Tag Archives: innovation

Who wants to actually slaughter a cow?

The Butcher and the Value Proposition

Every time I hear people working in digital in Australia complaining about potential clients not wanting to pay for their services, or not truly valuing their services, I sigh…. They somewhat viciously call these people, the non payers, the Parasite Economy.   But instead;  rather than blaming others,  perhaps they should be thinking about their own value proposition!

Because I strongly disagree with them.  In my argument I like to use the analogy of the Butcher. Because A. I reckon the Butcher is a great analogy and B. It tends to upset the intellectual elite who embrace innovation and reject without thinking the “patently absurd notion” that they could learn anything from Butchers.

Evolving the Butchers Value Proposition and Business Model

But here’s the thing, the Butcher’s value proposition and business model is mature, clear and valued.

The value proposition is simple; people want to get some meat locally, but they don’t want to actually butcher a cow (yuck!) or have to store an entire dead cow (difficult).

The winning business model is to put a shop on the high street without competitors, front load your cabinets to look bountiful and be hygienic.

But when you pick at the surface, things get a bit interesting. Butchers have evolved their business model over thousands of years. You can be sure that along the way entrepreneurs have tried out different variations on the offering, and found they failed to deliver as much value as selling meat in a butchers shop. Do any of the below ring a bell?

  • Selling you cows for slaughter – checkthe value proposition of the butcher
  • Slaughtering you cow at your request – check
  • Providing you a slaughtering room to do the deed yourself – ?
  • Providing and sharpening butchers knives – check
  • Providing a large cool room for you to store your dead cow – check
  • Bringing meat cuts to you to buy, door to door – check

You see almost all these offerings are plucked from different parts of the value chain, but the local butcher operates the part where his value is maximised and easy to understand. He converts larger pieces of meat into a variety of meal size portions makes them available for you locally. It sounds simple, but it took thousands of years to evolve to this.

How can you not learn from this evolution of a business, or find it fascinating?
Its quite apparent that when people complain of potential customers not valuing their service, the truth is not that there is no value, but the market hasn’t yet determined where the simplest and greatest value is.

Perhaps if you look at your offering through this lens, you can evolve your offering to something that’s easier and more lucrative. Note – nobody asks the Butcher for free food as it will be good exposure for them as there is no Parasite Economy for Butchers!

And when he innovates?

Butchers know that when competing, you get the greatest acceptance and valuing of innovation when it is a small referenceable change rather than a complete paradigm shift. Which is why you see new and different sausage mixes being on sale – rather than lab grown meat in the cabinets!

disruptive innovation and food

Today at lunch my father announced that some industries are doomed due to disruptive innovations but some are safe. I of course reacted emotionally at first telling him he was talking complete rubbish, but then after pausing to draw breath, I like to think I rationally pointed out why no sector is safe from disruptive innovations.

Ziferblat CafeWhen talking about innovation I like to talk about Butchers and Restaurants.

The basic value proposition for a butcher is quite simple and has been the same for a thousand years. Nobody wants to slaughter a cow, and its pretty hard to store a whole cow to eat at your lesiure. Much easier to get some one else to do the dirty work, then take a tiny share. There is not much innovation going on in the sector and the heuristics for running a successful butcher shop are fairly simple – put it on the high street, front load your cabinets with delicious offerings, look hygenic.

However old and mature the standard business model is, don’t think you’re safe from disruption.  Consider restaurants.

The value  proposition of a restaurant is also pretty simple – pay a third party to give you food that you can’t or wont prepare for yourself.   But when you talk about innovation in restaurants, things start to get weird when you pick at the surface.   At most restaurants you pay for the food you order, with each dish a separate price.

Sometimes the food is in the kitchen for you to order, and sometimes its brought to your table for you to select (love yum cha!). Sometimes you pay a set price and get a set menu. Things can get much more innovative though. In South America, kilo restaurants are not uncommon. Restaurants that advertise a price per kg. You then load up your plate with whatever you like from the bain-marie, weigh it then bay the kg price.  And now there is a new innovation I find quite fascinating – as it approaches the monetisation problem from a completely different angle and throws out the original value proposition effortlessly.  A pay per minute cafe has just opened in London. Basically everything is free, you just pay for how long you stay at a rate of 3p per minute.. The catch is that for many things you may like, you may have to cook yourself. Eg there are eggs and bread in the pantry and frypans and toasters available.

