these trying times, to take a
cyclical view of change rather than a linear one.
The CEO of Blink suggested that while a venture capitalist says "no" 99 times and "yes" just
once, the entrepreneur learns to hear "no" 99 times persisting to hear the "yes." In our
interview a couple of weeks ago with Bud Paxson, founder of the Home Shopping Network, Bud
emphasized that while he is remembered for his successes, he has actually started about 40
businesses, most of which have failed. To view the Paxson webinar visit
http://www.kaihan.net/webinars.html.
I think that such entrepreneurs must have a brain with mismatched wires. While most of us pull
our hands out of the fire, while we retreat from negative feedback, these people actually see
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the downside and the beginning of an upside. They are like athletes who use pain as a guide.
The pain shows them they are stretching themselves.
The Huskies are also wired in reverse. They took the devastating half-time score and instead of
living in a story of defeat, they chose a story of renewal. They acted as a pendulum rather than
a falling rock. They missed 18 of their first 20 shots in the first half, the lowest first-half scoring
total in their history. But they came back to dominate in the second, digging themselves out of
inevitable defeat to win and protect their undefeated title.
The answer, I believe, is to pay careful attention to the stories we tell because our people will
fulfill the stories they are told. Ask yourself the questions below to see how you can respond
to adversity like the Huskies.
1. Are we telling stories that encourage a cyclical concept of time or one that describes a
linear one?
2. How can we respond like the Huskies and turn our current difficulty into motivation?
3. How can we help our colleagues see pain as the predecessor to reward, and a fall as
the beginning of rise?
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Thu Apr 15, 2010
Find An Expansive View
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Picking the right scale for your mission is an art. Define your purpose too narrowly and soon run
out of aspirations to fill. Set your sights too high and you risk de-motivating your people. To
illustrate this concept, I want to examine two seemingly similar companies: inVentiv Health
(VTIV) and PDI Inc. (PDII).
In 2002 inVentiv Health and PDI were battling head to head in an emerging type of business:
providing outsourced sales forces and marketing services to healthcare companies. The
healthcare industry was experiencing a shift. Pharmaceutical firms were beginning to look at
their variable cost structure and flexibility, looking for partners who performed non-core, nonstrategic activities at a lower cost than they could on their own.
inVentiv and PDI both seemed well positioned to ride the coming wave. Both had survived a
disastrous year in which each company shrunk by nearly 50%. They were lean and hungry, and
they were each standing at about $250 million in revenue. (PDI was slightly larger at $284
million in 2002 revenue, compared to inVentive’s $215 million.)
Both companies were ready to grow, but each would pursue growth through distinctive
strategies.
During the next seven years, PDI’s revenues would steadily fall to just $115 million by 2008, a
60% drop. Meanwhile, inVentiv’s revenues skyrocketed to $1.1 billion by 2008, a 520% rise.
How can two companies so alike in size and ambition have such divergent futures? I got a
chance to talk with with Blane Walter, inVentiv’s CEO, about his company’s experiences and its
mission. That’s where I saw a clear difference.
PDI describes itself as “a leading provider of outsourced pharmaceutical sales teams that target
healthcare providers.” While accurate, the mission’s inspirational component, to be “a leading
provider,” points to a fairly predictable destination, "outsourced pharmaceutical sales."
inVentiv’s self-description allows for more flexibility: “inVentiv Health Inc. …is a leading
provider of value-added services to the pharmaceutical, life sciences and healthcare industries.”
It allows the company to step beyond outsourced sales into R&D, marketing, and advertising,
for example, while still sticking to its mission.
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This is similar to another company I’ve featured, Vistaprint. While their competitors limit
themselves to being “printers,” Vistaprint wants to do anything it can do profitably to help
small businesses market themselves.
There is well-established influencing technique that suggests you call someone something and,
for at least an instant, they put on the character or the label of what you just named. They then
act accordingly. If you say, for example, “you are one of those kinds of people who are not
afraid to take risks,” then it is easier to get that person to take a risk.
Mission, visions, or self-conceptions play a similar role in organizations. As we’ve seen many
times over, what a group of people know themselves to be guides what options they see and
which they choose. A broader self-conception, then, will enable your people to see more fourth
options because it gives them more space in which to explore.
As inVentiv’s mission allows for a broader view of how the company can compete for business
and grow, PDI limits its vision to an “outsourced pharmaceutical sales team.”
This distinction between the missions may seem minor, but a lot of my research into strategic
narratives shows that people are wired to live the stories they are told. Ask yourself the
questions below to see how you can potentially broaden your mission to engage and ignite
your staff.
1.
2.
3.
What is our current mission?
How does this mission limit our client base or service offierings?
Is it built around the capability you are the best at, or is it designed to fit industrydefined boundaries?
4. How could we subtly, yet effectively, change our mission to spark new ideas with our
employees?
5. Are there new industries our company could service by altering our original vision?
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Wed Apr 21, 2010
Find New Ways To Coordinate Your Business
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Last week I introduced inVentiv, an innovative company that provides outsourced sales forces
and marketing services to healthcare companies. As most of the outthinkers we’ve profiled,
inVentiv understands that power comes from coordination. It has strategically acquired new
firms to fill in gaps in its offerings.
Today the company encompasses a collection of distinct agencies, each with a unique
capability. They can conduct pharmaceutical R&D, they can build new product launches, they
can turn-on a sales force. inVentiv has a company that can help clients across almost every step
in the chain.
While having all the pieces in place means inVentiv can hold onto a greater share of the
business, this by itself generates no strategic advantage. The magic happens when inVentiv
starts coordinating its parts.
inVentiv makes this strategy an explicit priority and clearly states in its 10-K from February
2010, “We are also engaged in a continuous process of expanding and refining our service
offerings, and pursuing cross-servicing opportunities within and across our business segments,
in order to respond more flexibly to the market and address broader revenue opportunities
with existing and new clients.”
During my interview with Blane Walter, inVentiv’s CEO, I learn how the company started
keeping track of integrated wins. By following the number of projects in which clients purchase
two or more services, inVentiv’s services started to coordinate themselves. This shifted the
mentality of inVentiv’s individual parts. It encouraged its leaders to start thinking about the
whole. And that can lead to magic.
For example, inVentiv has become one of the leading providers of “patient compliance
solutions,” programs that help companies ensure that patients stay on their medication
regimen. Another business unit works with pharmacy partners and has access to pharmacy
prescription data. So the company’s management wondered, as Walter said, “Could we take
this communication platform and use it to connect with large numbers of patients?”
By putting together information about prescriptions with its platform for communicating with
customers, inVentiv is able to notice when patients are falling off their regimen and then
communicated directly to them to encourage them to get back on. This fixes a major problem
for patients, doctors, and drug companies.
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It also provides a great example of ethonomics. As Walter said, “Thirty percent of on chronic
therapy patients fall off their treatment.” By helping people stay on their medicine regimen,
inVentiv reduces costs for its clients while providing extra protection for patients.
Steve Jobs once said, “Creativity is just connecting things.” The way new things come into the
world by combining old things together for the first time. As inVentiv conducts more exercises
looking for creative ways to combine its businesses we can expect to see unexpected new
services emerge. As long as its competitors are playing with a narrower breadth of services,
they will not be able to match inVentiv’s innovative potential.
Ask yourself the questions below to see how you can use this time-tested strategy of
coordination to provide an innovative new service, product or process.
1.
Is there any overlap between parts of my business?
2.
Can we coordinate these parts to create something new?
3.
Can we coordinate these parts to reduce waste?
4.
Is there a service or product that our clients have asked for? Is there a way to
combine parts of the business to offer this new innovation?
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Wed Apr 28, 2010
Make Your Clients Depend On You
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Last week I introduced how inVentiv (VTIV) coordinates its breadth of services. By strategically
sharing information and providing integrated services, inVentiv moves the company from a
“guest” to a “host.”
This seems to be the original insight that led inVentiv to begin filling in its capabilities through
acquisition. As CEO Blane Walter explains, “Prior to the inChord acquisition *in which inVentiv
bought the marketing firm that Blane had founded], we were the leader in providing reps. Then
inVentiv bought into being the leader of providing clinical support. In 2005, the insight was that
we've done well in those businesses, and now we could go into marketing and reaching patient
outcomes.”
So inVentiv has sequentially added services, expanding step by step, into its clients’ businesses.
The company has found that when a client uses more than one service, its risk of losing that
client drops meaningfully. In this way, inVentiv’s guest-to-host strategy supports one of the first
pillars we discussed: customer captivity.
That is something that cannot be underestimated. In their book, ‘Competition Demystified’,
Bruce Greenwald and Judd Kahn define customer captivity as a true competitive advantage.
They write, “This can be because the customer has high costs in switching to an alternative
product or service provider, or high costs in searching for this alternative, or simply because the
customer has developed a strong habit in buying the product or service.”
The captured customer is golden, and outthinkers look for ways to attract and keep clients.
Ask yourself the questions below to see how you can combine services or products to help
you expand more deeply into your customer's territory.
1.
2.
3.
4.
What do we do best?
What supplemental service or product do we hear our customers asking for?
What are our clients’ three most important needs?
How can we offer new services or products to fill those needs?
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Wed May 5, 2010
Creating the Turnaround
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
My last few posts on inVentiv Health (VTIV) were picked up by PDI (PDII), the competitor I
compared them to in my first post. They reached out to me and I had the chance to interview
PDI’s CEO, Nancy Lurker. What she shared with me fits what my last three posts laid out – how
inVentiv has grown so dramatically over the past eight years while PDI has actually shrunk. But
Nancy’s insights also point to a new horizon for PDI because the company is making changes,
redirecting itself, and indeed, reinventing itself.
I liked what Lurker shared about PDI. The management acknowledges past mistakes while
maintaining respect for its competitors. However, Lurker says PDI is resisting the common
“copy-cat” response. When a company realizes its strategy is inferior to a competitor’s, it
usually, in my experience, defaults to simply trying to copy the “winning” competitor’s formula.
PDI is not doing this. It is crafting its own path.
There is a lot I could share about the interview. But today and tomorrow I am going to focus on
the three most important insights in my view.
Retell the story – find a compelling “anchor”
Lurker joined PDI as CEO at the end of 2008. She came from Novartis Pharmaceuticals
Corporation (the U.S. subsidiary of Novartis AG), where she served as an SVP and the chief
marketing officer.
She saw that PDI had lost its way. This once innovative company had “grown rigid.” It had, in
other words, fallen into what I call the “metal phase” of innovation - when the innovation loses
its ability to adapt to changes in the market.
Lurker had seen this symptom before in a previous employer (not Novartis). That company had
grown so successful that it had stopped questioning itself. It became more sensitive to what it
might lose if it changed strategy. It was extremely successful, but Lurker saw that it was
growing stiff.
So Lurker jumped from that company to Pharmacia, which was an underdog at the time. People
thought she was crazy because she was leaving a winner for a horse in the middle of the pack,
but what she saw was that the horse in the middle was hungrier, had stronger leaders, and was
pursuing a more compelling vision. The move worked for her and for that company, which grew
tremendously and eventually was sold to Pfizer.
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When she joined PDI, the first step in her turn-around was to “anchor” the company in the first
10 years of its existence, during which the company was innovative, flexible, and forward
thinking. She retold the company narrative and she was able to get rid of the sense of fear that
had engulfed PDI’s people. By using the original story of PDI, Lurker infused a sense of heritage
and pride within her people.
Communicate until it hurts
For an article I have been working on for Harvard Business Review, I have been interviewing lots
of leaders of large companies to understand how they use stories to shape their organizations.
Microsoft’s COO, Kevin Turner, is an example of a leader that I have studied fairly extensively.
He is known as a storyteller.
When we hear “storytelling” we often think of the “soft” elements of leadership, creating
meaning and passion. While these are important, my research shows that leaders use a
different type of story far more often. They tell short anecdotes, what I call “strategic
narratives,” that inform a certain type of behavior.
Examples of such anecdotes can be found at the root of all strong cultures. Japanese Zen Koans
are an example. The Chinese 36 Stratagems are another. In the U.S. we often site colorful
stories and aphorisms by Benjamin Franklin or Warren Buffett.
Buffett recently wrote, for example, that you don’t ask a barber if you need a haircut. What he
was communicating was that you don’t ask a banker, who is paid a commission for a
transaction, if you should buy a company.
Stories are powerful tools for shaping behavior and thereby directly impacting strategy. But this
takes an immense amount of communication.
Lurker has been building momentum for a turn-around strategy by, among other things,
focusing on constantly telling stories about the new strategy. She has lunch regularly with
different employees. Her goal is that she gets to have lunch with all inside employees each year.
During these lunches she makes sure to communicate her message continually and on-point. To
broaden the strength of her mouthpiece, she has now gotten all of her top management team
to start communicating the same points, in their own language, of course.
Applying “strategic narratives” can build a powerful advantage if you are willing to invest the
effort. As Richard Nixon once said, "About the time you are writing a line you have written so
often that you want to throw up, that is the time the American people will hear it."
Ask yourself the questions below to see how you can find a new energy in an old story.
1. When you tell the story of YOUR organization, where do you start?
2. What is the most compelling part of your organization’s history?
3. Can you remind people of a time when your business was being particularly
innovative?
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Thu May 6, 2010
Big News in Pharma Outsourcing
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Something is happening in the pharmaceutical services outsourcing business. Just a day before
my webinar with Blane Walter, CEO of inVentiv Health (VTIV), the leader in this space, inVentiv
announced it will be acquired by Thomas H. Lee Partners.
In addition, just a few minutes ago, PDI announced that its “first quarter-to-quarter
improvement in financial results for PDI in the last several years.”
Come learn directly from Walter what this all means for inVentiv, PDI, and the future of the
pharmaceutical business in general. If you’d like to participate, click here to register for free.
Executive Briefing with Blane Walter, CEO of inVentiv Health
Friday, May 7 at 11 am EST
https://www2.gotomeeting.com/register/832228866
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Fri May 7, 2010
Use Your Business’ Reach For Financial Gain
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
An ancient Chinese stratagem suggests that you consider pointing at the mulberry tree while
cursing the locust tree, or, in more straightforward terms, focus your attention on an object
while your intention rests somewhere else.
Some industries are built around this concept. Media companies, for example, focus on viewers
and readers and listeners, but they make their money from advertisers.
On Wednesday I started a review of PDI (PDII). What I see is a company undertaking a strategic
shift that creates a similar a dynamic. When I asked the CEO Nancy Lurker about how she would
describe the company or what the company’s purpose is, she said “We don't view ourselves as
just providing outsourced sales to pharma companies. We see ourselves as providing best-inclass service to physicians and their staff. We can communicate to the doctor in the way, shape,
and form the doctor desires.”
This means if you are a doctor and want an in-face visit, you get that. However, if you prefer
digital communication, you get that. If you want information after hours, you get that. If you
want it during office open times, you get that.
PDI’s core competence, if you want to call it that, is to really understand how doctors want to
get the information they need. This is valuable to doctors, but doctors do not have to pay for it.
Instead pharmaceutical companies and others pay to have that communication to doctors.
Just as I now love to watch “TV” on hulu.com. I used to use Apple TV, but this requires me to
keep paying to rent and buy episodes. On hulu.com I can get what I need for free because I
watch a few commercials.
Rest your attention on doctors or TV viewers while your intention points at pharmaceutical
companies or advertisers. This creates a powerful strategic dynamic. It also expands what PDI
can become enormously.
We have not yet seen this strategy shared in PDI’s public documents. Its 10-K still presents itself
as “a leading provider of outsourced pharmaceutical sales teams that target healthcare
providers, offering a range of complementary sales support services designed to achieve our
customers’ strategic and financial product objectives.”
But behind the scenes, Lurker has been communicating this new strategy to employees and
customers for some time now. We should soon see it shared with the market.
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Ask yourself the questions below to see how you can offer a service to one group while
getting another to pay for it.
1. Who receives an extra benefit from your business?
2. Who wants to reach that target audience?
3. Is there a way to offer your clients more access to this audience?
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Tue May 11, 2010
Computers and the Crash: Human Intuition Cannot Be Replaced
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Last week’s one-day stock market plunge nearly ruined our kitchen. We are remodeling our
house and planned to sell stock to cover the cost of kitchen cabinets, but when we called our
broker to initiate the trade we learned our shares had dropped 20% in just a few hours! We
knew something strange was happening – the stock was coming off a strong quarterly earnings
report. Since we had other options, we decided to wait for the market to correct itself.
