Devangshu Dutta
October 16, 2007
BOOK REVIEW: HIDDEN IN PLAIN SIGHT: Erich Joachimsthaler
In the midst of extensive or frequent civil works, fluorescent high-visibility clothing contributes to the invisibility of the individual, and can serve as a superb disguise. Similarly, in the midst of extensive research and in-depth analyses, basic insights can go unnoticed.
Erich Joachimsthaler has plenty of examples in his book Hidden in Plain Sight to drive home the point that attention to stuff that is not so obvious to competition can lead to brilliant success such as Sony’s growth through innovative products (the WalkmanT, for one) that met unexpressed consumer needs. Conversely, an inability to spot this can bring even the leaders down, illustrated once again by Sony’s loss of leadership in mobile personal entertainment to Apple’s iPod.
The challenge for companies is to uncover the hidden opportunities by looking into their business from the outside rather than the usual inside-outwards view, and by accurately defining the ecosystem of demand. For most management professionals, this will be harder than it seems.
The exercise begins with the question, “Why didn’t we think of that?” This is intended to remind the reader of how the obvious escapes attention as we sink deeper and deeper into complex analysis and in developing ever more complicated scenarios. And Joachimsthaler sets out a framework that he believes can help larger companies to innovate in a structured way.
Of course, the reader may feel differently, and quote George Bernard Shaw who divided the world into two kinds of people, the reasonable and the unreasonable, and credited innovation to the latter. Or one may agree with Henry Ford who, apparently, felt that customers did not really know what they wanted. He is reported to have quipped: “If I had asked my customers what they wanted, they would have said, ‘A faster horse'”
Yes, at the cutting edge, innovation may seem to be more about the innovator’s creative desire to do something different, and less about “meeting customer needs”. Yet, it is the unmet and, more importantly, unexpressed customer needs, that offer the greatest source of competitive advantage.
This is why innovation seems to spring more from small companies, or companies that are started up around a specific idea that is unique or new. In such a small company or a start-up, typically the founder/innovator/inventor is drawn from the same pool as the target customer. Therefore, while they may be addressing a need they feel acutely, the innovators are unconsciously plugged into their customer’s unmet/unexpressed needs. There are seldom any silos; the whole team is generally focussed on the one problem to be solved.
However, as companies grow larger, functional specialisation emerges — division of labour based on skill-set is deemed to be a more efficient way of doing things. The design folk design based on “trends”, the marketing folk market as they know best, and the manufacturing folk produce to specification and the “demand” generated.
With this speciality of skills taking over, there is a growing disconnect between their efforts to dig for insight and the gold that is “hidden in plain sight”. While data is available in abundance, real knowledge is scarce, and insight just gets buried in well-structured processes and hand-offs between functional silos.
This trend has only accelerated in the past 15-20 years with pervasive information technology that enables the mundane operational process to the most strategic. Never before have management teams been so focussed on information and analyses. As businesses grow, data warehousing and data mining are defined as the competitive cutting edge, pushed along by interested parties (including IT solution providers, but that is another book!).
However, in reality, excessive information is increasingly passed off as knowledge. An inward focus on the management team”s own objectives is often disguised as insight gained on the customer or the market. Functional specialists analyse the market, the latent needs and the gaps in their own way, and if the company is lucky to have some generalists, some of those dots get joined to form a more complete picture.
It is in reminding management of this reality that Joachimsthaler’s book provides a tremendous service. It presents a well thought out model named, curiously enough, DIG – short for Demand-First Innovation and Growth. The three elements laid out sequentially begin with a framework for defining the demand landscape, identifying the opportunity space within it, and then creating a strategic blueprint for action.
Joachimsthaler’s process to define the demand landscape requires managers to put themselves in the customer’ shoes – a process demonstrated with examples from Proctor and Gamble and Pepsi”s Frito Lay. Using the customer’s goals, actions, priorities (there’s the “GAP”), needs and frustrations, demand clusters can be developed and filled out with additional research. The strategic fit between these demand clusters and the brand can then feed into the next steps of identifying the opportunity space.
The filters, or lenses, as the author calls them, are the “eye of the customer”, the “eye of the market”; and the “eye of the industry”. At every step, assumptions and presumptions need to be challenged. Using these lenses, the sweet spot or spots and the growth platforms can be identified, and extrapolated into the strategy. On the downside, the book is clearly about a framework, which may have been best detailed in an article, rather than being stretched over a book.
The author does stress at one point that it is not about “brainstorming”, but about structured thinking. However, he seems to do this in a tone that suggests brainstorming as something vaguely distasteful due to the lack of directional structure.
