A systematic framework for value innovation

Expansion stage software companies, such as our portfolio companies, usually hit a few hurdles in their growth trajectory. Typically, one of the issues they face is expanding outside of a limited market, similar to that of an early adopter’s market, or seeking expansion outside of a crowded market that includes quite a few competitors. For instance, one of our portfolio companies, Central Desktop, has been competing in the really competitive market of “project management and collaboration software”. In recent years, the maturation of this market led to speedy price erosion and commoditization of common feature sets, forcing competitors to find new markets or niches that enable them to distinguish themsleves by some degree of specialization.

How can a new startup reinvent its product to address new markets, or to expand its present market enough to experience the rapid growth their venture capital advisors are always urging?

Not only do these issues concern product strategy, but also the entire corporate competitive strategy and positioning.  There exists some well researched examples as it relates to innovation management that can be readily adapted for these situations. Kim and Maubourgne, in their 2005 book “Blue Ocean Strategy”, listed 6 “frontiers” or “perspectives” into which innovations can be focused to generate new markets or revive existing ones. They are:

1. Substitute industries: That is, to glimpse beyond direct competitors and view the market as the aggregate of both direct competitors and substitutes. For example, the most powerful competitor to all project management tools is in fact Microsoft Excel.

2. Strategic groups within industries: That is, to redefine market segments existing within a current market, deliver outstanding, differentiated value directly to those segments, and develop the market from within.

3. The chain of buyers: Most companies only concentrate on the instant buyers yet they neglect to address influencers and users who might in the end turn out to be buyers, given a sufficiently attractive value proposition. As an instance, for a long time RIM dominated the smartphone market since they served the needs of corporate IT departments very well. Apple doesn’t have great corporate email on the iPhone, however, its outstanding form factor, user friendly interface and versatility enables it to appeal directly to the corporate users who are running to the iPhone, in spite of their IT department’s misgivings.

4. Complementary product & service offerings: Expand a product horizontally by integrating with other products and services that serve the same market segment. 37signals does this really well by integrating with quite a few other web-based software tools that form the backbone of small business software systems.

5. Functional or mental appeal to buyers: Many times, the correct way to differentiate is to go in opposition to the industry norm. Again, Apple has written the book on this, because they continue to come out with models after models of fantastically designed, expensive looking laptops that are priced at a premium to the market, similar to how other PC manufacturers attempt to upgrade their offerings with more and more impressive processors.

6. Time: This is perhaps the most subtle of the perspectives. Essentially, Kim and Maubourgne identify “shakers and movers” in the industries who, instead of holding out for outside forces to shape their markets, participate completely in the growth of the market, either through internal innovation, strategic investment or regulatory adjustments. They develop into the headliners, the frontiers moving vanguard that truly outline brand new markets.

Tien Anh Nguyen is an Associate at OpenView Venture Partners, responsible for delivering strategic value-add services to the portfolio companies as part of the OpenView Labs team.

“The point of resolve” is the moment when an individual or a group summons up the will to make a tough decision. We risk losing it all, or gaining significantly.. But at some point the door opens, you make the decision, and suddenly it’s behind you. Ahead of you are the consequences. But for the moment, you are at the point of resolve.

Decisions are made even more difficult with the hundreds of factors that can come into consideration.. The spin can befuddle us. Our course can feel shaken and out of control. But, finally, we obtain our moment of resolve.. Once you break through, you’re past the moment of resolve and into implementation mode. There’s no turning back.

To be a valuable leader, you must enlighten others about these moments of decision.. People need to know you’ve made a tough decision, that you’ve committed to a course of action, and that there’s no turning back. People look for signs of resolve in their leaders – it builds trust to know that their leaders are willing to make tough stands.

After the critical choice is made, an important ground rule comes into effect: the entire group must remain united in upholding the decision, even if you opposed it previously.. It’s mandatory the ground rule be clear: once the decision is made, we all stand in support of it.. Leaders who want to build trust enforce this ground rule and make no exceptions.

