investiledysfunction

My last post was about companies going after the underserved in order to expand the markets available to them.  This effort of going after the underserved is what I have deemed pursuing Green Prairies.  To understand the name, read the prior post (link here).

Today, I read about Denis O’Brien, the founder of Jamaica-based Digicel, whose company embodies the Green Prairie strategy.  He’s set up his cellphone company in places others avoid like the plague, e.g., Papua New Guineau, Wester Samoa, El Salvador, Vanuatu, Haiti, East Timor and 27 other generally impoverished and inhospitable territories and countries.  It seems to be working as he’s built a $2.2 billion personal fortune with this business.

O’Brien’s strategy which he articulated in the 8/11/08 Forbes is “Get big fast.  Damn the cost.  Be brave.  Go over the cliff.  The competition doesn’t have the balls.”  Not the most common way to articulate one’s strategy, but you get the point.

He’s already tackled these poor markets and is making money and is now thinking about entering the USA where only 80% of the population has a cellphone.  If he does this, US incumbent carriers may be in for a fight.  Digicel has all the attributes of a disruptor.  They go after a market which nobody cares about and then move upstream.   If they can serve the impoverished profitably, their model can work as they move up the ‘foodchain’.

Digicel’s success is attributable to many things including O’Brien’s understanding of the importance of resource allocation.  “If you have limited resources, you have to be more clever, skillful, more defiant,” he commented in Forbes.  Digicel demonstrates why today’s little startup gnat can be tomorrow’s royal pain.  Although at $2.2B, Digicel is beyond the point of being a gnat.

He also has a penchant for risk-taking.  When asked about entering Fiji, he comments, “Everyone was saying, ‘Don’t go.  It’s unsafe.‘”  Accepting risk is part of innovation and pursuing green prairie strategies.   This is why it is always perplexing when companies make risk one of the deciding parameters they use to determine which innovative projects to pursue.  They’ll argue that a project is too risky to pursue.  To compound things, legal, corporate communications and others who aren’t paid to be innovative will confirm these notions.  In fact, if the risk is high, the main dimension to consider is whether the reward is sufficiently large to warrant taking it.  You get rewarded for managing risk well.  Ultimately, if it’s easy/not risky, others will do it. That’s easy.

Digicel is showing that taking risk and managing it well can be very profitable.  At the same time, they’re doing this with less resources.  Their established competitors will not be able to go downstream nor will they want to believing it is too risky, too small of an opportunity, etc.  In the end, they’ll miss the Green Prairie as Digicell lays claim to it.

Oddly enough, that’s a picture of my dad playing Nintendo’s Wii Fit which I snapped one morning when home visiting my parents.  In fact, my parents who’ve never really been fans of video games actually went out and bought a Nintendo Wii so they can play the Wii Fit.  My mom is pretty industrious and has decided that she should purchase several more to sell on eBay, but that’s a whole other story.

The short of it is that my parents are addicted to it.  My father does it for 30-45 minutes a day as does my mom.  This is the genius of going after what experts will call white space or pursuing blue ocean strategies.  To coin my own term, I’m calling these green prairies as it seemed a color describing a large space was necessary.

And so Nintendo has done this phenomenally well.  Instead of pursuing the hardcore gamers with their first person shooting games, Madden football updates or a game that lets you carjack civilians although that sounds like a great deal of fun, Nintendo decided to go after the “underserved”.  And as they’ve recently overtaken Sony in the USA, it seems they may be on to something.

Unfortunately, this is not a strategy that many large organizations take when it comes to innovation.  They go after the same old slice of the pie and find new ways to divide that up even further, and as a result, there are whole sets of customers left out but who likely have money in their pocket they’d gladly part with if the right offering came to light. Going after the underserved doesn’t mean the people at the bottom of the pyramid as CK Prahalad has made so famous.  It might mean this, but as Nintendo has shown, the underserved can also be people with money.

The problem with going after the underserved is that it requires taking risk.  The market research, the gurus, the pundits, the industry experts, etc will all say that there is no opportunity here because their worldview is narrow and confined to the market as they’ve defined it.  Your internal experts in the business, risk, strategy, legal, etc who are often Chief No Officers will also come up with a litany of reasons to do nothing.

