Farrell: This is A Penny For Your Thoughts. I’m Farrell Styers.
Innovation has always been one of the big engines for business growth, and for getting ahead of one’s competitors. Companies that do it first or do it well tend to do well. For at least the last 10 years, innovation has become so hyped that companies that are using unproven business models and have never even turned a profit can be valued at millions or even billions of dollars, IF they’re seen as disruptive innovators. These companies often began as scrappy young upstarts that, despite their size, completely upend the business models of traditional operators in whatever space they’re working in. But their new way of working is so innovative that investors and consumers see huge value. The most famous of these are the tech unicorns, like Uber and Airbnb. But these stories go far beyond tech. They include food, cosmetics, travel and pretty much any other industry you can name. Now, if you’re working at a big traditional firm, you might look at these companies and wonder how they’ve managed such a feat. Or you may be jealous of their ability to move so quickly, take such big risks and think in such novel ways. This is innovation envy. How can a big, slow-moving traditional player be more like these smaller disruptive innovators? We’re talking to a few people today who have some ideas on how to do this. First, we’ll talk to the man who literally wrote the book on innovation envy.
Filip: I’m Filip, I’m a Managing Partner at InSites Consulting, and the co-author of Innovation Envy, which I guess is what we are here for.
Farrell: That is what we’re here for. And to get us started, let’s look at an innovator who isn’t one of these tech unicorns, but is a great example of someone who came into a big industry dominated by massive global players and managed to thoroughly disrupt it.
[Mike: Hi, I’m Mike, founder of dollarshaveclub.com. What is dollarshaveclub.com? Well, for a dollar a month, we send high-quality razors right to your door.]
Farrell: Dollar Shave Club started with a random conversation back in 2012 between two friends, Michael Dubin and Mark Levine. They discussed how terrible shopping for razors was. Not only were they expensive, considering you were only buying a tiny metal blade attached to a plastic handle. But the entire experience was frustrating, even embarrassing. First you had to get to the store and find the grooming section. But once you got there, there was a bewildering array of razors with different features, different numbers of blades, different colors and brands. And once you’d gone through the exhaustive mental exercise of choosing, you had to find a store clerk, because often the items were kept under lock and key. The conversation planted the seed for a new business idea: a subscription service for inexpensive, high-quality razors delivered to your home. In a short time, Michael Dubin had quit his job to launch the company. And to get things started, he starred in a now famous slapstick video introducing the concept.
[Mike: Yeah, a dollar! Are the blades any good? No, our blades are f***ing great!]
Farrell: Hours after launching the video, the company had 12,000 orders and it only grew from there. Their rise was stratospheric. Dollar Shave Club eventually claimed 16% of the market. And recall, this in a sector dominated by massive global players. Now back to Filip. He co-wrote the Innovation Envy book (or bookzine, as he calls it) that this episode is based on. And he and his co-author wrote the book because they could see an audience for it.
Filip: The audience is definitely people in, I would say, consumer insights, marketing and innovation. Because in a way, in the story, we tap into the three angles or the three dimensions. But of course, it’s about innovation, but we know that it’s more than just R&D and technical innovation. There is also a lot of consumer insight that comes into it. There is a lot of go-to-market and marketing that goes into it. So it’s a more holistic approach on innovation. Who is it for specifically within that audience? It’s those companies, which we call the incumbents, larger organizations that we see have a hard time getting to market fast; or they see a high failure of whatever they launch in terms of new products. And then they look at these successful disruptor-start-up-like smaller companies, that are very agile, fast, effective, and are actually eating away market share. So, it’s meant for those companies that have the ability to scale, so they have a larger organization, have well-established brands, but have a hard time bringing new relevant innovation into the market.
Farrell: There are a few ways that the big incumbents get closer to the disruptors chipping away at their market share. First, they can just buy them. In fact, in 2016, Unilever bought Dollar Shave Club for over a billion dollars. Another way they can try to get some of their mojo is to steal. Well, not actually steal, but some big companies just look at what’s succeeding for the small disruptors, and try to do something similar. AB InBev not only buys successful craft breweries, but they’ve also created brands and products that copy the style and branding of the movement. But at its core, Innovation Envy is a framework to help companies be more like these smaller brands.
