August 16, 2010

60) Netflix (for the 3rd time)

危 wēi  danger

I love Netflix’s approach – I’ve written more blog posts about it than any other company (as you can see here).  Over the last few months a few people have pointed me to a version of the company’s strategy that is posted online as a short briefing to their job candidates – I took a look and was impressed with what I read but a little part of me wondered if it had been accidentally leaked into the public domain.  Surely making its strategy and beliefs public gave some sort of advantage to its competitors?

机 jī opportunity

To the contrary, the more I have thought about it the more I think it is another smart move from Netflix.  After all, it’s naïve to think in this technological age that a top-level company strategy can be kept a secret (I know that Apple is perhaps the counter-argument but even its broad strategy leaks into the public domain occasionally).  Broad strategies and ideas are easily copied – it’s the details in tactics, execution, capacity to learn fast and ability to change direction that differentiate the winners and losers.  With that in mind it makes complete sense to make top level strategy public if it reaps any rewards at all.

Those rewards might include:

  • Enabling the right potential employees to self-select themselves for recruitment
  • Ditto for partners
  • Clarity of goals and beliefs to the whole organization (after all, I’m amazed how many employees think that their company doesn’t actually have a clear goal)

Anyway, I’m confident that the company knows exactly what it’s doing because this is a version that was updated only 5 days ago:

How About…

  • Making your strategy entirely open (after all it’s likely to be common knowledge anyway)?

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May 17, 2010

52) McDonald’s

危 wēi  danger

Further to my post on Clover Food Labs last week a couple of my [few] readers have said to me that they love Ayr’s entrepreneurial approach but that it’s unrealistic for larger companies to perpetually prototype and iterate.  Their logic seems to be in line with that of the great Stanford Professor, James March who has argued that it’s incredibly difficult for organisations to simultaneously be explorative (searching for new opportunities) and exploitative (maximizing the payoff from existing opportunities).  With this in mind, shouldn’t large companies stick to building their ‘exploitative’ muscles – extracting value from their existing opportunities until that opportunity is exhausted and them move on to exploration again?

机 jī opportunity

I don’t think so, mainly because in fast-changing markets the exploration would come too late.  In his new book ‘The Design of Business’, Roger Martin makes an eloquent case for the discipline of ‘Design Thinking’ – an approach that we at IDEO use to tackle the challenges our clients present us with.  Rotman explains that design thinking “enables the organization to balance exploration and exploitation, invention of business and administration of business, and originality and mastery”. Perpetual prototyping is one tool used by the Design Thinker to enable simultaneous exploration and exploitation.  It strikes me that McDonalds is an example of a company that manages it – it prototypes relentlessly and it’s certainly big – according to Fast Food Nation, nearly one in eight workers in the U.S. have at some time been employed by McDonald’s.  It prototypes in store but also through the team of Dan Coudreaut, Director of Culinary Innovation. Ideas can come from those in his test kitchen or from franchisees or suppliers, and are prototyped initially in the full size store and kitchen at the head office.  This broad source of inspiration followed by prototyping enables them to trial around 1800 new products per year of which only a handful make it into the stores – but when they do they’re nearly always successful.  It also reduces the risk associated with launching new products by revealing the broader impact, for example Coudreaut tried a product called the McDouble Cruncher which was like a cheeseburger with barbecue sauce and onions. Although it was hugely popular when trialed the team observed that consumers stopped buying quarter-pounders (a core menu item) – not a good thing for margins so it was dropped.

How About…

  • Aiming to be simultaneously in explorative or exploitative phases?
  • Prototyping whatever your company size, increasing the number of ideas that you  can test and reducing the risk of failure?

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May 11, 2010

51) Clover Food Lab

危 wēi  danger

Starting any business is scary.  Starting any restaurant business is very scary.  It’s expensive to set up, there’s legislative hoops to jump through, location and menu are critical (and it’s tough to do market research before making the leap) and quality standards have to be maintained.  Finally, consumers are fickle so even if it’s initially successful you can’t rest on your laurels.  Surely you can only start by jumping in head first at the deep end?

