Innovation by popular opinion – evolutionary or revolutionary?

What do Best Buy, Starbucks and Barack Obama all have in common? They’ve all launched sites designed to solicit customer ideas for their business and policies. (At least Obama used to have this capability on the transition site Change.gov. I can’t seem to find the ability on WhiteHouse.gov.) MyStarbucksIdea.com has been around for over a year, and Best Buy’s Idea X just launched. Given my recent post on how defending the status quo kills companies, I wondered if this sort of solution would help companies find that next great revolutionary idea to transform the company.

I really like this idea as a way to generate some fresh new ideas that come from the people being served by a business. And there are some very good ideas on the new Best Buy site; ideas that range from improvements to their Reward Zone program to ways for customers to register for help in busier stores. I love that customers have this ability to submit their ideas, and I love that Best Buy and Starbucks are using open brand techniques and letting all ideas be shown publicly, even when they aren’t always complimentary.

But, man, what a task to review all of those ideas! As a way of helping to sift through the ideas, each of these sites has a voting mechanism ostensibly designed to move the best ideas to the top.Or at least the most popular ideas.

So, will this concept help companies find that next great revolutionary idea for their businesses? 

I’m not so sure. My experience is that popular voting is a pretty good way to find evolutionary ideas, but it doesn’t work as well for revolutionary ideas. This is because most people tend to gravitate towards incremental improvements to concepts already familiar to them and have trouble visualizing radically new concepts.

To be clear, I’m not in any way knocking these systems or the idea of the popular vote. I love that Best Buy and Starbucks are reaching out to their customers and trying to find ways to improve their businesses by better meeting their customers’ needs and expectations, and my guess is they’re not looking for revolutionary ideas via this mechanism. (Although, given both company’s solid histories of revolutionary innovations, if they come across a revolutionary idea I’m sure they’ll act upon it quickly.)

So, how then do companies find revolutionary ideas?

It seems we often rely on executive brainstorming sessions. Those sessions almost always use the same technique (i.e. generate lots of ideas and vote on your favorites) and I find those techniques are exactly the reason they usually fail to produce transformational ideas. Usually, there aren’t a lot of guidelines issued prior to the session — by design — and the problems to be solved are usually not well-defined and agreed upon. As a result, the most out-of-the-box ideas tend to lack votes and end up in the trash heap.

I recently read a Harvard Business Review article that promoted a different approach. Instead of coming up with random ideas on the fly, the approach is to spend time garnering support with individuals from a variety of functional areas prior to submission of the idea. Feedback is incorporated and the idea is able to develop more fully. Only once it’s gone through some development is an idea submitted for review by executive decision makers.

How different would these strategy brainstorming sessions be if the ideas had some development before they were suggested? Of course, radical ideas that cause transformational change will still meet resistance from all who benefit from the status quo, particularly when those revolutionary ideas are, almost by their nature, not likely to produce immediate financial results. This is the primary issue address by Clayton M. Christensen in his excellent book, The Innovator’s Dilemma. Christensen advocates creating entirely separate groups or even funding new start-up companies as a way to incubate these new strategies while they develop. This incubation approach is much the way many e-commerce organizations got their start, and I think it worked in many ways. Of course, now the new dilemma is how to bring it all back together with the parent companies. (Sigh) Nothing’s easy.

I hope more companies will follow Best Buy’s and Starbucks’ leads in opening their brands to customer ideas and public feedback. I look forward to the many great ideas I’m sure will come from it. I hope also that we can all find some techniques to deliver some really great revolutionary ideas to keep our companies vibrant and relevant for a long time to come.

What do you think? Do you have any great brainstorming techniques to share? Have you seen new ideas come to life in your company?

Defending the status quo kills companies

“Defending the status quo is what kills companies.” That line comes from the excellent book More Than a Motorcycle: The Leadership Journey at Harley-Davidson written by former Harley CEO  Rich Teerlink and his organizational consultant partner Lee Ozley. The book chronicles Teerlink’s and Ozley’s process to change the culture at Harley-Davidson to ensure the company was ready for the challenges to come. What I found most remarkable, though, was that they didn’t initiate this massive change when the company was troubled — they initiated massive change when the company had just completed a successful financial turnaround and the press was actively singing their praises.