Therefore, going after the underserved requires going against the prevailing wisdom (I use the term wisdom loosely here).  It is also risky as it will require changing your own organization’s view of how to interact and deal with this underserved population.  This population is underserved for a reason - because your current offerings are unattractive to them (for price, quality, etc reasons) or just not catered to them.  Just putting a new package on your existing product and calling it “Product for the underserved” won’t work.  You’ll have to understand what they want, how they want it, why they want it, etc.  And in many instances, the people who’ve worked for so long in your organization on serving existing customers may not be the best equipped to do this or even be all that willing because it may be seen as a competitor to the ‘old guard’.

But, the model of going after green prairies (I’m really hoping this terms sticks) works as shown over and over again.  Nintendo is just one prominent example.  Yellowtail wines, Cirque du Soleil (both discussed in Blue Ocean Strategy) and the Tata Nano are all examples of products and companies going after the white space - sorry I meant green prairies.

But doing this requires having the right people at various levels of the organization and a willingness to zig when others are zagging.  There is personal risk here if you are the person in charge because if it doesn’t work, people will come after you and blame the company’s failure on your risk-taking.  If it works, people will write Harvard case studies about you, the media will make anoint you a superstar, and other companies will mindlessly follow what you’ve done thinking that your “best practice” can be exported to them and somehow miraculously, they’ll get the same results.  There’s an overused concept around this that many talk about — it’s called risk-reward.

If you were hired to or feel it best to maintain the status quo, don’t bother finding the green prairies.  Someone else will and then they’ll write about what a dinosaur you are.  If you’re inclined to spend some time carefully considering opportunities, you might develop some pretty interesting ideas and see that green prairies are where it is at.

A brief history:  Based on my iPhone rant, I received a link to a site that offered “Pwnage option for Windows Users“.  Does that mean anything to you?  Yeah me neither until very recently.

And so upon reading this bit of gibberish, I forwarded it to one of our super talented interns in the hopes that she’d decipher this bit of lexicon for me.  And she did.  She explained that for computer geeks and gamers, and in my view, in some altered reality, PWN (pronounced “pone” like ‘own’ with a p before it) means “own”.  So when playing videogames, if one player says to another “I pwn you”, they’re saying “I own you” which translates to “I own you.” (translation not necessary)

From my perspective, this new language is utterly ridiculous, but that is besides the point.  This whole exhange underscores the need to involve everyone in your innovation efforts.  There is no monopoly on perspective or ideas.  The right or most useful ideas and perspectives are not resident with just a handful of the most senior people or even just with the creative genius you’ve anointed as your head of innovation.

These perspectives are around you in the people in your organization and often at varying levels.  We often find a dichotomy exists between the impression of senior leaders and junior staff when it comes to innovation.  The senior team thinks the company makes decisions quickly and is innovating in the right places but when you ask the same question to junior staffers, the answer is often diametrically opposite.  The truth is probably somewhere in the middle. The main things this underscores are:

1. The need to develop communication paths between all levels of people within the organization so different perspectives and experiences are captured and considered when thinking through or developing an idea.  This will help you generate better ideas.
2. The development of these communication pathways also is great for motivation.  When people understand the direction of or why decisions are being made about certain projects and are involved in these decisions, they become invested, and this serves to enhance the process and output of innovation.

Nobody PWNs all the good ideas in the organization so it’s good business to get everyone involved.  If you’re a N00b to this language called l33t, learn more at Urban Dictionary.

A barbecue is a place where I expect to see some friends, enjoy some good food and witness the power of the internet in matching people with talent, however niche, to those in need of that talent.

Okay - maybe not the last one, but let me explain.

Old-school barbecues - The host ends up working the grill the entire day/night and so cannot mingle with guests and enjoy themselves.  This is a problem.

New-school barbecues - Our friend went on Craigslist yesterday and put up a post indicating he was looking for a grillmaster.  Within a few hours, he got nearly 20 responses and selected one person sight unseen and without even speaking to him.  His selection was made based on the quality of the email he received.

The outcome - The grillmaster was tremendous.  The food was good, and our host enjoyed his evening.

I fall in love with the internet more and more every day.

