This blog first appeared as Steve Wunker's piece for Forbes
By Steve Wunker
About twenty-five years ago, Harvard Business School Professor Clayton Christensen coined the term “disruptive innovation.” I worked with Clay for many years building his consulting practice, and I can tell you that he had no idea the concept would take off as it did. Nor did he suspect that interpretations of the concept would become so mangled. It was one of his regrets that he didn’t call disruptive innovation by a more precise name that might preclude it from being stretched – in common parlance – to cover almost anything.
As Clay laid it out and proved through extraordinarily detailed research, disruptive innovation occurs when a new offering caters to an overlooked customer segment through providing greater accessibility – which might come in forms such as low price, ease of learning, extreme convenience, and so on. Incumbents usually neglect these offerings because they aren’t as financially appealing (at first!) as what they do for their biggest and most profitable customers. Over time, these offerings improve and their customer base broadens, until the upstarts overtake the incumbents and wipe them out. Think of how traditional camera makers ignored smartphone cameras – at first, they were almost toys, used mainly by teens as they socialized. Now, those old-line camera companies are stuck with vastly shrunken businesses that survive only by catering to the most demanding photography professionals and hobbyists.
Costovation, as detailed in my 2018 book on the topic, is the process than enables this disruptive innovation to happen. It empowers companies to re-think industries and to find low cost ways to compete while delighting a well-defined customer set. How do you make it happen? You need three disciplines:
1. Gain Breakthrough Perspective – First, you need to shatter old industry norms. Look for who is being ignored and what underlying needs exist for those customers. Consider how market trends may re-shape needs. Seek new technologies and business models that could upend established norms.
One great place to start is by deeply understanding the Jobs to be Done of potential customers. This is another concept originating with Clay that has been much-twisted into unrecognizable forms. Go back to the real roots and do it in a disciplined way. This way, you can find what really matters to these customers. Additionally, you’ll understand what these people (in either a B2C or B2B context) are doing – both within and outside your industry – to get these things done.
Planet Fitness – a low cost gym that leads the industry in both growth and customer satisfaction – did this by understanding casual exercisers. Oftentimes, they weren’t going to a gym at all, but rather walking, jogging, or doing home-based routines. What motivated them to exercise, and what hindered them from going to the gym? These insights underlay a great opportunity.
2. Have Relentless Focus – Segment customers according to their Jobs to be Done, and what drives people to prioritize different Jobs. Determine what customer set you’ll be appealing to. What do they really need? What don’t they need? What’s the real competition?
For Planet Fitness, the market segment wasn’t just someone who came to the gym infrequently. There are many types of people who do that. Rather, they understood that the casual exerciser may not come to the gym at all, but they could still exercise a reasonable amount. This person often felt intimidated by the gym experience with complicated equipment, pushy trainers, and fitness freaks. They didn’t want a body fit for Mount Olympus; they just wanted to feel healthier, perhaps lose some pounds, and feel accepted. This meant they didn’t need a lot of weights and jocks hovering about – those actually detracted from their desired experience – and needed mainly basic cardio machines.
Planet Fitness also looked at economics and competitive positioning. It realized that a gym focused on cardio could largely run itself, and that low labor costs could enable it to have long opening hours. Casual exercisers wouldn’t pay much of a monthly fee, so keeping costs minimal would really matter – fortunately there was a tight linkage there with the low-cost labor model. Furthermore, it recognized that the casual exerciser market was both quite large and underserved.
3. Blur Boundaries – As Clay chronicled, disruptive innovators often didn’t rely on just one way to create accessibility. By looking across the business model, they could pull several levers that served to both align their proposition tightly to customer Jobs, and to make their proposition difficult to copy.
Planet Fitness didn’t seek to create a gym; it aimed bigger, building an experience and a lifestyle. It offered pizza nights – pizza nights!— to foster community and underscore that it’s a place for regular people. It adopted a blaringly bright logo to convey energy and fun. Going to the gym wasn’t to be a chore, but an enjoyable break. Positive energy abounds. That’s all part of the customer experience.
Together, these three disciplines of Costovation combine to enable businesses to think and act in radically new ways. They ensure customer delight and alignment with company strategy. This is the way to make disruptive innovation happen.