They changed when conventional wisdom would have said to keep doing what they were doing.

Bankruptcy courts are littered with companies who kept doing what they were doing and failed to adapt to changing marketplaces and changing customer needs and expectations.

I spent 20 years in the music industry with Tower Records, so I’ve see one of the best examples in recent years of an entire industry that desperately clung to the past rather than embrace the future. The music industry didn’t suffer because of Napster and illegal downloads; it suffered because it turned its back on its customers in favor of short term profits.

The music industry failed to recognize the opportunity that came with the advent of the Internet and digital music formats. Rather than see their industry from their customers’ perspective, the industry fell pray to the elitism I’ve discussed previously. So a computer company took their business from them. Apple‘s iPod and iTunes took the music retailers’ business and substantially wrestled control away from the music labels.

The retailers could have created digital music stores if they weren’t so worried about protecting their current businesses. And there were other opportunities available. Seth Godin spoke to the industry last year and gave some excellent examples of opportunities to change the business model.

Now other traditional industries like newspapers, video stores and bookstores, among others, are also losing substantial market share to new, technology based upstarts. Others, like travel agencies, are mostly gone.

But some companies are embracing change even during the height of success.
A recent Forbes interview with Xerox’s retiring CEO Anne Mulcahy highlighted her strategy to focus Xerox on “paperless printing” even though the entire organization was basically built on paper-producing technology. Rather than focus on paper, Mulcahy instead said the company’s value was always about the creation, management and dispensing of information, “Democratization of information, however it happened.”

Threats to existing business models aren’t only coming in the form of digitization.
Look at the shoe business. In ten years, Zappos.com went from a germ of an idea to a $1 billion company. Their model? “In March of 2003, we made a decision to be about customer service,” say their CEO, Tony Hsieh, in a recent Fast  Company profile. “We view any expense that enhances the customer experience as a marketing cost because it generates more repeat customers through word of mouth.”

Customer experience as a marketing cost. It’s a whole new way of looking at the shoe business (or retail in general), and it’s a hit worth a cool billion in a short amount of time.

I can’t believe that billion dollars was incremental business to the overall market. That share came out of somebody’s  hide. And that means an existing shoe business could have done it first if the thought process and the courage to act  was there. If the Zappos model works, it can be applied to anything, and it appears that’s exactly what Zappos intends  to do.

And the radical ideas keep coming. Chris Anderson has a controversial new book, Free, that describes a future he believes will be centered largely around business models that give away 95% of their offerings and make money on the remaining 5%. Are Anderson’s ideas open for debate? Sure, but they and other seemingly nutty ideas should be regularly and honestlydiscussed. One of them may well be the next billion dollar idea.

It doesn’t take wholesale change in the marketplace to significantly disrupt a business model.
A drop in business of 10-15% can have massive impact, as many have clearly seen in the current economic downturn. But the economic downturn has not sunk all boats. Amazon.com reported a sales increase of 18% and a net income increase of 24% for their first quarter this year.

As e-commerce continues to be the growth vehicle in retail, and as Amazon continues to dominate e-commerce, I wonder how brick and mortar retail models will adapt. I believe there are many opportunities today to leverage both the growth and value of e-commerce and existing physical real estate.

Certainly, tying the web experience and the store experience together via cross-channel capabilities is a must. In the industry, we talk a lot today about capabilities like order online and pick up in store, and I think those are good.

But how can we take it further?
For example, I know from my experience with in-store kiosks at Borders that a lot more people than I expected still aren’t comfortable shopping online. They want someone to help them use the kiosks, and then they want to pay with cash at the register. Why not use our store POS systems to take cash payments for online orders? What if we took it a step further and took cash payments for other sites’ orders. What if the physical store essentially became an affiliate for a pure play e-commerce site and took the cash along with a commission? What type of opportunities might that open for both the pure play and the brick and mortar store? What other reasons should customers continue to shop physical stores well into the future as technology and delivery systems continue to improve?

What challenges does your business face in the coming years, or what businesses in general do you see most at risk? How could your business model change — maybe radically — to address those challenges? Or, do you think this is all hogwash? Let’s discuss.