While examples from the companies studied keep the text alive, yet in places one struggles to correlate the examples with the framework. Indeed, there may well be too much structure to this book, and not enough examples of how inter-disciplinary thinking and functioning can actually produce sustained innovation.
Understanding the model itself can be a fairly involved process. The best way to tackle it may be to approach it as a project, and use the DIG framework as a how-to guide for a real problem. If you are a structured, methodical, sequential kind of manager and possibly work in a large company, the book could provide tools to put that thinking to work for innovation in a team. On the other hand, if you are more of a “people person”, you may want to leave this book alone. [For more, here’s the book on Amazon.]
Devangshu Dutta
April 20, 2007
A few weeks ago there was an immense buzz about an email that was apparently leaked from Starbucks. Chairman Howard Schultz apparently had written this to CEO Jim Donald, and there was immense speculation about whether it was fake or a genuine leak.
Well, Starbucks itself put that mystery to rest by confirming the e-mail’s authenticity, and that makes it even more interesting. The soul-searching shared by Schultz in the memo, reflects the criticism that Starbucks has faced in recent years.
As a pioneer of “the third place” experience, it must be especially painful for Schultz to admit that the quality of experience now is below what the consumer would (or should) expect. In the quest for scale and efficiency, he says:
“…we have had to make a series of decisions that have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.”
He acknowledges ownership for the decisions, which he says…
“…were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is unfortunately much more damaging than the individual pieces.”
As a brand with over 13,000 locations, clearly Starbucks needs to be able to work with a model which is consistent across locations, can be implemented quickly, and delivers the product quickly and at controlled costs. Automation and packaging are two major areas that have given it that capability, but have also become the weak point of the experience from the perspective of coffee connoisseurs, or even people who would just enjoy a “rich and personal” experience.
Schultz quotes some specific cases that are especially powerful illustrators of what is right AND wrong with the business model.
“…when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency but removed much of the romance and theatre that was in play with the use of the La Marzocca machines. This specific became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista.”
Clearly the automatic machines improve the consistency of coffee delivered in each cup of Starbucks, and also reduce time the customer waits (a huge issue in many of the stores where peak-hour traffic can result in customer queues right to the door). But it is that much more generic an experience. And one would imagine that the barista behind the counter is also just that bit less involved (dare we say, less passionate) about the cup.
Creating a process (and better still, automating it) reduces the dependency on individual skill in any business, and is a strategy followed by all businesses that want to scale up without losing quality. However, an experience that is supposed to be “personal” and unique, needs to retain the human touch to a far greater degree.
Schultz talks about moving to flavour-locked packaging – again a great decision to retain the quality of the product across the chain of stores, while creating an efficient supply chain from procurement, through roasting, bagging and shipment to stores. Each of the outlets receive the coffee with a optimal shelf life left in the product. However, as Schultz says,
“…I believe we overlooked the cause and the affect of flavour lock in our stores. We achieved fresh roasted bagged coffee, but at what cost? The loss of aroma — perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the customer, and once again stripping the store of tradition and our heritage?”
When Schultz took over Starbucks there were hardly any significant competitors – it was either personalised, neighbourhood cafes or fast food joints serving low-grade motor oil masquerading as a beverage. The product itself that Schultz wanted to sell was not just the coffee, but the possibility of someone having a beverage in a relaxed environment outside home or a bar.
Today, Starbucks has itself upgraded the customer’s tastes and expectations, but risks losing that product leadership to smaller competitors, even as the fast food chains are improving the coffee that is served on the go, at prices often cheaper than Starbucks, and also as other “third place” options emerge.
It is the closing of the memo that shows a ray of light…
“…we desperately need to realize it’s time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience. I have said for 20 years that our success is not an entitlement and now it’s proving to be a reality…Let’s get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others. We source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world, and we have an enormous responsibility to both the people who have come before us and 150,000 partners and their families who are relying on our stewardship.”
From reactions from various quarters, it seems that a lot of people not only agree with Schultz, but also admire him for his frank assessment of Starbucks’ weakening brand leadership and authenticity. When the leadership is honest with itself, there must be hope for the brand and the company.
An acquaintance who works with Starbucks expressed it eloquently when she identified the challenge of “staying small, while growing big” and said, “I’m glad our leadership hasn’t forgotten the qualities that have made us who we are.”
Starbucks remains a market leader by far, in terms of retail footprint worldwide and can only grow stronger by sorting out these issues which are at the core of the business.
Devangshu Dutta
October 31, 2006
Normal human tendency is to label what one doesn’t understand. And so we call the younger members of society by various names – youth, teens etc. By putting them into categories of age, we claim complete understanding of what they are, what moves them, and what they want, in effect adopting convenient disguise for the fact that we actually don’t have a clue.
