Endless Innovation

The Umbrella Problem: Time for Business Model Innovation?

In an article for the Wall Street Journal, Anjali Athavaley recently described why it is so hard to design an umbrella that won't collapse or flip inside out. It's not that companies aren't trying - they are experimenting with space-age materials, testing umbrellas in high-tech wind tunnels and even consulting experts in aerodynamics to find a "perfect" umbrella that doesn't flip inside out on a particularly gusty day. Any incremental improvements, of course, come with costs.

Once you get to the $20 price point for an umbrella, there does appear to be some improvement in umbrella performance, and at the $100 price point, you can build a superior canopy-style umbrella. However, the problem (from the perspective of umbrella manufacturers) is that consumers are only willing to plunk down $6 for a cheap throwaway umbrella. Once you get to the $100 price point, the size of the umbrella becomes so enormous that it's completely impractical for anyone other than golfers.

Let's call it the Umbrella Problem. Manufacturers say that "they have had a tough time innovating because most people aren't willing to pay much for an umbrella." As a result, they are locked into a design mindset that "hasn't changed in centuries." Even the director of product development at umbrella-maker Totes admits that "[the umbrella] is an archaic thing... it's fundamentally a stick with spokes with a piece of cloth on it."

Putting all of this together, I've been thinking of a radically new business model for umbrella manufacturers that borrows heavily from the world of (yes) disposable razor blades and disposable ink cartridges. Companies like HP are brilliant at getting consumers to plunk over hundreds of dollars for a new printer, and then buy new ink cartridges on a fairly regular basis (but not so regular that they get too annoyed). In fact, HP makes more money from selling print cartridges than it does from selling printers. Everybody benefits -- HP makes lots o' cash, while consumers feel that they have a state-of-the-art machine that does exactly what they want.

How could this model be applied to the world of umbrellas? I'm thinking that companies like Totes Isotoner could develop expensive, state-of-the-art "sticks and spokes" (for $100+) and then sell consumers cheap, disposable "pieces of cloth" that fit onto these "stick-and-spokes" (for less than $6). Of course, they wouldn't be able to call them "pieces of cloth" -- they'd have to call them something like "Mach II Rain Canopies." People wouldn't lose these "sticks and spokes" like they do umbrellas because they would be able to carry them in their bags and briefcases without getting everything wet.

Another idea might be to partner with a company like London Fog to offer a "total rain protection system." A consumer buys a pair of rubber boots, a rain jacket and maybe a rain hat, all for a very expensive price. Then, the manufacturer kicks in the umbrella as a "freebie." Anytime, a consumer loses his or her umbrella, they contact the company with a special code and receive a new one free (up to, say, a maximum of 6). The key is that the expensive "rain protection system" subsidizes the cost of the umbrella. Consumers feel like the umbrella is free, but they are instead paying for the coat, boots and jackets. When consumers have already committed hundreds of dollars to a particular brand of "rain protection system," they have a vested interest in getting the umbrella from the same company and not wandering off to another competitor.

In short, the solution might just be business model innovation, not product innovation.

Any other ideas for how innovative companies can solve the Umbrella Problem using business model innovation?

[image: Wall Street Journal]

Innovation Lessons from The Great Reset

Ever since the publication of The Rise of the Creative Class in 2002, Richard Florida has been at the forefront of the national debate about the role of the creative class -- writers and artists as well as white-collar knowledge workers -- in urban revitalization, regional economic development and the future of our cities. If you're living or working in a city that has created a district that resembles New York City's SoHo or TriBeCa (loft living, lots of creative types, cafes and funky shops), you can thank Richard Florida.

Florida's latest book, The Great Reset, offers up a future vision for America after the housing and financial crises exposed the contradictions and weaknesses in our current economy. Arguing that the current economic period more closely resembles the Long Depression of the 1870's rather than the Great Depression of the 1930's, Florida lays out a prescriptive mix for what policy makers, innovators and urban planners should be embracing over the next few years. The "new normal" will include less conspicuous consumption, less emphasis on massive suburban sprawl, and new thinking about transportation (i.e. more emphasis on high-speed rail).