But what happened and what does it mean? While financial experts have yet to agree on the
cause of the unexpected fall, the incident provides a micro-cosmic view of how paradigms shift,
science advances, great companies win, and why human intuition still trumps computers.
Imagine that you are taking a jog through the woods, listening to birds, smelling pine trees, and
feeling the uneven surface of the dirt path below your feet. You catch sight of a particularly
interesting flower high on a tree and, without slowing your pace, look up to get a better
glimpse.
This momentary distraction sends you off the path and you plunge into a lake. The flower
suddenly disappears as do the bird calls and the sensation of the path under your feet. You feel
cold wrapped around your body and see only a murky blue around you.
Do you keep running?
Or do you start swimming?
The computer programs that automate much of the market’s trade activity plunged into the
water and kept on running. They did not recognize their context had changed or, if they did,
they did not know how to swim. You could say that market experienced a paradigm shift that
trading programs could not adapt intelligently to.
Thomas Kuhn, the scientist who coined the term “paradigm shift” in the early 1960s, outlined
the process as such:
1.
First, the system and the people in it operate well using a common set of beliefs and
assumptions (e.g., stock prices slide up and down according to the market’s momentum)
2. Then we start to see some anomalies (e.g., a stock’s price is radically different now
than it was one minute ago)
3. Most people brush aside these anomalies as acceptable levels or error or noise
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4.
Some people see the anomalies as evidence that our accepted assumptions may be
false. They challenge accepted assumptions, re-try discarded ideas, look for a new set of
rules
5. A battle emerges between the old guard and the new. The new guard wins not
because it convinces the old guard “but rather,” as Max Plank said, "because its
opponents eventually die, and a new generation grows up that is familiar with it."
One could say that the market fell so suddenly because computer programs were unable to
move from step 3 to step 4; they could not recognize the anomalies as indications that the rules
had changed; they could not adapt.
More accurately, the people who programmed the trading software only gave it instructions
that worked under the old rules and when the market suddenly began behaving in an
unrecognizable manner, there were no instructions for how to adapt. While humans are able
step out of paradigms, we have not been successful at programming this skill into software. We
can question our beliefs. Programs, for the time being, cannot question theirs.
It is this ability of switch our views of the world that allowed us to shift from a Newtonian
concept of physics to Einstein’s relativistic view or that enabled us to see that our solar system
rotated around the sun and not around the earth.
This is not to say that had humans been running the trades instead of computer programs we
would have avoided the crisis. We may have adapted and turned the market around more
quickly, but shifting paradigms is not easy. Indeed, this difficultly explains the success of many
of history’s most successful military strategists and most innovative companies.
Genghis Khan, for example, conquered more land than any other man in history to a great
extent because his soldiers approached warfare with a hunting paradigm. They surrounded and
herded their enemies while their opponents lined up across the field. The Mongol’s opponents
could not respond intelligently to their tactics because they were stuck in a different paradigm
for war. Alexander the Great, Napoleon, and Sun Tzu all played with paradigms to win battles.
Dell grew from a dorm room experiment into the largest PC manufacturer aided by the fact the
company saw the PC business as a direct distribution and logistics challenge, rather than a
technology design one. HP took over a decade to respond intelligently to Dell’s threat. Urban
Outfitters, Vistaprint, and Southwest Airlines all capitalized on the competitive protection that
comes from shifting paradigms.
So when your opponents start automating, when they replace thinking people with people
who just follow orders or replace those people with computers, there emerges an
opportunity to change the rules. When everyone else see 1-2-3, you have the opportunity to
surprise them with a 4th option. Ask yourself:
1.
2.
3.
What rules are your competitors playing under?
What do they assume to be true so much so they have stopped questioning it?
Are these beliefs really well founded? Are they ALWAYS true? For everyone?
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4. What opportunity does this insight represent for you?
www.kaihan.net
53
Mon May 17, 2010
Two Ways to Build for Change
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
“Build for change.” What an unusual slogan for an enterprise software company.
Isn’t it the goal of every profitable enterprise software business to build a standardized
application and try to sell it as many times and with as little customization as possible? Not at
Pegasystems (Nasdaq: PEGA).
At PEGA, the current industry leader in Business Process Management solutions (BPM), change
or adaptability is at the core of the company’s software development philosophy. It is not
something to be avoided. It is not something to be ignored. It is an opportunity to provide
solutions that truly meet clients’ ever-evolving business needs.
Since Alan Trefler founded PEGA in 1983, he has managed to engineer consistent and
impressive growth. In the last five years the company has generated 250% growth, reaching
$250 million in revenue in 2010 from around 100 million in 2005.
On the surface it seems PEGA may simply be another young software company that took an
early lead in the right emerging segment. But a few weeks ago, we interviewed Alan, the CEO
and founder of Pegasystems, and believe there is something special going on.
As a former competitive chess player, Alan brought an unorthodox view to the software
industry. He realized there was an opportunity to innovate in the enterprise software sector
through a dynamic software product that would be flexible and customizable to better adapt to
clients’ changing business needs. He wanted to empower business people by allowing them to
“own the change,” at least on the technology side.
As Alan put it, “If you don’t believe in the rhythm of change, if the rhythm of change is
measured in years or quarters because you know that from writing a [technology request]
document to the delivery of the result it’s going to take a year, then you become obsessed with
putting everything into *that document+…*but+ if you believe you can really iterate every
week…then your whole view changes. This is an approach that enables continuous
improvement.”
There are two important strategic shifts to note in how Alan describes PEGA’s strategy.
First: rapid iteration. A revolution has been underway in the software industry in recent years.
The model was to build and test a perfect piece of software and then release it to the world in a
www.kaihan.net
54
big launch. But today we see the value of the rapid-iteration model in which companies like
Google launch lots of imperfect “beta” products and adapt them as people use the software.
This approach cuts against the traditional Western view of change: change means uncertainty.
It means abandoning the status quo. It zaps energy.
Instead, this rapid iteration approach falls more in line with Eastern, primarily the Taoist, view
which suggests all moments are changing. The ball never comes to rest but is in constant
motion. When the traditional Western view says you are on the top of the pyramid, the Taoist
view says you are already falling.
Second: shift from an information-centered view to an interface view. Essentially the
traditional view held that what programmers needed to do was design an interface that
allowed users to access continually changing information. Your inventory changes by the
minute, but your inventory monitoring panel on your enterprise software stays the same.
But an emerging view is that the interface itself must continually change based on user needs.
Indeed, this view holds that the best model is one in which the user co-creates the interface. If
you really want to dive deeply into this new view, Kaihan’s father wrote an article on it:
http://www.asc.upenn.edu/usr/krippendorff/CENTEREDNESS.html.
In practical terms, PEGA’s approach is to create a system whose interface adapts as people
need it and to do this without having to invest in a heavy redesign process. Alan likens this
approach to building flying horses when your competitors are building bridges.
During the recent recession, PEGA actually grew. As IT spending improves, it makes sense to
expect PEGA to continue growing. Traditional players like IBM have attempted to acquire their
way into the BPM space but have so far not been able to challenge BPM’s leading position.
Will PEGA’s rise continue? It is probably too early to tell, but as long as it holds onto its unique
perspective – rapid iteration and a co-created user interface – while its competitors cling to
older mental models, history tells us PEGA will remain unique and continue to grow profitably.
Ask yourself the questions below to see how you can not only make your business more
adaptable to change but also profit from it:
1. What types of change are your competitors trying to avoid that could present an
opportunity for you?
2. What fixed part of your business or service could you change into a dynamic,
continually changing one?
3. How can you change how your employees relate to change, so they stop
associating with uncertainty but instead welcome and champion it?
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55
4. If you were given a blank sheet of paper and were tasked with redesigning an
entire industry, starting from scratch, what innovative point of view would you bring
to the drawing board?
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56
Tue May 25, 2010
Learn From the WSJ – Attack Your Competitor’s Stronghold
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
The Lion, the Mountain, and the New York Times
It takes about 40 minutes by train to get from my home into New York City, just enough time to
get through the Wall Street Journal and knock off a few morning emails. But last month I left my
emails untouched and instead enjoyed a special treat: the Wall Street Journal’s New York
Section.
The WSJ’s decision to launch a special section dedicated to covering New York’s local political,
real estate, and entertainment news may seem like just a product expansion on its surface, but
it illustrates a powerful strategic pattern with ancient roots, a pattern that works in war,
politics, and business.
As it turns out, a former business classmate of mine is now the Wall Street Journal’s General
Manager and so I got some firsthand insight into what is going on.
First the pattern. There is an ancient Chinese strategic narrative that says that if a lion comes
down from its mountain stronghold, you win in one of two ways. Either you beat it on the open
plain (because the lion is less effective on flat ground than in its mountain stronghold) or you
take its stronghold so it can’t get back to the mountain.
This is like Haagen-Dazs leaving its stronghold premium ice cream in a failed attempt to
compete with Ben & Jerry’s off-the-wall flavors. This is like the U.S.’s current strategy in
Afghanistan which focuses on seizing the Taliban’s southern stronghold. In current U.S. politics,
this is the “tea party movement” filling in where they feel Republicans have abandoned
conservative strongholds. If your opponent leaves his stronghold unguarded, consider moving
in.
For years the New York Times has been slowly abandoning its New York stronghold in pursuit of
the national, and international, market. And the WSJ noticed. As my friend, Kelly Leach, general
manager at the WSJ said (see interview below), “When we started exploring the opportunity in
New York, we found that in the past decade the New York Times had seen a nearly 40% decline
in its circulation in the New York market -- that was evidence to us that there was a reader need
in the New York market that was not being well met by the currently available options.” The
lion was leaving its mountain stronghold.
www.kaihan.net
57
So, the WSJ decided to move in. What many analysts overlook is that this opportunity is even
bigger than the readership numbers suggest. Sure, the WSJ will win over some new New York
readers. But the real immediate money in the short term comes from the WSJ offering New
York advertisers the ability to reach its existing affluent readers in the New York market as
James Ledbetter at slate.com (see
http://www.thebigmoney.com/articles/judgments/2010/05/11/wall-street-journal-s-new-yorksection-isn-t-bad-it-s-just-misundersto) points out, the WSJ strategy is more about advertising
than readership.
New York advertisers are hungry for a platform to put their ads in front of New York readers.
Why should they pay for the eyeballs the NYT attracts from across the country and the world,
when they selling shoes on Madison Ave? By creating a separate section of exclusively local
content, the WSJ offers advertisers a targeted vehicle to advertise to commuters like me, who
may actually decide to stop by that Madison Ave store today.
You can keep reading below to read my interview with Kelly Leach, and see how the WSJ is
attaching the New York Times stronghold.
Kaihan: How long ago did the WSJ start exploring the idea of launching a New York section and
what were the key rationales for doing so?
Leach: We began exploring the idea of launching a New York section about a year ago. We view
it as a continuation of an effort that began back in 2008 to expand the coverage in the paper to
make it a more complete read for both our current Journal readers and prospective readers.
Beginning in 2008 we added news pages to the paper to create space for more U.S. and World
news along with Sports and expanded health and wellness coverage. We also launched WSJ
magazine, which has provided a home for Journal-quality storytelling incorporating beautiful
photography. Local news is a key topic for which readers turn to a newspaper, so it was a
natural next step in the progression towards making the Journal a more complete package of
news for readers. When we started exploring the opportunity in New York, we found that in
the past decade the New York Times had seen a nearly 40% decline in its circulation in the New
York market -- that was evidence to us that there was a reader need in the New York market
that was not being well met by the currently available options.
Kaihan: Will the NY section be available in regions outside of New York?
Leach: The content of the NY section is available on wsj.com and on The Wall Street Journal on
the Apple iPad. (Kaihan’s note: In other words, “no.” This fits my belief that the strategy is
focused on local advertisers who do not want to dilute their ad spend by paying for non-New
York readers.)
Kaihan: Was there a reason to use full color beyond the higher ad rates this might generate?
www.kaihan.net
58
Leach: We decided to use full color because it would make the section a richer, more visually
appealing experience for both readers and advertisers.
Kaihan: What types of local content will the new section focus on first (e.g., arts, local politics,
real estate)?
Leach: The local content will focus on the topics you mention -- arts, local politics, real estate -along with education, society, sports, local business, crime, and state politics of interest to this
area.
Kaihan: Is the current coverage on the new section's launch missing anything or getting
anything wrong (e.g., is it really a strategy focused on "attacking" the NYT)?
Leach: The first few weeks of the Greater New York section have exceeded our expectations.
While it's too early for sales figures, we have heard strong and positive response from existing
readers and those picking up the Journal for the first time, welcoming the new section and our
commitment to the New York market. Advertisers continue to see the value and embrace
Greater New York. We already had 40 advertisers on board pre-launch, and we have added an
additional 20 in just the first two weeks, with some scheduled through the end of the year.
Launching the section was a business decision that fits with our strategy of expansion, and the
section presented as a great opportunity. Given the complexity of this market, and decline in
regional coverage, there was room for a high quality, complete broadsheet to serve readers and
advertisers in the New York market.
To summarize, the WSJ’s decision to launch a local New York section plays on a proven strategic
pattern: when the lion leaves its mountain stronghold, take the stronghold. Ask yourself the
following questions to see how you can use this pattern to your advantage:
1. What is my competitor's stronghold?
2. What was my competitor’s stronghold last year, five years ago, ten years ago?
3. How has my competitor’s focus shifted?
4. What would happen if I moved in?
www.kaihan.net
59
Tue May 25, 2010
Learn From the WSJ – Attack Your Competitor’s Stronghold
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
The Lion, the Mountain, and the New York Times
It takes about 40 minutes by train to get from my home into New York City, just enough time to
get through the Wall Street Journal and knock off a few morning emails. But last month I left my
emails untouched and instead enjoyed a special treat: the Wall Street Journal’s New York
Section.
The WSJ’s decision to launch a special section dedicated to covering New York’s local political,
real estate, and entertainment news may seem like just a product expansion on its surface, but
it illustrates a powerful strategic pattern with ancient roots, a pattern that works in war,
politics, and business.
As it turns out, a former business classmate of mine is now the Wall Street Journal’s General
Manager and so I got some firsthand insight into what is going on.
First the pattern. There is an ancient Chinese strategic narrative that says that if a lion comes
down from its mountain stronghold, you win in one of two ways. Either you beat it on the open
plain (because the lion is less effective on flat ground than in its mountain stronghold) or you
take its stronghold so it can’t get back to the mountain.
This is like Haagen-Dazs leaving its stronghold premium ice cream in a failed attempt to
compete with Ben & Jerry’s off-the-wall flavors. This is like the U.S.’s current strategy in
Afghanistan which focuses on seizing the Taliban’s southern stronghold. In current U.S. politics,
this is the “tea party movement” filling in where they feel Republicans have abandoned
conservative strongholds. If your opponent leaves his stronghold unguarded, consider moving
in.
For years the New York Times has been slowly abandoning its New York stronghold in pursuit of
the national, and international, market. And the WSJ noticed. As my friend, Kelly Leach, general
manager at the WSJ said (see interview below), “When we started exploring the opportunity in
New York, we found that in the past decade the New York Times had seen a nearly 40% decline
in its circulation in the New York market -- that was evidence to us that there was a reader need
in the New York market that was not being well met by the currently available options.” The
lion was leaving its mountain stronghold.
www.kaihan.net
60
So, the WSJ decided to move in. What many analysts overlook is that this opportunity is even
bigger than the readership numbers suggest. Sure, the WSJ will win over some new New York
readers. But the real immediate money in the short term comes from the WSJ offering New
York advertisers the ability to reach its existing affluent readers in the New York market as
James Ledbetter at slate.com (see
http://www.thebigmoney.com/articles/judgments/2010/05/11/wall-street-journal-s-new-yorksection-isn-t-bad-it-s-just-misundersto) points out, the WSJ strategy is more about advertising
than readership.
New York advertisers are hungry for a platform to put their ads in front of New York readers.
Why should they pay for the eyeballs the NYT attracts from across the country and the world,
when they selling shoes on Madison Ave? By creating a separate section of exclusively local
content, the WSJ offers advertisers a targeted vehicle to advertise to commuters like me, who
may actually decide to stop by that Madison Ave store today.
You can keep reading below to read my interview with Kelly Leach, and see how the WSJ is
attaching the New York Times stronghold.