The key here is that disruptive innovation can come to any sector, simply by having a good look at the value proposition that underlies all the other activity.

The butchers value proposition is just started to get looked at – which is why we are seeing franchises of poultry specialists, direct to the public wholesalers and champagne served with tastings!  Plenty more innovation to come I think.

Thinking different about suppliers and customers

Furthering the discussion about innovating from my last post, here another upshot of a conversation I had with office mate Peter Tunjic, which I want to extend a little.

Perhaps the traditional concepts of customer and supplier lead you to bad thinking and behaviour. Perhaps a better way of thinking is that there is just the business, and everyone else is a trading partner.

Thinking differently about trading partnersOutrageous you say! Heretical you say! Well consider this. Business need cash to survive, your trading partners either provide you cash, or resources that you utilize for an eventual transformation into cash.

So who can give your business cash?

  • Investors give you cash for shares – so you can start to operate.
  • “Customers” give you cash for products or services – so you can continue to operate.
  • Benefactors give you cash for good behaviour – so you can grow
  • Government grants give you cash for research – so you can grow
  • Banks give you cash in return for a promise to repay it in the future – so you can grow
  • Perhaps there are more?

So who do you give cash to?

  • “Suppliers” take your cash – in return for products and services you use to operate
  • Employees take your cash – in return for labour that you use to operate
  • Governments take your cash in return for the right to trade.

Now why this is important is that sometimes :

  • Its not obvious where to place the traditional of supplier and customer .
  • By labeling our trading partners in this way we mask opportunities.
  • By labeling our trading partners in this way, we poorly allocate resources to manage them.

Consider the two sided market place such as 99 Designs. They have designers competing to win projects (and perhaps get paid cash for their work, but perhaps not) and businesses logging design jobs and eventually receiving a design for the money they pay. Both are critical trading partners for 99 Designs to survive. The designers won’t come to the site if there are no customers supplying design jobs, and the businesses won’t come if there are no designers to do the work. In a two sided market place you need two groups to interact. But who is the customer here?

Consider the online business that generates content, wrapped in advertising, that is read by people who also pay a small fee to read content behind a paywall. The people supply eyeballs that the business sells, but they also provides cash for content.  The journalists supply content in exchange for cash but they also receive profile which they may trade on, and the advertisers supply content and cash. Again, clear demarcation of customers and suppliers is impossible.

So an innovative company may look at all the trading partners it traditionally calls suppliers and ask the question “what are they prepared to give me cash for?” It may also look at the trading partners it traditionally calls customers and ask “what are they supplying that I can sell for cash?”

Thinking this way gives rise to management of relationships based on their importance in the supply chain, not just sales people managing customers and purchasing officers managing suppliers. Which is why we start to see job titles such as community manager, engagement manager and supply chain specialist!

So to reiterate the point of my last post – if you want to innovate successfully, question the basics of everything you do.

So you want to innovate like Steve Jobs?

This week I had an interesting conversation with my office mate, Peter Tunjic, about innovation. Peter likes to point out that most management theories are like the Emperors new clothes – and there is usually a competitive advantage in questioning and rejecting the theories.

Steve JobsSo this weeks conversation was on how Steve Jobs innovated.

Apple became the words most valuable public company by innovating in design and products, by innovating at the business model level and by innovating at the corporate level. Plenty has been written about Apple’s products & design and the impact of disruptive models such as the App Store and iTunes. but very little has ever been said about Apple innovating at the corporate level.

So lets set the scene with some facts – Apple paid a minor dividend until 1995 at around 10-12c a share, then discontinued the plan. The dividend plan was only restarted in 2012 after Steve had stepped down as CEO, and was then run at $10-$12.  Peculiar no?

So what happened?  You could argue that the answer is hundreds of years old, so some history first.  When chartered companies first started to appear in around 1,600 they were formed with a specific monopoly or charter, given by a royal family or parliament. Fast forward to around 1844 and legislation appeared in Britain around forming companies, so that anyone could do it and have their own agenda. When a company was formed, it was called “incorporation”. ie it was considered a body in its own right (corporal form). Early companies couldn’t own other companies because of course that would be considered slavery!  Shareholders, were simply the people that gave the company money so that it could operate, and they did so hoping to get a return. The company was pre-eminent, not the suppliers of cash.