Filip: If you look at those successful stories of disruptors, for us there are three elements. One is Friction, and then we see over and over again: with those disruptors, often, their innovation starts from a personal friction or attention that they experience in day-to-day life.
Farrell: Think here about Michael Dubin and Dollar Shave Club. He had a personal friction – the misery of the shopping experience for razors – and he built a new way to solve it.
Filip: The second one is Passion, and that is something again – just to take the example of Michael Dubin again – he realized as well: it’s not something I can do as a hobby, starting up this business is something I need to own, I need to be accountable for everything, every step in the process. So, for us the passion bit is also something that we feel the incumbents might be lacking to a certain extent. Meaning also for them: they work on that one solution, there is that one solution for that friction that they have, and they will not give up, it’s the one thing they will be working on. If you look at large incumbent organizations, they have a funnel, they want a funnel, they want to have a funnel with lots of concepts and ideas in there, and then they treat those concepts more as… I would say not so much as assets and maybe too much as one of those things that we have in the funnel. Maybe not as passionate as they should be.
And the third one is then piloting, or Pilot, which we initially actually wanted to call gut, because that’s what it is about. It’s about going to the market and start selling and marketing your innovation, maybe when it’s not 100% ready, but maybe when it’s 90-95% ready, go in there, another word you could use is beta-testing. An example I also refer to in the bookzine is Goddess Garden; Nova Covington is the founder of the company. Again, personal friction, her daughter was super allergic to any skincare product out there in the market. So, she developed her own skincare line. She started selling her first almost prototypes at a farmers’ market in Boulder, Colorado. So, again there, it’s about going into the market. It is by the way a practice we see more and more already within incumbents. So, some of our clients already realized that these big nation-wide launches of a fully validated concept is not the way forward. So, we see what they call or we call scale-up initiatives. You start something on a smaller scale, can be with one retailer, one bar, whatever, a few stores, and then you just see whether it’s a success. Why not, then how can we optimize? And you give it time to scale up. And then ultimately, those incumbents might end up with a nation-wide launch. So, those are the three components of the framework that we feel to one extent or the other, a lot of the incumbents envy.
Farrell: So we have Friction: what is the need or problem you’re trying to resolve? Passion: are there dedicated and creative people willing to keep the spark alive? And Pilot: can we take the risk of going to market without a fully refined product and learn from that launch, even if it’s imperfect?
Now this Friction – Passion – Pilot framework makes sense and it seems to fit what we see in reality. But what is the connection to research? After all, this was dreamed up by a few market researchers, so they must have had a view on how research fits into all of this. We started with Friction, and asked Filip how relevant it was to someone working in a market-research function.
Filip: Very. I would say everything about it is relevant for the industry, because from a disruptor standpoint, the friction is something they live by. They do not need to identify it, it’s something that they live by. In larger organizations, we need a function within the organization that brings that friction in. So they need to go out, identify, validate and bring that friction in. So, of all the DNA elements, this is where I think there is the highest fit with consumer insights or the research function. Because it is about going out there, immersing with consumers in relation to the category, and really observing habits, talking to them about frictions and tensions, ultimately trying to identify consumer insights, which are the unit, the currency of innovation, because they can offer a platform to then start building solutions.
Farrell: At these smaller start-ups, Filip says, they don’t need to rely on market research because they live the friction. The incumbents need to generate that, by generating insights through consumer research.
Filip: This is probably at the intersection of Friction and Passion, where you say: I have this one, and I’m going for it, all in for that one single tension or friction that I have. It is almost a luxury to only have one. Of course, if you are a large organization, you need to have more than one. You cannot have your whole organization or your whole innovation department work on solving just one issue. Maybe yes – I’m actually not even sure if this is the case – there is a lot of qualities and benefits also for being a large incumbent; you have R&D departments, you probably have the best in the world to develop new formulas or whatever. So, I think it is definitely a strength of those incumbents that they need to tap into.