Kaihan: How long ago did the WSJ start exploring the idea of launching a New York section and
what were the key rationales for doing so?
Leach: We began exploring the idea of launching a New York section about a year ago. We view
it as a continuation of an effort that began back in 2008 to expand the coverage in the paper to
make it a more complete read for both our current Journal readers and prospective readers.
Beginning in 2008 we added news pages to the paper to create space for more U.S. and World
news along with Sports and expanded health and wellness coverage. We also launched WSJ
magazine, which has provided a home for Journal-quality storytelling incorporating beautiful
photography. Local news is a key topic for which readers turn to a newspaper, so it was a
natural next step in the progression towards making the Journal a more complete package of
news for readers. When we started exploring the opportunity in New York, we found that in
the past decade the New York Times had seen a nearly 40% decline in its circulation in the New
York market -- that was evidence to us that there was a reader need in the New York market
that was not being well met by the currently available options.
Kaihan: Will the NY section be available in regions outside of New York?
Leach: The content of the NY section is available on wsj.com and on The Wall Street Journal on
the Apple iPad. (Kaihan’s note: In other words, “no.” This fits my belief that the strategy is
focused on local advertisers who do not want to dilute their ad spend by paying for non-New
York readers.)
Kaihan: Was there a reason to use full color beyond the higher ad rates this might generate?
www.kaihan.net
61
Leach: We decided to use full color because it would make the section a richer, more visually
appealing experience for both readers and advertisers.
Kaihan: What types of local content will the new section focus on first (e.g., arts, local politics,
real estate)?
Leach: The local content will focus on the topics you mention -- arts, local politics, real estate -along with education, society, sports, local business, crime, and state politics of interest to this
area.
Kaihan: Is the current coverage on the new section's launch missing anything or getting
anything wrong (e.g., is it really a strategy focused on "attacking" the NYT)?
Leach: The first few weeks of the Greater New York section have exceeded our expectations.
While it's too early for sales figures, we have heard strong and positive response from existing
readers and those picking up the Journal for the first time, welcoming the new section and our
commitment to the New York market. Advertisers continue to see the value and embrace
Greater New York. We already had 40 advertisers on board pre-launch, and we have added an
additional 20 in just the first two weeks, with some scheduled through the end of the year.
Launching the section was a business decision that fits with our strategy of expansion, and the
section presented as a great opportunity. Given the complexity of this market, and decline in
regional coverage, there was room for a high quality, complete broadsheet to serve readers and
advertisers in the New York market.
To summarize, the WSJ’s decision to launch a local New York section plays on a proven strategic
pattern: when the lion leaves its mountain stronghold, take the stronghold. Ask yourself the
following questions to see how you can use this pattern to your advantage:
1. What is my competitor's stronghold?
2. What was my competitor’s stronghold last year, five years ago, ten years ago?
3. How has my competitor’s focus shifted?
4. What would happen if I moved in?
www.kaihan.net
62
Tue Jun 1, 2010
Where, Oh Where, Is My Tata Nano?
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Learn to Use Reverse Innovation
I kept my eyes on the blurring, chaotic stream of Mumbai traffic, looking for the famed “Tata
Nano” - the cheapest car in the world. To be honest, I don’t think I saw one, but then again, I’m
not sure I would recognize it crammed between moto-rickshaws and the tiny black Soviet-eralooking taxi cabs swerving around pedestrians crossing streets.
But I know they are out there, because everyone is talking about it. Indian business people I
spoke to bring it up regularly in conversation as a symbol of India’s emerging flavor of
innovation. Everyone is picking apart this marvel, seeking to gain insights seemingly to answer
one question: why did this happen in India?
I was conducting a workshop with Hermann Simon, one of the world’s leading gurus on what he
calls “hidden champions” – (mostly German) companies that you have never heard of but that
dominate a global niche like making glass for museum cases – and he was proud to say that
about 50% of Tata’s components are manufactured by German companies.
And that fact just agitates our need to answer the question: if much of the technology for the
Tata Nano is manufactured in Germany, why was this innovation born in India?
What we are witnessing with the Tata Nano is what is commonly referred to as “reverse
innovation” - or a process that begins by focusing on the need for low-cost products for
countries like India and China and then adapting that innovation for the developed world.
If a German car company was tasked with developing the “cheapest car in the world,” the end
result would most likely be a car priced just under the competition and with just enough “stuff”
to still give it feel of a high-quality German car. But by understanding what price tag they had to
beat to capture the Indian market, Tata was able to engineer a vehicle that caught everyone by
surprise – the customer with a price tag of ½ of the closest alternative ($2,000 per car) and the
engineering community with a product that, at first sight, seemed a bit surprising to many –
with smaller wheels, a unique mix of materials, and a movable steering wheel to reduce the
cost of having to adapt it to different driving customs.
www.kaihan.net
63
India offered the perfect environment to introduce the Tata Nano – it has a need and the Tata
Nano can fill it. What a perfect example of how a well-organized business can look at its
current technology or service and see how it can use reverse innovation to create something
new and needed. Ask yourself the following questions to see how you can offer a new product
or service that new customers need.
1. What is the biggest puzzle or bottleneck in your industry that your competitors are trying
to stay away from, and how can you turn it into your competitive advantage by learning from
other unorthodox players in other countries or industries?
2. How can you use your current technology or service to provide something new?
3. Who could use this new service or product?
www.kaihan.net
64
Tue Jun 8, 2010
Use Reverse Innovation to Inspire Ethonomics
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Last week I wrote about reverse innovation. We often witness this in other countries where the
local conditions--whether due to political uncertainty, low local income levels, or unfavorable
geography-- seem like a hindrance to innovation to the "established players" but serve as a
source of unusual inspiration to the local entrepreneurs who use these conditions to come up
with ideas that are truly unorthodox.
This reminds me of a company I started covering back in August 2009, Husk Power Systems,
which is bringing light to rural people in India by using locally grown rice husks to create
electricity. Two young entrepreneurs saw a need, developed the technology and found
ethonomics, a profitable way to serve a greater good.
In the book "Start-Up Nation" by Dan Senor and Saul Singer, of the many "economic miracles"
they identify taking place in Israel, a story of a company called Better Place captured my
attention.
Better Place creates systems and infrastructure that support the use of electric cars. The
company was built on the premise that just because the current car battery technology is still in
its infancy, it doesn't mean it has to stop us from buying an electric car. The company's founder
Shai Agassi realized the problem wasn't in the battery; it was in the way we were thinking about
the logistics.
By creating a "smart grid" of battery-charging terminals and battery-switch stations in Israel,
the shortcomings of the current battery would become a non-issue, making electric cars not
only an attractive alternative but a preferable option for the consumer.
Soon after its founding a few years ago, Better Place raised $200 million in funding, making it
the 5th largest start-up in history. It now has presence in China, Japan, Australia, the U.S.,
Canada, France and Denmark and is on its way to deliver on its initial mission: to free the world
from dependency on oil.
And this brings us back to our initial questions: why was Better Place born in Israel? Why didn't
the car maker Tesla Motors, for example, with a deep tradition in electrical engineering, come
up with this idea?
www.kaihan.net
65
Clearly, freeing Israel from a dependency on neighbor-produced oil got many people in the
country excited. The next reason was size. Due to the country's small size and its hostile
relationship with its neighbors, Israelis are unable to drive beyond their national borders. This
makes Israel the ideal setting to implement Better Place's idea. The number of battery swap
stations the company would have to build-out early on would be limited and manageable for a
start-up. According to Agassi, "Israel's adversaries had actually created the perfect laboratory to
test ideas."
On Tesla Motors' Web site it says, "If [Nikola Tesla] were alive today, [he] would look over our
100 percent electric car and nod his head with both understanding and approval."
Tesla Motors came up with many innovative ideas in their own right ... but I have a feeling if a
visionary like Tesla were alive today, he would have moved on from trying to design the best
battery in the world to a more pressing problem--creating a distribution grid that would make
the logistics of driving electric cars not only feasible but also seamless and preferable.
Ask yourself the questions below to see how you can think of unorthodox business ideas that
will catch your competitors by surprise:
1. What are the three things that are the biggest challenges to your industry and what
innovation could you come up with if you were asked to break all three?
2. Where are your competitors pointing their eyeballs and what would you discover if
you looked the other way?
3. What greater problem do you see facing your clients, and how can solving another
issue alleviate your customers’ concerns?
www.kaihan.net
66
Tue Jun 15, 2010
What’s a Duck to Do?
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Pre-1992, even loyal customers struggled to recall the insurance company’s name - the
“American Family Life Assurance Company.” But today, customer and non-customers alike,
indeed anyone in the U.S. or Japan who watches television, cannot take a summer stroll past a
park pond without thinking “Aflac.”
How did a small, family-owned, run-of-the-mill insurance company from Georgia evolve into a
$20 billion icon, with a brand as infectious as Ronald McDonald or Mickey Mouse? I recently
had the chance to sit down with Daniel P. Amos, Aflac’s CEO, and my conclusion is that while
the Aflac duck may appear to be the star of company’s story, it really only plays a supporting
role.
After speaking with Amos, I was able to identify several unexpected approaches. Over the next
week I will share only two of the many strategies that set Aflac apart from its competitors. For
those of you interested in learning more and hearing directly from Dan Amos, please sign up for
my free executive briefing webinar on June 22 at 11 am EST (9 am PST). Visit
https://www2.gotomeeting.com/register/638804058 for more information or to register.
Creating Something Out of Nothing
It is perhaps inaccurate to call Aflac an American company. Sure it was founded by three
brothers from Georgia post World War II. And yes, it remains family run and the CEO, Amos,
still lives in a small Georgia town and speaks with a cultured southern drawl. However, the
company generates over 70% of its revenues from, and attributes over 80% of its assets to, its
Japanese operations.
This success in Japan can be traced to an insight derived from simple mathematics. By the early
1970s the Japanese were living longer and dying from different types of causes. The prevalence
of deaths from cancer grew dramatically, setting off a nation-wide concern that some kind of
cancer epidemic was emerging.
As Amos describes, “The Japanese were scared that there was an epidemic of cancer taking
place, back in 1974 when we were licensed [in Japan to sell cancer insurance]. The fact is there
wasn’t an epidemic. What was going on was the life expectancy of the Japanese had gone from
58 or 59, and it had jumped to 84. People were then just living long enough to get cancer.”
www.kaihan.net
67
This growing awareness of cancer built a demand for a new type of insurance which Aflac met
by creating what Amos calls the “third sector.” “We became the first company to be licensed
after the war. At that time, they had two basic insurance markets – they had the non-life and
the life. The life was called sector one. We created what we call the third sector… we developed
a cancer insurance policy… It paid X amount if you died for any reason, but if you died of
cancer, it paid ten times that amount.”
Aflac created a new type of insurance and convinced the Japanese government to give it a
temporary monopoly. For seven years, Aflac would be the only insurance company that could
sell cancer insurance in Japan.
That seven-year monopoly gave Aflac enough of an advantage that, even decades after the
Japanese government removed Aflac’s monopoly protection, the company held on to nearly
the entire market. By 1990 Aflac was producing 70% of its revenue from Japan and commanded
a 90% market share of cancer insurance. In 1992, when the company changed its name from
American Family Life Assurance Company to Aflac, its market share was even stronger at 94%.
Aflac was enjoying the benefits of a well-proven strategy – to “create something out of
nothing” – a strategy that is at the source of innumerable breakthrough companies including:
· Gatorade, which beat its much larger competitors, Coca-Cola and Pepsi, in the sports-drink
market by creating the sports-drink category
· De Beers, which created the tradition of giving diamond engagements rings and thereby
generated billions of dollars in diamond sales
· Sweets manufacturers in Japan and Korea which created “White Day,” a made-up holiday
occurring 30 days after Valentine’s Day during which men must reciprocate the multiple gifts
women gave them on Valentine’s Day (on Valentine’s Day women are to give significant others,
brothers, fathers, and co-workers gifts)
One might think that creating new categories or occasions provides only a short-term
advantage. Incumbents should be able to quickly copy and squeeze out smaller innovators. But
when designed properly, this strategy puts up a number of cognitive blocks for competitors and
can provide years of competitive advantage.
Competitors often find themselves too entrenched in old mental models to respond quickly.
First, their market share calculations and sales projects leave out the emerging category so they
fail to see the new category emerge. Then the new category appears insignificant so they fail to
see the new category creators as a threat. When they recognize the new category as a threat,
their systems and strategies prove inappropriate for competing successfully in the new
category. Your competitors struggle to recognize and adjust to the new category you have
created and the innovation grows unchallenged.
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68
As Mahatma Gandhi said, “First they ignore you, then they laugh at you, then they fight you,
then you win.”
Ask yourself the questions below to see if you can increase your profit margins by offering
something new.
1. What category or occasion can I create out of nothing?
2. Is there a growing trend that I can get in front of?
3. Since people love traditions, is there a meaningful tradition that a new product or service can
play off of?
4. Can I offer a new version of an old idea to spark consumer interest in my company?
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Fri Jun 18, 2010
Building a Brand: Aflac Takes a Gamble on a Long-Term Strategy
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Earlier in the week I started reviewing the insurance giant Aflac. In 2004 we start to see the
growth rates of Aflac suddenly starting to climb and a new radical idea was starting to pay off
for Aflac: the duck.
Over 2003 and 2004, Aflac started to enjoy the fruits of an uncommon bet it placed a few years
earlier. Back in 1990, the company decided to launch a name recognition campaign. After a
decade of running the campaign, name recognition was still less than 10%. CEO Dan Amos
figured that “At that rate … I’d be retired before we reached 25%. We had to do something
dramatic.”
So the company invited several advertising agencies to pitch them ideas. One of these agencies,
Kaplan Thaler Group, came up with the idea for the “Aflac Duck.” Two stories circulate about
how the idea came to be. The first is that the creative who developed it was walking in the park,
wondering how he could make the name Aflac memorable, when he heard the sound of a duck
and suddenly made the connection that Aflac sounded like a duck’s quacking.
The other version is that one of the creatives on the account asked “What’s the name of the
company account we are pitching?” His colleague replied “It’s Aflac – Aflac –Aflac-Aflac.”
Someone noted that he sounded like a duck leading the team along the creative path to the
Aflac duck.
The agency was not sure whether to pitch the idea because it diverged so starkly from the staid
commercials of insurance companies, meant to communicate trustworthiness and stability. But
the agency gave it a shot, and Amos and his team decided to give them a chance to see if it
could work. After testing, the idea of the Aflac Duck proved powerful. It scored three times
better than Aflac’s existing commercials.
Picking the Duck was not easy. First, positioning an insurance company as fun and quirky cut
against industry dogma. It was believed that people wanted their insurance companies to be
reliable, not funny.
Secondly, making it even more difficult to take on the risk was the fact that another commercial
that used a TV star, rather than a make-believe duck, tested twice as effective as Aflac’s
previous commercials. So Amos faced a decision - take the safer bet of a company
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spokesperson, which was still twice as good as the past, or he could challenge the industry
norms, and transform Aflac, a family-run company with over fifty years of history, into a duck.
I would not be surprised if most insurance executives, experts as they are at weighing returns
and risk, would choose the safe option with a 200 percent return. But Amos is not like most
executives. His company is an extension of his family so he can think long term and if you think
long-term and compound the 300 percent return (remember the Duck commercial was three
times as effective) over a decade, you see the Duck will guide an entirely different destination.
So did the gamble work? Well, 10 years later Aflac enjoys 90 percent name recognition. Ask
yourself the questions below to see how you can challenge the norm and build a stronger
brand. For those of you interested in the other effective strategies that Alfac’s management has
employed, then please join me and Aflac’s CEO Dan Amos on Tuesday, June 22 at 11 am EST (9
am PST) for a free executive briefing webinar. Visit
https://www2.gotomeeting.com/register/638804058 to register.
1. What industry dogma – what accepted belief – have you not actually tested yourself?
2. If someone from an entirely different industry were to enter you business, how would they
do it?
3. What part of your industry do you think lacks the most and how can your business transform
that current perception?
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Fri Jun 25, 2010
Oil Spill May Force an Innovative Social Construction
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
As oil continues to fill the waters off my wife’s home state, Louisiana, inventors around the
world are surely scheming up new technologies to prevent such catastrophes from happening
again. While I wish for their success and am thankful for their efforts, history says their energy
would be better spent engineering a different kind of innovation. The kind of innovation we
cannot see.
