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This article was released in my CAMagazine column in March 2009. shortly after the great economic collapse of 2008.

Inertia — real or implied — establishes a culture of inaction, and that can lead to another slippery slope

Given the new economic volatility, shrieking stock market headlines, and the reappearance of a sense of dread in the corporate world in September 2010, it’s probably a good time to re-read the article.

There are countless examples where history has shown us that it is those organizations who focused on ensuring that they were still actively pursuing innovation — whether through product development, the exploration of new business models, external partnerships, the pursuit of new markets and customer groups — were those who managed to achieve the greatest success in the long run.

Catch the key line at the end: “The greatest mistake any organization can make right now is to do nothing.”


Keep Those Ideas Coming
Jim Carroll, March 2009

I have started to think about the events of the past few months in the context of economic grief — an emotional process closely related to the stages of bereavement. The economy unraveled so quickly that many organizations still find themselves in the early phases of economic grief, marked by shock and denial. Corporate idea factories have come to a standstill and innovation paralysis is settling in.

The result is that we’re not just in an economic recession; we’re entering an idea recession, similar to that of the last downturn starting in 2001. Yet, in allowing innovation to dry up, businesses are missing out on great opportunities for success. After all, companies such as Burger King, Microsoft, CNN and FedEx were all started up during recessions.

The Wharton School of the University of Pennsylvania released a provocative article in November 2008 suggesting a recession is the perfect time for disruptive innovation — that is, rewriting an industry’s business model to achieve significant growth. Think of Steve Jobs and the iPod, which he first released during a less-than-rosy economy in 2001.

So what do companies need to do to make the most of this recession? First, accept the economic reality. Those unable to move past shock, denial and anger through to acceptance will be innovation laggards and will only be ready to innovate once the market and industry recovery is underway. Unfortunately, that may be too late.

Innovation leaders, however, are prepared to keep their idea factories running (perhaps not at full tilt, but running nevertheless) in the face of uncertainty. They know there is still a place for innovative thinking despite the vast sections of the economy under stress. They know there are growth markets and opportunities for marketplace, distribution-channel and operational innovation. These leaders are aware ongoing change in consumer behaviour means there are still new ways to brand, grab customer mind share and forge unique and distinct relationships.

It is critical that organizations begin to undertake a series of bold actions that reorients them to face future challenges. These actions should include several integrated elements.

  • Boost the experiential capital of the organization. Get your teams working on projects and ideas that build up their experience. For example, they might explore new methods of branding and marketing (particularly to the next generation); investigate technologies that can stream-line business processes; or work with distribution models that expand market potential.
  • Identify weaknesses or areas for improvement. Consider what elements of the organization’s product line, skills or structure could benefit from specific innovation efforts. For example, are competitive threats emerging that you haven’t really thought about? What should you be doing to innovate your way around those challenges?
  • Explore key opportunities through a variety of risk-oriented initiatives. If, for example, you focus on a customer-retention strategy (such as visiting every customer in the next three months to see if you are meeting their needs) can you put a stop to future revenue leakage?

The greatest mistake any organization can make right now is to do nothing. Inertia — real or implied — establishes a culture of inaction, and that can lead to another slippery slope. Today, innovation isn’t simply an option — it’s critical because it is the best way to gain traction.

A few weeks ago, I was the opening keynote speaker for the 2011 Multi-Unit Franchising Conference held at The Venetian in Las Vegas.

The audience were owners and operators of multiple franchise operations, primarily from the restaurant / food sector, but also from other franchise operations in auto, pet care, home supplies and other retail product lines.

An audience of close to 1,000 listens to Jim Carroll's keynote on fast paced consumer, retail and restaurant industry trends in Las Vegas

My keynote topic was built on the theme “”Where Do We Go From Here? Why Innovators Will Rule in the Post-Recession Economy – And How You Can Join Them!”

 

What did I take a look at? A wide variety of the fast-paced trends impacting the retail / restaurant sector today. I broke my talk down into 3 key trends, what I might call:

  • Consumer velocity
  • Mobile madness
  • Intelligent infrastructure

1. What We Know: Consumer behaviour shifts faster today than ever before

The average consumer scans 12 feet of shelf space per second.” That’s a stat I’ve long used to emphasize that the attention span of the typical shopper of today is shorter than ever before — and retailers need to innovate to ensure they can keep the attention of today’s consumer.