Communicate the Results

At some point, the decision is made. The next step is telling people the results and explaining the rationales behind the decision. Surprisingly, this is where a lot of decision processes break down. Your journey may be finished, but there are others who are still lost.. An intricate decision can impact many people.. It’s not often where one can see people mistakenly communicated a choice too broadly.. On the other hand, I’ve seen countless examples of failing to let key people know what happened.

Don’t forget to publicly recognize everyone involved. Small tokens of appreciation – a team t-shirt, a team photo– are important symbols of having participated in an important decision. Small things can symbolize big contributions and provide people the recognition that builds trust.

Once the decision is made, there’s one more thing you should do. You should gather together the individuals involved and collaborate with them on how well the decision was managed. What worked well? And how it could be improved upon for next time? This feedback may seem unnecessary – but believe me, you will glean things that can help you improve all your future decision processes.

Take this free work survey to see if your organization practices the 10 Quantum Leaps of high-performing organizations.

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Leading at Light Speed is an essential new leadership book by Eric Douglas synthesizing the best business practices into 10 Quantum Leaps that build trust, spark innovation, and create a high-performing organization.

The first quantum leap is Align the Core Values. An example of core values can be seen on page 21, with Procter & Gamble as the company cited.

One of the world’s leading manufacturers of consumer products is Procter & Gamble. With billions in sales, P&G has a reputation for excellence in marketing. Our leaders communicate and reaffirm our core values, giving us long-lasting success.

People
• We attract and recruit the finest people in the world.
• We build our organization from within, promoting and rewarding people without regard to any difference unrelated to performance.
• We act on the conviction that the men and women of Procter & Gamble will always be our most important asset.

Leadership
• We are all leaders in our area of responsibility, with a deep commitment to deliver leadership results.
• We have a clear vision of where we are going.
• Our goals are focused, achieving leadership objectives and strategy.

Ownership
• We accept personal accountability to meet the business needs, improve our systems, and help others improve their effectiveness.
• We all act like owners, treating the company’s assets as our own and behaving with the company’s long-term success in mind.

Integrity
• We always try to do the right thing.
• We value honesty and authenticity.
• Within both the letter and the spirit of the law, we act.
• Every action, every decision upholds the values and principles of Procter & Gamble.
• Here at Procter & Gamble, our team members are always our most important asset.

Trust
• We are determined to be the best at doing what matters most.
• We question the status quo and seek answers to our doubts.
• It is our great desire to improve our organization and succeed in the global marketplace.

Passion for Winning
• We respect our P&G colleagues, customers, and consumers and treat them as we want to be treated.
• We have confidence in each others intent and effectiveness.
• It is our belief that the best work comes from a solid basis of trust.

Discover how well your organization measures up to the 10 Quantum Leaps with this free work survey.

Leading at Light Speed is a powerful leadership book for businesses, public agencies, and nonprofits revealing the 10 specific ways an organization must act and behave to build trust, spark innovation, and create a high-performing organization.

The Ambition Paradox is a concept in Leading at Light Speed described in Chapter 9 along with three other Leadership Paradoxes. You must purchase the book in order to read all four.

True leaders are ambitious – but their ambitions are in service to something greater than themselves. Martin Luther King, Jr., Jimmy Carter, Cesar Chavez, Barack Obama – each had ambition, but they harnessed their personal ambition to a larger cause. Peter Drucker, the famed management consultant, describes it as a singular focus on defining what the organization needs. When Louis Gerstner took over at IBM, he saw the need for far greater customer focus. When Jack Welch took over at General Electric, he saw the need to divest the company of any business that wasn’t number one or two in its marketplace. When Darwin Smith took over at Kimberly-Clark, he saw the need to sell the mills and focus on the paper products business. Let it not be said that these were not men of ambition. But the main thing was that each felt they had found precisely what they needed to do for the good of the organization. No one told Gerstner or Welch or Smith to do these things. Each had the ambition to get it done. Nevertheless, these were the essentials.

Leaders master the fine line between self-serving ambition and selfless ambition. In the end, it boils down to the fact that effective leaders are willing to do the things that are right for the organization – even though it will challenge the organization and cause some people pain. So when faced with the ambition paradox, ask yourself: “Am I willing to suffer some personal loss – even up to losing my comfortable way of life or my job – in order to do what’s right?” If the answer is yes, then you’ve found the path through the ambition paradox.