Fast forward to 1970 and a peculiar management theory started to take hold that went along the lines of “the purpose of the company is to increase the wealth of the shareholders”. This position was obviously highly popular amongst the masses who were investing, as they were now perceived as being more important than the company. Executives also loved it because no one would complain how much they earned, if the shareholders were making a good return. Even if the dividend was sucking badly need resources out of the company.

Today the concept of investors first, is gospel. Even if it regularly doesn’t make sense. i.e. how can you have strategy to increase the wealth of shareholders (not some but all), when under modern trading conditions some can be on the shareholders register for a tenth of a second and others for a decade.? Why also should a company weaken itself, giving away hard won cash to people who usually  aren’t the initial investors and therefore haven’t added value to the company?

So Steve Jobs rejected this investor first gospel and embraced the older company first idea. He repaid the cash of initial investors through dividends, but once done he ceased paying dividends as giving away cash made Apple weaker, not stronger. This strategy helped build the biggest publicly traded company in the world, with cash reserves larger than the UK treasury.

So if you want to innovate like Steve Jobs, question the basics of everything you do.

innovation and birthday gifts

I believe that the major reason Australian businesses don’t like internet based competition is it forces the clever businesses to innovate, and the lazy businesses to drop prices before dying.

Last week I realised I hadn’t done anything about birthday presents for my wife, despite the fact her birthday is easy to remember, as its on Valentine’s day. Anyway, on the Thursday I went online and ordered two presents, both physical goods, one order from the UK and one order from about 50km away in in Victoria. The UK goods were a clothing item she had seen in a catalogue and therefore in an industry where there is lots of competition. The Australian goods however were fairly unique, being a subscription to a magazine with no direct competitors.

The result
The goods from the UK were delivered on the Monday morning, 4 days after I had ordered them (via DHL).
The goods from Australia were despatched on the Tuesday, 5 days after I had ordered them, and delivered 6 days after the order (via AusPost).

Now I know the sample size of this example is tiny, but Continue reading innovation and birthday gifts

saving your job with data visualisation

Most Churchill Club events start with an idea, something I have noticed that then sits in the back of my head weeks, months or years until I understand how it “fits” as a good event.

An example of this is data visualisation, or the way that complexity is being represented as an accessible visual medium. Occasionally I get flicked funny bits and pieces such as a pie chart which represents how much of a pie chart looks like a Pac Man (possibly the funniest pie chart joke ever) however there is a lot more serious use going on. For example:

Information Maps – Such as the roadmap of trends and technology from NowAndNext

Displaying Data – Such as this wonderful display of scientific evidence for popular health supplements from Information is Beautiful.

Displaying Concepts – Such as this representation of Capitalism from Speldwright.

Interpreting Data – Such as this image on understanding how the sexes perceive colours by GraphJam

Displaying Connections – such as this representation of word usage and flow in poetry.

And this is just the start. Word clouds are now common place and most blogging software has components that can automatically generate them for you. There is also some great merging of domains such as this execution of psychology, cartooning and animation by RSA Animate and Dan Pink on Youtube.

In this new world of data visualisation there are no rules – just a marrying of analytical insight and creativity.

Technological advances have allowed this to happen, with some fabulous tools online for data visualisation as well as in packages. One of my favourite tools is VUE from Tufts University. I regularly use it for mapping out my thoughts.

But what is the driver? I think its an impact of globalisation & technology. If you are a white collar worker doing routine work, you know you are pretty much going to be losing your job at some stage to either a low labour cost country, or your job will be automated. However what is now happening is that the automation trend is creeping up higher the ladder and in many places expert systems and automation are unexpectedly replacing “professional” jobs. Machines such as the Autorefractor will replace your average Optometrist, 3D printing will replace some engineering jobs and tools for automatically building websites are now legion.

The only defence against losing your job is to start innovating, start being creative. I think this is the major driver in the interest of data visualisation as well as interest in topics such as design thinking as a business tool. Perhaps the Churchill Club event isn’t on data visualisation, perhaps its actually about the rape & pillage of ideas and methodologies from the design world.