The innovations that have most impacted our world are invisible. We cannot touch, feel, or
smell them. But they nonetheless exert a transformative force on the world.
Take, for example, mankind’s original innovation: the scratch plough. 5,000 years ago a farmer
picked up a three-prong stick and saw it not as “firewood” but as a “plough,” and he did what
we do with a plough. He stuck one prong into the ground, tied the other prong to an ox, used
the third prong to guide a line that he dug through the dirt. He then planted seeds and, at the
end of the season, when he for the first time enjoyed having more food than he needed, he
realized this was a good thing. Farming was born. Over time this “invention” transformed most
of humankind from hunter-gatherers into farmers.
Take a look at that first stick, though. It looked physically unlike any other three-prong stick.
What triggered the innovation, which led to an agrarian society, was the concept of a “plough,”
not the physical artifact.
If this concept – which I think holds the key to innovation – seems too abstract, lets take a look
at an invention a little closer to home. This invention began in China around 3,000 B.C. when
merchants started collaborating by mingling their goods, distributing them across many
different boats, rather than each merchant loading all his goods onto one boat. This way, if a
boat sunk, the loss to any one merchant would be minimal. In other words, merchants bound
together to spread the risk of losing goods to the sea. Insurance was born.
About 2,400 years later, ancient Greeks and later Romans formed “benevolent societies.” If a
member of such a society died, the society would pay for that member’s funeral costs and take
care of the family left behind. Death insurance was born. Death insurance gained much greater
popularity in the 1700s when it sold under the more palatable name, “life insurance.”
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Without such invisible inventions, civilization would surely not exist. We would not have
evolved from small bands of hunter-gatherers into communities of farmers and then into the
highly interdependent, specialized societies we live in today.
The pattern is clear, in each case. Someone experiences some pain (they starve through a bad
hunting season, they lose a ship). They invent something invisible, a new concept, a new social
construction, like “farming” or “insurance.” This new concept brings people together to make
the world more predictable. Society evolves.
On a smaller scale we see great companies do this well. Apple creates the “iPod” – which it
claims is not an MP3 player but an entirely new concept – and millions flock to it generating
billions of dollars in revenue.
Earlier this week I conducted an executive briefing webinar with Dan Amos, the CEO of Aflac.
He discussed how Aflac invented a concept – and I don’t mean the Aflac duck – which propelled
the small family-owned insurer into a global giant. To learn how Aflac created a third sector of
insurance, visit http://www.kaihan.net/webinars.html and sign in to view the webinar
recording.
Right now we have an opportunity to create something evolutionary and revolutionary. There
are people hurting in the Gulf. They are bearing an unfair burden based on our world’s
dependence on oil. It is time to create a new concept, a new social construction that can save
an entire region while bringing us closer as a nation.
Ask yourself the questions below to see how you can create a new concept or service.
1. Where do you see a need, or pain or an unfulfilled desire?
2. How could society come together to address this?
3. What invisible innovation – what social construction – could you create to make this happen?
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Thu Jul 1, 2010
Three Insights Into Doing Business in Venezuela
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
This week I ran a program on “influencing” for 240 managers and entrepreneurs in Colombia.
Although, as usual with my travels, I don’t get to stay as long as I would have liked, (I only
stayed in Caracas for a little more than 24 hours), I did get the chance to ask many people what
it is like to do business that region.
Colombia’s geographical neighbor is the always-interesting Venezuela. Learning about South
American business had to include some information about the country, and I got a lucky break.
That evening I had dinner with an old college friend of mine – a former Senator in Venezuela –
and got more of an inside peek behind the Hugo Chavez curtain. The dynamics are fascinating.
Understanding them could lead to significant wealth for those willing to take the risk and those
with the long-term perspective needed to pursue it.
Below is a list of the key takeaways from my dinner. Maybe this can benefit those of you
interested in moving into the South American market, or perhaps there are smaller lessons that
can be applied closer to home.
1. Making money in Venezuela is tough. The country lacks an active, formal currency exchange.
If you earn Venezuelan Bolivars, you do not know if and at what rate you will be able to convert
that money into U.S. dollars or Euros.
2. The country could be worth the wait. With 30 million people, Venezuela is one of the largest
Latin American countries. It is too large to overlook. This is why multinationals from HP, Sony
and others are continuing to build their businesses here, even though extracting profits in a
timely manner is difficult.
3. You must be able to withstand the swings. Venezuela’s economy depends excessively on the
price of oil. When Hugo Chavez took the presidency in 1999, many worried his policies would
sink the price of oil. But instead the price of oil soared from less than $10 a barrel to over $145
per barrel. Now that oil prices are on their way downward again, the government’s hold on
power seems to be weakening.
No risk, no reward. We’ve heard it all before. But there is truth in that statement because it is
those who were willing to risk a lot – Jobs, Gates, Buffett - who have the ultimate success. Ask
yourself the questions below to see how you can take a calculated risk.
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1. What market have I been interested in entering?
2. What is the true cost (overhead, marketing, security, risk management, etc.) of entering that
new segment, country or industry?
3. What are the potential rewards for entering that market?
4. Which number (reward vs. costs) is higher and by how much?
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Thu Jul 8, 2010
A Lesson on Leadership - From Venezuela with Love
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
During my recent seminar on “influencing” for 240 managers and entrepreneurs in South
America, one issue participants shared with me was the "leadership vacuum." Local executives,
who reach seniority, want to leave Venezuela because of the difficulty of doing business there,
and outsiders resist being posted in the country for the same reason. As a result, companies
have difficulty filling their top country-level spots.
I've heard the reason Venezuela took a turn 11 years ago when its free democracy eroded into
a culture of corruption. The pendulum swung too far and is now correcting itself to an equal
extreme. The government sector has multiplied while the private sector has eroded.
But as my taxi races through the city's arteries, past massive building, framed by mountains, I
appreciate the potential of the country. This is one of the largest in Latin America. It has
infrastructure, order, and massive resources. It is struggling between two paths: the current
one influenced by Cuba and, it is rumored, Iran, and the pro-business, pro-Western one. The
second path has a large but uncoordinated mass of Venezuelans who are trying to lug their
country into a new era.
Perhaps the lesson here is that context matters. It is not enough to have people who value
creativity and ingenuity. If they cannot also build an organizational structure that protects these
freedoms, if democracy or autocracy leads power into the firm grasp of a few, the pendulum
will swing erratically between the two, perhaps never resting at balance.
What can we learn from Venezuela? Maybe it’s a question about leadership tactics and
corporate culture. Ask yourself the questions below to see how you can find a balance between
confidently guiding your organization or people while still encouraging innovative strategic
thinking.
1. Can I delegate or am I a micro-manager?
2. How do my employees see me – as a friend, tyrant or something in between?
3. Is my presence as an authority figure diminishing my staff’s creativity?
4. Am I too friendly with my staff, causing them to be unresponsive or mildly disrespectful?
5. Is there a way to set up boundary-free brainstorming to alleviate the fear of being honest
and sharing off-the-wall ideas?
6. Could outside activities bond my employees to each other and to me?
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Fri Jul 16, 2010
Create Competitive Disruption Across Eight Dimensions
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Every year I travel down to Cali, Colombia to talk about
"service innovation." I spend a week with a group of young managers from places like ColgatePalmolive and Cadbury Schweppes, exploring the anatomy of great service experiences. And
every time I go someone tells me, "You have GOT to have dinner at Andres Carne de Res." This
restaurant, they say, is unlike any other you have experienced. But no one could tell me WHY
the experience is so unique. And because my recent trips to Colombia never coincided with
Andres's hours (the restaurant is only open Thursday through Sunday) I left home still
wondering what all the fuss was about.
Last week, while in Colombia delivering a workshop for HP, I finally got my chance to confirm
that Andres Carne de Res really is unlike any other restaurant I have experienced. What started
out feeling like the Twilight Zone--we were accosted by a perverted doorman and then three
loud maids (read more below)--evolved into the most unique dining experience I have ever
known. I'm going to break down the restaurant's strategy using the same framework I use to
teach my "service innovation" class--the "8 Ps."
The 8-Ps framework says that you want to look for disruptive innovations (i.e., for innovations
that will differentiate you and that your competitors will choose not to copy) across eight
dimensions: product, price, place, promotion, position, processes, people, and physical
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experience. Most breakthrough companies I study are able to hit three or four of these "Ps."
Andres hits them all.
1. Product: Lets start with the basics. Andres Carne de Res offers a long menu of creative
dishes. We started with chunks of pork skin ("chicharrones") served on a long, flat, wooden
bowl with a side of cilantro guacamole dipping sauce. Local beers are served with a paper
yellow butterfly pasted to their bottle necks. Wine is served in bottles individually hand-painted
in bright colors by local artists.
2. Price refers not just to actual prices, but also to how they are communicated and how
customers pay. When we asked for the menu our server (more gender friendly than "waiter")
gave us a metal case about the size of shirt box. She showed me that inside was a scroll, and
cranking the bottom or top handle rolled a menu up or down. It felt like an ancient Egyptian
Web site that you scrolled down to see offerings and prices.
3. Place: Andres Carne de Res is nearly 30 years old, it is packed every night it's open, and
people talk about it from all over the world, but the restaurant has only two locations. One is in
a distant suburb, a farm really, 30 minutes outside of Bogota. Two years ago they opened their
second location: a four-story maze in one of Bogota's cheekiest shopping districts. I went to this
newer location to avoid a long trip.
4. Promotion: As far as I can tell, Andres does none. They rely exclusively on word-of-mouth.
That is what got me there and, judging from the packed tables and dance floors, the nopromotion strategy is serving Andres just fine.
5. Position: It's hard to fit Andres into a box. The restaurant felt somewhat like an original Hard
Rock Café, a quirky space filled with interesting pieces of art and paraphernalia. But it is more
than a theme restaurant because it has three dance floors, a stage, a piano, and a DJ, and
actors interrupt your meal every now and then, playing funny improve scenes, which make you
think of a funky Disney resort.
6. Processes: Behind the scenes this multi-sensory experience is supported by an uncommon
orchestration. I could not figure out how they engineered it, but we must have been helped
over the evening by at least seven different people who passed us off as seamlessly as the
Brazilian World Cup team passes around a ball. In college, I spent three years waiting tables and
came to understand that the best way to guarantee a seamless experience is to dedicate one
server to each table. Andres proves this dogma wrong.
7. People: When we walked through the restaurant's door I was a bit surprised by the
characters hanging out trying to get in. One, wearing a bandana, thin mustache, and a suit that
looked something like a security guard's uniform, was offering in a loud voice to pat down
women visitors for weapons. At the stair landing, three women dressed as maids commented
loudly that whoever had ironed my shirt did a terrible job and offered to take care of it for me.
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About a third of Andres' 1,000 or so employees seem to be actors. Their job is simply to play
interesting characters and entertain the guests all night.
8. Physical experience: Finally, Andres has created a physical experience that I cannot truly
describe. I lack the skill to give it justice with my words. There were fresh cut roses hanging on
strings above our heads, butterfly-shaped confetti fell from the sky, industrial metal staircases
led you from "hell" up to "purgatory" then to "heaven" (a huge fireplace sat on a landing
between hell and purgatory and a 10-foot tall bust of Jesus hung from the Heaven floor
[ceiling?]). As the DJ's music displaced the eating, as diners abandoned tables for dance floors,
the restaurant evolved, revealing layers and layers of intricate surprises.
The case of Andres Carne de Res suggests that you consider at least two things. First, of course,
get yourself to Bogota and experience it for yourself. Second, look for what you can do across
all eight dimensions to design a truly unparalleled, disruptive customer experience.
What are you doing now that (a) customers love but (b) competitors will not copy in:
1.
2.
3.
4.
5.
6.
7.
8.
Your product
How to price, communicate prices, and collect payment?
How you promote?
How to distribute (place)?
Where you position yourself relative to competitors?
Your processes?
The people you hire and inspire?
The physical experience you create?
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Wed Jul 21, 2010
The Death of Creativity = The Death of Innovation
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Last week, I was working from the 24th floor of a hotel in Lima, Peru, overlooking an ocean
dotted with surfers under skies filled with skydivers, working on a new training program on
innovative and strategic thinking for a client, when an email message popped up. A good friend
of mine interrupted my flow with an article. At first I thought I'd check out the article later. But
since I was in the middle of writing a workbook section on the value of exploring, of taking
unplanned "excursions," as the innovation firm Synectics calls them, I thought I should take a
peek.
Po Bronson and Ashley Merryman recently authored a cover story for Newsweek magazine
titled "The Creativity Crisis." It is worth a read, but if you do not have time, here is my
"CliffsNotes" version:
1. You CAN measure creative potential: a long-term study of children, initiated by Dr. E. Paul
Torrance, has shown that by seeing how young children perform certain tasks, you can predict
their future creative output (the number of patents they file, books they write, businesses they
start, research papers they write, etc.). While the "Torrance test" is not perfect, it seems to be
surprisingly accurate.
2. U.S. creativity is dropping: the average Torrance score of U.S. children had been rising
steadily until 1990. But for the past 20 years it has been in decline.
3. Creativity outside the U.S. is rising: through Europe and Asia, schools that once encouraged
rote learning are embracing creativity, while in the U.S. we have been regressing, squeezing out
time for creative thinking because we have been increasingly training our students to pass
standardized tests. Could this mean the U.S. is losing its "innovation" advantage?
4. Killing creativity has social costs: creative problem solving is composed of two phases-convergent thought in which you diagnose potential problems and divergent thought in which
you create potential solutions. People who are able to do both--to diagnose problems and
create solutions--tend to have better relationships and are "more confident about their future
and ability to succeed." Unfortunately, we seem to be training our students to do more
problem identification and less solution creation.
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5. We can teach creativity: studies showed that music students, Jazz musicians, and dancers are
able to "turn on" creative thought more easily when improvising their art than people less
trained in the arts.
6. Teaching creativity does not come at the cost of "real" learning: there seems to be a common
belief that if children have time to be creative (e.g., to take art classes) then they are being
robbed of time for real learning (e.g., memorizing scientific formulas). But the experience of
some innovative schools shows that by having children explore creative solutions to problems,
they learn important facts without even knowing it. One school had students come up with
creative solutions for insulating the room from outside noise. By the end of the process, the
students understood how noise conducts through different types of materials. They didn't learn
the science by memorizing. They learned it by trying to solve a problem.
7. Creativity is not bound by art: I believe strongly in the power of "strategic creativity." I
believe the people who have significantly impacted the world--from Gandhi to Martin Luther
King Jr.--share an ability to see strategic solutions that others overlook. This article supports this
view. It shows that creativity need not be contained to art rooms or music halls. By practicing
creativity in any domain--creatively solving science or history or social or, as I do with clients,
business problems--we enhance our ability to find exciting solutions to any type of problem.
I also think the article beautifully plots out the path of creative thought:
"When you try to solve a problem, you begin by concentrating on obvious facts and familiar
solutions, to see if the answer lies there. This is a mostly left-brain stage of attack. If the answer
doesn't come, the right and left hemispheres of the brain activate together. Neural networks on
the right side scan remote memories that could be vaguely relevant. A wide range of distant
information that is normally tuned out becomes available to the left hemisphere, which
searches for unseen patterns, alternative meanings, and high-level abstractions.
Having glimpsed such a connection, the left brain must quickly lock in on it before it escapes.
The attention system must radically reverse gears, going from defocused attention to extremely
focused attention. In a flash, the brain pulls together these disparate shreds of thought and
binds them into a new single idea that enters consciousness. This is the "aha!" moment of
insight, often followed by a spark of pleasure as the brain recognizes the novelty of what it's
come up with.
Now the brain must evaluate the idea it just generated. Is it worth pursuing? Creativity requires
constant shifting, blender pulses of both divergent thinking and convergent thinking, to
combine new information with old and forgotten ideas. Highly creative people are very good at
marshaling their brains into bilateral mode, and the more creative they are, the more they dualactivate."
As you can see, I was pleased to take a break from my workshop preparation to be reminded
and validated for what I am constantly sharing with readers and clients--create a culture that
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fosters innovation. Follow the suggestions below to become a better creative strategist and
grow your business as well as your brain power.
1. Do not think that your domain experts--your operations people, accountants, or statisticians-cannot contribute innovative ideas to other areas of your business.
