Innovation l Re-Innovation. Reframing the Mental & Business Model.
By Ron Lunde / April 2016Insights
“It’s not necessary to change… if survival is not mandatory!”
What must companies do today to generate billions of dollars in revenue, create thousands of jobs, reward investors and sustain the environment? They have to think about it. They have to think outside the box, they have to think in new boxes and they have to Innovate and Re-Innovate. They must reframe both their mental & business models.
There is a significant lost opportunity and cost inflicted on companies if their management teams are mired in the status quo, teams that don’t or can’t tackle the hard work of Innovation and Re-Innovation.
- Cell phones weren’t introduced by AT&T
- Online mapping was not introduced by Rand McNally
- Overnight package delivery wasn’t introduced by the U.S. Postal Service
- Diet and caffeine-free soft drinks weren’t introduced by Coke
Innovation Changes Reality
Some examples of disruptive and reality changing business Innovations:
- Uber is the world’s largest taxi company, yet owns no automobiles.
- Facebook is the world’s most popular media company, yet creates no media.
- Alibaba is the world’s largest retail company, yet has no inventory.
- Airbnb is the world’s largest accommodation provider, yet owns no real-estate.
The Track of Innovation Change
In 1995, less than 1% of the world’s population had an Internet connection. Today, that number is around 46% or 3.4 billion people. On April 21st, 2016, Nielsen released its 4th–quarter 2015 Comparable Metrics report, Smartphones now have 82% U.S. HH penetration with cross-platform functionality… meaning they can access synchronized information virtually anywhere, 24/7 regardless of device.
Technology, linked to a variety of platforms (PC’s, Desktops, Tablets and Smartphones), has spurred Innovation, sometimes disruptive, at an ever, almost exponentially, accelerating pace. Consumers today have near-perfect information and near-infinite product, services and price choices. And… consumers today cannot seem to live without things they did not know existed yesterday. Therefore, technology and consumer expectations meld to produce a change in existing reality through unprecedented Innovation!
The Necessity of Understanding Innovation
“Business has only two functions—marketing and innovation.” Peter Drucker
There is a dictionary definition for the word Innovation… but it does not really seem to fit what is going on today. Today’s innovators and change agents are redefining the word to also mean, reframing issues and thus reframing the mental model or mental model that leads to innovation. Reframing a problem allows people to see old reality through a new lens—and that in its own right is an important innovation. Many call this process, ‘thinking outside the box’. Advances in technology or shifts in consumer expectations mean that now, we must also often switch our thinking to thinking in new boxes. Innovation can therefore be represented as a change in reality.
Example: Steve Jobs and Mental Model Innovation
Steve Jobs achieved spectacular Innovations by reframing a mental model which led to reframing product, business and solutions models. He re-imagined—he linked new technologies—he combined things that had never been combined before. For example, in 2007 Apple introduced the iPhone. The iPhone, for the first time, was a single device that converged an iPod, phone, camera and touch screen. Jobs reframed the mental model of what a phone could be. Jobs thus was able reframe a business model as cell phone carriers were now forced to buy the phone from Apple and resell it to consumers over some period of time on a contract basis. Jobs went on to create the APP Store which subsequently has sold billions of dollars of iPhones and Apps. The iPhone and the APP store were Innovations, consumer solutions and software applications that were useful to consumers. To reiterate, ‘Consumers today cannot live without things they did not know existed yesterday.’
McDonald’s Changes the Menu
Following is a headline from a Fortune Magazine article, January 23, 2015:
“McDonald’s reported a 21% decline in quarterly profit on Friday as sales slid across all regions, ending a challenging year on a poor note.”
Following is a headline from a USA Today article, January 25th, 2016:
“The fast-food giant’s all-day breakfast strategy, rolled out nationally in October, also appears to be winning over customers. The company credits all-day breakfast with helping send sales at U.S. restaurants open at least a year up 5.7% in the quarter ended Dec 31. That marks the second quarter in a row of same-store sales growth in the U.S., after seven quarters of declines.”
Historically, the restaurant industry has always thought about food in ‘day parts’—Breakfast, Lunch and Dinner or certain foods for certain times of the day. Someone at McDonalds apparently asked the questions, “What if today’s customers want breakfast type foods when they want it? What if breakfast products were not really about the time of day?
McDonald’s, for the moment, is an example of a company that recently mastered something we will call Re-Innovation. Their challenge was not based upon a disruption by new technologies; rather the challenge was a change in consumer expectations. Consumers moved on from the way McDonald’s and other fast food restaurants defined their business. McDonald’s management reframed their thinking. They moved from trying to sell what they made to finding out what their customers wanted to buy, when they wanted to buy it—and found ways make it happen.
The challenge for the McDonald’s management team was not to Innovate and create a new business. McDonald’s management was required to re-innovate their existing business model—to look at their customers in new ways.
In other words, Innovation or Re-Innovation is about reframing your mental models to connect your products and services by adding customer value and by serving your customers better than anyone else can serve them. Reframing Mental Models leads to the linkage of product, business and solution models that serve as the foundation for radically successful Innovation or Re-Innovation.
Innovation and Re-Innovation is simply about ‘Thinking Outside the Box’ or ‘Thinking in New Boxes’ and turning that thinking into reality.
Contributed by Ron Lunde, Senior Marketing, Advertising Executive & Market Strategy Consultant
Ron held senior management positions in grocery retailing including Supervalu, Grand Union and Price Chopper. He was also a Sr. VP. at the Leo Burnett Advertising agency. Ron is credited with introducing Space and Category Management systems to the industry as well as working with the Price Chopper team to introduce and deploy the first data driven frequent shopper program in the US. He was also a consultant to the Financial Accounting Standards Board in developing the Issues that govern the accounting requirements for all trade promotion and marketing expenditures. Lunde currently serves as a Market Strategy consultant to retailers and CPG brands.