Do you have a brilliant idea?

Picture this:

  1. I am approached by “John” who has been recommended to talk to me about his new venture – but it turns out he wants me to sign an NDA before he can discuss it. I refuse to sign unless he can give me an outline of what he is proposing, so we agree to meet at a cafe for coffee and a chat.
  2. When he arrives, he explains his  venture is still at the idea stage – but it turns out he hasn’t done much research.
  3. He has a manilla folder with him – which turns out to be empty, I’m not kidding!
  4. He is convinced he is on a winner and doesn’t want advice, just investors – but it turns out I have to pay for the coffee as in his excitement he has forgotten his wallet.

This has happened to me more than once (more fool me). The problem is that everyone has some great product ideas, as well as some completely rubbish one. Only they can’t differentiate, they think all their ideas are good.

Since I try to get smarter as I get older, I now demand a high level overview to be sent to me in the mail, before I will commit to investing any time at all. However I also recently noticed a new service on the landscape, that specifically deals with peoples ideas for products.

Its called Quirky. What Quirky does is get you to to submit your idea to their community. The crowd then decides whether your idea has legs, and if so they they then get their paid team to evaluate the product, doing research, design, branding and engineering. If everything looks a go, they then manufacture and market your product.

If your idea doesn’t make it, it only costs you $10 to submit plus you get a whole lot of feedback.

If your idea does make it, you get paid, the crowd gets paid, and of course Quirky gets paid.

Its as close as I have seen to getting real life product validation, without you needing to invest. It could save a lot of time in coffee shop’s listening to people assert their idea is brilliant.

Turning waste into PR

I went to hear from Tom Griffith of Emma and Tom’s fruit juices at The Hive the other day. Apparently in their early days, their minimum production runs were always more than they could sell, which was a problem as their stock was highly perishable. Their clever solution was to use this excess as sponsorship for events.

This got me thinking about my social venture, the Churchill Club.  Although vastly different from a fruit juice company  i thought –   our production run, an event,   normally exceeds our ability to sell as well, i.e. there are normally some spare seats in the room.

Some quick facts:

  • We run around 22 events a year in Melbourne on Technology, Entrepreneurship and Innovation.
  • We can currently sit 60 people at an event.
  • We charge for tickets but always have a couple of people attending free as they are the speakers, the speakers guest, or special guests of the club.
  • Each person costs us to attend as we provide canape and have an open bar.
  • We don’t break even until we reach 20 people and the modal event has around 35-40 people.

So after listening to Tom, it occurred that perhaps rather than looking at us selling an event, perhaps we should be thinking about it as having 60 seats available that are highly perishable, and normally 20 or so seats expire, un-consumed every fortnight.

With this in mind I thought about two potential options.

  1. Giving away a couple of seats as sponsorship to some groups I think are worthy, and
  2. Selling some excess tickets at the last minute discount that can sit just above our costs.

Now because I have recognised that I am no where near as clever as I used to think I was, I circulated these thoughts to my “brains trust” first. And below are paraphrased versions of their answers.

Scott Kilmartin – founder, haul : In the theatre business they call giving away free tickets, ‘papering the room’, which is great to add atmosphere and get some potential new members through the door. If you keep the ‘papering of the room’ relatively quiet and do it with a view to building alliances and tie in to some sponsorships then I think it’s a good idea.

Peter Lewis – GM Business Development, Hydrix : It would be worthwhile to be quite strategic with the sponsorships and deal with some some unexpected groups that would certainly touch the demographic. eg the RMIT entrepreneurship course or recruitment companies like Mitchell Lake.

Jon Manning – Director, Sans Prix : I would always say experiment and compare results. Discounting last minute tickets though is contrary to current pricing wisdom as patrons should be rewarded for booking early, not waiting to the last minute. Have a think about how airlines do ticket pricing, because these people are seriously good at it.

Bob Peterson – Director, F3 : Experimenting with your business model is intelligent. However I don’t like selling-off the perishable/fungible excess stock (discount model) even when/if you have a small number of pre registrations. It sets lower expectations to the attendees, whereas gifting tickets can raise credentials. Last minute discounting simply devalues your brand.

And yes, I had to look up fungible too.

