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The smell of the skunk is a good thing when you need a Disruptive Product to power Growth – Part 1

February 22, 2013

What keeps you up at night?  Your competitors sell about what you do, charge about what you charge and talk to their customers about how you do.  Then along comes the game-changer and you go from being one of the main obvious 3 choices to looking like ‘yesterday’. The current term for a real, game-changing service or product is ‘disruptive’, and it’s more than a new product or line extension – it makes all other category participants irrelevant; it takes the Etch-A-Sketch of business, turns it upside down and shakes vigorously. The problem is, most of our employees have had disruptive creativity beaten out of them or it wasn’t there to begin with.  Our project management and product launch capabilities are too linear to be used, as-is.

If you’re a P&C carrier, serving drivers, your disruptive nightmare may turn out to be a new kind of competitor such as MetroMile.  You sell being billed and then paying a claim – the customer sees you as charging monthly and then fighting you on getting their car fixed.  Even if, they never have a claim, the average customer sees you as being a necessary evil, 12 months a year.  MetroMile sells coverage by the mile, much like Progressive’s telematics plug in, but incorporates a series of end-user oriented dashboards showing each policy holder their  average gas mileage, average vehicle speed, ongoing  gas consumption, trip length frequency and an ongoing benchmark (actually a customer retention genius move) comparing  their MetroMile policy to the driver’s previous plan.  It’s a daily friendly contextual conversation between customer and company.  Even worse, MetroMile is not your traditional carrier, it’s the aggressive technology front end of a smart insurer, and it’s located in fast paced Redwood City, California, South of SFO.  So it’s a non-traditional market entrant, using breakthrough customer-engagement technology while you have a Mobile enter-a-claim app – maybe revolutionary inside your HQ, but a nothing new to the rest of the market.

We all have ‘strategic’ initiatives, run by our IT or a combined business-IT team as a parallel activity to daily ops.  With Digital business, as with most strategic initiatives, linear or competitive match improvements are often insufficient, even if the easier path is to innovate and not pioneer.  While living within existing innovation processes reduces stress on your employees, your internal processes, overhead assumptions, and bureaucracy, it does, however, leave the door open for someone else to shake up your market, leaving you  in the ‘other participants’ line.

We already know the Bad Skunk

Poorly executed disruptive innovation initiatives often get bogged down in internal politics and bureaucracy from the beginning – they are doomed to come in late, over budget and scaled back to being an also-ran. In one case we know of, the deliverables were 6 months late, scaled back to being barely useful, and 8X initial cost estimates. Departments all want a piece of the new toy, at least while the initiative seems successful, followed by Senior Leadership level political jockeying as part of the post-cost overrun sharing process.  Part-time resources get sucked back into their day-jobs, the office layout sends the message of ‘old school spoken here’;  new non-BAU (see our previous post on Business As Usual)  initiatives also have the burden of proving their mind-bending disruptive  innovation is worth the investment.  The business needs this breakthrough fast to gain competitive advantage while the R&D and Dev and Ops teams want politically safe, non-confrontational, sequential processes. Executing on disruption makes your brain hurt, but like anything at that level, the ROIC releases pure, 100%,  endorphin to the Markets and Shareholders..

How does the organization respond to a troubled disruptive initiative?  The signs of ‘ugly’ appear early – they get the ‘smell of the skunk’, way before they collapse.  Who hasn’t heard of a key initiative referred to in terms of “I hear it’s not going well, the word is, they’re going to miss their dates”. Problem is, this is after occurance and need not be. The key is to cut the hype and understand up front – is this an innovation (and therefore doable within existing processes and governance), or is this truly disruptive, needing a different approach.

Especially with new and complex business driven applications where the technology is not fully baked, it’s easy to have these initiatives start to smell really badly, really quickly.  First comes over commitment to the end user buyer, either inside or, worse yet, outside the corporate walls.  In short order, all the RAG reports go from Green to Amber to Red, highlighting Risks, and Issues and escalation dates, but nothing moves the needle, it’s just reports.  Panic follows at some point (usually when out-of-the-project Senior Management starts to ask really hard questions), and a War Room is established.  Since the core way the initiative is run hasn’t changed, it’s the same people getting the same results, only more colorful as every War Room I’ve ever seen has a dashboard published daily.

As everyone who has ever had to deal with a  dog who thought it could overpower a skunk knows, the skunk always wins and you wind up buying Costco package amounts of tomato juice.  The dog goes Business As Usual, pays the price, retreats and repeats.

Now we need The Good Skunk

We have to realize when we want real breakthrough, ‘wow – I never thought of that!!!’ kinds of new products, our internal innovation and standard incubators are not going to get us there.  They too much reflect the basic organization and are loathe to having a conflict with other groups, such as Product Management or IT.  We need a Skunkworks.

Why?  When the stakes are high enough, and a true market disruption is required, the company sets a high-bar stretch goal, binds it within meaningful but still loose constraints, pulls just a few of their best cross-disciplinary staff from their day-jobs, sets up shop offsite and lets the Skunkworks create the solution.  In some companies, this is called R&D and has its own campus, complete with test manufacturing facility. Others, such as Google, require employees to set up temporary 2 and 3 person Skunkworks to develop non-incremental products.

Steve Jobs was famous for at least 2 of these.  The first, in the early ‘80’s, was located behind the Good Earth Restaurant in Cupertino, CA. Fifty top flight employees produced the Macintosh. The second was a team of carefully selected ‘pirates’, located 3 blocks from the main campus near a Texaco gas station.  Who knows what’s still up and running, post Jobs, but we can hope. Job’s motto for his Skunkworks was “it’s better to be a pirate than join the navy.” It was business driven asynchronous commercial ‘warfare’. Can it work inside a big, process bound and regulated company?

Lockheed Martin has their famous Skunk Works, officially known as the Advanced Development Programs, specializing in designing and delivering revolutionary, needle moving, results.  Go to Wikipedia and you can see their list of breakthrough airplanes and other vehicles.  Contrast this with the far less complex typical business system project with the usual time delays and end-user feeding frenzies when deadlines are missed, or a system is said to be ready when in reality, behind the scenes, it’s been cobbled together and brittle.  Airplanes do not do well with brittle. Their Skunk Works got its name due to the strange smells emanating from the circus tent housing it, with the help of the Lil ‘Abner cartoon strip’s ‘Skonk Works’.

How do we know if we can use a Skunkworks for a particular strategic initiative? Is it too radical for our organization and culture? What are the Thresholds?   Stay tuned for Part II.

Richard Eichen is the Founder and Managing Principal of Return on Efficiency, LLC, http://www.growroe.com and is one of their senior turnaround leaders/CROs, Program Rescue and Interim Executives with over 25 years’ experience reshaping companies, Operations, IT/Systems Integration and key initiatives. Return on Efficiency, LLC specializes in those companies and initiatives where technology is the primary means of service delivery and revenue creation.  He can be reached at richard.eichen@growroe.com

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