There are several ideas and concepts in The Great Reset that really resonated with me:

(1) Every economic crisis has a "spatial fix." In other words, the Long Depression of the 1870's resulted in the transformation of America from an agrarian society to an urban society with large manufacturing cities while the Great Depression resulted in the transformation of America from an urban society to a massive, sprawling suburban/exurban society. What's next? Florida argues that we are about to witness the rise of massive "mega-regions" like Bos-Wash (the Northeast Corridor from Boston to Washington) and "Chi-Pitts" (the corridor from Chicago to Pittsburgh). Holding these mega-regions together will be high-speed rail lines.

(2) The service industry is America's most important source of future innovation. It's easy to dismiss many service-industry jobs as low-wage or low-value. However, as Florida argues, service industry workers at places like Whole Foods, Starbucks, Zappos, REI and The Container Store are emerging as important sources of innovation and value creation. Let's face it, America doesn't really "make" anything any more. We provide services. As technology and the Internet become ever more part of the service equation, the perceptions gap will narrow between high-end service industry workers (white-collar knowledge workers) and low-end service industry workers.

(3) The future of housing will become more plug-and-play. The goal of home ownership, once treasured as part of The American Dream, will continue to evolve. With so many people caught underwater in their mortgages, housing has been transformed from a long-term investment into a burden or obstacle preventing people from moving to where the jobs are. In 2008, American social mobility was at its lowest point since the 1940s -- quite simply, Americans were so caught up in owning huge McMansions, that they found themselves trapped when the housing market imploded. They literally couldn't sell their houses, except at a huge loss. As a result, Florida argues that the rental option, so popular in New York City, will become more popular nationwide. To encourage mobility, housing developers will build new types of "plug-and-play" housing communities. For example, check out these AVE extended-stay units from Korman Communities -- they're basically housing communities with furnished rental units and hotel-style services for people relocating to the New York City, Philadelphia and Washington, DC regions.

As an investor, I've already got a few big themes to consider for 2010. High-speed rail, as I've argued before, is going to be big -- as much as Warren Buffett loves the railroads, I do too. I'm also looking for new types of service industry companies that are embracing innovation and technology at the customer level. What are the companies or trends that you think could be part of The Great Reset?

[Video: Mega-Regions of the Future]

When Innovators are Exiles on Main Street

Of late, I've been fascinated by the "back story" behind the creative process, especially with the factors that drive innovators to succeed with any creative project. With the re-release of the Rolling Stones' Exile on Main Street album today and the upcoming release of the Stones in Exile documentary film (now screening at Cannes), new facts and details are coming to light about that magical one month back in 1972 in the south of France, when the Rolling Stones famously recorded their legendary album at Keith Richards' French villa.

So what can we learn from this creative "back story" of the Rolling Stones in exile? For me, there are several lessons for innovators who, for one reason or another, find themselves exiles on Main Street:

(1) Sometimes your most innovative work takes place when your back is up against the wall. In 1972, the Rolling Stones were fleeing tax problems, looming legal issues and all the complications of debauchery-fueled rock 'n' roll. Yet, they produced some of their greatest work, including some all-time classics, when given some very real constraints. It's a common story that start-up entrepreneurs tell about bootstrapping their business during unforgiving economic periods -- when forced to do more with less, they actually end up producing some of their best work. As we emerge from the worst financial crisis since the Great Depression, I'm sure we'll see and hear more about these types of bootstrapping success stories.

(2) For inspiration on a particularly tough innovation problem, try revisiting some of your earlier work. In the process of re-mastering and re-releasing the Exile on Main Street album, it became clear that some of the "outtakes" on the album actually comprised some of their best work. Mick Jagger, in revisiting his prior work, expected that the outtakes would be "unfinished and slovenly." What he found, however, was that some of the songs were actually "finished and controlled." Sometimes, it's just the passage of time that gives you a new perspective on your work.

(3) Implementing an elaborate system for innovation may actually reduce the level of innovation in your organization. Many companies attempt to establish rigorous criteria, milestones and stage-gates for any innovation to get to market. What the Rolling Stones did in one month, though, was extraordinary. They threw this kind of caution to the wind. Instead, they took the approach that they'd jam for a full month, see what happens, and then keep only the 10 "best" songs. By some accounts, there was a "24-hour party" going on upstairs at the mansion, while members of the band were trying to work downstairs. Going back through the archives, it turns out that there were at least ten additional songs that now have the potential to become instant classics.