It’s not just keeping up with fleeting attention spans — it’s about adapting to the fast pace of how quickly consumer choice changes. Consider what is happening with the rapid emergence of revenue in the late night business segment – it was up 12% in 4th quarter 2010, compared to 2-3% for other parts of the day. That’s why major chains have been focusing on new “happy hour” offerings — and so their success increasingly comes from how quickly they can scale and adapt to fast moving trends.

We’ve seen plenty of fast innovation from various organizations in the sector to respond to quick consumer change. Morton’s capitalized on the new consumer sensitivity towards value when it jumped on the trend that involves the “casualization of fine dining” with its’ $6 mini-cheeseburger.

Other fast trends drive the industry. The Sydney Morning Herald ran a great article in April of 2011, noting that “… the world of cooking and restaurants is becoming more like an arm of show business …..” with the result that “everyone wants to see the chef.” That’s why we are seeing many restaurants from fine-dining to fast casual moving the kitchen to the “front of the house,” or in other cases, a lot of TV display technology that provide for video links from tables to the kitchen. The evolution that is occurring is that the chef is becoming the star, and more and more of the staff are becoming ‘performers.’ Innovators in appropriate sectors would see the opportunities and jump on this trend.

Whatever the case may be, the consumer of today changes quickly, and innovators check their speed and agility in being able to respond to this reality.

2. What We Know: Technology – especially mobile – has become the key influencer of today’s consumer decision making.

Simply put, the velocity of mobile adoption, local search and product promotion is evolving at a pace that is beyond furious.

Consider the growth rates underlying today’s technology. It took two years for Apple to sell two million iPhones. It took 2 months for them to sell 2 million iPads! It took 1 month to sell 1 million iPhone 4’s!

The impact of such trends is an explosive rate of growth of wireless Internet usage. Mobile represented but 0.2% of all Web traffic in 2009. That grew to 8% by 2010, and is expected to hit 16% of all traffic this year.

Some suggest that mobile searches now exceed the number of computer based searches. What is also well known is that most mobile searches are for “local content.” Not only that, but Google has found that when someone gets a smartphone, the number of searches they make increases 50 times!

What is clear is that people are using their mobile devices to find nearby – stores, retailers, restaurants and just about everything else. Combine this with the emergence of new promotion opportunities (through apps and other tools) and you’ve got a revolution in the making in terms of local product promotion. That’s why the success of many retailers / restaurants will come from their success with location-sensitive coupon technology.

Bottom line? Innovation is: rethinking in-store uplift in terms of new methods of interaction!

3. What We Know: We will have far more opportunity for operational innovation through the rapid emergence of new technology, infrastructure and other trends

Consider how quickly near-field payment technology is going to steamroller the retail / restaurant sector. Simply put, over the next few years, the credit cards in our wallet will disappear as our iPhones, Blackberries and Android phones become the credit card infrastructure of the future. This is a HUGE trend — it provides countless opportunities for innovation, disruptive business model change, new competitors, and all kinds of other fun opportunities.

The trend has enormous velocity – we can expect $113 billion in transactions by 2016,  with 3.5 billion transactions – and with this comes new opportunities for loyalty and contact followup. From an innovation perspective, the sector will have to ensure they can ingest the new infrastructure quickly enough, and keep on top of the industry change that it will cause to ensure that challenges are turned into opportunity.

There are all kinds of other areas of fast change that present opportunity. Consider the issue fo ‘green buildings’ and sustainability. The West Australian newspaper recently noted that “with the rapid increase in knowledge, skills and availability of materials, costs have fallen. The industry now understands how to build green and building a 5-star Green Star building is now generally cost neutral.”

Some franchisees are taking this to heart, with aggressive plans involving eco-friendly buildings. Chick-fil-A has a  LEED initiative in building a test model restaurant that has water usage down by 40% through rainwater collection; an electricity reduction of 14% through the use of skylights & energy efficient appliances; 20% of the building content is from recycled material; and 30% more fresh air than regular buildings. While the structure is 15% more expensive to build, they expect a fairly quick payback — and will manage to get a branding image to their customer base that they don’t just talk sustainability – they do it!

From this perspective, innovation is keeping ahead of and planning for hyper-innovation with IT, energy, environmental and other infrastructure trends that impact facilities or the nature of the customer interaction.

 

Innovators get ahead by focusing on bold ideas, and exploring the concept of 'experiential capital' - Jim Carroll

I also emphasized that innovators aren’t afraid to make bold moves. Every franchise and retail organization today is looking for opportunities for cross-promotion, cross-selling and product placement. So consider this observation from the Dallas Morning News in March 2011 in an article titled: Funeral home adds little sip of heaven: Starbucks Coffee.