2. Block out time for creative exploration throughout the day. In every meeting, no matter how
tight its schedule, set aside a little time to explore creative ideas. Tell your people, "Let's think
about how many different ways we could solve this problem." This expands the innovative
capacity of your people and may lead to breakthrough ideas.
3. Encourage your kids to think. My son asks "Why? Why? Why?" 100 times per day (actually he
asks "Por que? Por que? Por que?" because we speak Spanish at home). Encourage your people
to keep asking why. Don't let them be satisfied by the accepted solution.
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Wed Jul 28, 2010
Three Steps for Changing Reality
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Last Sunday morning I enjoyed a rare, quiet moment. Because it
was still cool enough to eat outside, the kids stuffed cereal into their little mouths in front of
the pool while I lay next to them, The New York Times and coffee in hands. The article I was
reading covered Elon Musk, who made his riches helping to build PayPal and is now CEO of
Space X and Tesla Motors, the electric car company that went public on June 29. It was a
successful IPO and the first American car company to go public since Ford in 1956.
A few years ago, while doing research for my third book, The Way of Innovation, I interviewed
Musk. He is a fellow Wharton Business School grad. My meeting with him shaped the overall
theme of my book and I was struck by the same thing the NYT article covered: does Musk twist
reality?
The answer, I believe, is yes. He twists reality. But so does Steve Jobs, Richard Branson, and any
highly successful entrepreneur. Indeed, anyone who has significantly impacted the world--from
Gandhi to Martin Luther King Jr.--does the same thing that the press and analysts are faulting
Musk for.
You should learn their tricks too.
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In the article, Darryl Siry Tesla's former VP for sales and marketing says of Musk, "It's a reality
distortion field and it's a powerful one. He gives the facts to fit the narrative he wants out
there."
Another detractor, Ray Wert, editor in chief of Jalopnik, a blog about the auto industry, says, "I
don't believe him ... I don't think he is lying. I actually believe that he believes what he is saying.
But I just think it's nowhere near what the reality is."
These complaints, I believe, come from a fundamental difference in the way that most of us
think about reality. You see, most of us view language as a way of describing what is--describing
a fixed, already existing reality. But those who really impact the world view language as a tool
for changing reality. Reality adapts to fit our words as much as our words adapt to fit reality.
This is not an ivory tower philosophical point. It is a practical and critical principle that anyone
who wants to create change--build a business, launch a product, or get a park built in their
neighborhood--needs to embrace.
Consider that those who work with Steve Jobs describe the same "reality distortion field" that
Tesla's former VP describes follows Musk around. Consider that Mohammad Yunus, who I also
interviewed for the same book, a Nobel Peace Prize winner and creator of "microcredit," says
that his greatest challenge has been "to change the mindsets of people." Or consider Donny
Deutsch's deceptively simple but profound suggestion that entrepreneurs need to "fake it till
you make it."
They all point to the same thing: to change the world you need to change reality, and to change
reality you need to change perception, which you engineer with creative language. Here are
three steps to begin changing the world:
1) Create a compelling idea: when I spoke to Musk about Space X and asked why he wanted to
create a private space company, he said something like, "Because a future in which everyone
can get into space is more exciting than one in which only the government can." Therefore, you
need to describe an ideal situation that appeals to people's common sense. And keep it really
simple. If your description of this ideal future is too complex, then you won't be able to
understand nor explain your project well enough.
2) Diagnose the changes that need to take place: for mankind to evolve from hunting and
gathering societies to agricultural ones required two major innovations to occur: A, the
invention of the scratch plough and B, the domestication of the ox. If we did not have both, we
would either be riding oxen to hunt or sweating under the hot sun as we scratched lines too
short to plant seeds in. For bold ideas to be realized, it usually requires that multiple parts of
the system undergo radical change.
Musk's vision of an electric car that could travel halfway across the country on one charge
between breakfast and bedtime requires not only breakthroughs in battery technology but also
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the creation of a system of "gas stations" at which drivers can stop to swap out batteries. It
requires the passing of new laws and regulations to encourage electric vehicles. It's a
multifaceted problem that seems impossible if you view these challenges as reasons the idea
won't work. However, if you view them as variables in the system that you can influence, then
they become simply part of the puzzle.
3) Explore possible solutions: having identified the various interconnected elements that need
to change, you must now explore never-before-tried solutions. The breakthrough usually occurs
through an analogy or metaphor. Yunus, for example, banged his head against the banking
sector, which refused to accept his idea of microcredit. His dream became reality when he
stopped viewing his project as a social plan but rather as a bank for the poor. Then all of the
previously insurmountable problems revealed simple solutions.
These three steps are the beginning of a new framework I have been developing on helping my
client create innovative competitive strategies. Ideal, Diagnosis, Exploration are the start of my
five-step process called IDEAS. Stay tuned to learn the final two steps in the IDEAS format.
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Thu Aug 5, 2010
From Winning to Crazy: How to Assess Your Company's Ideas
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
The review of Kaihan Krippendorff's strategy framework continues with a look at how to
evaluate potential strategies to isolate those with the highest potential.
"What the ancients called a clever fighter is one who not only wins but excels in winning with
ease."
--Sun Tzu, The Art of War
Last week I wrote about business icon Elon Musk and related his success to my IDEAS strategy
development framework. By using Musk as an example, I shared the first three components of
my approach to creating strategic advantages--Idealize, Diagnose, and Explore. Today I want to
delve into the first step of the next piece of the process--A is for Assess.
A key difference between innovative companies and less innovative ones is defined by what
they decide to do with seemingly improbable ideas. It makes sense to focus your attention only
on the ideas that are feasible and, indeed, this is what most companies do. But more innovative
companies keep "crazy" ideas on the table. They invest time exploring whether these ideas may
become feasible.
To avoid your team's tendency to discard ideas that seem initially "crazy," it helps to break
down your process of choosing from the ideas you generated during the "Exploration" phase
into two steps, carefully managing each to give truly innovative solutions a chance.
Assess
Since you do not have time to test all of your ideas with rigorous analysis, you must first
conduct an initial assessment to decide which are worth the effort. Many great ideas die at this
early phase, because, upon initial assessment, the team rules them out.
Why did it take HP decades to adopt a version of Dell's "go direct" model? Why did it take
American Airlines, Delta, and other traditional airlines 30 years to mount a meaningful counter
to Southwest's budget airline model?
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Great companies fail to adopt great ideas because, initially at least, they fail to recognize an
innovative idea as holding strategic value. They are not even willing to invest the time to
measure the idea's risks and reward potential.
To help your group avoid its natural tendency to rule out ideas that initially appear "crazy," it
helps to assess your ideas across two unrelated dimensions. I call these the "path" and the
"ease." The goal is to find a way to win with the least amount of effort and find the path of
greatest ease.
The Path is defined by the impact the idea would have on achieving your goals. If you had a
magic wand with which you could achieve every idea you conceived, which ones would prove
to be the most impactful and profitable? Judge those ideas using a scale of high, medium, and
low to the impact they can have on your organization's path.
Then assess the Ease with which you could realize each idea. Consider how little it will cost,
how quickly it can be implemented, if your organization has the capabilities or knowledge to do
so, and how complex execution will be. Again judge the achievability of each idea as high (low
cost, quickly implemented, and leverages our capabilities), medium, or low.
This exercise will result in four types of ideas:
"Winning moves"--high impact (or "path") and high "ease" ideas that you should probably
begin acting on immediately.
"Tactics"--ideas that are easy to execute, but that will not significantly improve your situation.
You may want to execute these, but do not prioritize them as strategic.
"Time wasters"--low impact and difficult-to-achieve ideas that are probably wasting resources.
We often find that through this exercise companies identify many initiatives that are timewasters. Remove these from your agenda to focus on higher-return efforts.
"Crazy"--these are ideas that appear difficult to achieve but that could lead to significant strides
to you advancing along the path. Innovative companies tend to keep these ideas alive. They
continue to discuss such ideas, looking for ways to improve their achievability. Most companies,
however, have no room for such ideas and risk being surprised later, but the creative
competitor finds a way to make the idea work.
By jointly classifying each idea into these four quadrants, you and your team have to consider
every idea. You remove completely a company's tendency to kill off ideas by refusing to
consider them. To complete the process, remove "time wasters" and "tactics" from discussion,
and focus your time discussing how you can turn "crazy" ideas into "winning moves." The magic
is in the "crazy ideas." These are ideas with true innovative potential.
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Thu Aug 12, 2010
Storytelling and Influence: Learn How to Get What You Want
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
"Management cannot be expected to recognize a good idea unless it is presented to them by a
good salesman." -David M. Ogilvy
You have devised a brilliant strategic idea. You've asked the right questions, diagnosed the
critical issues, conceived a set of unorthodox solutions to address the key issues, narrowed
down your ideas into an actionable set of priorities, and now you feel confident in your idea.
Everything is in line and ready to go, but many great ideas fail despite the above efforts because
the person who presents them cannot sell them effectively into their organization, investors,
employees, etc. You must now think strategically about how you will communicate so that your
idea builds support.
Here is where the "S" in my IDEAS framework comes into play: you must be able to tell a
memorable story.
The Influence "GAME"
Influence is fundamental to your ability to lead and impact your organization. It is a skill we
exercise every day, whether consciously or not, to shape our environments and get things
done. Increasing the effectiveness of your influence relies on your ability to tell a memorable
story and get people to be committed to that idea.
My way of teaching the effectiveness of influence is to break it down into a four-component
GAME:
1.
2.
3.
4.
Goal: what do you want to achieve?
Audience: whom do you need to influence or get input from?
Message: what do you want to say?
Expression: how will you deliver the message?
Goal
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Before you launch into your pitch, you need to take the time to really understand who you are
seeking to influence. Your first goal is not always to convince. There are generally three types of
outcomes you will want to achieve through your communication:
1. To understand: you may not yet be sure what position someone holds or what role
they play. So you are often seeking simply to better understand their view and role.
2. To loosen: when someone is in strong opposition and/or when you have multiple
opportunities to engage with someone, you may only need to move them toward
being open to another point of view. If you can get them to say, "I'm willing to
consider alternatives" or, "Okay, I'm willing to hear more," that may be all you
need to produce agreement.
3. To convince: your goal may be to convince someone of something and have them
take action on that conviction.
Audience
Having defined the goal, the next step is to understand the person or people you are seeking to
influence. To do this effectively, put yourself into their shoes and ask the following questions:
1. How aware are they of the issue or idea?
2. If they are aware of the issue, how well do they understand it (e.g., are they
already experts or do I need to educate them)?
3. Do they already hold a strong point of view about the issue and, if so, what is that
view (positive or negative)?
4. Why do they hold this view?
Message
After analyzing the audience, you want to now craft the message that is most likely to achieve
your desired outcome. Studies have shown logic is a relatively ineffective approach to changing
minds. Rather, people use non-logical approaches to make up their minds and only thereafter
use logic to support their decision. You must therefore use something other than logic to
convince someone to consider your position and then use logic to lock in their new conviction.
Here are some questions you might ask in decided how to structure your message:



How can I open my presentation to engage others? A good framework to consider is:
situation, complication, question, answer.
What metaphor do I want to use to frame my idea?
How can I frame the past facts related to this issue in a way that tells a helpful story (i.e.,
tells a story that leads people to see the action you are suggesting is a natural next
step)?
Expression
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With message in hand, informed by an analysis of your goal and audience, you are now ready to
decide how to "express" your message. Before you jump immediately into planning a
presentation, ask some of the following questions:






Is it better to do this by phone than in person?
Is it better to circulate a report than give a presentation?
Should we meet at work (e.g., on campus) or somewhere else?
If at work, should we meet in their office, my office, or somewhere else (e.g., a site
visit)?
Is better for us to stand and present with PowerPoint or to sit down and talk in a small
group?
Should we use any props?
By using simple frameworks like IDEAS and GAME, you can truly clarify your priorities,
strategies and effectiveness. Good leaders understand the power of influence, and great
leaders understand how to back up that influence with a compelling idea and necessary
research. Take the time now to go through these processes in order to save yourself time and
money by following the profitable, and sometimes crazy, ideas.
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Tue Aug 24, 2010
Is Google Destined to Be Evil?
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
At my workshop in New York last week the
conversation drifted to Google's and Verizon's
plans to introduce a new kind of Internet which
looks more like a toll road than a free highway. I
was not surprised that everyone in the group was
upset by the idea. But I was surprised that Google's
plans came as a shock.
Sure, the plan runs afoul of Google's now famous
self-directive to "not be evil." But the evolution of
Google from underdog to an industry leader follows the inevitable pattern of every successful
firm.
The reason for this transformation has nothing to do with values but all to do with sources of
power. You see, small companies must build competitive advantages on things we as
consumers admire--like producing great products--because the only tools they have at their
disposal provide temporary advantages. Keeping consumers always happy is hard work, but
necessary when you have competitors waiting in the wings to steal your clients away.
But as companies grow stronger, things change. They become intrigued by a new set of tools in
their tool box. In my last book I called this stage of evolution "earth." The innovator, who now
owns the innovation, wants to protect his gains. The sources of advantage that got him here
will no longer sustain him. So he shifts his strategy to pursue three goals:
1. To lock up critical inputs (as Google seems to be wishing to do with Internet
access).
2. To leverage economies of scale.
3. To build customer captivity.
This is not to say that we should not be afraid of Google's more obvious approach. But I don't
think we should be surprised. To believe that Google would continue to be gratuitous is naive.
We all aim to build an empire and we all know we would alter our mission to protect our
significant gains. So ask yourself the questions below to see how you can start developing a
business strategy to tackle the three objectives above.
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1. What can we give away for free in order to capture more customers?
2. How can we lock up access through partnerships with vendors or another industry?
3. How can we use our processes to decrease our costs?
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Mon Aug 30, 2010
Blue Nile Sparkles
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
I recently had the chance to interview Diane Irvine, the CEO of Blue Nile. This leading online retailer of
diamonds and fine jewelry has taken over the industry and recently reported financial results for its
second quarter with net sales increased by 9.7% to $76.6 million. Despite the current economy, Blue
Nile set another record sales quarter.
Blue Nile was founded by Mark Vadon in 1999 after he
was frustrated with the engagement ring-buying
experience. The education process of buying a ring
involved learning a system of codes depicting color and
clarity and learning arbitrary social norms. The journey eventually led Mark to a new wife, but it
also led him to an unlikely new profession. Mark became a diamond salesman himself.
The idea came to him quickly. He first needed to find a store that was already set up to sell a
diamond ring online. He found one--a small mom-and-pop jewelry store in Seattle that had set
up a Web site. After purchasing the diamond ring online, Mark went to visit the owners. He
bought the store, and then started selling diamonds on a larger scale online in 1999.
Blue Nile's launch could not have been more poorly timed. It launched online just as the "dotcom" bubble was bursting. But luckily, Blue Nile was one of the few pure, online businesses to
survive. Over the next four years it grew to $120 million in revenue, in 2003 it went public, and
over the subsequent five years it expanded 250%, reaching $320 million in annual revenue.
We cannot explain Blue Nile's success with traditional logic. It owns no diamond mines, as De
Beers does. It enjoyed no pre-existing customer captivity as Tiffany has been able to build with
its distinctive turquoise bags. But if you analyze how Blue Nile's management team explains its
success you see the inner workings of an outthinker. Blue Nile cleverly plays on several industry
dogmas and so has designed a strategy competitors have difficulty responding to effectively.
Traditional advantage
Starting with the traditional advantages--economies of scale, preferential access to resources,
and customers' captivity--we see that Blue Nile understands how companies win. It is working
to build all three sources of advantage.
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


Economies of scale: by selling diamonds directly to customers, rather than through
stores, they understand they are building a "scalable, capital-efficient business model
that enables growth with lower working capital requirements than traditional storebased jewelry retailers."
Preferential access to resources: the company invests heavily in continually
strengthening its supply line. As Diane underscored when I spoke to her, "We can
dynamically display approximately 60,000 individually certified high-end diamonds for
sale to consumers and clearly one couldn't do that before the Internet existed. We're
doing this via exclusive supply relationships with some of the largest diamond
manufacturers around the world who are cutting and polishing the diamonds and then
giving us listings of their inventory. And the exclusive relationship provides that we're
the only consumer-based Internet company that can show those diamonds for sale to
customers."
