The APICS Interview | September/October 2013 | 23 | 5
And like the results
Editor’s note: Jeremy Gutsche is founder of the crowdsourced trends website Trendhunter.com and author of the award-winning Exploiting Chaos, which explores innovation discovery during times of change. Gutsche will present Sunday’s general session at APICS 2013, September 29–October 1, in Orlando, Florida, USA. Here, Gutsche speaks with APICS magazine staff editor Christopher Jablonski on developing an opportunity-based culture, managing the effects of disruptive innovation, and focusing on your customer.
Jablonski: What are the key factors that lead some companies to thrive during times of uncertainty?
Gutsche: The companies that evolve through periods of chaos, the ones that don’t get toppled, have a specific mission or a drive. Everyone in the organization knows the purpose of what they’re doing and why, and it’s not just something that’s easy to build like widgets. It’s more specific to the customer experience and what they’re actually trying to do.
The next thing is that they tend to have a lot of customer obsession. Building off the company mission, they are deeply thinking about what they’re doing for the end consumer. The customer doesn’t just need to be the person who buys the products one day; it’s the different groups you’re interacting with, the service you’re providing within the organization, the business partners within the whole supply chain field. If you think of them as your customer, what experience are you trying to create? By getting deeper into what their goals are, instead of just delivering product A to source B or figuring how to source material C, you end up pushing yourself to solve their bigger problems. And that leads to creating more value. That’s customer obsession.
The next bit is about experimental failure. To actually make change happen, you have to have an organization where people can experiment, try new things, play around a little, while knowing that not all their experiments are going to work. That allows you to adapt.
The final part is about intentional destruction. Destruction is a word that scares people, especially in operations management. There is this goal to do things perfectly and have everything super-hyper-efficient and done on time and in the right place. But, in order to evolve, you need to be able to try new things. And when you get good at something, often you don’t want to deviate from what has already been working. Pushing yourself to be able to destroy some of that mentality, using your experiment in order to push to something new, is the end goal.
Jablonski: Why is it so important to experiment and take risks?
Gutsche: During periods of chaos and change, we tend to get complacent once we’re good at something. We don’t always push ourselves as hard as we would if we were brand-new and hungry to try and grow opportunities.
We also benchmark ourselves to what our competitors do. When you look at what your competitors do, you’re seeing what’s popular; you’re seeing what’s mainstream—all the stuff that has already happened. And if you closely follow every one of them, you won’t actually be finding every unique opportunity. The lesson is that popular is mainstream—it’s already happened; and, if you just emulate your competitors, then you’re not going to be any better than them. The core is something different and unique, the cutting-edge ideas that are fresh and don’t yet exist in your marketplace.
Jablonski: What are some forms of risk-taking that organizations can engage in?
Gutsche: I’ll give you a case study from the [British Broadcasting Corporation] (BBC). At the BBC, innovation means coming up with new TV show ideas. In the 90s, people stopped tuning in. As viewership decreased, they needed to figure out a way to spark creativity, to become more innovative. But, like so many of us, they looked to their formula for success—the routine thing that they’d become so good at—which was cranking out shows. They tightened things up to make sure everything would properly follow the formula that they knew so well. They put rigid controls in the system. While this ensured precision, it also meant that innovation narrowed and market share started to fall.
When they looked at that system, they knew they wanted to make changes, but it’s tough to rip out a structure that’s already there and working at a certain level. Instead, they decided to keep everything in its place, but put in a gambling fund. The idea was that content that failed the screening process and didn’t fit the mold, that perfect formula, could still qualify for gambling-fund money. The idea that ended up being a failure of an idea but getting the gambling fund money was The Office. And, of course, The Office went on to become their biggest hit and international export.
A gambling fund can be made with money, but also with time—a proportion of your week or your team’s week that will be spent trying to think about a different approach. Maybe that means getting deeper into a customer’s mind-set. By going a little deeper, by pushing with different ways of doing work, you can start to unlock new ideas. Some of them will fail, but when you think about it like portfolio management, the gambling fund is your high-risk stock. Maybe it works and maybe it doesn’t, but you budgeted for it, and it’s within the narrow, predictable confines of an experiment you’re able to take on.
Jablonski: It makes sense that a company just treading water or on the downswing would have to take risks. But what about companies that are currently experiencing success?
Gutsche: When you’re trying to survive, you need to make bigger gambles in order to try and make a turnaround happen. But being good makes us complacent, and we don’t push ourselves as much.
For example, Kodak was doing great, and they even invented the digital camera in 1976. But they never were forced to try and make a business out of it. They didn’t have to, because they dominated print. And as their competitors went to digital … eventually, they were gone.