Recently, car insurance companies have begun offering insurance rates based on how much you drive and how well you drive - a pay as you go model.  So the more you drive, the more you pay.  If you break abruptly or drive fast, your insurance goes up.  Instead of an actuarial model determining typical behavior for a 18 year old, the companies can now offer more precise pricing and as a result, the responsible 18 year old is rewarded and the aspiring Nascar driver pays more.

This is an innovative way to price insurance and so this got me thinking about the pay as you go model or more generally, pay for behavior models.  Here are some examples of pay as you go models that I appreciate:

1. Google - The old model was advertiser shows ‘impressions’ or ‘views’ and hopes that this translates into desired behavior but never knows.  Google only gets paid when they make a desired behavior happen.
2. ZipCar - This is a great service that lets you rent cars in short increments (a couple of hours) so to do errands around NYC, it’s great.  Why rent a car for the full day when you don’t need it?
3. Yips Chinese - Unless you live in NYC, you prob don’t know Yips but it’s a dive Chinese restaurant chain that sells pretty good Chinese food.  And it sells its food by the pound.  It’s a great concept actually because it seems cheap but they’ve tapped into the “your eyes are bigger than your stomach” phenomenon so every time I’ve gone there expecting to get a deal, I leave having purchased a $13 lunch.

Beyond its current applications, there are probably many other places where pay as you go or pay for performance could work.  Flights for instance?  Should smaller, thinner people pay less?  Presumably, they are lighter as are their clothes/luggage and so they require less jet fuel. The possibilities are endless but the model is a great step forward in many instances of aligning the customer and vendor’s objectives and in incentivizing the appropriate behavior.

Innovation often crops up in the most unlikely of places and often can emerge when two seemingly distinct disciplines, ideas or technologies come together.  Case in point is a recent effort to utilize technology used to detect earthquakes with horses to sense/find micro-cracks in their bones.  The effort which will enable early detection of such micro-breaks and fractures will hopefully avoid the need to euthanize horses as was recently done with Kentucky Derby Winner, Barbaro.

This example underscores the need, however, to have a method by which such discoveries, technologies, etc can be shared with a wider community and across different disciplines.  While this example of knowledge-sharing or “cross-pollination” is a great one, it appears that this sharing is often accidential or serendipitious.

Does anyone know of vehicles that foster/enable this type of knowledge-sharing in a more structured way?

Innovation is a good thing.  Usually.

In the case of the LZR swimsuit made by Speedo, we’re seeing great innovation that needs to be reigned in.  For those unfamiliar with the LZR, it is for lack of a better description “spandex on crack”.  Swimmers wear it and it contours their body and does all sort of other crazy things that ultimately makes swimmers more aerodynamic and faster.  Here’s a picture for the curious.

Since the LZR’s release, 41 world records have been set and 37 of the swimmers setting them were wearing the LZR.  Hmmm…I think me sees a trend.

So first of all, I must tip my hat to Speedo who I always thought of as the makers of ill-fitting banana hammocks for coming up with this technological marvel.  I must also say that I think the Olympics organizers should ban the LZR from the Olympics (I know they don’t care what I have to say but I’ll put it out there anyways)

As Italian swim coach Albert Castagnetti has commented, the LZR is basically “technological doping” and he is right.  The Olympics are about human skill, talent, perseverance, etc.  With the LZR, two swimmers of the same exact caliber (impossible I know but indulge me) would have different times because one has the LZR.  The LZR is not cheap and so those who can afford it are advantaged.  Ultimately, the LZR is a performance enhancing swimsuit so like doping, it shouldn’t be allowed.

Enough on that topic.

But while on the Olympics and performance enhancement, lets talk about the prosthetic wearing runner who was disqualified from running.  Per the Engadget blog from earlier this year,

“Oscar Pistorius, a double-amputee sprinter, has been denied a shot at the Olympics… for being too fast. The runner — who uses carbon-fiber, prosthetic feet — was reviewed by the International Association of Athletics Federations (or IAAF), a review which found the combination of man and machine to be too much for its purely human competitors. According to the IAAF report, the “mechanical advantage of the blade in relation to the healthy ankle joint of an able bodied athlete is higher than 30-percent.” Additionally, Pistorius uses 25-percent less energy than average runners due to the artificial limbs, therefore giving him an unfair advantage on the track… or so they say.”