Farrell: As a big incumbent, you are not your target market. Researchers need to find and validate frictions faced by consumers. So, there’s a clear need for research in the Friction part of the innovation model. Let’s look at Passion.
Filip: This concept of ownership, of accountability, this owning the funnel or putting someone to lead the innovation from insight to go-to-market, that is something that is lacking when you look at incumbent organizations it’s more like a relay race: we identify an insight, we hand it over to R&D, then it goes to marketing, they hire an ad agency, and by the way that it actually goes to market, there is a big gap often between what the initial intent was of the concept and the solution, and the final execution. By handing it over, you lose a little bit this ownership, and this ‘this is my passion project and I’m going to be available for every decision that needs to be made.’ So, I think this is one element which a lot of incumbents again envy.
The second one is the illusion of creativity within the organization. Thinking again of Nova Covington and Goddess Garden, what you see there is: she was the expert in identifying the tension, because she was living with her daughter that was allergic to most, if not all of the skincare products available in the market. But then she had to rely on others to actually build her solution. Her husband was a nutritional scientist. In a way, that was a type of crowdsourcing: you actually hire an external expert to do the concept development or to develop creative solutions.
Farrell: And this is where we meet our second guest, François Pétavy.
François: So my name is François Pétavy, I am CEO of eÿeka, and I come from different worlds that connect with what eÿeka does, because in my past, I’ve been working in the film production industry. I’ve also been working on digital marketing, agency world, and also in Market Places with eBay, the online platform. As you’ll see, eÿeka connects those dots pretty nicely, because it is in some way a marketplace for ideas and creativity for brands.
Farrell: A small note here. Since recording this, Francois has left eÿeka. But he spent years leading the company and has a great deal of insight on creative crowdsourcing. To understand how this fits with our Innovation Envy model, we need to understand how creative crowdsourcing works.
François: So, eÿeka is a way for brands and agencies to find freshness in creativity, find new ways of building brands and bring novelty in the way they innovate, build consumer experiences. And the way we create that freshness, the way we bring unexpected ideas is through a community of 400,000 creative people who are registered on our platform, so the core of what we do is based on our online platform, where this community gathers. What we do typically is, we take challenges from brands, could be innovation, consumer experience, creative developments, and we take those challenges and bring them to our community in the form of online competitions which last a few days, typically, or a few weeks. And the community delivers ideas against that competition to win prize money.
Farrell: A brand that’s in this Passion part of the innovation story needs to take an insight that embraces a consumer friction, and turn that into an idea and then a concept. Where incumbents often hit a roadblock is that they try to do this internally, and those company insiders may not have the newest and freshest ideas. Start-ups don’t have this problem, because they have no history. eÿeka uses creative crowdsourcing to allow a company to put together a challenge and then have thousands of proven creatives compete to come up with the best solution to that challenge, harnessing their creative passion.
François: What our clients tell us is that very often, because they just try to ideate internally, they always get the same types of ideas, because they are so much into the category that they don’t see things from outside. So, experience proves that this process, those ideas usually bring the power to disrupt the status quo, these ideas are really out of the box, and actually we can throw the box away in some way. And when those concepts are properly transformed, for example for workshops, what we see is that they deliver better, for example in screenings and in markets, they deliver better in range of something like 20 to 40%, especially on attributes such as uniqueness. Because those people are not constraint by the way things are getting done, or what the conventions are in a category, for example. And also, in terms of relevance; these ideas are actually very relevant to consumers, because also they are coming from the horse’s mouth, people who are actually close to consumers.
Farrell: That’s all well and good, to hear how helpful creative crowdsourcing is, from someone who sells creative crowdsourcing for a living. But what if you’re the one buying it? We also spoke to someone who had the experience of integrating creative crowdsourcing into a larger product-innovation program.
Mathilde: I’m Mathilde, I’m responsible for consumer and marketing insights within Reckitt Benckiser (note: now Reckitt).