Customer captivity: Blue Nile says it maintains "an obsessive focus on the customer. We
believe that maintaining high overall customer satisfaction is critical to our ongoing
efforts to elevate the Blue Nile brand and to increase our net sales and net income."
When the company provides effective customer service, it has the potential to build a
uniquely strong emotional bond because the company is engaging its customers at one
of the two to three most pivotal moments in their lives. As Diane describes, "We're
dealing with someone during a significant time in their life. It's a happy occasion. We're
helping customers and many times we're the first person to know that this individual's
going to get engaged."
The Blue Nile Difference
While Blue Nile is competing well across the traditional sources of advantage, the traditional
sources of advantage are no longer enough. Tiffany is also competing to build economies of
scale (more stores and inventory), secure preferential access to resources (proprietary designs
and brand), and establish customer captivity (for example with its immediately recognizable
Tiffany bag).
Tiffany has been playing this traditional game since 1837 and they are good at it. This means
Blue Nile must create additional points of differentiation.
This is where Blue Nile's customization comes into play. With more than 70,000 diamonds and a
few hundred settings, Blue Nile can help customers design more than a million different rings.
Because each diamond and setting is chosen by the customer, they can truly create the ring
they want. In the traditional jewelry space, customers are forced to choose from the diamonds
and settings that are currently in the store. The client isn't encouraged to mix and match
diamonds and settings, and therefore the options are limited.
Blue Nile's approach puts the consumer in control and makes sure that client is satisfied. If a
person wants a great diamond with a small carat weight, they can find it. In traditional jewelry
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stores, that is virtually impossible. Blue Nile truly serves the client first and therefore the
company's bottom line grows.
Blue Nile's competitive advantages are clear, but this company isn't resting on its laurels. Over
the next week or so, I will be sharing other aspects that differentiate Blue Nile from its
competitors. Ask yourself the questions below to see if you can copy some of Blue Nile's
successful strategies.
1. Is there a way to scale our business or processes in order to lower overhead
expenses?
2. Is there a company we can partner with that can offer us more control over a
particular resource?
3. Is our business truly focused on the client?
4. How can we provide better customer service?
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Wed Sep 1, 2010
Selling Information, Not Diamonds
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Blue Nile's divergence from industry norms begins with its purpose. Most jewelers exist for the
jewelry. Tiffany & Co., for example, describes itself as "the world's premier jeweler and
America's house of design."
While this positioning may seem innocuous, it exerts
a powerful pull on how Tiffany's people see their
business and the thousands of daily decisions they
make that compose the company's real strategy.
They focus on making beautifully designed jewelry
and gift items. They particularly focus on developing
proprietary designs that become Tiffany's signature
items. To sell these designs, they place them in an
environment that enhances the company's "premier"
positioning. Tiffany's language, history, and mission
direct its people toward taking a sales stance.
Indeed, Tiffany was even sold for six years (1978 to 1984) to Avon, a company whose historical
advantages stem from its innovative sales practices.
By contrast, when I asked Blue Nile's CEO Diane Irvine how she described her company's
purpose, she said, "Our focus is empowering the customer with information."
Looking back through the company's history and observing Blue Nile's customers' behavior, we
see this company is engineered to educate, rather than push diamonds. The average customer
looks at over 200 pages of information, spends more than three weeks on the Blue Nile site,
and calls Blue Nile's customer service line in Seattle to talk things through with a live person.
Further bolstering this information focus, Blue Nile's customer service representatives do not
receive a commission for their sales, so they have no motivation to push customers to make a
quick decision.
Try imagining a Tiffany store salesperson cheerfully greeting a customer who has been popping
in for the past three weeks and walking that customer through 200 pages of information before
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they ever commit to purchasing a diamond. Now you
can begin to see the disruptive power of Blue Nile's
focus.
As Diane says, "We really have a customer who's looking for a lot of information and we're
providing complete transparency. So it's something that has been very disruptive in the
industry from a supply chain standpoint and certainly on the retail side."
This strategic pattern--approaching an existing business as someone from another industry
would--lies at the beginning of numerous disruptive companies. This is pattern #4: stay out of
their stronghold.
CarMax, for example, forced its much larger competitors out of the used car retail business by
approaching the job of selling used cars the way a retailer would instead of the way a car dealer
would. The company was founded by retailers, and they made a concerted effort to only fill top
management slots with retailers. As a result, they made decisions that made sense to retailers
but were confounding to car dealers. They gave their salespeople a flat sales commission
instead of one based on the price they could get for a car. They built an inventory tracking
system so complex that the company's car-dealing competitors simply did not know how to
duplicate it.
Do your people define your business differently than the competitors define theirs? If not, its
worth looking for a new perspective. By approaching your industry or business from a different
point of view, you can find unexpected and valuable new strategies. A subtle shift in mindset, if
shared among everyone, can orchestrate thousands of unorthodox daily choices that your
competition will have difficulty duplicating.
Ask yourself the questions below to see how you can stay out of your competitor's stronghold
while stealing more market share:
1. At its core, what does our business do? Are we in retail, in service, etc.?
2. How would someone from a completely different industry look at our
organizational structure?
3. How does this new vision change internal behavior?
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Wed Sep 8, 2010
Creating a Two-Horned Dilemma
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Blue Nile's disruptive potential probably comes from its engineering of the classic competitive
dilemma, coined "The Innovators Dilemma" by Clayton Christensen in his book by the same
name. You force your competitors onto the horn of a dilemma. They can either run to protect
themselves against one end of the horn, while exposing themselves to the other, or vice versa,
but they cannot do both.
Last week I conducted a Webinar with Blue Nile's CEO Diane Irvine and this strategy was
discussed at length. For those of you who didn't attend, you can listen to the recording by
visiting http://www.kaihan.net/vpw_login.php?img=blue-nile.
To understand how Blue Nile forces its competitors to choose between two losing approaches,
try to imagine yourself as the traditional competitor trying to compete with Blue Nile. You know
Blue Nile is growing and is more profitable, in percentage terms, than you are. You have
resources and a brand so you figure you should simply copy Blue Nile's model. But as you think
through your strategy you find the hard choices returning you to a strategy of inaction.
The first step, of course, is to sell diamonds online. You can easily figure out the technology,
build the requisite customer service team, and sort out how you will plug into your inventory.
But what type of diamonds should you sell--the high quality ones you offer in your stores or
lower quality ones?
To complete with Blue Nile, you must choose to sell high quality diamonds because Blue Nile
has cleverly chosen a premium positioning. As Blue Nile's CEO Diane Irvine explained, "We're
not positioned as a discounter. We are selling a very high end product but selling it for much
less. So I think of this as the smart way to shop and I think our business is made possible
because of the Internet."
Your next strategic choice is to decide how to price your online inventory. You can afford to sell
these diamonds at a lower "online" price because your online business does not have to pay
retail rent so your costs are lower. You could drop your prices while still holding up margins. But
if you sell high quality diamonds, the same quality you sell in stores, for a lower price online,
then you are communicating to your customers that you are overpricing your offline offerings.
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While in some categories retailers can get away with this (e.g., you may expect to pay more for
a book sold in Barnes & Noble than you would for the same book purchased on Barnes &
Noble's online store, www.bn.com) but diamonds are different. You become more pricesensitive when choosing a $7,000 diamond than when choosing a $14.95 book. And while you
are willing to pay for the convenience of getting the book in your hands today rather than wait
three days for online shipping, three days seems not long to wait for the diamond that will mark
a major turning point in your life.
Indeed, as Blue Nile has found, many people find the in-store experience of diamond shopping
to be less attractive than the low-pressure experience of shopping online. Sell your diamonds
cheaper online and customers will stop buying in your stores.
Now that your options to sell high quality diamonds online have been exhausted, you explore
the other option: selling lower quality diamonds online. Regardless of at what price you offer
these low-quality diamonds, your strategy will be have little effect on Blue Nile's continued
expansion into your market because you're aiming your online business at an entirely different
market.
At the end of the exercise you must make a tough decision: do I sell cheap diamonds online or
do I abandon any serious efforts to sell diamonds online? Blue Nile does not care which you
choose because in either case you are choosing not to compete with them.
Because of Blue Nile's engineering of the "two horn" strategy, the strategy known in the 36
Stratagems as "Besiege Wei to Rescue Zhao," history shows it needs little else to deflect
competition from traditional players. Entrenched incumbents face an impossible choice and so
are moved to quietly observe Blue Nile's progress.
But innovators must contend not just with existing competitors; they must also prepare
themselves for future ones. An analysis of Blue Nile's strategy shows they are building an
additional competitive shield that, if skillfully assembled, could deflect would-be attackers for a
considerable amount of time.
Ask yourself the questions below to see how you can create a strategy that your competitors
can not compete with.
1. What do we do differently than our competitors?
2. How can we dive further into our niche and truly control that space?
3. What strategic choices can you make that your competitors, even the smart and
well-funded ones, will choose not to copy?
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Fri Sep 10, 2010
Five Laws of Conflict – Burning Korans Breaks them All
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
This Saturday, Florida-based pastor Terry Jones had
planned to lead his congregation in a Koran
burning, celebrating what they call "International
Burn a Koran Day." Although everyone from the
Pope to Hillary Clinton has urged him to halt his
plans, it seems that only a sign from God can keep
him from following through. I can't decide if Terry
is short-sighted or brilliant, if he lacks all ability to
skillfully manage conflict or if he is, intentionally or
accidentally, leading us to peace. Let us first review
the folly of his Koran burning plan, drawing from
history's most brilliant masters of conflict. My
survey shows that Terry's demonstration breaks
five fundamental laws governing how to win.
1. Violence is an inferior strategy: one of Sun Tzu's
most important statements is "the highest
realization of warfare is to attack the enemy's
plans; next is to attack their alliances; next to
attack their army; and the lowest is to attack their
fortified cities." Niccolo Machiavelli wrote, "Arms
are permissible when there is no hope except in arms." Here we have two of history's most
well-known individuals saying great strategy solves conflict without violence. Now while
burning Korans is not physically violent, it is morally vehement and, as we will see in a moment,
grossly misdirected.
2. Make means consistent with ends: we love to read stories about bloody clashes of
civilization--the French and U.S. Revolutions, for example. But the violent ones rarely sustain
their victories. The Irish Republican Army, Palestine Liberation Army, Basque ETA, and Sri
Lankan Tamil Tigers all ultimately struggled against the popular resistance their violent means
engendered. In contrast, consider non-violent "wars" like the liberation of India, the end of
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apartheid in South Africa, the removal of dictators in the Philippines and Chile, or the
democracy movement in Poland. All resulted in sustainable victories. As Gandhi pointed out,
"The means must be consistent with the ends." History tells us that burning Korans, even if
successful in some way, will eventually lead to an unsustainable world filled with burning
Korans, Bibles, and Torahs.
3. Create no competition: Sun Tzu wrote that "to win one hundred victories in one hundred
battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill." The
best strategies preempt competition. By this measure, the burning of Korans is a step
backward. It achieves no meaningful gain while it can only excite competition. What the
burning of Koran does is draw a challenge in the sand; it creates an "us vs. you" dynamic that
Gandhi saw as critical to undo: "We reaffirm our unity with others when we transform 'us'
versus 'them' thinking and doing." At the heart of the Koran-burnings folly is that it achieves no
gain yet activates conflicting identities--Christian vs. Islam--that will naturally trigger conflict.
4. Isolate your opponent: one the greatest strategists of modern times, Colonel John Boyd,
suggests that a critical element of any successful campaign is to isolate your opponent from his
supporters. Sun Tzu called this "attacking alliances." Some U.S. military strategists
conceptualize our conflict with Islamic extremists as being a battle with four concentric
spheres: at the center is Al-Qaeda (our primary target), surrounding them are various Jihadist
groups that gain support and inspiration from formal-Qaeda, around them are Islamic
fundamentalist sympathizers, and around them is the broader population of followers of Islam
(see this report, PDF file). A smart strategy would laser in on Al-Qaeda and other Jihadist groups
while isolating them from the support of sympathizers and followers of Islam. By robbing the
target of their support, you weaken them. Burning Korans incites the outer concentric rings to
support the Al-Qaeda target. It takes natural supporters of ours and gives them a reason to
support the "enemy."
5. Never come down to your enemy: if your enemy is good with a sword, it would be foolish to
pick up a sword against them. Instead, you should wield a weapon with which they are less
familiar. If you fight like your enemy, you become your enemy. By turning to burning Korans,
Terry sinks to the extremists' level and breaks this important strategic law.
My Hope
While Machiavelli paints a foreboding hue on Terry's Koran-burning strategy ("There is no surer
sign of decay in a country than to see the rites of religion held in contempt"), my rosy lenses
cannot help but reach for a positive outcome from this situation.
For the first time Hillary Clinton and Sarah Palin have something to agree on. Sarah joins Hillary
in urging Terry to hold back, warning, "It will feed the fire of caustic rhetoric and appear as
nothing more than mean-spirited religious intolerance. Don't feed that fire." Reverend Billy
Graham's son has been calling Terry asking him to stop. Republican conservative Haley Barbour
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says of the incident, "I don't think there is any excuse for it." Gen. David Petraeus, Angelina
Jolie, and even the Pope have all weighed in on the same side.
Could this be Terry's real plan? To unify the U.S. behind our highest ideals? Whether intentional
or not, if Terry follows through, let us all hope that he and his 50-member congregation will set
up a global shift that will result positive momentum for all of us. The strategic principles
outlined above apply to any conflict you wish to skillfully engage in, whether for your business
or life. Ask yourself the questions below to see how you can truly master conflict:
1. What would it mean to attack your enemy's plans or alliances, rather than
attacking your adversary?
2. Are your means consistent with your desired ends?
3. Is your strategy activating unnecessary competition?
4. How can you isolate your competitors from their sources of support?
5. What is your competition's preferred form of battle and how can you avoid playing
their game?
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Wed Sep 22, 2010
Condense Your Strategy to Its Core
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
My last blog, "Five Laws of Conflict - Burning Korans Breaks Them All," generated a flood of
emails and responses. Clearly people are passionate on both sides of the issue. My intention
was not to take a position, but to simply lay out a practical strategic analysis of the situation.
Passion, when channeled correctly, can create a powerful strategic advantage. When a
company's people are all focused on one mission, one purpose, they become passionate and
engaged about it. However, in order to truly leverage the passion of your people, you must
make sure your strategy is well-defined.
Verne Harnish, probably the world's leading expert on how midsized firms can unlock their
barriers to growth, penned a compelling challenge recently, arguing that if you can't express
your strategy in one sentence, you don't have a clear strategy.
I think he is right. His challenge opens the door to discuss the tangle of misconceptions of what
strategy is--starting with the false belief that strategy is important. We often mistake what is
important with what is strategic. This confusion leads to long-winded strategic statements,
littered with comas and semicolons that blur into an incomprehensible bundle of jargon barely
distinguishable from the bundles the competition totes around.
Over the past few months I have begun comparing the strategy statements of highly successful
companies with their less successful rivals. What this exercise is starting to highlight is that fastgrowing firms are very clear about what makes them different.
The under-performers, grasping to catch up, lay out lists of priorities that are no different from
what every good player in their business should be doing. Who cares if you offer great
customer service or adopt best practices or strive for efficiency? Your competitors are doing the
same. These things will not separate you from the pack. These priorities may be important in
the way that tying their shoelaces is important to Olympic runners. They are important but they
give you no edge.
By cutting out all of the important, yet non-strategic, fat from a strategy statement, a company
is left with a lean, pure, juicy center of what makes its business great. Use the prompts below to
try taking on Verne's challenge to reduce your own strategy to one powerful sentence and see
if that clarity can ignite new passion within your organization.
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1. Write down your company's strategy.
2. For each sentence, ask yourself, "Would my competitors, being smart and
aggressive, choose not to copy this?"
3. If the answer is "no," then delete that phrase. It may be important but it is not
strategic.
4. Whatever you have left is your real strategy. If you are looking at an empty page,
then it is time to generate some new thinking. What strategic options are you not
now considering?
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Tue Sep 28, 2010
Five Years of Stock Value: WebMD Beats Google
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
If you had the guts five years ago to bet on Google, then you would certainly have done well.
But had you bet on WebMD, you would have done better. Since late 2005, while the Nasdaq
index has netted little return for investors and Google's stock price gained 68%, WebMD's more
than doubled, gaining 105%.
