We dream vaguely, but dread specifically. This is how my colleague Jules Goddard describes the Gordian Knot of innovation. But maybe we can dream specifically. Extraordinary imagination is based on extraordinary realism. Flights of whimsy are only as powerful as the foundation of fact they are based on.(1) This is what Aristotle — and later Walt Disney — called the “plausible impossible.” To be plausible an innovation must be reasonably consistent with prior experiences. To be impossible the new offering must be a fresh idea that surprises and delights buyers with dramatically higher utility at a reasonable price.(2)
In my twenty plus years of experience in strategy/innovation, I’ve found that to remain firmly on the ground (plausible) while simultaneously creating a breakthrough value proposition (impossible) is best accomplished through considering noncustomers. Noncustomers may never purchase your product or service — and they are often too expensive to reach — but they are a proven and practical source of breakthrough insights, hidden in plain sight.(3)
Noncustomers are the optimal anchor point for strategy development because:
1) They do not share the same well-worn categories as your customers. As a result they provide the distance from your current offering to rethink, reframe and recombine, while remaining firmly on the ground (the next post will be dedicated to this topic).
2) A noncustomer’s perspective creates a heightened sensitivity to where your offering over-serves, underperforms and creates pain points that your existing customers passively endure.
3) Most importantly, noncustomers lead us to the alternative solutions they turn to outside of your market; and in doing so, they illuminate the universe of recombinations that can be incorporated into your new offering.
Consider this sample of recent strategic moves our team created through noncustomer insights.
A school food service firm observed that most students opted out of the traditional lunch program. Observing students outside of school our team found that on weekends kids preferred Subway sandwiches. Through further interviews we found youngsters preferred Subway because, a) their parents believed the food was healthy so it was allowable; b) it was fast, and most importantly; c) for kids it is the only time in the week they could tell an adult what to do. With these insights the food service company dropped the traditional hot lunch program for a lower-cost combined made-to-order sandwiches and “grab and go” offering that captured the lion’s share of a highly commoditized market.
A bank in the Baltics was struggling to convince senior citizens to switch from cash to credit card transactions. By focusing on alternative fidelity cards pensioners would accept — senior discount cards — and combining the best of both approaches, the bank grew demand ten-fold in two months. The Baltic bank was acquired by a powerhouse European financial institution within months.
A Fortune 500 cosmetics company was exploring ways to grow the $942 million American eye makeup market. Counterintuitively, our innovation team shifted its focus from core customers to the 85% of the market that did not use eye makeup regularly. After observing and interviewing women who rejected make-up, our team (a cross section of employees across verticals and brands) found that when noncustomers wanted to feel good about their appearance they would first turn to lip balm. After three days of rapid prototyping with noncustomers, the team created a revolutionary applicator and formula that made eye makeup as easy to apply as lip balm.
How did these firms create growth strategies hidden in plain sight? They focused on insights from buyers who rejected, or in many cases, never considered their offering: noncustomers. By understanding noncustomer behavior, firms can eliminate and reduce the key competitive factors where they are over serving the market — and thereby reduce costs and pain points. Simultaneously, by understanding the utility levers noncustomers turn to outside of one’s current market space, firms create new utility factors to dramatically increase buyer value.
To the market the results appear to be a radical innovation, but we have found it is quite often just a 5–10% change in a product or service’s value proposition or business model. Noncustomer innovation is driven by exploration rather than a destination. Therefore, working within a firm’s strategic scope and risk appetite, the results of our approach can range from routine, to architectural, to radical to disruptive innovations.(4) The noncustomer driven product development approach carries the low-risk profile of an adjacent move from a firm’s core, yet with the returns of a “radical” market creating strategy. The key indication that our strategy development has been successful is when a team member says, “Why didn’t anyone think of that?” This is the plausible impossible.
In future articles I will go deeper into the Blue Ocean Strategy/Shift process that powered these noncustomer insights, but from a higher viewpoint, consider the four steps of noncustomer driven value proposition creation.
Step One: Identify Your Core Utility Factors. What do you spend time and money on to capture and retain customers? Break down each of these key competitive factors to their “first principles.” That is to drill down to the most basic levels of utility you offer, e.g., speed, convenience, security, luxury, etc. Then ask, what is the state of your core utility factors relative to the competition?
Step Two: Uncover Pain Points. Using qualitative fieldwork follow customers and noncustomers through the lifecycle of searching, purchasing and using your offering. Note where you are over-serving, under-serving, and creating pain points for buyers while identifying hidden costs. Next scan the market universe where other industries have solved these blocks to buyer utility. Consistently, one finds that every pain point has been solved elsewhere.
Step Three: Discover Alternative Sources of Noncustomer Utility. A company does not only compete within its own strategic group, scope of use, or even the same industry but across a myriad of alternative products and services. In making decisions buyers implicitly weigh far-flung alternatives and make trade-offs. The thought process is intuitive for consumers, but suppliers rarely consider buyer’s alternatives. Now ask, where do noncustomers turn to gain the same or similar utility as they could have obtained from your offering? Then, most importantly, ask “Why?”
Step Four: Converge on Creative Recombinations. Return to your current offering and ask, given the insights from the Diagnose step, what elements of the current value proposition can be eliminated and reduced? How can costs and pain points be reduced? Next, looking at the Discover step, what are the utility levers you can raise and create to dramatically raise buyer value?
Your noncustomers may not be thinking of you, but you should be thinking of your noncustomers. So often the most obvious, important and profound realities are the ones that are hardest to see. Today, the ability to spot, decode and connect the little things that customers and competitors take for granted are the overwhelming driver of competitive advantage. These insights do not require Einsteinian genius, nor Picasso-like creativity. They are a simple recombination of existing elements that are right in front of your eyes. In the next article I will build on our noncustomer’s perspective and illustrate how we turn these insights into new plausible/impossible products and services.
© 2020 JASON HUNTER. F&W STRATEGY | INNOVATION.
COMING UP: CANNED CREATIVITY | SIX PATHS REVISITED | OCEANS IN PRACTICE | THE DESK IS DANGEROUS
(1) The common denominator of breakthrough innovations over time is that they are always based on a foundation of fact. See, Tim Harford, Fifty Inventions That Shaped the Modern Economy (New York: Riverhead Books, 2017).
(2) Utility: the state of being useful, profitable, or beneficial. I will be using this word, a lot. We need to focus on first principals in our work. More on this in the next post. “As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.” — Ralph Waldo Emerson
(3) Defining a customer by what they are not can be befuddling. So let me clearly define noncustomers. Noncustomers are buyers who fall into three levels: 1) “Soon-to-be” noncustomers are on the edge of your market waiting to jump ship; 2) “Refusing” noncustomers consciously choose against your market; 3) “Unexplored” noncustomers are in markets distant from yours. Consider the three tiers of noncustomers in the video game industry: casual gamers -> board game players -> senior citizens. See, W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant; Expanded edition (Boston: Harvard Business School Press, 2015).
(4) Gary P. Pisano, “You Need an Innovation Strategy” Harvard Business Review (June, 2015).