Farrell: That is Mathilde Levy of Reckitt Benckiser, usually shortened as RB. You may not know RB by name, but you likely know many of their brands, like Air Wick, Durex, Lysol, Vanish and dozens of others. Mathilde is responsible for market insights, so she oversees all research there. And the case we wanted to speak to her about was Cillit Bang, a line of household cleaning products. They wanted to innovate with Cillit Bang, but they faced a challenge.
Mathilde: The challenge with the brand is that it is seen as a very tough brand, these are really tough cleaners, so you use Cillit Bang when you have a place that is very dirty and you want a strong product to clean your surfaces. So that’s the core positioning of Cillit Bang. So roughly in the range we had maybe 3 to 4 different products, so it was quite a small range of products. So, it’s not always easy to innovate on this brand, because due to this really strong equity, strong positioning etc., that can be seen a bit niche also, and a bit polarizing for the consumer.
Farrell: They had a strong brand, but they were also facing a decline in what she described as “business performance” for the brand. They needed something new to reinvigorate the business. They conceived of a research program where they would immerse with consumers, and then immerse their team in that consumer reality and create new ideas for the future.
Mathilde: Listening to the non-users was also really important to really understand the drivers and the barriers of the brand. We also did a brainstorming piece with the consumers, so through role-plays etc. they could give their suggestions in terms of new product ideas or brand stretching, or all that kind of stuff. There was really an immersion phase, so that also the team could really feel the insights or really understand them.
Farrell: She explained that all of this went well, except that the consumers and her team struggled to come up with useful new ideas. The research generated plenty of insights about the needs people still faced, but not innovative ways to address them.
Mathilde: It’s very hard for people working on the brand 24 hours a day to come with new ideas also. So, in fact we had some nice ideas, but I would say it was not super creative.
Farrell: Mathilde explained that this wasn’t a route they had anticipated using beforehand, but it became the most practical option.
Mathilde: As I see it, you can’t do creative crowdsourcing without deeply understanding your consumer first. So, as I see it, you couldn’t skip the online community. You really have to do first the online community to understand the consumer, to let the organization or the company feel and experience the insights, so that’s also a question of communicating all the findings. And then you go to creative crowdsourcing. So, it was really richer than what we obtained from internal brainstorming or in brainstorming with consumers, because these people are really creative. They were recruited for this skill, and you could really see the difference. And what is great, also, is not to only have the perspective of the French people, but maybe also of the Brazilians, or wherever they are, because sometimes in their market there already is some stuff that is interesting, and that can also enrich your community. So, the diversity of nationalities for me is an asset.
Farrell: And that is how RB fit the Passion part of our project. They overcame their narrow vision of the market, by using a pool of creatives to help them think outside the box. But they built it all on the frictions of their customers. And they did this without the 2 to 3 years that she said it would normally take. RB developed a new wipe based on the research that hit the market in a fraction of the time. This brings us to the third and final portion of our model – Pilot. Many companies use a stage gate or a traffic-light system where for each step closer to releasing the product to the market, there needs to be key metrics attained and full buy-in from all internal stakeholders, otherwise the project is stopped. Now, going back to Filip, he says incumbents should reconsider their strategy.