I recently had the chance to speak with Wayne T. Gattinella, WebMD's CEO. My goal was to not
rehash the now well-known history of WebMD's founding, but rather to understand how this
company has produced such impressive returns over the last five years. Gattinella shared at
least three lessons that we should all consider. Over the next
week I will lay out these shining principles that have led to
such success.
First, I will give a brief history for those unfamiliar with
WebMD. It is the brainchild of one of the Internet's founding
fathers, James H. Clark
(http://en.wikipedia.org/wiki/James_H._Clark), the creator of
Netscape. A year and a half after launching Netscape, just as
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the company was preparing to go public, Clark came up with another idea: creating a central
depository for patients' medical records so they would not have to repeatedly fill out forms
when they went from doctor to doctor. The company was named Healtheon.
Healtheon went public in 1999 and then merged with an Atlanta-based company called
WebMD in a deal valued at $7billion. The company evolved over the years. It expanded into
related businesses. Its stock price traded above $100 per share but, in 2001, as the dot-com
bubble burst, its stock price tumbled to $3 per share.
Revenue actually kept growing and the company seemed to be moving toward profitability, but
the business was clearly playing in a new post-dot-com environment. It needed a strategic
overhaul. Gattinella and his team took over in 2001 to engineer that. While we spoke,
Gattinella shared how he and his team helped make WebMD one of the world's best
performing technology companies. His insights are worth contemplating, whether you are an
investor looking to diagnose the trail of a future "WebMD" or whether you are leading your
own firm looking to propel your company forward.
Lesson #1 - It's Okay to Run Away
Soon after Gattinella took back over, he began extracting the real WebMD from its nonstrategic businesses. While the dot-com bubble was growing, the company had spread itself too
thin. As Gattinella said, "It was a situation where the Internet itself had gone through its bubble
burst, and like most, like many Internet companies in its time, WebMD was a high flyer and a
near flameout."
So the goals changed. Instead of rationalizing all of the acquisitions that had been made along
the way, Gattinella and his team decided to focus on restoring the WebMD brand as a highly
trusted brand for information. In other words, WebMD had lost its way and it needed to get
back to its core: a trusted brand source of medical information.
This was not unlike Steve Job's famous first move, when he retook the reigns of Apple, of
dramatically cutting more than half of the company's R&D projects, stopping its license
business, eliminating 15 of 19 products, and withdrawing the company from printers, scanners,
and portable digital assistant businesses.
Like water withdrawing before a wave, great expansions often begin with contractions. To grow
requires that you understand this natural principle, that you appreciate the strategic value of a
retreat and not blindly associate it with defeat. By withdrawing your energy from low-potential
priorities and redirecting it to stronger parts of your businesses, you then have the real
potential to create a disruptive dynamic. What may seem as an apparent retreat is actually a
smart offensive move.
Outthinking the competition requires unorthodox approaches and tactics that your competitors
do not expect or want to copy. Ask yourself the questions below to see where you can cut less
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strategic aspects of your business in order to strengthen the core that makes your company
strong.
1. If you had to pull out of half of your strategic priorities, what would they be?
2. By eliminating less strategic pieces, how could you redirect your energies?
3. What could a new company focus do to those important strategic priorities?
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Wed Oct 6, 2010
Passionately Pursue Customer Captivity
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
There are three primary sources of long-term sustainable competitive advantage: customer
captivity, economies of scale, and preferential access to resources. Lock on to one of these
early and you can build a potentially insurmountable barrier to competitive threats. WebMD
intelligently focused early on one of these three: customer captivity.
When I pushed CEO Wayne Gattinella to tell us why WebMD
has become the leading player in its field, he said, "The brand
as in any category is very, very important, as we really did
spend time in the earlier years establishing the credibility and
the trust in the brand. That's what gives you the headroom to
do more." While others might have sought out near-term
profits, selecting a portfolio of business that blended together
the right mix of risk and reward, WebMD decided to focus on
building a brand of trust. Like any online business, it's
important to make sure customers believe and trust that their
information is protected and that the site is accurate and
credible.
As Gettinella explained, "It wasn't many years ago when
consumers were concerned about putting their credit cards on
the Internet because some unknown person in some unknown country was going to rip you off.
And over time you learned the trusted sites, like an Amazon, where you felt perfectly
comfortable doing that, and now it's not even second thought."
The challenge is that such sources of long-term advantage take a longer time to establish than
the more accessible short-term ones. It is quicker and easier to come up with a fun new
feature, or maybe launch a new iPhone app, than to do the harder work of building a really
meaningful advantage that competitors cannot copy next year. WebMD understood this early.
It saw that its long-term sustainability depended not on clever pricing or flashy content, but
rather by single-mindedly building a brand consumers could trust.
Ask yourself the questions below to see how you can capture customers with confidence.
1. What can you do now to start building customer captivity?
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2. What is your company's strength and how can you communicate that value to your
customers?
3. Are there other ways to capture customers, like economies of scale or preferential
access to resources?
4. What steps can you take now that will have a long term impact beyond any short
sighted gain?
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Mon Oct 11, 2010
The Perfect Balance: Blending Flexibility and Consistency
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
WebMD's revenue is now approaching $500M per year, nearly twice its revenue four years ago.
It is facing an evolutionary challenge that all breakthrough companies wrestle with at some
time before they reach $1 billion in revenue: how do they become a large firm without losing
the entrepreneurial behaviors that got them here?
Many, probably most, companies fail to make it through this evolutional step. Those that do,
find a way to adopt the ability to create a large firm that maintains the flexibility and speed of a
smaller one. As Michael Porter put it, "So companies have to be very schizophrenic. On one
hand, they have to maintain continuity of strategy. But they also have to be good at
continuously improving."
WebMD is taking this challenge head on with an elixir of consistent values that encourage
change. As its CEO Wayne Gettinella said, "You see what makes companies great and you also
see what can destroy or certainly change the shape of a successful company. And culture is so
important to that. So here at WebMD, we talk a lot about operating with the speed and the
agility of a start up, which is the best of what a start up does and produces, but also performing
with the confidence and consistency of an established organization."
This challenge is not unique but how to tackle it still isn't completely clear. It depends so heavily
on senior leadership and the internal culture of the company. The ones that keep pushing
forward while offering an engaging work environment seem to thrive. The Apples, Googles,
Zappos, and Whole Foods of the world have an edge on their more stogy peers--they are
nimble beasts. Ask yourself the questions below to see how you can grow without losing the
flexibility of a small, agile company.
1. What values and behaviors should you never change because they make you
unique?
2. How do you drive your people to continually seek better ways to do everything
else?
3. How do you foster internal culture to keep people from becoming complacent?
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Can Rosetta Stone Reach the Fourth Level of Advantage?
BY FC Expert Blogger Kaihan KrippendorffThu Oct 14, 2010
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
I'm heading down to Orlando next week for Verne Harnish's Growth Conference where about
500 mid-market CEOs will hear from a roster of innovative business leaders including Tom
Adams, CEO of Rosetta Stone. I've covered Rosetta Stone here before and think it is making a
plethora of intriguing counter-intuitive moves--like an outthinker. I recently had a chance to sit
down with Tom and we discussed how Rosetta Stone is seeking to advance its lead in language
learning. Here are some key takeaways.
Only 20 minutes into a 13-hour flight on China Air toward
Bangkok, I got something oddly precious being strapped to a
seat, surrounded in white noise, with a silent phone: insights.
I spent last week talking with the CEO of Rosetta Stone (RST),
and while on this flight, I had an insight: Rosetta Stone is on a
proven path, the same one that most of the highly disruptive
companies of the past twenty years--Dell, RIM, Google--have
trodden.
This does not guarantee RST's success. Others have tried to
climb the same footholds and slipped, but RST seems to know
where to go. Here is the path to the four levels of advantage:



Level 1: follow the pack. Simply copy what others are doing, adopting proven best
practices, with the goal of being number 4 or 5 in your market. Like the number three
bird in a flock, you won't get there first, but you enjoy an easy ride. Most companies-probably 60 percent--compete at level 1.
Level 2: inspire the pack. You may find one or two things you can do differently and
exploit them as long as possible, knowing that others will eventually copy. The
innovators who launch cutting edge products find their creativity copied by the
behemoths that compete at this level. TiVo creates the DVR, Cablevision takes it. Philips
invents the CD-Rom and loses the market to lower-cost competitors. Tesla Motors
(TSLA) inspired all major car companies to launch electric cars in the next two years. My
unscientific estimate is that 30 percent of companies compete at level 2.
Level 3: bewilder the pack. A better idea, if you can find it, is to do something the
competition will resist copying for a while because it costs too much to imitate, relies on
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
capabilities and experiences they lack, or hurts their core businesses. Dell "going direct"
and Southwest's re-adopting the point-to-point model are examples of this. I believe
only 5 to 7 percent of companies compete at this level.
Level 4: leave the pack. Occasionally a company will actually leave the pack by doing so
many things differently and--this is a critical point--making these points of
differentiation interdependent, that they become something new. Disney, for example,
evolved from an animated film company into the first truly diverse media company,
going from cartoons (which gave them characters) to parks (which gave them closer
customer relationships) to experiences (hotels, cruise ships, etc.). You can copy pieces of
the Disney model but trying to excel at all of them, particularly the culture, is nearly
impossible. GE put in play a similar dynamic. My guess is fewer than 3-5 percent of
companies have the guts to compete at level 4.
I am not saying that Rosetta Stone will be the next Disney. Leaving the pack involves immense
execution risk because you must learn entirely new skills and build capabilities foreign to your
core market. But I can see RST taking the nascent steps to get there.
RST started off in the pack, building a $30 language-learning software to compete with $30
language-learning DVDs and books (level 1). It inspired the pack by adopting interactive
technologies with engaging imagery and games (level 2). It started bewildering the pack by
orienting itself as "natural learning," or helping people learn a language not by conjugating
verbs or by memorizing vocabulary, but rather by replicating the immersive experience (level
3).
Now RST is attempting to build capabilities completely foreign to the language learning market.
They are actively building positions in cloud computing, social media, and virtual services. They
just released the second version of their "Totale" product, which blends their traditional
computer-based program with a suite of online tools. You can take a course on your computer
and, after you complete a few exercises, attend a live, online coaching session. If you are
learning Chinese, say, you would find yourself face-to-face with a Chinese tutor who interacts
with you and a few other students.
Totale will also match you up with others learning Chinese (or even native Chinese speakers
learning English) and allow you to play a number of online games that help you build your skills.
Tom spent an hour walking me through the offering. While I found it intriguing as a user, what
interested me more was what a competitor would see. To replicate this offering a competitor
would have to be able to build a service culture among a network of language coaches across
the world and integrate it into their current offerings.
Starbucks has proven how hard building a service culture can be. Starbucks employees must
look you in the eye for two seconds when they hand you a coffee. Try to get a Dunkin' Donuts
coffee employee to do that consistently. Competitors of RST would have to build a new culture,
social networking and critical mass of coordinated information in order to challenge RST.
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Reaching level four isn't easy, but then again RST does not have to become the next Starbucks,
Facebook, and Google rolled into one. But it does need to be competitive across all three
industries. If it can do this well enough I think we will see it follow the paths of others who have
dared to leave the pack and create something truly special.
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Thu Oct 21, 2010
A Shift in Perspective Can Create Millions
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
When Omar Soliman and Nick Friedman, recent
college grads, started collecting unwanted
junk, they were out to build an empire. But two
years later their business was struggling. So
they had a conversation than switched their
mindset and turn them instantly onto a new
growth path. They have since hit the Inc. 500
list of America's fastest-growing private
companies and their $3M+ revenues are still
expanding.
What insight did their conversation reveal? And what impact might it have on your ability to
unlock new growth?
The team met with entrepreneurship guru Michael Gerber and laid out their challenge a few
years ago at the same annual Gazelles Growth Conference I am attending this week. When
Gerber asked them, "Why do people like to do business with you?" the team realized it had
nothing to do with their garbage-removal expertise. It was because people love college. They
like helping college students. When they hire "College Hunks Hauling Junk," they don't just
expect their garbage to be removed, they expect an experience, a connection to earlier, more
care-free days.
That one insight shifted their company's identity--they would now operate like a university and
suddenly they made a number of small business decisions that seem counter intuitive for a
regular junk-removal company.
They looked at each customer touch point--how employees answered the phone or said hello
upon first entering a new client's home--and asked, "Does this fit our identity?"
They started recycling or donating their clients' junk whenever they could because this just
seemed what college students should do. They developed a list of 10 criteria their employees'
physical appearance should meet (e.g., shirt tucked in, hat on straight).
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I could go on to the 100 other small decisions College Hunks Hauling Junk made to align their
customer experience to their new perspective, but to do so misses the point. The lesson is this:
setting your company's identity is like gently guiding the head of a horse. It does not take much
energy but the slightest adjustment can align the thousands of small decisions your people
make every day and redirect your company's strategic trajectory.
Apple dropping "Computer" from its name is an example of the power of shaping identity.
CarMax viewing itself as a retailer rather than car dealer is another.
Next Wednesday, Oct. 27, 2010 at 2pm EST, I will be holding a free webinar with Nick Friedman
to learn more about how these two young entrepreneurs built this successful company. Sign up
now to attend and hear some of the "winning moves" that prepared Nick's company for a steep
positive trajectory and learn how you can apply some of the same principles to whatever you
are building. For now, ask yourself the questions below to see if you can change your
company's agenda and transform its advantage.
1) How do your competitors view themselves? What identity do they hold?
2) What is your identity and is it different than your competitors'?
3) What different identity could your company adopt to transform itself into something more
unique?
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Tue Nov 2, 2010
Four Lessons From Around the World
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
I recently hopped around the world--New York to Bangkok to Frankfurt and back home--over
the span of a week. I was conducting a series of seminars for a client and at each stop I had a
chance to work with senior managers from across an entire region. In Bangkok, for example, I
worked with people from Asia (China, India, Japan, Korea, Thailand, etc.) and in Frankfurt I
worked with people from Europe (France, England, Germany, Italy, etc.) and finally with people
throughout the Americas. This gave me an unprecedented opportunity to get a snapshot of the
world. Over the course of just eight days I got to interact with managers from every major
country on the globe. Here are four lessons from a quick tour around the world:
1) Get to know Asia: a European manager was commenting it had been years since his entire
region had come together because budgets were too tight. When I asked why his Asian
counterparts had told me they were meeting every year, he explained, "They've got India and
China." Their profits are growing, so they have bigger budgets. Your career would be well
served by positioning yourself in those markets in some way. If you are not ready to take an
expat role, then at least stay educated and look for chances to do work that touches China or
India.
2) But know that Asia does not exist: it's easy to point to Asia when you are coming from the
West, but remember that "Asia" was a Western invention. But to think of Asia as one unit is to
overlook the complex, millennia-old lines that divide the content into radically different
countries. China is no more similar to India than Greece is to Canada; indeed they are culturally
miles apart. Some economies are rising, others falling. Bulging salaries in India are pushing
textile work to Bangladesh. Smelting factories in China are filling Australian mining companies
with cash.
3) Don't live in the crisis: sitting in my Times Square office at the heart of New York, the
traditional heart of the global financial sector, it is easy to believe that everyone has suffered as
much as we have. But the news is more spotty. While the U.S. and Europe have barely scraped
by, other countries are quietly coasting along. Nearly all of Asia, most of Africa, and several
countries in Latin America have grew their GDP in 2009 while North America and Europe
shrunk. Colombia, for example, has remained off the radar, but as companies are closing their
2010 financials, they are realizing something exciting is going on there. The markets are
growing; the country is safe. (See this heat map from the CIA estimate real GDP growth in
2009).
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4) The virtual organization has not yet arrived: the people I worked with were not strangers.
They knew each other. They sometimes interacted daily. And yet in many cases they had never
seen each other in person. Managing my session breaks was a challenge because participants
were hungry to put a face and handshake to the voice and emails they knew their colleagues
by. Though technology has made it far easier to collaborate across time zones, it remains still
far from replacing the power of interacting in person.
Whether you are an entrepreneur or executive I believe positioning yourself well for tomorrow
requires that you do four things today:
1) Become an Asia expert
2) Learn that region's complexities
3) Step out of a crisis mentality
4) Jump on flights rather than pick up phones
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Fri Nov 12, 2010
Three Tips for Building Something Great
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Earlier this month I interviewed Nick Friedman, co-founder of College Hunks Hauling Junk,
during my monthly webinar (visit http://www.kaihan.net/webinars.html for the recording if you
missed it).
