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Innovation in the Collaborative Economy

Point: The collaborative economy enables new business models (and disrupts old ones).

Story: The collaborative economy is growing as individuals find new ways to connect directly with their peers to share or rent their assets and skills. The collaborative economy includes sharing assets like spare rooms (Airbnb) and cars (RelayCars) or consumable goods (CampusBookRentals, Toyswap) or services (TaskRabbit, oDesk).

The peer-to-peer rental market alone is worth $26 billion, according to Rachel Botsman, and that doesn’t include peer-to-peer-lending or crowdfunding, which is predicted to reach $5 billion this year.  Altimeter Group’s sample of 200 collaborative-economy startups revealed that one-third had received VC funding, amounting to $2 billion overall and an average of $29 million per company.

Consumers are sharing and collaborating with each other as new platforms make search easier and verification more secure.  The collaborative economy is expanding rapidly because it:

  • appeals to consumers who want to make money from their unused assets (RelayRides avg $715/mo)
  • appeals to companies who want to rent out extra office or warehouse space or equipment
  • appeals to individuals who want to earn extra income running errands or doing one-off tasks
  • appeals to individuals and companies who want to rent assets at a lower-cost or on a short-term basis
  • is good for the planet: renting a car when you need it means fewer cars need to be built. Patagonia is partnering with eBay to encourage re-sale of its used clothing rather than have it go to the landfill.

Some collaborative-economy startups are partnering with existing players. For example, Deliv partners with retailers who want to offer same-day delivery to customers.  Big companies, seeing potential disruption as well as opportunity, are entering the market as well. BMW is offering rentals from its dealership in San Francisco, and GM invested in RelayRides, which connects car owners who want to rent their cars with consumers who want to rent them by the hour, day or month.  GM gave RelayRides access to GM’s OnStar Navigation System, which is installed in 6 million American cars. Anyone who has an OnStar-equipped car and wants to rent it out can sign up on the site and then use the OnStar app to let the approved renter unlock the car via the app rather than handing over the keys.

Action:

  • Explore new business models enabled by the collaborative economy. Altimeter’s Jeremiah Owyang and Chris Silva offer three models: Company-as-a-Service, Motivating a Marketplace, or Providing a Platform. Or, use Alex Osterwalder’s Business Model Canvas to think through changes in the nine elements that make up a business model.
  • If you’re an established company, think about ways you could be disrupted, and consider jumping in or planning a counter-move.
  • If you’re a startup, consider providing a platform that connects and verifies the parties involved. Be aware of legislation and incumbents who may seek to legal action (bus companies blocking ride-sharing services like Ridester.com) or running afoul of licensure or insurance laws.
  • And whether you are an individual or a company, think about the under-utilized assets that you have sitting around.  Perhaps there’s a way to monetize them.

Sources:

 

The Sharing Economy, Economist March 9, 2013

Rachel Botsman, What’s Mine Is Yours: The Rise of Collaborative Consumption

Ontario bus-companies trying to shut down competition from ride-sharing groups

Crowdfunding tries to grow up – May. 6, 2013 – CNN Money

Jeremiah Owyang

Chris Silva

 

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CVS and Ford: Putting Designers in Customers’ Shoes – literally

Point: To design better for customers, put yourself in their shoes.

Story:  What’s it like to drive if you can’t turn you head easily to look over your shoulder? Or to  shop if bending over hurts and the product you want is on the bottom shelf?

That’s what older drivers feel, and every minute in the US, one person turns 66. In seven years, the US will have 55 million people over age 65 – a big market.

To better design for the needs of this market, companies like pharmacy chain CVS are putting themselves in the shoes of aging customers with AGNES. AGNES stands for “Age Gain Now Empathy System.” Developed by the MIT AgeLab, AGNES is a specially-designed jumpsuit that mimics what it feels like to be in your mid-70s. The suit can be be worn by designers, product developers, architects and planners to experience firsthand the physical challenges associated with aging. For example, bungee cords anchored to the helmet and hip restrict movement and rotation of the spine, and elastic bands from hit to wrist reduce shoulder mobility.

CVS will be making store design changes based on learnings from the suit. For example, they’ll be putting carpeting in the stores to reduce slick-floor slipping, and they’ll adjust the height of checkout counters to require less bending and lifting.