Filip: I think the idea is… remember the traffic lights, where let’s say in traditional stage-gate types of organizations you need the green light, on everything, on all your decisions, on all your marketing mix elements, you need a green light. And then we go full force and we have a media plan and we invest and we go with it. There are two things about that. One is: once you have all that information based on concept test and all the metrics and whatever that you did to build confidence that you are doing the right thing by launching it and by putting all those millions behind it, there is this feeling of ‘yes, we made it, we launched a product, success, guys, well done’. And then I say: ‘well, you haven’t proven anything!’ And the second one is: why don’t you then, with that concept in mind, why don’t you launch a little bit faster? A little bit earlier? Maybe when you have an orange light, where you’re not 100% sure but maybe 90% sure? And then we come into this MVP space. And where you say: ‘let’s agree to do it. We’re not going to do a full nation-wide launch, let’s start small and beautiful and then do this scale-up’. And that is what we consider a Pilot: going to the market, but also from day 1 make sure that you measure in-market success, that you know what is going on, and not only based on sales. First of all, if you look at some of the sales data, it comes way too late, and it’s definitely incomplete. And then we need to speed up the process and say, ‘what is going on?’ Because there are so many hypotheses: it could be the product, it could be that people buy the product but use it in an occasion that it was not intended for, it can be that it’s in the wrong shelf or aisle, it can be that people have misunderstood the communication or haven’t picked up on the communication, there is a lot of confusion about what the product actually is based on the campaign that was launched. So, there are so many assumptions. And you should actually make sure you have that 360° on the performance of your in-market initiative at all times. So that is the true Pilot mentality – to not only do it, to pilot, but also to make sure that you have a feedback system in place, which is often a mix of quant, really hardcore data, and also more qualitative feedback from consumers. But whenever something is wrong, you should iterate, you should be able to iterate. If you go into a pilot, it has always to be with ‘how are we going to optimize’, and ‘are we prepared for failure’. Because that is also something that I hear a lot: ‘yeah, but our company doesn’t really have a culture of failure’, and then I say, ‘you will fail anyway’; 50% fails, just embrace it and learn from it, at least.
Farrell: Filip gave an example from Pepsi, who used this pilot approach to innovation.
Filip: They already had an existing proposition, called Drinkfinity. It existed in Brazil, was pretty successful. And then they wanted to prepare it for launch in the US. US obviously always the big market, the big bet. But they decided not to do it in a traditional launch, because they said, ‘we already have a concept that is working, it is working in a market, we just need to fine-tune the go-to-market, and we need certain aspects of the product’. So, how we went in: they decided on a pilot market, which was in this case 3,000 employees, within the target group, health- and wellness-minded consumers within a certain demographic. And we actually sent those 3,000 people surveys, and then we sent them a welcome kit. So, they were part of a market, because they got the product, they got to taste the product, to use the product, and then they also had to reorder. Because the system is a vessel that you fill with water, and then you have pods, which are a mix of dry and liquid ingredients. You place a pod on top of the bottle, you push it through, you shake it and you have flavored nutritious water. That is the concept. So, we also wanted to see how our consumers were using this, when are they using it, are there any issues with the manipulation of the product, what about sustainability of those pods – all those questions were addressed. And also, they had to reorder and pay for those pods. So, a very realistic pilot market. And this was a great initiative in terms of creating a pilot market that is really low risk. But what they used it for, is, in the course of probably 6 to 8 months, they did 10 studies. They really decided on pricing, they went into what the future varieties funnel was, or what the UX of the e-commerce model was. So, they actually informed and tested the whole go-to-market or launch campaign, messaging; all of that was measured, tested, and also optimized for a full launch with consumers, which is happening now, so it’s now relaunched. It did go to market, and we are now actually replicating the same with consumers.
Farrell: So, with the Pilot phase, the Innovation Envy approach is to get your product out in front of your customers quickly, even if it’s just a small number of them. And then learn from them. Measure and adjust as you go. And crucially, be willing to fail; just make sure you learn from your failures.
And that is Innovation Envy. If you found any of this interesting, I encourage you to go check out the full Innovation Envy bookzine. We’ve only covered a small portion of the story in today’s show, and the ‘zine details several more case studies and digs deeper into the how and the why of the Innovation Envy model. It’s a quick, easy and visually entertaining read. You can find it at insites-consulting.com/bookzines/innovation-envy, or at the link in the show notes for this episode.
Today’s episode was produced by Felix Rumpf and me, Farrell Styers. I also did the mixing and tech production. In addition to co-authoring the Innovation Envy zine, Katia Pallini edited this show. Thanks to Filip, François, Mathilde and everyone else who participated and helped with making the episode.
If you want to find out more about InSites Consulting and our work, just go to insites-consulting.com/podcasts, or subscribe to our podcast on Soundcloud or Spotify.