Commentary & Analysis
Innovation, Risk and Your Customers
By Michael Josefowicz July 13,
By WhatTheyThink Staff
Published: July 13, 2006
By Michael Josefowicz July 13, 2006 -- The consultants and gurus tell us that innovation is the key to success. Printers' experience tells them that innovation is very risky and can waste lots of time and money. And everyone is right. Clayton Christensen laid out the problem for large companies back in 1997. From the Innovator's Dilemma... "Simply put, when the best firms succeeded, they did so because they listened responsively to their customers and invested aggressively in the technology, products and manufacturing capabilities that satisfied their customers' next-general needs. But, paradoxically, when the best firms subsequently failed, it was for the same reasons." Now that we are past the tipping point in the print industry, the rules are a little different. In the old days, to innovate meant finding time and money to be, as Christensen put it, "invested aggressively in the technology, products and manufacturing capabilities" your customers need. Post Tipping Point, it means focusing on what your customer needs, then putting together the functionality to deliver that, and just that, faster, better and with less risk than your competition-- and do so with an acceptable profit margin from day one. Forget about "owning" the customer. The only way to maintain a customer in an information-rich market is to prove yourself at every touch point. Gather the knowledge in your company, from manufacturing and sales to design the solution your customer needs. Use the internet and your networks to locate any needed functionality. Then make an intelligent "build, buy, partner or rent" decision to access that functionality. As long as your company has a true value added function, and you are dealing with network partners you can trust, it doesn't necessarily have to be expensive or time consuming to be the first to deliver a solution to your customer. Every job, every touchpoint Forget about "owning" the customer because of a previous, long term relationship. The only way to maintain a customer in an information-rich market is to prove yourself with every job, at every touch point. That's the new rules. It doesn't make much sense to try to fight it. Actually, printers are well-positioned by custom and history to thrive with these new rules. While other manufacturing industries are struggling with getting to ultra-customized manufacturing, the print industries have been doing it for hundreds of years. A flexible network of trade shops has always been the underpinnings of the business. We've always been an on-demand industry. A good rule of thumb is start with whatever you can do better than anyone else. That's the place to put your time, money and energy. In the era of information scarcity, a good printing broker or retail printer added value by getting just the right fit of function, time and price for a specific customer at a specific time. Printing customers rarely cared where the printing was done, as long as it was done correctly at the right price. The specialist trade shops won because they did not have significant sales expenses, The retail printer or broker won because of the price and time differential in getting the right sources, and the customer won because they had someone they trusted, facilitating the process. That was then, and this is now. In the information-rich environment we now live in, finding the right source is much less of a hassle. With a little practice, Google searches will find whatever functionality is needed pretty quickly. Email mitigates the need for time consuming phone call after phone call. And perhaps most important, email, if used correctly can solve most of the "he said, she said" problem. As standards continue to develop, the ability to network will only get easier. We are past the tipping point because there is now a critical mass of printers who fit into this way of working. The next generation of print buyers have grown up in an information rich environment. They are comfortable working this way. The printers who have made the appropriate mindset adjustment are doing just fine. The trick is to find a defensible position within this environment. The most common sense approach is to choose where you decide to be in the value network based on where you are starting from. A good rule of thumb is start with whatever you can do better than anyone else. That's the place to put your time, money and energy. But this does NOT have to mean investing lots of money. But it usually does mean investing lots of brain time. New ideas will lead to figuring out what your customer needs. And then you need more new ideas about making it easy for your customer to buy it from you. The good news is that you probably already have the best, most practical, most profitable ideas in your organization. It's in the heads of your people who already deal with your customers. The job is just to ask them, make the time for the right conversations, and respect the knowledge that you have accumulated in your company. The good news is that you probably already have the best, most practical, most profitable ideas in your organization. Identifying and implementing practical, profitable solutions to proximate pain points are hard problems. And it's only solutions to hard problems that are real value-adds. It's only real value-adds that makes profits. A custom-fit integrated affordable solution that solves a hard problem can often be inexpensive to implement. That's why it's called innnovation. Here are some guidelines that might help you manage innovation in your company. The common wisdom is that customers are motivated by greed and fear. In my experience I think fear is the much more important driver. Even at the C-level, where fear is described as "risk management," getting anyone to do anything that they are not already doing is hard even if it is clearly more profitable. If greed were the primary motivator that wouldn't be true. Even at the C-level, where fear is described as "risk management," getting anyone to do anything that they are not already doing is hard even if it is clearly more profitable. In any ongoing business, the risk of failure is much too high. But in the vibrant, entrepreneurial, information-rich world we now live in, there are many centers of value creation that have a risk profile to keep working at something until they get it right. If they are built to take the risk, let them take it. Depending on your own risk profile, you can always buy, network or rent the functionality when it has been tried and tested. Remember, Google was started by two graduate students and ran for years before it made a penny. They had the risk profile to do that. Which finally brings me to the main point. The appropriate price --how much can you charge for your product/service-- is determined by a couple of things. One is the amount of money. With a well-defined product, there is no way of getting away from price competition. It's a fact of life. By now we've all gotten used to it. The other is an acceptable level of risk. Being responsible for printing, in either a large or small organization, is a very, very risky business. Any failure is very visible, most successes are not noticed. Even today this risk is mitigated by working with printers who you know will cover your back, catch errors, and always do what had to be done. Being responsible for printing, in either a large or small organization, is a very, very risky business. Any failure is very visible, most successes are not noticed. But the upcoming generation will tend to mitigate their risk by standards-based printing, proofs that actually accurately --no fooling around-- predict the final product, and service level agreements that have clear penalties for late or substandard delivery. And finally the often overlooked value that people will pay for is a hassle-free process. This is usually thought of as "saving your customer time." But it might be more useful to use a fuzzier idea --saving your customer hassle. Every customer, in every business, will pay a certain amount for reducing complication, frustration, and tension. Every customer, in every business, will pay a certain amount for reducing complication, frustration, and tension. The opportunity is that eliminating hassle doesn't have to be expensive. Therefore, whatever you charge for it can be very profitable. It's a very inexpensive way to improve customer loyalty. If you are focused on constantly making it less of a hassle to buy from you, than to buy from your competitor, all other things being equal, why would any one change. Depending on the job and the client, a 5 percent or maybe a 10 percent or even 15 percent difference in price will be paid, to avoid the extra hassle. The challenge is that it requires truly caring about your customer as more than a revenue stream. If you are only looking at the possible income, it will be much harder to innovate to solve their problems. It also requires the confidence in your core strengths to give up on the idea of "owning the customer". Only the customer owns the customer. Her loyalty is reinforced or damaged every time she touches your company.