机 jī opportunity

To the contrary, my colleagues Ryan and Colin (thanks guys) told me about Boston-based Clover Food Labs, a startup that has cunningly overcome these challenges.  Instead of committing to a site and launching a concept blind Ayr Muir has taken a more creative approach.  He decided to keep location flexible and costs low by opening a food van.  Muir tries different locations and menus with the goal of homing in on the right restaurant format.  Everything that Clover Food Labs does is in Beta (hence Labs) – it has taken some clever design to be so flexible.  For example, the truck itself is a giant whiteboard enabling Muir to edit menus instantly (see the image below).  In addition, Clover is completely open with the public – publicizing the bad stuff (see Muir’s Great Sandwich Disaster post here) in addition to the good stuff.  The open experiment approach seems to be working, I read that the van sells out often and mistakes seem to be less frequent – maybe Muir’s homing in on his restaurant format – it will be interesting to see if he can give up on the flexibility his van yields…

How About…

  • Starting small to learn? And staying in Beta forever?
  • Questioning every sacred cow?
  • Being totally transparent (even the bad stuff) to shorten the feedback loop and create a real dialogue with your consumers?

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here’s a photo Colin took of the stall itself – with menu in progress…

March 15, 2010

44) Zara

危 wēi  danger

The $300-billion fashion industry has always struck me as a tough industry to disrupt – after all it’s dominated by global fashion houses that have enjoyed a near monopoly on trend-setting – trends that they drive through expensive fashion shows and enormous marketing campaigns.  The industry is highly seasonal (conveniently improving the fashion houses’ product turnover) and consumers have grown to accept that they have to wait 6 months or so to buy the clothes that they see on the catwalk (the time it takes the incumbents to organize manufacturing through third parties).

机 jī opportunity

Zara’s contrarian approach has turned this model on its head – instead of investing in setting trends (for many years it had a zero advertising policy) it is almost entirely reactive and focuses on keeping its costs low.  Its whole model is geared around speed to market and low cost experimentation – for example unlike other large fashion houses, Zara owns all of its designing, manufacturing and retailing operations – enabling it to retail product that it designed less than 2 weeks earlier. It relies on its frontline employees to feedback on emerging trends, and use PDAs to feedback instantly on the success of its new lines (which are initially made only in medium size to limit investment).  Stock is made to order and can be replenished within 36 hours in any store in the EU.  Zara’s pioneering approach, often described as ‘fast fashion’, has helped it overtake GAP to become the largest fashion retailer in the world – in part driven by the fact that its rapid stock turnover leads its patrons to visit its stores 17 times a year versus the industry standard of 4 visits.  Zara rightly is changing the industry and scaring the traditional firms - Louis Vuitton fashion director Daniel Piette described Zara as “possibly the most innovative and devastating retailer in the world”…

How About…

  • Harnessing your front-line staff to feedback consumer responses and set strategy?
  • Question the status-quo in industries that are structured in a way that detract from the consumer experience?

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March 2, 2010

41) Vodafone

危 wēi  danger

Fixed line and mobile telephone providers have been on a collision course for years, after all to consumers the way ‘communication’ is fulfilled is unimportant – differentiation has principally been around service experience and price.  The convergence has been particularly interesting in large businesses, where mobile phones have become the medium of choice for many executives even when sat at their desk, representing a valuable revenue stream for mobile telco’s such as Vodafone.  However, these revenues fell away quickly when new technologies emerged to route mobile calls made within offices through the local IP network, drastically reducing call costs.

机 jī opportunity

To arrest this loss of revenues Vodafone went back to basics and benchmarked its customer value proposition agaist its competitors.  It realised through customer research that the Achilles heel of these new technologies was the need to set up multiple accounts with service providers and the hugely complex bills that resulted. Vodafone responded by entering into partnerships with fixed-line operators (including BT in the UK) and service providers (including Central Telecom) to manage technology interfaces and provide a single solution to the customer.  Through these partnerships it was able to provide customers with a single bill and a single number per user – thereby gaining revenue from all aspects of the call routing (both fixed line and mobile) and recapturing the lost revenue of calls made on mobiles within offices.

How About…

  • Researching your customers’ experiences of your product/service and that of your broad competitive set?
  • Partnering with players from adjacent industries (who otherwise might be competitors) to offer single, simple solutions and derail disruptors?

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(co-authored with Matt Lill, London-based strategy consultant and serial enthusiast – thanks Matt)

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