We’re on a slippery slope with the Olympics.  Here are some enhancements I expect to see by the 2020 Summer Games.

• Javelins with engines
• High jumpers with jet packs
• A USA basketball squad that plays like a team

OK.  Well, I never thought Speedos and proshetic limbs would make it into my Brilliont blog, but there is a first for everything.  I’m off for a swim.

We do lots of work around innovation and one of the things we do is keep on top of what is going on out in the marketplace especially amongst new, innovative startup companies.  To this end, we have created a database of 6000+  innovative companies to ensure we’re on top of the latest & greatest technologies, business models and ideas.  The database grows basically daily and our knowledge of what is going on out there grows with it.

Oftentimes, our understanding of these innovative companies leads us to venture capitalists who provide the fuel (aka money) for these young companies to take shape and grow.  In recent work on green companies, I came across an article on Vinod Khosla of Kleiner Perkins fame and now on his own with Khosla Ventures and his outlook on the green movement.

Khosla has created a presentation entitled “Mostly Convenient Truths From a Technology Optimist” and in this, he states that global warming is “a technology crisis, not a resource crisis” and that solutions to large problems require “a dash of greed.”

While we may not wish to admit it, Khosla is entirely right when we think about what will make green efforts successful.  Except for a notable and loud contingent of folks, many people are not going to go green unless their greed is satiated.  By greed, I don’t mean necessarily mean monetary greed although if going green will help people earn more or save money, that will help in adoption.  It could also be greed for their time (make things simpler so I save time or save effort).

Ultimately, Mr. Khosla hits on a very human sentiment which is “what is in it for me?”  He is using this to drive his own investments forward in various green tech areas.  Overall, efforts that are grounded in this idea of enlightened self-interest will do the best.  Whether it is for VCs like Khosla or for companies who wish to be more green or for individuals aiming to go green, self-interest will save the day.  For companies, being green in a way that impacts and benefits your bottom line will be much more sustainable and impactful than much of the public relations efforts tagged as green that we are seeing these days.

Emerson Electric is a darn big company.  It has 140,000 employees and $22.5 billion in annual sales coming from 60 business units.  They had a goal for these units that a third of sales should come from products released in the last 5 years, but according to BusinessWeek, there going a step further by segmenting their new product sales a bit more into the following 4 categories:

• Minor improvements
• Major improvements
• Products that are new lines for the business
• Products that are new to the world

There is nothing very revolutionary about Emerson’s approach except that they’ve actually done it.  Many organizations talk about disruptive vs incremental innovation and will say they don’t do enough disruptive ’stuff’.  What is great about Emerson is that they’ve put a metric around innovation which their business units must aspire to - 1/3 of revenue from products in the last five years.

Their added detail around how they’ll categorize this innovation allows them to manage their innovation efforts as a portfolio.  For example, we’re doing lots in the minor improvements category but not spending enough on bigger risk, higher reward new to the world products.  By doing this, they can adapt their resource allocation decisions in a way that provides a balance amongst their innovation efforts and provides a more thoughtful way to achieve their 1/3 of revenue from new products goal.

Even without this nuanced look at innovation, Emerson’s willingness to put a hard metric against innovation in their unit goals is commendable.

So I just finished reading the Wall Street Journal Report on their All Things Digital Conference which features interviews with Steve Ballmer, Bill Gates, Rupert Murdoch, Jerry Yang, Sue Decker, Tom Rogers (Tivo), Melinda Gates, etc.  Jeff Bezos was also interviewed and as I’ve noted many times in my blog, the guy just has the right outlook on innovation, management, etc.  There is some talk that I may have a “man crush” on him and A.G. Lafley of P&G with which I disagree.  (more on that below)

In any case, the conference website has some pretty interesting stuff so I wanted to include a link to their site for all to check out - All Things Digital.

Back to the man crush comment.  According to Urban Dictionary, a man crush for those who don’t know is defined as follows ” A man having extreme admiration for another man, as though he wants to be him.”  This maybe overreaching a bit (don’t want to be either Bezos or Lafley) but the admiration point is pretty on point.