Meanwhile, Blackberry popularized the smartphone. They were even so good at making a smartphone we called ourselves “CrackBerry” addicts. We’d hover around our Blackberries hunched over in that Blackberry pose. As a result … they never thought they had to worry about the consumer market. They could never predict that a consumer device, the iPhone, would actually one day in all temerity come back and take away their business clients.
So being good is actually dangerous, and highly successful companies need to be stirring a sense of paranoia because that’s when the mighty fall.
Jablonski: Are there any ways that disruptive elements can help a company instead of just posing a threat?
Gutsche: What I like about the concept of disruption is that it’s not something that’s brand-new, but it does speak to the idea of thinking about a completely different way of doing things. It’s not that everything’s going to change, but to evolve even in little ways takes the mind-set of thinking: How can you do things in a completely different way? And, if something is possible, someone else is going to do it.
There was a man named Pierre Wack who, before the [Organization of the Petroleum Exporting Countries] (OPEC) nations had formed together, worked for Royal Dutch Shell. At the time, the price of a barrel of oil was pretty low. He looked at the world situation and said, “You know what? We can keep on optimizing, and Shell will get even bigger.”
In his view, the way to look at things is what could happen, not just what’s going to happen. When he looked at the situation in the Middle East, he said it makes sense that if the OPEC nations knew they could form a cartel, then they should. And, if they should, then maybe they might. So he prepared Shell by realizing that, while it isn’t going to happen for sure, if it does, the world changes. That disruption led Shell to rebuild their strategies around that scenario. As a result, a year or two later, OPEC was formed, the prices of oil skyrocketed, and Shell evolved from being the [eighth-largest] oil producer to number-two in the world.
In this mind-set, you’re not saying you have to disrupt your whole business, but how could certain scenarios change your company’s position? Preparing can help you survive, grow, and not be caught by surprise when the world shifts.
Jablonski: What are some ways current companies are finding to take advantage of disruptions? How are some businesses falling behind?
Gutsche: The one that jumps out at me in almost all situations is social media. Most brands are of the mind-set, “We can’t really prove the [net present value] on doing aggressive things with social media, so we’ll wait a few years to figure it out.”
When disruption happens, it tends to happen in three stages. The first stage is that this new engine comes along, and some early adopters are gravitating toward it, and a company or a strategy builds a reputation and excitement among early adopters. But, the big incumbents don’t really care. It’s not a threat; it’s just another irrelevant thing in the background.
Stage two is when the new company starts taking away some of your customers, but they’re the ones you don’t make money off of, and you don’t really worry. Then they start taking on the bigger accounts, the corporate accounts. The little guy starts building up a brand. People know about them now. They become this maverick brand with a really cool product.
Finally, stage three is the one nobody ever sees coming. That’s when the little guy doesn’t just grow and take up your business, they make partnerships. They partner up, perhaps with a competitor, or someone else who’s always eyed your marketplace, and when they do, it’s a knockout punch. Because, suddenly, they have everything they need to be able to dominate the industry. They have the brand, they understand all the little guys, and the partnership gives them access to the big, high-end accounts. And the next thing you know, the market’s disrupted.
Jablonski: Do you have any other examples for our readers on how customer obsession leads to winning results?
Gutsche: I’ll give you one more story, which will dive a bit into my next book. The Gap takes about nine months to get a design onto the showroom floor. And that’s pretty fast, actually. The fashion is getting better, and it’s a leading company.
On the other hand, there’s Zara. Amancio Ortega, the founder, is the third-wealthiest person in the world. But people don’t know him. There wasn’t even a picture of him until the 2000s. He didn’t do interviews, he wore the same suit every day, and he led a much more traditional life. But unlike The Gap, instead of taking nine months, Zara can take just two weeks.
Their designers will sit in a fashion show and draft an idea for a design. It is not manufactured in China—everything, the design and manufacturing, is done in A Coruña, Spain. And as soon as that design hits A Coruña, they draft it up, mock up the dress, have it ready, and it’s in stores in two weeks. They don’t do huge batches, they do small ones—11,000 products a year.
Then, at the end of the day in every store, they enter in information on all their products that didn’t seem to work out and why. For example, for dress number 448, people don’t like the collar. The information goes straight to the designers, who made the dress only two weeks ago. When the new dress comes out, guess what? It doesn’t have a collar.
What’s so cool about this story is it’s about supply chain management and information detection becoming a very different competitive advantage. No, it doesn’t work with mass outsourcing. It’s about fast information and quick turnaround, which is very on trend with where a lot of companies are trying to go. It’s about the whole organization’s operations management. It’s about information and production being tight, succinct, and quick.
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