Two weeks ago, Clayton M. Christensen lost his battle with cancer, passing away at the age of 67. Professor Christensen’s book, The Innovator’s Dilemma, is arguably one of the most important business books ever written. He was a Harvard Business School (HBS) professor whose revolutionary theory on disruptive innovation has impacted billions through its application by entrepreneurs and business executives. Unless you went to HBS or are somehow involved in the innovation eco-system, you may never have heard of him.
One of the cornerstones of Prof. Christensen’s theory was that the things that make well-managed companies successful are the same things that eventually lead to their downfall. When The Innovator’s Dilemma was published in 1997, this was radical thinking.
Today, we almost take for granted that innovation is the key to sustaining and growing your competitive position in the marketplace. The issue, Christensen argued, was that businesses, having become so skilled at selling whatever widget or service they were offering, focused on shorter-term metrics, neglected to take big risks, invest in longer-term ideas, or react to potentially disruptive new technology or business models.
Christensen focused on the X factor of innovation – humans.
The Innovation X Factor
We often talk about organizations or even industries as monoliths doing this or doing that. It’s easy to forget that people are making decisions and experiencing the consequences of those decisions. It’s also easy to forget that even when we talk about business-to-business transactions, human beings are making the decisions, whether to use, buy, recommend, review, refer, or ignore.
Since human beings are making the decisions, we must focus on understanding their motivations if we hope to serve them. I use the term “serve” intentionally. By serve, I do not mean customer service as it is traditionally used.
Customer service is such a small part of the customer’s experience.
By serve, I mean the value that you are uniquely qualified to provide to your customer (this includes internal customers in your organization)?
What benefit do you offer your customer? How do you provide that benefit?
Understand What Motivates Your Customer
Even though I worked in business as a corporate attorney, I had no business experience when I started my entrepreneurial journey. I thought that I did.
I did not know what I did not know.
When I was an undergraduate, I had studied Joseph Schumpeter and his theory of “creative disruption” which is the academic antecedent to Christensen’s work, whereby capitalism inherently destroys old industries and economic systems in the process of innovating new ones.
But, that’s pretty much it. Like many of you, I had no occasion to think about creating value or innovating for my customers.
Why is any of this important?
When Christensen wrote his book in the mid-1990s, technology was mostly purchased by businesses, not consumers. Today, that’s no longer the case. Even my mother who lives in “the country” has an iPad. (For those who don’t know, in the South, “the country” refers to that metaphorical last mile where there is still no cell service.)
The adoption of technology has changed the motivating factors for consumers far beyond the basics of price, accessibility, and performance.
It has also created exponentially more ways to understand customers' motivations. Shotgun advertising (mass marketing) and mass production are relics.
Organizations must adapt to the accelerating adoption of technology by consumers and the impact that it’s having on their behavior.
Consider this example from retail.
Kidpik is a fashion retailer for girls that uses digital to deliver clothing of exceptional style and accessibility (i.e., affordability). Launched in 2016, there are no stores. Mix and match outfits based on styles pre-selected by girls are delivered monthly, quarterly, or annually, whatever is chosen, on a subscription-based model. Girls keep only what they like. They may return everything else. Big discount, if they keep it all. Girls are thrilled to unbox their outfits when their box arrives.
A very different experience than a trip to the mall battling traffic, searching for styles and sizes, and dealing with nonsense.
Use What You Know…
As I mentioned in my last email, most organizations start their digital transformation journey by focusing on digital marketing as an “add on”. They do not address digital strategy.
For example, a retailer with stores launches a website where the same outfits found in the store are sold. Emails with discounts are sent incessantly and millions are spent on Facebook ads to little or no effect. In a business with tight margins, that’s a recipe for bankruptcy. Hence, the retail apocalypse.
But consider that traditional retailer business model versus the kidpik business model. Kidpik’s model creates an experience for the end-user (the daughter) and the economic decision-maker (the mom) that’s hard to beat.
But just as important is the way that the value is delivered – the value network, the people, partners, assets, and processes that enable the business to create, deliver, and earn value from the value proposition are fundamentally different.
This is what is meant by business model. Both business models use digital marketing. Digital marketing is not a secret sauce. In fact, it turns out that it’s a poison pill without a digital strategy. Ezra Dabah is the founder of kidpik. He has been an entrepreneur in the children’s apparel industry working with his creative team of 30 years.
How have Ezra and his team succeeded in transforming where others have failed?
The answer is mindset and mission.
Retail still requires design, merchandising, sourcing, manufacturing, and marketing. Without this expertise, all the technology in the world won’t help.
But Ezra and his team did not get stuck in the competency trap of attempting to work in the same way they had worked in the past.
They had a willingness to grow, to learn, and to take a risk.
Most important, they recognized that their formula for retail success based on their deep understanding of their customer and their passion just needed a new formula for business success (a new business model).
Full disclosure. I have known Ezra Dabah and many of the people on his team for over 15 years. So, I want to touch on an important factor, which I know has helped them succeed.
Their mission is their passion.
“At the heart of every kidpik subscription box is our mission to make fashion accessible to all girls and give back to girls in need."
The mission permeates the brand. It captures the heart of the customer (both the end-user and the economic decision-maker) and it motivates the employees. This combination is critical to success in digital. Slinging products, digitally or otherwise, just doesn’t work.
I’m thankful to those of you who have provided feedback. I welcome more.
My passion is to encourage you, my audience, to take advantage of the opportunities presented by digital. Use what you know and grow.
By overcoming your fears and making the necessary changes, you can thrive.
I know it.