My personal favourite term is “tweens”. In my dictionary, tweens are that magical, difficult, weird age somewhere in the region of 10-16 years, give or take a couple of years, when one is not quite an adult to be allowed an opinion, and not quite young enough to be indulged one. I believe that is why rebellion is the hallmark of the tweens and the teens.
Let’s look at the broad segment of the young (under 20) population – about 450 million individuals in India are estimated to be below 20 years of age. 105 million individuals are in the age group of 15-19 years, already in their early years of discretionary consumption. About 112 million individuals are in the 10-14 years segment – within 5 years many of these will be making career choices, and in another 5 years most would have already begun earning and spending. Imagine the power of the tweens and the teens.
However, this is not one homogenous mass of youngsters who think in the same way. Some, of course, will be a typical marketer’s delight – gulping heavily-advertised colas and wolfing down pizzas and burgers at a birthday party with their pals, while demolishing each other on the latest game console. Others may only be aspiring to acquiring a fraction of such a lifestyle in their later years. Many – too many – will not only not have these things, but may not even be able to dream of a lifestyle that looks much different from their parents.
Some are motivated by firang lifestyles, and may look at the earliest opportunity to apply for a student visa in the west. Others are surprisingly loyal to the idea of staying within the country, and actually contributing to progressing it. An increasing number find their “Indian skin” very comfortable to wear, even while moving in rhythm with a semi-westernized lifestyle.
They’ve got a whole bunch of different ideas about relationships. To many, career options are always wide open and whoever works for life in one job may have no other options. Yet, when it comes to personal friends, the buddies from pre-school may still be the ones they hang around with.
Clearly age, then, is not the key differentiating or grouping factor. Neither, it would seem, is income or education. SEC segmentation more or less breaks down when dealing with the youth. There are many, possibly hundreds of segments for a marketer to deal with.
“What’s hot” may change every week – if it’s really hot, it may stay around 3-4 months. RDB ( Rang De Basanti ) was a protest against the society the young are inheriting, and its candle-light march was emulated for many a cause. But Munnabhai is cool today, and Gandhigiri is now the road to follow. On the other hand – are these really two sides of the same coin?
Some very global trends catch on very fast, while others are uniquely Indian.
So how does one make sense of this kaleidoscope? How is a marketer to predict what will appeal to the most consumers? How can we lead the consumers into our store, to our brand counter, to the product that we want to promote?
If I were to pick one learning for the youth market that made – and still makes – youth markers successful, it is the fact that they do not predict fashion and trend. They do not attempt to lead the consumer but follow diligently. They identify the opinion leaders, identify with them, and understand what’s hot with them. Then they place their bets – a lot of them, well-spread out. Sure, not all of them are right, but it’s a whole lot better than trying to predict fashion 8-12 months in advance.
An equally critical step is to let go of the trend even as it is being picked up by others. After all, if you’re really with it, by now you ought to have identified the next hot trend rather than flogging the same horse that everyone else is on.
Here a newsflash, the youth are bright, for all the appearance of vacuity; extremely opinionated, despite the apparent boredom they display; fully-charged up with the current domestic social concerns and a clear view – well-informed or not – of what’s happening around the world.
We’ve seen some successes in the Indian market, with a few companies being at the forefront of trying to understand and cater to the youth with offerings that are innovative and promotions that talk to them in their language. And yet, most companies are still working at them in the same mould as they were a decade ago, while others are simply trying to transplant strategies that worked in another country.
The largest market opportunity in decades is going a-begging. What’s going to be your platform to make the connection? What’s the relevance of your message? Unless you’re listening to the youth, they’re unlikely to be listening to you.
Devangshu Dutta
August 31, 2006
Mall Mania, Mall Madness – alliterate as you will – it’s a phenomenon that is certainly taking over the newsprint, airtime and, quite possibly, your neighbourhood.
A study published in 2005 estimated that by 2007 over 360 shopping centres would be operational around the country, with approximately 90 million square feet. A meagre increase of 0.08 sq. ft. in per capita shopping space doesn’t seem like much in a country of a billion-plus people.
But most of it is concentrated around the big cities – Delhi and Mumbai account for more than half of the total space projected, with the other metros and mini-metros such as Bangalore, Pune, Hyderabad etc. taking the total up to 90% of the space.
One may argue that money (real estate development) is only following the money (consumers) – after all, there are more consumers and higher incomes in these major urban centres.
But why would mall developers expect Delhi’s consumers to suddenly switch en-masse to shopping in Gurgaon, where 6 malls are already active in a short distance of about a kilometre, 3-4 more under hectic construction in the same area and several more scattered around that suburb? Or why do Mumbai’s developers expect people to drive several kilometres from the suburbs on a regular basis to the centre of town to grace only their shopping centre? It is only such expectations that can explain the gold rush mentality that is overpopulating certain areas with shopping centres and malls.
