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Kevin & Jackie Freiberg

Great Innovations Come From Dissatisfied People

Business Outlook Magazine, September 17, 2011

Authors Kevin and Jackie Freiberg speak to Patanjali Pahwa on strategy and dissecting critic-speak.

How important is identifying patterns in developing a sound business strategy?

Kevin: Intersection of trends is white space and in those white spaces are opportunities for innovation and differentiation. Early on, Southwest Airlines’ founders Herb Kelleher and Rollin King observed that there wasn’t an easy way to fly within the state of Texas. They also observed that the airline paradigm at the time was to fly people from smaller, outlying cites (spokes) using little planes, into big cities (hubs), make the customer wait several hours until they had enough people to fill a big plane, and then fly them to another hub. It was called the hub and spoke system. Good for the airline, but inconvenient for the customer. Southwest asked, ‘Why do we have to fly hub and spoke? Why can’t we fly point-to-point?’ So, it started flying between San Antonio, Dallas and Houston Texas. This new business model gave it greater aircraft utilisation (more flights per aircraft) and more convenient routes for those flying within Texas. Since airplanes only make money when they are in the air and airlines grow when customers are happy, it was a very successful strategy.

How important is a roadblock in forming strategy?

Jackie: It can be very important. In the case of Southwest Airlines I can think of a few roadblocks. The three major carriers—Braniff, Texas International and Continental—did everything they could with the legal and economic firepower they had to keep Southwest from getting off the ground. Herb Kelleher, Southwest’s founder, fought his way through 43 judicial and administrative proceedings, all the way to the US Supreme Court, over a period of three years. All of this turmoil did two things. It engendered a warrior spirit among Southwest employees that is still legend today and it forced the company to become extremely creative. Today, 39 years later, Southwest still has the fastest turn times in the industry. It can turn more planes, faster, with fewer people than anyone in the industry.

How do you use critics to shape strategy?

Kevin: In many cases you don’t. If Ratan Tata had listened to the critics there would be no Nano. If Steve Jobs had listened to the critics there would be no Macintosh, iPod, iTunes, iPhone, and iPad. I’m not suggesting that the critics can’t make you better. But when you are trying to do something big and bold that’s never been done before, more often than not the critics are invested in the status quo or yesterday’s innovation. So, I think you have to listen with a very discerning ear. Where is this critic coming from? Is this critic levying his option to make us better or take us down?

Having said all this, most great innovations emerge from the minds of people who are dissatisfied, even outraged with the way things are—so they are essentially critics of the status quo. One rainy night in Bangalore after witnessing a two-wheeler with a family on it crash, Ratan Tata had had enough. He declared war on the complacency of people who had witnessed the same thing all their lives and were satisfied with the status quo.

Is that what leads to “positive disruption”?

Kevin: Pixar is one of the most successful studios in the history of movies and the most creative company in the world. After three box-office sensations, Toy Story, A Bug’s Life, and Toy Story 2, Steve Jobs, Ed Catmull, and John Lasseter worried about the company getting complacent. They asked director Brad Bird, a veteran of Walt Disney, Warner Brothers and Fox, to join the Pixar team and shake it up. Now here’s an incredibly successful company that recruits a guy who just come off a financial failure called The Iron Giant. Bird pushed people beyond their comfort zones, gave outcast animators a voice, and encouraged dissent. The disruption worked. Under Bird’s direction, Pixar won two Academy Awards for the innovative animation in The Incredibles and Ratatouille. That’s positive disruption

Strategies evolve in pursuit of a goal, but should the goals evolve as well?

Kevin: Yes and no. If you are trying to solve a problem that you think matters but doesn’t really matter, then the goal must evolve. Think about the innovations you are most in awe of—the ones you wished you had invented—what do they have in common? The people who created them really nailed a problem. It may have been a problem that none of us knew we had, but the inventors clearly understood the need they were trying to address. One of the most critical parts of disruptive innovation is clearly and accurately defining the problem. Does it really matter? As you learn more about what it’s like to be your customer, what their world is like and how they would use your solution, the goal can change.

The “no” part of my answer is this. When Ratan Tata determined that the goal would be a Rs 1 lakh car, he also laid down the gauntlet by indicating that the Nano would not be an “apology car.” After the Rs 1 lakh target was set, materials costs escalated by 40%. Political unrest forced the company to move its manufacturing plant—95% complete—all the way across India. Wouldn’t that cause the goal to evolve? Wouldn’t consumers understand and forgive a change in direction? Tata didn’t give them a chance to weigh in; he held steadfast to the goal. And thus, the famous line, “A promise is a promise.”

But Tata—and the Nano—came in for huge negative publicity. How should that be tackled?

Jackie: You tell the truth. You be proactive and get out in front of the story; you don’t wait for others to tell the story for you. We think Tata Motors has handled this quite well. It didn’t run from the issues; it jumped on it and immediately investigated it. Then the company publicly reported what it found.

Whenever there IS a safety issue you have to over-communicate what you are doing to address it in order to put people’s minds at ease. Tata Motors has extended warranties and launched a new comprehensive maintenance program for $2 per month. The company is moving in the right direction here, but it needs to make a “full court press” to get the word out.

The company must over-communicate and appeal to people’s emotions as well as their logic. In other words, explain why the safety issues were isolated incidents and not engineering defects. The light bulb goes on for different people at different times so you have to be very consistent and, to some degree, repetitive in your communication. Then, perhaps the company could appeal to people’s emotional side by showing loved ones of Tata executives driving the car. That’s a huge validation of safety.

Where is the next game-changing idea, like the Nano, coming from?

Jackie: We are big fans of the Planetree model of healthcare in the US. It is an association of hospitals that is changing the way healthcare is delivered. It’s a great example of business model innovation. They are taking the best of hotels and restaurants (hospitality), spas and fitness centres (wellness) and hospitals (clinical care) and transforming the patient’s entire experience.

Imagine a hospital that looks and feels more like a 5-star hotel or spa; a hospital where patients are empowered to be partners with care givers by making notes on their own medical charts, and where families are able to cook a cancer patient’s favourite soup in a kitchenette right outside the patient’s room. Planetree is using massage, aroma and pet therapies to calm nervous patients before stressful procedures such as an MRI.

The whole focus is on prevention and wellness versus acute care. The idea is to help people build healthy lifestyles so they don’t end up in the hospital in the first place. The model is designed to empower patients to OWN their own wellness, to PARTNER with care givers to create a way of life that prevents serious illness from happening.Anyone involved in the healthcare debate in the US will tell you that the cost of healthcare is growing fast. Cost cutting is not a quick fix; it starts with engendering a health lifestyle. Think about how the game will change in healthcare if a critical mass of providers adopt the Planetree philosophy!