At McKinney’s Turrentine Jackson Morrow Funeral Home, it’s now possible to pay your respects to the dead or plan your own funeral with a venti Caramel Macchiato in hand

Craziness, or smart niche-marketing? I think it’s innovation!

So what do you do? My message to the folks in Las Vegas was to get involved and explore these fascinating new worlds that surround you!

Many of them might hold themselves back from Facebook advertising, because the concept might simply seem overwhelming for a small to medium sized mulit-unit franchise operation. Yet, today Facebook now accounts for 1 of 3 every online ads. And we are seeing the rapid emergence of new online ‘aggregators’ that are focused on helping small business take advantage of that fact. These organizations — such as Blinq — manage the buying of thousands of individualized ads, based on age, location, interests.

They should simply try the world of mobile promotion. Buffalo Wild Wings gave it a shot for one recent NFL based initiative, and indicated that they tripled the return on their investment.

Think differently in terms of new ways of reaching the consumer. Pizza Pizza, a Canadian chain, recently released a new iPhone App that allows online ordering. Nothing new or special about that – such apps are becoming a dime a dozen, and are quickly becoming de rigueur. What is cool is that the chain has revealed that it is working to link the  app payment system to university meal card plan, in recognition of the fact that many students in the target market might not have credit cards (or “credit worthy” cards.)

Bottom line? One of my key closing messages was that innovators focus on the concept of “experiential capital” -there’s a lot going on, and to figure out, we should just get out and do it! Try new ideas, explore new initiatives, undertake new projects. One of the only ways to get ahead is to work quickly to build up your experience in all the new opportunities that surround you.

A quick little video from a keynote in which I outline what organizations often do — with good intentions that go horribly wrong.


Think about what happens — suddenly, a message is established that only ‘special people’ on the ‘special team’ are responsible for innovation.

Here’s what I wrote in What I Learned From Frogs in Texas — which, by the way, you can now buy for your Kindle from Amazon or for your iPhone/IPad on iTunes.

Three Simple Ideas

The essence of innovation is really quite simple. It is all about coming up with new ideas that help you to run the business better, grow the business and transform the business. But it isn’t just about idea generation—innovative companies excel at implementing these ideas and making them work.

Let’s examine each of these areas.

Run the Business Better

There is plenty of opportunity in every organization for operational innovation; that is, doing what you can to “run the business better.” This type of innovation involves a continuous effort to change, improve and redefine business processes, whether they involve customer service, HR practices, logistics and shipping methodologies, purchasing processes or just about anything else.

Never think there isn’t huge room for improvement—most organizations are inherently inefficient, with outdated or illogical processes in place. There is countless potential for improving the way organizations work, and plenty of opportunities for innovative thinking with respect to the way things are done.

Add it up and look at the benefits from doing things smarter or more effectively and there can be a huge return.

Grow the Business

Second, make sure you understand the opportunities from “growing the business,” or what might also be called “revenue-focused innovation.”

Most often, new revenue comes from new products and the ability to enter a new marketplace. Yet that isn’t the only way to enhance revenue. Think about business model innovation, for example: new business ideas involving expansion in existing markets or new ways of reaching the customer that weren’t previously possible (or that no one had thought of before).

Revenue enhancement can also come from changing the nature of existing products, such as adding a service component to a product that can bring in additional revenue. It might involve enhancing the perceived image of a product so it is more valuable to the customer, resulting in the customer being willing to pay more for it.

The key is, don’t think about “growing the business” and revenue enhancement as simply coming from new products or new markets; there are plenty of other methods for innovative thinking that can lead to revenue enhancement.

Transform the Business

Last but not least, always keep in mind the concept of “transformational innovation.”

Transformational innovation involves taking a look at the way the organization is structured, and thinking how it might be able to work smarter, more efficiently and with better results by changing the skills makeup of the organization. It involves constant, probing questions that continually assess the organization and its skills, such as:

Do we have the people we need in the right places/positions?

Do we have the right people with the right skills available at the right time?

If we are suddenly faced with rapid market change, do we know how to access specialized skills and talent we might need?

With the global connectivity that has emerged over the last few decades, there is plenty of opportunity to do today what couldn’t have been done even five years ago, in terms of how an organization accesses the skills, resources, talents and capabilities that it needs to get the job done..

Organizational transformation also recognizes the concept of “partnership” as a key corporate structure for the future. In a world of mammoth complexity and constant change, organizations must focus on their core competencies and partner with others to accomplish the things they cannot or should not do. In essence, they must recognize that the path to the future is to concentrate on what they do well and on what is critical to their central mission, and to seek partners to help out with everything else.

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