While per-capita availability of A-grade shopping real estate looks really low, in certain areas we foresaw oversupply, with developers thinking in terms of “property” rather than as retail space managers.
Most shopping centre developers have carried out only cursory studies on the customer catchments that their tenants will be expected to live-off. As a result, conversion of footfall into sales is low for the tenants, except for food-courts, which are benefiting from the window-shoppers rounding off a day or an evening of roaming the malls with a meal. There is a lack of differentiation in product and service offer between the shopping centres and, with nothing distinctive on offer, repeat visits and – more importantly – repeat purchases are a challenge.
Developers in smaller towns seem to be following the same model, scaling up space or scaling it down based on the capital cost vs. expected capital gain and tenancy income. They are pitching for much the same brands as tenants as the developers in the bigger cities.
There is competition for customer traffic between the shopping centres and large stores (such as Mumbai’s newly opened Hypercity, across the street from InOrbit Mall, both developed by the Rahejas), between the shopping centres and the traditional high street, and between large format stores and speciality malls.
For the most part shopping centre development in India in the recent years has been seen as an aspiration to be fulfilled – hence, the most important factors have been the size of the shopping centre, quality of fixtures, marquee tenants who can provide the glamour or the legitimacy). The focus has been more on the “positioning”.
The business will begin maturing and will begin taking developmental leaps forward when centres are seen as commercial infrastructure to be planned with the end-consumer in mind, and to be serviced over a certain lifetime.
Until then, we can look forward to announcements of many hundreds of shopping centres, the launch of a few hundred, and the conversion of many of those into uses other than as shopping centres within a few months or years of their launch. And for investors also it might be a game of Roulette rather than Patience.
Devangshu Dutta
August 8, 2006
Mall Mania, Mall Madness – alliterate as you will – it’s a phenomenon that is certainly taking over the newsprint, airtime and, quite possibly, your neighbourhood.
A study published in 2005 estimated that by 2007 over 360 shopping centres would be operational around the country, with approximately 90 million square feet. A meagre increase of 0.08 sq. ft. in per capita shopping space doesn’t seem like much in a country of a billion-plus people.
But most of it is concentrated around the big cities – Delhi and Mumbai account for more than half of the total space projected, with the other metros and mini-metros such as Bangalore, Pune, Hyderabad etc. taking the total up to 90% of the space.
One may argue that money (real estate development) is only following the money (consumers) – after all, there are more consumers and higher incomes in these major urban centres.
But why would mall developers expect Delhi’s consumers to suddenly switch en-masse to shopping in Gurgaon, where 6 malls are already active in a short distance of about a kilometre, 3-4 more under hectic construction in the same area and several more scattered around that suburb? Or why do Mumbai’s developers expect people to drive several kilometres from the suburbs on a regular basis to the centre of town to grace only their shopping centre? It is only such expectations that can explain the gold rush mentality that is overpopulating certain areas with shopping centres and malls.
While per-capita availability of A-grade shopping real estate looks really low, in certain areas we foresaw oversupply, with developers thinking in terms of “property” rather than as retail space managers.
Most shopping centre developers have carried out only cursory studies on the customer catchments that their tenants will be expected to live-off. As a result, conversion of footfall into sales is low for the tenants, except for food-courts, which are benefiting from the window-shoppers rounding off a day or an evening of roaming the malls with a meal. There is a lack of differentiation in product and service offer between the shopping centres and, with nothing distinctive on offer, repeat visits and – more importantly – repeat purchases are a challenge.
Developers in smaller towns seem to be following the same model, scaling up space or scaling it down based on the capital cost vs. expected capital gain and tenancy income. They are pitching for much the same brands as tenants as the developers in the bigger cities.
There is competition for customer traffic between the shopping centres and large stores (such as Mumbai’s newly opened Hypercity, across the street from InOrbit Mall, both developed by the Rahejas), between the shopping centres and the traditional high street, and between large format stores and speciality malls.
For the most part shopping centre development in India in the recent years has been seen as an aspiration to be fulfilled – hence, the most important factors have been the size of the shopping centre, quality of fixtures, marquee tenants who can provide the glamour or the legitimacy). The focus has been more on the “positioning”.
The business will begin maturing and will begin taking developmental leaps forward when centres are seen as commercial infrastructure to be planned with the end-consumer in mind, and to be serviced over a certain lifetime.
Until then, we can look forward to announcements of many hundreds of shopping centres, the launch of a few hundred, and the conversion of many of those into uses other than as shopping centres within a few months or years of their launch. And for investors also it might be a game of Roulette rather than Patience.
