On the other end of the spectrum, we’ve seen companies direct their innovation efforts towards finding radical ways to do less—which correspondingly allows them charge less to their customers. These businesses are veterans at making tough trade-offs; they relish in ruthlessly and imaginatively funneling down to the bare bones of what their customers need. There are many ways to go about this cost-cutting, but the end result is almost always a transformative approach to the industry. We call this Costovation.
An example of this down-market innovation is Omenahotelli, a Scandinavian chain of budget hotels where just two things are guaranteed: a cheap rate and a central location. Anything else—like a lobby, receptionist, or even housekeeping services—is not part of the deal. Guests receive passcodes to unlock the front door and then self-service their way through their stay in highly-standardized rooms. Omenahotelli runs on a simple concept—price and location above all—and is as innovative as it is lean. It’s perfectly suited for budget travelers exploring an expensive part of the world.
Here are two key lessons about innovation that we’ve gathered from businesses that excel at Costovation.
Recognizing that retailers voraciously compete with each other to deliver both selection and price, Trader Joe’s and Costco cherry-picked what they perceived to be the single most important purchasing trigger in grocery—price. Then they designed revolutionary business models around it, from the ground up. In time, consumers found (perhaps unintended) value in having fewer choices, which streamlined and took decision-making out of the shopping experience.
When asked about what solutions they want to see, customers aren’t very creative—they usually point to an enhanced version of what they see today. A team focused on creating a better bread product might have designed unique packaging or recommended a new flavor combination, but would easily have missed out on the opportunity to redefine the relationship between retailers and manufacturers. As a result, it’s important for innovation teams to drill down into the jobs that customers are trying to get done. Stores don’t just want to sell better bread. Unspoken, underlying jobs might include demonstrating freshness, visually showcasing the bread, and creating a warm customer experience. Retailers deeply value solutions like parbaking and in-store bakeries that directly address those jobs. That’s why seemingly laborious—but money-saving—solutions like grind-your-own peanut butter stations, bulk food bins, and fruit-on-the-bottom yogurt have succeeded in a culture where convenience is a perennial trend.
Luckily, companies that have excelled at Costovation have left clues for others to follow. Start by relentlessly focusing on a core set of jobs to be done. Remember that more is not always better. And take care to innovate in all areas of the business.
Read more about how to find Costovation opportunities here: http://www.forbes.com/sites/stephenwunker/2013/12/10/377/#48e658b120a5
This post was originally published on Medium. It was written by Jennifer Law.