I think the pattern was fairly clear though.

  • Strategically gifting a few tickets on the quiet to worthwhile organisations = Good.
  • Last minute discounting = Bad.
  • Business model experimentation = Excellent.

Event Report from the Churchill Club’s – Serious Play

Notes taken by me at the Churchill Club programme on the 17th February 2011.

With
Bill Lang
– Founder, Scores on the Board
Gilda Howard
– CEO, Gowrie Victoria
Trudi Pavlovsky
– Founder, The Dream Initiative

What is Play?

Play is activity that is normally; enjoyable, not motivated by a desired completion, not motivated by external demands. It is the doing that matters, and with play, children are the experts.

There are lots of different classifications of playing, including:

  • Practice Play – Provides critical opportunities for children to develop both individual gross and fine muscle strength and overall integration of muscles, nerves, and brain functions.
  • Constructive Play – Constructive play is when the environment is manipulated to create things. It is a basis that is required downstream to be good at manipulating words, ideas and concepts.
  • Dramatic Play – Where you learn to abstract, to try out new roles and possible situations, and to experiment with language and emotions with fantasy play.
  • Social Play – By interacting with others in play settings, children learn social rules such as, give and take, reciprocity, cooperation, and sharing. Through a range of interactions with children at different social stages, children also learn to use moral reasoning to develop a mature sense of values.
  • Games with Rules – Developmentally, most children progress from an egocentric view of the world to an understanding of the importance of social contracts and rules. The “games with rules” concept teaches children a critically important concept – the game of life has rules (laws) that we all must follow to function productively.

There are also a number of different ways of playing, including:

  1. Unoccupied play: the child is relatively stationary and appears to be performing random movements with no apparent purpose. A relatively infrequent style of play.
  2. Solitary play: the child is are completely engrossed in playing and does not seem to notice other children. Most often seen in children between 2 and 3 years-old.
  3. Onlooker play: child takes an interest in other children’s play but does not join in. May ask questions or just talk to other children, but the main activity is simply to watch.
  4. Parallel play: the child mimics other children’s play but doesn’t actively engage with them. For example they may use the same toy.
  5. Associative play: now more interested in each other than the toys they are using. This is the first category that involves strong social interaction between the children while they play.
  6. Cooperative play: some organisation enters children’s play, for example the playing has some goal and children often adopt roles and act as a group.

As we get older, we tend to spend a lot more time with Cooperative and Associative Play, basically dropping the others.

There was a suggestion that flirting and sex play are the main ways adults play. But nobody in the audience felt comfortable exploring that line of discussion.

Games are a subset of play, but often conversations around play end up about discussions on games only. You need to remember you can be playful without playing games. Games is play with rules and outcomes. Rules are necessary to prevent conflict and aid understanding.

Quotes

Plato was also attributed as saying “You can learn more about a person in an hour of play than in a year of conversation.”

Nagle Jackson said “The truly great advances of this generation will be made by those who can make outrageous connections, and only a mind which knows how to play can do that.”

Brian Sutton-Smith said “The opposite of play is not work, it is depression.”

Why is Play important?

Why do we have play? Play provides an environment where we can:

  • Fail without consequences and therefore learn without pressure.
  • Release thoughts that are normally constrained.
  • See situations differently.
  • Re frame ideas.
  • Re-energize.
  • Engage in different discussions than we normally wouldn’t.
  • See or create new opportunities.

People at play are more present, engaged and passionate.

Being valued and involved with workmates, motivates people. Its important for everyone to feel they have a voice.

Happy people are more productive, and playing makes people happy.

As children we learnt through play, and those experiences stick. Adult training is mostly boring and generally consists of either short courses or “teach yourself”. Play is therefore a powerful learning tool (amongst other things) untapped by most adults.

Play engages the whole of you – your mind, emotions and body not just the brains.

Innovative Companies don’t use bureaucratic models.

So What is the Science of Play?

The part of the brain known as the Amygdala, has strong involvement in connecting emotions with memories and responses.

There appears to be an actual physical relationship (chemical) between thinking you can do something and actually being able to do it. So it appears to be true that “if you think you can, you can, if you think you can’, you can’t.”