Similarly, Ford Motor’s engineers use a similar suit (they call it the “Third Age Suit”) to experience driving with restricted movement and dexterity in hands, knees, neck and even eyesight (goggles simulate cataracts).  Ford also has a bulbous weighted “empathy belt” that simulates the physical effects of pregnancy.  All of these inventions help give designers a better sense of the consumer’s experience of the company’s products and services.

The result: not only will product designers develop better products for the elderly, but their innovations — like Ford’s hands-free automatic parallel-parking system — appeal to consumers of all ages. Simplicity, ease and comfort attract customers of any age.

Action:

  • Create tools or protheses that simulate the customer’s experience of the product or service
  • Test products and services for ergonomics for a wide range of customers (especially the growing population of those over 65)
  • Look for win-win design solutions that improve usability for everyone.

 

Sources:

MIT AgeLab: AGNES (Age Gain Now Empathy System)http://agelab.mit.edu/agnes-age-gain-now-empathy-system

Future Demographics – The Silver Book: http://www.silverbook.org/browse.php?id=57

Interview with Dr. Joseph Coughlin on AGNES and the AgeLab: http://web.mit.edu/newsoffice/2009/coughlinqaa-0414.html

In An Aging Nation, Making Stores Senior-Friendly
http://www.npr.org/2011/05/10/135773106/in-an-aging-nation-making-stores-senior-friendly

In a Graying Population, Business Opportunity
http://www.nytimes.com/2011/02/06/business/06aging.html?pagewanted=all&_r=0
A Profile of Older Americans: 2011 – Administration on Aginghttp://www.aoa.gov/aoaroot/aging_statistics/Profile/2011/docs/2011profile.pdf

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Intuit’s High-Velocity Experiments

Point: Fast-cycle experiments let companies create the best product/service offering with the least risk.

Story: At the World Innovation Forum, Scott Cook, co-founder of Intuit, described his company’s culture of high-velocity experimentation. Intuit uses an experiment-driven decision-making process throughout the organization. Rather than expect executives and managers to know all the answers, Intuit uses large numbers of low-cost experiments to test new product, service, and marketing ideas.

To illustrate how high-velocity experimentation works in organizations, Cook described how the concept works in Intuit’s 20-person online TurboTax unit.  In the past, this unit ran about 7 experiments during the annual three-month tax filing season.  Now they run 140 experiments.  Not only do they run more experiments, but they run each experiment on a fast cycle so that they can accumulate results and grow more knowledge during each season. Intuit created a weekly cycle for developing, testing, and analyzing experiments that lets each experiment create new information that feeds into the next set of experiments the next week.

Fast experimentation also improves employees’ sense of engagement and ownership.  In the past when the 20-person team did only seven experiments per year, the average team member might only have one of “their” experiments run once every three years.  But with new high-velocity approach, each employee creates and tests a new idea once every two weeks.

Paradoxially, running more experiments and getting more failures lowers the fear and cost of failure.  When a company runs only a few experiments — and every change or new product really is an experiment — then each experiment matters a lot more to the company and to the employees working on that experiment.  If an employee works for more than a year on a single big experiment, then the failure of that experiment surely has an impact on the employee’s career, even if the company professes to permit failure.  But if an employee works on many quick experiments that steadily improve organizational performance, then the success or failure of individual experiments matters little.

In Intuit’s case, 89% of experiments fail, and yet the online TurboTax unit increased conversions by 50% and successfully created a widely-lauded smartphone app that lets people do their entire tax preparation — from taking photos of tax documents, to automatically putting numbers in the right boxes, to electronically filing their forms — all on a smartphone.  The hundreds of tiny experiments let the TurboTax unit tweak and test many variations to come up with the best offering.

Action

  • Trust experiments rather than experts to find the truth in a dynamic and volatile business environment.
  • Teach individuals how to perform cheap experiments by finding and testing the key assumptions behind every new idea rather than building one big new product.
  • Use large numbers of low-cost experiments to both grow knowledge and improve employee engagement.
  • Create an accelerated cycle of experiments to reduce time-to-knowledge and time-to-market.
  • Coach executives to become experiment-seekers — to use experimentation as a key decision-making tool.

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