In my last post I spoke about how Lew Kornfeld, while he was President of Radio Shack, created two category disrupting products. I have received some positive feedback and questions about how you would go about creating a disruptive product or service. With that in mind, I thought I would share my ideas with you. By the way, you can now get a copy of all of Lew Kornfelds “Messages from the President and Flyer Side Chats” on Amazon.com. This book is a must read for anyone that wants to know the how’s and why’s of the greatest retail electronics company ever created. Many of the principals that Lew and his team used are still very much relevant today. And, as Lew would say, "for only $14.95 I don’t know how they can afford to print it"
If you look at Uber and Google, you get a great view of two of the biggest disrupters in today’s business world. While neither of these two companies created their service (advertising in the case of Google and Taxi service in the case of Uber) they both saw inefficient markets that had fallen into the “because that’s how we always did it” trap. In the case of Google, both newspapers and electronic media were run by just a few organizations that had owned their properties for generations. These companies felt like there was an opportunity to better service the consumer by forgetting the rules and just concentrating on the goal of better serving the market they defined. So, let’s go about doing that for your business.
Step 1 - Define your goal
First define what you are trying to achieve. That is much easier said than done. Too narrow and you are a one trick pony, too broad and you will try and be all things to all people, that has never worked so far. So answer this question and you will be well on your way. What Makes You Unique? In other words, what do you want your customers to be saying about you to their friends once they learn about you?
With Google it was their superior search engine. Remember, they did not have the first search engine; they just had the best one. So, by people using that search engine, they could let them see ads. Their other customer (advertisers) would have superior information about the consumer and could reach them more efficiently and in a more targeted way than ever before. Unique and powerful information for their customer to use. So, what makes you unique? Why should the customer choose you to give their hard earned money to? What will they get that will make their life better.
Step 2 - Determine your customers activities outside of your store
Once you have defined your goal (and if you take it seriously it will take more than just a bit of time; perhaps a couple of days) it is on to your second step. Determine what your customer does with his time or money when not spending them in your store. For instance, when Toys R Us customers are not spending time in their store what else are they doing? I would venture to say they are spending time and money on family vacations, team sports activities, car trips, health insurance, electronic hobbies, religious activities, family meals and many other activities. By understanding the use of time and money by your customer you can now start to understand where there is an opening for you.
Step 3 - Look for your opening
Have an open discussion as a group. You will find that you feed off each other by working in a group. There should be a time when anyone in the group can say anything. Can you put yourself in the room with the Uber team and hear someone say “let’s just bypass the Taxi authority and lower the costs of operating a Taxi by not having our drivers pay for a shield!” I wonder what we would hear if we were sitting in the room with the folks from Bitcoin. Now there is a discussion. I can hear three people (probably all lawyers) say, "you can’t do that." What would happen to the worlds banking system? In the first part of this session there should be no “you can’t do that!” Remember, you are looking for big unique opportunities. Anything goes, because after this session we are going to move on to step 4.
Step 4 - Build your list of real possibilities
Work on each of the items you have discussed in Step 3. Let’s say you were in the travel business. You determined your customers like to travel and you would like to help them. They don’t like traveling in groups but like all of the information you can get in group travel. One of the “solves” on the board might be to make individual travel machines with built in geo-based “site” talks. Ask yourselves the following questions: 1- Would the customer like the idea? 2- Is it plausible in today's world? 3- Would the customer pay us a profit for the service 4- How big is the market? And 5- Whose market is going to be disrupted?
You may find that for your market you just don’t have a disrupting product. My sense is that if this happens you have not opened your mind to the possibilities. Think about the pet industry. When someone really understood that pets were simply an object for you to share love, they came up with the Pet Rock. You didn’t have to clean up after it, it didn’t get old, and you didn’t have to worry about your Pet Rock biting someone. It was a perfect Pet.
Step 5 - The gold is in the details
This is where the gold is…the details of the execution. Now that you have determined your disrupting product or service you have to determine how to best bring it to market. When Lew Kornfeld and his team decided to bring a personal computer to the market, there were no significant retail companies offering anything close to it. There was no way to determine how many of these computers would sell. It wasn’t a kit, it was the first fully functional computer ever sold in a national retail chain. Lew came up with an execution plan; he and his team decided that they would order 5,000 units because Radio Shack had 5,000 locations. If the product was a total flop they could use it for their POS system because, at that time they were using wooden drawers. (It was not a flop and it changed the Consumer Electronics business forever.)
With both Uber and Google they could have a pretty good guess at how big the market was that they were going to disrupt, and it was huge. At Axcelora, when we were building our model we knew there were more than 10,000 B2B companies that wanted to sell into the retail and restaurant markets. If each of these companies made 10 appointments per year (a low number) than we knew there would be 100,000 appointments made per year at a minimum. We made the assumption that we could gain 2% of that market over time. We then determine the cost of making an appointment (all in) for a B2B company and that influenced our pricing. All of that put together made us realize that we had a real opportunity for a new business. There would be hurdles to jump, of course, just like there is in any new business. But there was reasonable opportunity.
So, step 5 is to dive into the details. Look at this like a newspaper reporter and investigate without your emotional hat on. Is there a market? Who are the dominant players I am going to disrupt? How long have they been in the market? Are they willing to kill their current business to defeat you? (In the case of the Taxi business with Uber, would they be willing to devalue the cost of their licenses to work with the city to create their own Uber?) Is their culture bureaucratic or are they still flexible? What will the cost be to you if you fail? Do you have to bet the company or can you step into this gradually? How will your own team take to this new product or service? What will your customers think when you introduce your disruption to the store? Can you sample this on line to get feedback? What happens if you have a hit, can you replenish quickly? Do you have the right people on the team to make this happen? Are they resourceful enough or are they so steeped in tradition that they won’t be able to react to huge problems?
There are lots and lots of questions. My STRONG advice here is to write it all down. All problems are more solvable when they are written down. And if you get stuck, just drop me a line, I would be more than happy to help you out.
So, to recap:
1. Define your goal
2. Determine your customers activities outside of your store
3. Look for your opening
4. Build your list of real possibilities
5. The gold is in the details, mine for it
Think broadly and be open minded. That is the key to this exercise. Don’t worry if it doesn’t happen for you right now, you will get much out of the exercise. Good luck and enjoy the disruption.
Rich Hollander is a retail expert with over 40 years in the industry.