Take this free work survey to discover how well your company measures up to the 10 key practices of high-performing organizations.

Leading at Light Speed is a groundbreaking leadership book by Eric Douglas describing the 10 Quantum Leaps which build trust, spark innovation, and create a high-performing organization.

What is spark? By spark, I mean inspiring people to innovate and create.

It’s easy to spot an organization that has high levels of spark:

• People feel free to challenge the status quo.

• Going farther than what is expected by workers is the current norm for company employees.

• People feel their work is fun.

• When workers can suggest ideas for company changes they must feel unfettered by higher ups and their rank to do so.

• Sharing concepts freely concerning new developments on old improvements are a common practice with employees.”

3M is a good example of a company that focuses on trust and spark. Its “15 percent rule” enables employees to spend 15 percent of their work time exploring and conducting experiments. Tech people can freely apply for corporate funds for innovative programs they see fit to develop. Ongoing maturing innovation has developed such items as Thinsulate and ScotchGard.

Fred Smith

Fred Smith, founder and CEO of Federal Express, “We hammer home that not to change is to be in the process of dying, of not meeting the market as it is. Those who inspiring change earn many kudos as we see it. We don’t hang people who try something new that doesn’t work out, because that’s the easiest way to ossify an organization – to crucify the people who are trying to innovate.”

Steve Jobs

By now, nearly everyone is familiar with the story of how two young men named Steve – Wozniak and Jobs – pretty much created the personal computer industry. Today Steve Jobs, co-founder and CEO of Apple Computer, still puts a premium on fun, creativity, learning, and exploring new ideas: “Learning about new technologies and markets is what makes this fun for me,” Jobs says. “You just gotta go learn this stuff. If you’re smart, you’ll figure it out.”

Walt Disney

Spark thrives in an environment of freedom, where the unexpected is invited, embraced, and encouraged to evolve into value. Knowing the concepts inside and out is the level of deep understanding Walt Disney had for it. Long before Mickey Mouse came along, he injected creativity into his team of animators. He wasn’t content to have silent cartoons: he wanted to produce the first cartoons with sound. He wasn’t content with black and white: he wanted color. The people who worked with Disney often remarked on the freedom he gave them to try new things – and they drew on the culture he built to come up with their own dazzling creations.

Google

One of the best examples of spark is Google. A company not at the forefront of business ten years ago has since developed a bright image, a strong reputation with great integrity which adds up to a level of high spark. Today, new innovations influence everything from advertising and media to geo-science, disease control, and climate prediction. Several years from now I have a premonition that the Google guys will continue to revolutionize our daily lives at home and at work. Google has created a new kind of company, one that blends the best of a non-profit with the best of a for-profit. The speed of light is the level we operate at and has redeveloped, for the better, the strength of our goals and success of our mission.

Spark isn’t limited to the private sector. Ted Gaebler, co-author of “Reinventing Government,” sees innovation as one of government’s most important missions: “We need to start engaging public employees’ whole brains,” he says, “not just the expenditure control half. We need to engage the entrepreneurial brain as well.”

Is your organization implementing the practices of high performing organizations? Find out with this free work survey.

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Modern warfare writings (Sun- Tzu, The Art of Warfare) and traditional philosophy (Socratic teachings) identify the two key tenants of any business strategy: Know your enemy and know your self . . .

Understanding your competition (the Enemy) allows you to understand the market, the opportunity and to proactively react to his strategies to gain market share. Whenever someone tells me “there is no competition,” I know immediately that entrepreneur doesn’t know his market.

Knowing yourself helps you address your own short comings. if you can’t be the low cost provider due to lack of economies of scale or distribution channels, then your marketing strategy has to be about something other than price. Maybe it’s service, maybe it’s responsiveness. But knowing your weaknesses allows you to compensate for them in the market.

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Good People Make Tough Choices

As a budding entrepreneur, you will be faced with many tough choices. Often, we find ourselves deciding between right versus really right.