Of the numerous insights he shared from his adventure turning junk into a multiple million
dollar franchise, what participants have most emailed me about were the "ten business
commandments" Nick and his business partner Omar penned in their book, The Effortless
Entrepreneur. Without giving them all away (buy the book to get them all), here are my
personal favorites:
Number one: Never sacrifice health, family or friendships for business reasons. Executives and
entrepreneurs I work with who seem to love their work the most have achieved a balance.
Because they make time for health, family and friends they are then able to bring more energy
to their work. They get more done in less time with more joy.
Number six: Work ON the business from the outside, not IN it. The samurai, before going to
battle, used to reach a mental state of detachment. They entered battle not attached to the
fight. Because they maintained perspective, they hesitated less. Ironically by caring less, they
were actually able to win more. The same is true with business.
Number seven: Develop staff, client, and community loyalty. Great leaders and businesses, at
least the ones that sustain, create "pull." They shape an environment in which masses of people
want them to succeed. This collective power of having colleagues and customers and the
community at large rooting for you creates a tangible competitive advantage. It is like playing
every game on your home field.
There are seven more as important as these. But even if you start here, I think you will see new
energy build behind you mission. Ask yourself:
1) What parts of your life (health, family, friends) are you putting on hold today to focus on
your job or business? How could you make time for those things now, this week?
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2) How can you achieve a Zen-like state of detached commitment regarding your work?
Consider what would really happen if you failed. Explore the worst case scenarios. You are likely
to find it not as scary as you feared.
3) How can you create "pull" for your career, your job, your business? How can you adjust what
you are doing or how you engage key stakeholders so they are passionate about supporting
your success?
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Thu Nov 18, 2010
What Cold Batteries Are You Holding Onto?
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
The Chief Innovation Officer of a large financial
services company was interviewing me for an article
when she poised an unexpected question: "What do
you learn from your children about innovation?"
After stalling with "umm," it hit me: warm batteries.
My son has taught me to look out for warm batteries.
That lesson, I believe, is the fundamental key to
unlocking breakthrough ideas.
You see, we keep our batteries in the freezer because
someone once told me that cold batteries last longer.
So when my son's electric train stops working, we
replace its batteries with cold ones. When the
flashlight is dead, cold batteries bring it back to life.
When our baby's rocker no longer rocks, you guessed
it, cold batteries.
My son has figured it out. If something doesn't work, check if it has batteries, and if the
batteries are warm, replace them with cold ones.
Now, we may giggle and call it cute. The things a 4-year-old believes! But the same is true for
the way the world works around us. Isn't the process by which my son "realizes" cold batteries
make the train run identical to the one we use to make sense of the world?
1. We have a problem (get my train to run)
2. We notice a correlation (replacing warm batteries with cold ones makes the train
run)
3. We believe a cause-effect law (cold makes batteries work)
The scientific process is simply this process formalized: state a problem, develop a hypothesis,
test the hypothesis until it becomes a theory or law. And just like my son reaching for cold
batteries, this process leads us to accept any number of false beliefs.
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Outthinkers, great innovators, are willing to test these beliefs and challenge what everyone else
has accepted. Nearly every breakthrough company begins with challenging a false belief.
Consider: IBM: challenged the belief that there would only be demand for a few computers in
the world
Dell: challenged the belief that PC buyers needed their hands held by a retailer Southwest
Airlines: challenged the belief that hubs and spokes were better than point-to-point networks
Apple: challenges the belief that the designer works for the technologist (rather than the other
way around)
How many times a day do YOU reach for cold batteries in your business? What have you
accepted as just the way things are? Pick one accepted belief a day that your company or
industry holds, and ask, "Is this really true?" I am willing to bet in a month you will have come
up with at least three industry-transforming ideas.
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Mon Nov 29, 2010
Great Leaders Provide Hope
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
A couple weeks ago in Bangladesh, while staring out at the frenetic street pace from my car
window, I saw a crowd slowly strolling behind a white-haired dreadlocked man. He may be, it
turns out, the Forrest Gump of South Asia.
You see, this old dreadlocked man marches every day. He never speaks so has never explained
his purpose. So people have simply made up the purpose themselves. They say he is a saint.
They believe following him will bring good luck. So every morning, once spotted, this man
collects a crowd of marchers who flock around him as he circles city blocks all day.
He could really be marching for any number of reasons. He could be simply crazy or perhaps is
searching for a coin he dropped many years ago. The facts do not point us to a clear answer so
the human desire for purpose steps in. He must have purpose, it tells us; he must know
something we do not know.
Within the story of this white-haired, dreadlocked man lies a lesson on leadership: leaders
create meaning not only by passionately evoking a vision--indeed they need not say anything at
all--but by filling a gap their people need to have filled. They provide hope where people cannot
find it.
Rather than trying to convince your people to follow you, why not pay attention to who in the
crowd is already doing so. Maybe you should stop pushing, stop trying to lead, and instead just
start walking. See who follows you.
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Thu Dec 2, 2010
Four Points for Outthinking the Competition
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
When the U.S. Air Force asked their best fighter pilot, John Boyd, to analyze how he trained
pilots to outmaneuver even better-armed enemies, he took the task seriously. He analyzed not
just his dog-fights, but many of history's greatest battles, seeking to understand what he and
other great generals did to win. After years of analysis and refinement, he came up with a
powerfully simple answer.
His theory is that all intelligent organizations and even organisms win by passing more
efficiently through four stages of interactions with their environments:




Observation: collecting data from multiple sources (e.g., the senses for organisms,
business systems for corporations, spies for the CIA)
Orientation: analyzing and synthesizing the data to form a mental model
Decision: deciding to take a specific set of actions based on your mental model
Action: physically making or executing your decisions
You have surely heard the debates about which step is most important. Many say great
companies win through execution (Action) while others say the key is strategy (Decision).
Amazon offers 1,000 books about strategy and 6,000 about execution and if you read these
you'd think you'd have covered your bases.
But John Boyd would likely agree with a newcomer on the block who says that if you cannot
observe and orient well, all of your execution or strategy crafting skill is useless. It is time that
large companies begin to consider a new concept, Unified Information Access (UIA), a vision
espoused by an interesting young technology company called Attivio. UIA, if realized, has the
potential to turn the slow, entangling web that most large companies have into nimble jet
planes of information.
Check my blog next week when I will share my interview with Sid Probstein, Attivio's CTO, to
learn more about this vision, how Attivio is trying to get us there, and whether we ever will
reach the promise land.
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Thu Dec 9, 2010
Innovative Ideas Are Hiding in Internal Data
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
When Okio Morita, Sony's founder, strolled through his labs and saw engineers working with
small speakers attached their heads to listen to music privately, he made a connection. In
another lab he remembered seeing a different group of engineers working on a portable tape
player. He observed and oriented-- put two pieces of information together--and came up with a
new idea: a portable, personal music player. The Walkman revolutionized the electronics
industry and created the concept of mobile music.
Great ideas often come from connecting things that have not been connected before. But as
companies grow bigger and divide themselves into businesses and divisions, maintaining the
cross-filtering of idea-sparking information becomes unwieldy.
Attivio and its Unified Information Access (UIA) seek to bring this cross-pollination and
coordination to an entire company electronically. It essentially takes the structured dashboards
and reports of business intelligence (BI) and mashes it together with Google-esque
unstructured results of search, to give you all the information that is relevant to you in one
place, regardless of where the information comes from.
For example, if your company serves Coca-Cola, and Coca-Cola makes a payment on an invoice,
then not only would the accounts receivable department know about the payment, but that
information would also find its way to the account representative responsible for managing the
Coca-Cola relationship. He gets this information because he set up a query for information
about anything having to do with Coca-Cola.
With UIA, all the information that is relevant to your decision finds its way to one screen, pulled
from multiples sources, across the company and the web. This seems a little bit like what
Microsoft's Bing search engine is trying to do--combine unstructured search results with
structured information tools, like Bing's flight search channel with a "price predictor" that helps
consumers decide when to buy.
It looks like Attivio has the right idea. It grew 300% last year and doubled its client base,
attracting some big new names, including Advance Micro Devices (AMD) who said they went
with Attivio because, "We needed a new approach to information access that extended beyond
traditional search capabilities."
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And many experts seem to think that Attivio is taking the first step of an exciting journey.
Earlier this year, the Economist published a report called "Data, Data Everywhere" about the
deluge of digital information. Attivio's UIA platform, the Active Intelligence Engine, provides
immediate access to that type of data.
McKinsey & Co. cites the same proliferation of digital data as one of the top 10 technology
enabled trends to watch, saying, "Data are flooding in at rates never seen before--doubling
every 18 months--as a result of greater access to customer data from public, proprietary, and
purchased sources, as well as new information gathered from Web communities and newly
deployed smart assets."
Attivio seems to be the current leader in the trend. But being the first on the field does not
always give you the upper hand. Will Attivio outpace its competitors?
It depends on who steps up. Clearly the incumbents will have to overcome the usual
attachments to the way things were. As Sid Probstein, Attivio CTO, said "We don't have a legacy
to drag around with us ... One of our big competitors put out a product to try to compete with
us, but it was just a repackaging of a legacy [BI] solution."
Sid says they can expect to see this "wolf in sheep's clothing" competition for a while to come
as competitors from Oracle to SAP try to blend in search capabilities into their enterprise
database offerings.
The threat may come from the other start-ups who, like Attivio, are free to start with a blank
slate. When Attivio started, Sid and his colleagues began with a fairly vague idea. "We knew we
wanted to do something in the enterprise search space," Sid said. But what they realized they
really loved was helping companies solve complex problems and sometimes search was not
enough. Sometimes you needed more structured information gathering. They mashed the two
concepts together and started something new. Like Okio Morita connected two divisions and
created the Walkman, what would happen if your employees were better informed? How many
"Walkman" ideas might you unlock then?
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Wed Dec 15, 2010
Michael Vick Lessons #1 and #2: Guard Your Story and Pick Your Plot
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Lesson #1: Guard Your Story
Why does a company's stock price rise when investors
learn Warren Buffett is buying? The company's innate
value does not change but because Buffett evokes a
narrative--he buys a company and it becomes more
valuable--investors' expectations change.
The same is true in business and personal relationships.
People don't know you; they know your story. You
need to be aware of what story they are telling.
A few years ago, Michael Vick's narrative was that of a
prodigy. Then it became about a dog-fighting convict.
Now the lines seem to be blurring, but the message is
clear. People will believe the narrative, so you need to
concern yourself with what people think about when they hear your name.
Lesson #2: Pick Your Plot
Over Thanksgiving dinner, listening to Philadelphia fans debate whether they supported
Michael Vick or not, I came to the conclusion that whether you are pro or con depends
ultimately on what plot you fit Vick into.
Pro-Vick fans usually see him as representing the story of redemption: the imperfect hero falls,
realizes his mistake, and redeems himself. The anti-Vick fans see his reacceptance as
representing the story of the bad guy getting away with it: the flawed villain is caught but is not
punished.
We grow up hearing stories and categorizing them. This schema informs us on how we are to
see the world. Therefore you want to link your career to the right plot.
A friend and client of mine has come to embody what I call the "renewal" narrative: he is
known as someone who can turn a mature business into a growing one. He did it for a brand
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and then the company asked him to it for a region. And now, at an extremely young age, he is
doing it for an entire business.
There exist several schemas of possible plots to consider. Ronald B. Tobias, for example, has
identified 20 "Master Plots" from which one can build almost any narrative one wishes. These
include the "quest," the "underdog," and "transformation." Click here for descriptions of these
plots and exercises to practice them. Click here to read Tobias' book.
The practice will pay off and should help you craft the narrative plot that will be linked to your
career.
Read more leadership lessons from Michael Vick
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Thu Dec 16, 2010
Michael Vick Lesson #3: Get Noticed
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
Yesterday I discussed two lessons learned from Michael
Vick, including the importance of crafting a positive
narrative plot for your career. However, even if you get
the narrative you desire, you will not build power
unless you are also noticed.
Like Michael Vick, golfer Tiger Woods found himself in a
situation of public disgrace. However, he has not yet
been able to generate the excitement and momentum
Vick has. Why is this? Woods is not winning and so
people are not talking about him.
Vick is now working harder and playing better football
than he ever did before. People are noticing, they are
discussing it, and the anti-Vick narrative seems to be
dissipating, ever so slightly. So how can you get noticed
in your business? Is there an idea that you’ve been privately toying with? What project (pick
just one) can you launch this year to get noticed by clients, senior executives or another
company?
Read more leadership lessons from Michael Vick
Mon Dec 13, 2010
A Torn Public: To Love or Loathe Michael Vick?
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
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128
Inmate 33765-183 is free. He is running down fields,
passing, playing better football than probably any
quarterback playing today. For those unacquainted
with Michael Vick, or American football in general, let
me introduce you. Your career may depend on it.
Michael Vick is a prodigy. Two years ago, then-28-yearold Vick belonged to an elite class of athletes,
professional quarterbacks, those dexterous enough to
play the most pivotal position on an American football
team. He did not stand out from his crowd. But he was
not really trying. He was the last to arrive at practice
and first to finish; he spent evenings partying while his
peers watched game tape; he lived on raw talent rather
than discipline and practice. Yet Vick played as well as
those who tried much harder. He was like that
annoying genius in your class who never studied but still knew every answer.
Then Vick was sentenced to 19 months in prison for raising, fighting, and killing dogs. Public
outrage followed and would not subside. Even two years after his conviction, after Vick served
his time and signed on to Philadelphia’s football team, mention of Vick spontaneously whipped
up anger and protests.
But today Vick is approaching a pivotal moment in his career. He has risen from Philadelphia’s
third-string quarterback to their star, he is at 30 years old breaking other quarterbacks’ life-time
records, and he may win the prestigious Most Valuable Player award this year.
The public has not yet fully gotten behind him. I was in Philadelphia over Thanksgiving and can
tell you that Philadelphia fans are torn. On one hand they are thrilled with the promise and
excitement he injected into their team. But on the other, they are not ready to support an
animal rights abuser. Over the next few days, I will dissect how Vick has reached this point and
what will happen next, while highlighting four career
lessons you should consider.
The context in which people observe you--the people
you sit next to, the rooms you occupy--has an
enormous impact on their perceptions of you. This is
why politicians are so particular about the symbolism
that surrounds them.
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When Michael Vick first started playing for the Eagles, he commuted from his Virginia home. He
hung out with the same people in the same places as before his conviction. His career started
turning around only after he moved to Philadelphia. Once in a new context, people's
perceptions and his behavior began to shift. Is your context--your office, where you eat lunch,
where you meet, where you sit--communicating what you want people to know about you?
Does your after-work behavior complement your business persona?
Over the last week I have used the story of Michael Vick to discussed four ways to help your
career. By working on these--guarding your story, picking your plot, getting noticed, and
controlling your backdrop--you can have a profound impact on how people perceive you and on
the trajectory of your career. These principles can explain why stars like Michael Vick, Tom
Cruise, Carly Fiorina, Michael Phelps, or Chris Brown fall and why some of them rise again.
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Fri Dec 17, 2010
Vick Lesson #4: Control Your Backdrop
BY FC Expert Blogger Kaihan Krippendorff
This blog is written by a member of our expert blogging community and expresses that expert's
views alone.
The context in which people observe you--the people
you sit next to, the rooms you occupy--has an
enormous impact on their perceptions of you. This is
why politicians are so particular about the symbolism
that surrounds them.
When Michael Vick first started playing for the Eagles,
he commuted from his Virginia home. He hung out with
the same people in the same places as before his
conviction. His career started turning around only after
he moved to Philadelphia. Once in a new context,
people's perceptions and his behavior began to shift. Is
your context--your office, where you eat lunch, where
you meet, where you sit--communicating what you
want people to know about you? Does your after-work
behavior complement your business persona?
Over the last week I have used the story of Michael Vick to discussed four ways to help your
career. By working on these--guarding your story, picking your plot, getting noticed, and
controlling your backdrop--you can have a profound impact on how people perceive you and on
the trajectory of your career. These principles can explain why stars like Michael Vick, Tom
Cruise, Carly Fiorina, Michael Phelps, or Chris Brown fall and why some of them rise again.
www.kaihan.net
131