When you attempt to innovate within your organization, sometimes you'll find yourself an exile on Main Street and, quite possibly, an exile on Wall Street. And that's when you may find yourself producing your best, most innovative work.

Saatchi & Saatchi: How to Win Friends and Influence Followers in 7 Minutes or Less

In a format reminiscent of PechaKucha 20 x 20 (20 PowerPoint slides in 20 minutes or less) events, Saatchi & Saatchi asked 7 of the world's leading creative thinkers in 7 very different fields to share their ideas in 7 minutes or less at the first-ever 7x7 event in New York City. The speakers, ranging from the curator of the world-famous TED Conference to an ESPN Chess Grandmaster, took three basic approaches to winning friends and influencing followers in their allotted seven minutes: Going Global, Staging It Live, and Stimulating the Senses.

Going Global: Marc Schiller, CEO of digital marketing agency Electric Artists and co-founder of Wooster Collective, led audience members on a whirlwind tour of street art from New York to Europe to Australia, showing how and why graffiti artists are risking arrest to beautify public spaces and bring meaning to previously meaningless locations. Similarly, Chris Anderson of TED demonstrated the alluring power of innovative ideas by showing how TEDx events are sprouting up on every continent.

Staging It Live: Maurice Ashley, a Chess Grandmaster and an on-air chess commentator for ESPN, was perhaps the most inspiring speaker of the night, turning a routine chess match into a epic narrative more exciting than the running of the Kentucky Derby this past Saturday. He raised the stakes of audience participation by inviting two chess champions -- one in Belize (!) and one in New York City -- to compete in a frenetic, two-minute chess match via Internet. During the match, Maurice gave a live play-by-play, turning a simple castling into the type of drama one typically associates with a world-champion sprinter running the 100-meter dash in under 10 seconds.

Stimulating the Senses: Think beyond the spoken word or the brief video clip. The audience gave a rousing ovation to the St. Joseph's School Band from the South Bronx, who put on a tremendous live performance of Gustav Holst. Liz Arana, head chef at Alexandra restaurant in NYC, gave a live cooking demo of fried calamari that filled the hall with aromatic scents and left people talking excitedly about what they were smelling.

My takeaway lesson for the night: powerful ideas are made even more powerful by embracing one of the three presentation approaches above. If you're consulting to a Fortune 500 company, you probably won't get the opportunity to cook fried calamari while discussing P&L opportunities, but the idea of Going Global and Staging It Live are two particularly powerful presentation concepts that can help you win friends and influence followers -- all in 7 minutes or less.

"White Spaces" and Business Model Innovation

As businesses begin to emerge from the financial downturn of 2008-2009, attention has already started to focus on successful growth and innovation strategies for the next 12 months. For CEOs and other senior executives looking for a practical framework for business model innovation, Mark Johnson has written Seizing the White Space: Business Model Innovation for Growth and Renewal. Johnson, the co-founder and CEO of strategic innovation consulting company Innosight, has organized his new book around a deceptively simple premise: overhauling a business model needs to be more than just throwing some spaghetti against the wall to see what sticks.

Instead, a business needs a proven methodology to find the "white spaces" -- the uncharted territory well beyond a company's core business. This is harder than it sounds, since any business or organization is almost forced into small, incremental moves rather than bold, disruptive moves by the very nature of how most people define "risk."

In the book, Johnson points to a number of businesses that have managed to grow their way to success by re-evaluating what they do and how they do it: Tata Motors, Dell, Southwest Airlines, Apple. And, of course, there's the example of IKEA, which decided to sell furniture the same way other people sell clothing. The book also includes a foreword from A.G. Lafley, who mentions a few ways that P&G has used ideas about business "white spaces" to venture beyond mere brand extensions into entirely new categories.

During the week of May 3, check out the book's website for a virtual Blogger Book Tour hosted by top innovation bloggers Andrea Meyer, Braden Kelley and Jeffrey Phillips.