In his book, “How Good People Make Tough Choices,” Rushworth Kidder defines ethics as “right versus right.” To achieve high ethical standards, one must first understand the bases of ethics and then practice them. For example, it is “right” to tell the truth, but it is also “right” to be loyal to principles that treasure human dignity.

Take the following “truth versus loyalty” ethics test. You are a law-abiding citizen, and Harriet Tubman comes to your door and asks if she and her obvious runaway slaves can rest for the night. You are aware that the local sheriff has issued a warrant for her arrest. Your dilemma: Do you obey the law or succumb to your loyalty to the principles of human dignity and allow the slaves to sleep in your residence?

No one said it would be easy, will you make the right choice?

As I look at my projections for 2009 I am trying to figure out how to maintain profitability in this challenging economy. And while I haven’t raised my prices in a while now, this sure doesn’t feel like the climate to raise prices . . . so how do I navigate this and make sure I stay a FIT business?

For my business, I am looking long and hard about HOW I price – instead of just thinking of our services as traditional hourly rate I am starting to explore pricing that is based on the value we deliver to clients. That gives us an incentive to become more efficient for our clients without constantly eroding our own income. I want to move to a healthy environment in which my interests and my clients interests are completely aligned. And I want to make sure we are creating customer delight always, not encouraging clients to ask why we spent 15 minutes doing one thing or another . . .

So on my short list is Ronald J. Baker’s Pricing on Purpose: Creating and Capturing Value . . . check it out! I think FIT businesses need to reflect on how they price themselves. Join me in talking through how we can all improve our bottom lines, even in a challenging economy!

http://www.pbcsf.com/

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Business Book Club

This month we will be reading Guy Kawasaki’s “Reality Check“

In Silicon Valley slang, a “bozo explosion” is what causes a lean, mean, fighting machine of a company to slide into mediocrity. As Guy Kawasaki puts it, “If the two most popular words in your company are partner and strategic, and partner has become a verb, and strategic is used to describe decisions and activities that don’t make sense” . . . it’s time for a reality check.

For nearly three decades, Kawasaki has earned a stellar reputation as an entrepreneur, venture capitalist, and irreverent pundit. His 2004 bestseller, The Art of the Start, has become the most acclaimed bible for small business. And his blog is consistently one of the fifty most popular in the world.

Now, Kawasaki has compiled his best wit, wisdom, and contrarian opinions in handy book form. From competition to customer service, innovation to marketing, he shows readers how to ignore fads and foolishness while sticking to commonsense practices. He explains, for instance:

• How to get a standing ovation
• The art of schmoozing
• How to create a community
• The top ten lies of entrepreneurs
• Everything you wanted to know about getting a job in Silicon Valley but didn’t know who to ask

Provocative, useful, and very funny, this “no bull shiitake” book will show you why readers around the world love Guy Kawasaki.

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Very often, you will hear the metaphor of climbing a mountain when describing starting a business. Soaring to new heights, the self made man or woman standing alone on the peak, bracing against the elements having achieved greatness. . .

Amazing people who have faced adversity without succumbing to it. We are all at different stages of climbing the mountain. Some are looking at the mountain; while some are off climbing. And there are those have returned to earth with some fond memories of the summit.

In Michael Gerber’s “The E-Myth”, he describes a different take on the mountain, when the day to day struggles of managing our businesses overcome us.

• the zest for the climb had turned into a terror of heights . . .
• the rock had become something to cling to rather than scale . . .

Often, when climbing you can’t see the top. In Og Mandino’s “The Greatest Salesman in the World”, the author tells the story of the climber who turns back from the summit, because he was tired or frustrated. The climber never knows he was within a few feet of the top. The author sends this message as a reminder that you never know how close you are to making it, so don’t give up.

So my dear companions, pack your gear, grab some water, we are on a journey. You may tire, you may fall – but we are your friends, we will pick you up, dust you off and help you continue on your way. Some people climb alone, some use a guide, while others rely on teamwork. It doesn’t matter how, as long as you begin the journey.

Oh yea – wear sensible shoes!!