Studies have also shown that activities such as lying actually makes you weaker and being proud makes you stronger. But what’s more fascinating is that we pick up the vibes of others and and our brain chemistry try’s to match theirs. So if you associate with people who think you are weak, you will become weaker, if you associate with “can do” people, you will become more capable.

Which is why adults disengage, because they don’t believe they can do things.

Play is a method or re-engaging adults and allowing them to change their “programmed” responses. Re-engaged, motivated adults means increased results from their work.

Recent studies into Neuro-placticity appear to indicate we can change the way our brains work even when we are adults, especially by using tools such as play. We can continue to learn and old dogs can learn new tricks.

What are the issues with Play?

Babies put things in their mouth to learn. The desire to pay is built into us. Children want to play to learn, in fact some activities appear to be required. Studies show that reading difficulties will ensure for those that don’t learn how to crawl. However between the ages of 12-15, play tends to vanish as people become adults. Play is then thought of as being childish and not a desirable activity.

Adults only tend to think of play as a learning tool that can be used to make them better at their work.

In organisations the is a fear of play as it doesn’t fit into the seriousness of work. There is also difficulty in running successful play programmes as it will not meet all learning styles, nor fit in with all cultural and generational perceptions. Therefore you will never have 100% engagement in play activities.

Fun ideas aren’t considered reliable, because they are fun.

What things can I do?

We can build play back into the fabric of what we do, to create happy engaged organisations, not just see it as a learning tool.

Some examples of playful behaviour in the workplace include:

  • Pirate day’s, and inviting candidates to take $2,000 to not join the company at Zappos.
  • Graffiti Walls, Pool Tables & Employee Artwork hanging on walls at Google.
  • Slides between floors at places like Macromedia and Technical University of Munich
  • At Cha Cha Sam they occasionally get up and sing or make weird noises.
  • At Destra they would bang a large gong when they had something to celebrate or announce.
  • Nerf ball fights, dead ants and competitions are also common.

Competition can also be made playful. In the military play is a normal learning tool to reinforce lessons and there is almost always “good” conflict inherent in the game. But there must be rules in the game for conflict to be okay.

In large corporates though, they want to be sold on the $ rationale

Accept that real life environments are never ideal. You cannot get the whole group engage because there are too many personalities involved.

Recognise that the optimal group size for games is < 7 and effectively facilitating activities for over 12 people is almost impossible. Online games can be large eg over 20,000 players, but this is because you only interact with a small handful at a time.

– end of report –

Failing Smarter

Last month we ran a fascinating session on failure at the Churchill Club. It was prompted by a comment of a friend of mine who had been the commander of the Australian forces in the Solomon islands a couple of years ago. He said “Of course failure is going to happen, so we give people room to fail in training”

The conversation on the evening covered a number of different views of failure that were food for thought, including:

Science needs failure. Its basic process, the scientific method, is to make a hypothesis then test it repeatedly. Each failure makes the hypothesis more robust. Scientific hypothesis are never proven, but each failure in trying to “prove it wrong” adds to its weight. Interestingly, Science also recognises that failures can also have enormous value in an unexpected way. Known as serendipitous outcomes, there are too many examples to mention where something was invented by mistake. Consequently its accepted in research funding that interesting failures could likely occur through a new research direction.

The art world values failure, they call it creative accidents.  In fact some Artists set out to deliberately fail hundreds of times, just to see what happens.

For the military failure is expected and the impacts are serious – failure causing death is all to likely an outcome. Therefore, individuals are given room to fail as much as they need in training so, that they can get things right when it matters. This focus by the Military on failure led to the formation of the first military staff college in Prussia in 1801 – Its basic thrust was “lets learn from our mistakes”.

But sadly – Australian business has a problem with failure.  In a small market like Australia its impact is great, as compared to a large market like the USA where the impact is generally small. Consequently it is rarely planned for, learnt from or even acknowledged.

But the kicker for the evening for me was this:

In Science – Research funding applicants are generally only successful around 20% of the time, but almost never on their first go. Clever researchers expect this, and consequently design their first round proposals to derive the maximum amount of feedback on what is wanted by the funding body when the expected failure occurs.  They see the first failed application as the part of the process that determines exactly what’s wanted, but isn’t stated in the brief.

I think there is an awful lot to learn for us in business, from just that little idea.