Category Archives: disruptive innovation

What Big Shoes Can Teach Startups About Jobs-To-Be-Done Marketing

People need shoes. There is a grand market for shoes. Zappos has proven it. Big Shoes dubbed “Store Sko” in Norwegian, a small shop in my neighborhood that sells (guess what) big shoes, has also proven it. The shop has been running profitable for years. Big Shoes is master of segmentation marketing.

Asymmetric motivation

Big Shoes has a positioning advantage – competitors, incumbents and mainstream shoe shops are reluctant to pursue the market of abnormal shoe sizes. First, the market is not perceived large and hence lucrative enough compared to mainstream markets. Second, customized shoes require customized inventory and production lines.

Reverse marketing

When a mainstream shop cannot provide for the customer that shoe size s/he is looking for, they refer to Big Shoes, a sales person told be. Big Shoes receives referrals from competitors because they are in fact not yet competitors – they target different segments. Rather, for the mainstream shop, it is a matter of customer service.

Customer service

Since Big Shoes is about the only big-shoes-specialist in Norway, customers come back. As customer retention is high, Big Shoes builds a stronger relationship to its customers who again share the news with new customers.

Jobs-to-be-done

People with extra large feet do not mainly need a spectacular design or shock-absorbing functions with their shoes. They need shoes that fit. Big Shoes excel at solving that problem for this particular segment. The shop has even started providing shoes that competes with regular shoes on design.

By getting the job done and solving a real customer need, Big Shoes are able to provide great customer service, keep clear of competition, and accordingly charge extra. The shop has added mail order as distributions channel and expanded into additional XXL product ranges. Big Shoes is on the disruptive track.

What are other examples of disruptive, jobs-to-be-done marketing startups?

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How Lean paradigms go beyond gorillas’ assembly lines

Lean Manufacturing, Lean Production, Kaizen and Continuous Improvement (dear child has many names) have created buzz for many years. Originated with Toyota’s production system, “Lean” was primarily created with manufacturing businesses in mind. Now as manufacturing businesses are increasingly rendered by service and network businesses, how does Lean paradigms go beyond gorillas’ assembly lines and keep up with the new economy?

In one of my favorite articles, Casting of the Chains (pdf) from 2003, authors Ø. Fjeldstad and E. Andersen make a fruitful observation.

The world has changed. From 1960 to 1999 manufacturing companies’ share of GNP in the US, as well as its workforce, fell from 30 per cent to 15 per cent, with the consequence that such businesses are now a minority of the S&P500. Banks, transportation, building, healthcare, research pharmaceuticals and other services companies have taken over. Strategic models of the world, however, have not changed. When managers develop strategies for their companies, they still use the tools and language of the manufacturing organisation.

In brief, the authors found limitations in applying Porter’s Value Chain to other than traditional assembly line-based manufacturing businesses. Consequently, the authors extended the Value Chain to two more models; the Value Shop and the Value Network. The Value Shop creates value by scheduling activities and applying resources in a fashion that is appropriate to the needs of the client’s problem (typically management consulting, lawyers and doctors). Value in a Value Network is created by linking clients or customers who wish to be interdependent (typically banking, social networks and dating venues).

Business Model Patterns on Value Chain, Shops and Networks

When I joined my current employer to work with the web and startups, I did at the same time choose from working on Lean methodology alignment with one of Scandinavia’s leading media companies (see also Bharat N. Anand‘s Harvard Business Review case). Regardless of my interests in innovation methodologies and owing my conviction to entrepreneurship, I wanted to work with growth ventures rather than cutting down “corporate bacon” (is that innovation?). Later I discovered the Lean Manufacturing Startup, which basically adopts Lean Thinking and Customer Development to early-stage ventures and startups.

Although Lean Startup principles are argued to be generally applicable, it has mainly been applied to Enterprise- and Consumer Software cases. However, as far as Microsoft Windows creates value by linking consumers with third party software developers, and Google links consumers with advertisers, the software business generally acts as a value network. Hence, I believe that we start to see cases with the lean paradigm being adopted to the new economy.

In this manner, I assume that new schools of Lean methodologies not only help traditional management thinking avoid cramming business models with manufacturing approaches, but also preserve new-product introduction and disruptive innovation alongside continuous improvement.

The network economy calls for new models – entrepreneurship or management?

Technology changes. Yet, methodology remain. When managers develop strategies for their companies, many still use the methods and tools of the traditional organization. As mentioned in the previous post on the Lean Startup Business Model Pattern, there are new methodologies in town. However, the traditional business strategy formulation frameworks still fail to adapt technology change and the network economy, as well as the understanding of entrepreneurship as process but a whim. I reckon that there are some trajectories especially fruitful for adaption.

  • Take Michal Porter’s frameworks for an example. How do you apply the value chain framework to networked businesses, two-sided markets (e.g. social networks, online dating, auction sites, search marketing, credit cards, banks, etc.) where manufacturing is not the locus of value creation [1]. Management and consultants of all colors tend to stand by the former, but are the models still valid?
  • Also consider whether entrepreneurs have the time and resources to sit down and carefully lay out their long-time strategy. Or whether strategy formulation should come as consequence of processes where resources are scarce and uncertainty is extreme. This calls for new frameworks that embrace entrepreneurial learning and change methodologies. To site Steven Blank, A Startup is Not a Smaller Version of a Large Company. Instead early stage ventures require their own tools and techniques.
  • Commodification of web services, API’s and social media allows unstructured strategic models to become structured. That is, conceptual models would integrate data about your customers, such as user behavior and demographics to aid in decision support and increased responsiveness. Similarly, how does rapid collaboration and the free flow of information that are made possible with the social web affect the technology adoption life cycle?

The management challenges presented by entrepreneurship are different [2]. Nevertheless, the management challenges presented by the networked economy (read cloud computing, social web, you get it) are different. Network companies create value by facilitating connections between two or more customers. Not by efficiency in A-to-B manufacturing. Too often  managers try to use traditional strategy methodologies when dealing with new technology paradigms. Similar to what Clayton Christensen & co may think of as cramming. When dealing with the introduction of disruptive technologies of any kind, managers still have to align with entrepreneurial approaches. Indeed, there is a need for change methodologies.

[1] There are some excellent work on value networks and multi-sided markets by among others Ø. Fjeldstad and E. Andersen‘s Casting of the Chains , Tom Eisenmann, and the contributors at the Catalyst Code blog.

[2] This post was also inspired by Is Entrepreneurship a Management Science? by Eric Ries for Harvard Business Review

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