It has been said that consumers do not buy drill bits they buy holes. In fact, consumers don’t really buy holes either. They buy entertainment services that happen to require a hole in the wall for wiring. The hole, like the drill bit that is used to make it, is just a means to a larger end.

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A great many software products, bought as products, are really substitutes for services. Kiosks replace fast food order takers. Consumers and companies replace bookkeepers with financial management software. Printers are replaced with desktop publishing. Travel agents disappear as web sites offer similar services and the always available ATM machines replace the not always friendly or available bank teller.

So how is it helpful to think about products as substitutes for services?

First, such a view shifts thinking from technology to customer experience. Technology is important, but it is incomplete without translation into a route for consumers to achieve their goals. If we are to replace the services of a bank teller with a machine, for example, what services must the machine deliver for the customer to perceive the service experience to be complete, and how might the new technology improve the experience?

Second, a service perspective assures that the human elements involved in product purchase and use are considered as a part of product design. People are the users of products at the end of the day. If there were a service provider present as the consumer used and consumed the product what would this service provider say and do? How might thinking about this hypothetical service provider alter the design of the product, the usage instructions, and other products bundled with the product? How might the product improve upon the service experience through standardization and improvements in quality while replacing or at least causing the consumer not to miss the human element of a transaction and consumption experience?

Third, thinking about products as services forces an examination of customer goals that drive purchase. What is required by the customer to achieve these goals? If the service sought by the customer is a printed page, what is necessary to produce this experience? The answer is not just a printer, and a service provider would know this and provide all the things necessary to produce the printed page desired by the customer, and this process would be invisible to the customer. In contrast, many printer products are sold without the necessary cables to connect to a computer or other device. This means the “service” experience is broken and the customer finds that the product does not deliver the desired service.

Fourth, this view of product as service has implications for branding and brand identity. If the product were a service provider, how would that server be described and what would this description communicate about the brand. The “Helping Hand” character that has been used to advertise Hamburger Helper for decades and Progressive Insurance’s energic, friendly, and bossy Flo character provide elaborate identities for their associated brand.

Finally, service-dominant logic can be useful in thinking about how to “productize” a service. One problem with services is that they are often poorly defined and subject to feature creep (of course a free car wash should be included in my auto repair!) Identification of the full complement of benefits a customer seeks from a service provider can provide more definition of the service “product”. Such definition can be a powerful tool for managing customer expectations and for more completely defining the brand experience. For example, what should define the driverless taxi that pulls up to the curb to pick up a passenger.

Thinking about the services embedded within and delivered by a product can make products better, suggest features, and identify opportunities for improvement over human delivery. It can also suggest how a service product should be defined. It is a thought experiment worth some time and effort.

Contributed to Branding Strategy Insider by Dr. David Stewart, Emeritus Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.

At The Blake Project, we help clients from around the world, in all stages of development, define and articulate what makes them competitive and valuable at critical moments of change. Please email us to learn how we can help you compete differently.

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Telling awkward truths has little upside for the truth-tellers. These truths can:

• • Have widespread positive impacts, but create few specific big winners
  • Lead to there being quite clear losers
  • Could be stated by someone else better suited to absorb any blowback
  • May be wrong

Even those unscathed by a truth-teller may come to fear the person. After all, something dear to you might be targeted by that individual in the future.

Yet innovation requires this behavior. Without it, zombie projects persist, companies march in the wrong direction, and firms miss big opportunities outside their usual target zones.

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How can you cultivate a culture of telling awkward truths?

1. Talk with your team about instances where things got derailed because hard truths were ignored.

2. Show that mistakes are OK. A project-ending mistake doesn’t need to be career-ending; thus, truth-telling won’t be fatal to work colleagues.

3. Invite dissenting views about important decisions. As legendary GM boss Alfred P. Sloan once famously said in a meeting, “Gentlemen, I take it we are all in complete agreement on the decision. Then, I propose we give ourselves time to develop disagreement, and perhaps gain some understanding of what the decision is all about.”

4. Do skip-level meetings to get hard truths from those below you. To quote a Kellogg’s executive about the perils of managerial sugar-coating, “Problems enter this building on the ground floor as Corn Flakes, and by the time they get up here they’ve become Frosted Flakes.”

5. Talk about your own mistakes and things you wished you understood earlier. Role-model what you’re looking for. Posters on the wall won’t change the culture. Truth-telling will. Do it, or all other efforts to improve your innovativeness will struggle.

Contributed to Branding Strategy Insider by Stephen Wunker, Managing Director of New Markets Advisors and Author of The Innovative Leader.

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But what exactly makes for an innovative leader? Leadership is a multi-dimensional endeavor. It’s not just about crafting bold strategy, inspiring innovation, or thinking fast. Take two historical examples.

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In the 1910s, Henry Ford ruled the auto industry. Yet by the end of the 1920s, Alfred P Sloan had knocked him off his perch without having the manufacturing scale, low costs, or wide distribution that Ford enjoyed. Sloan’s underdog company was an amalgamation of marginal brands, yet this firm – General Motors – pulled off the feat without any major technological revolution. Instead, Sloan understood the market well and pushed his company to innovate in new directions: the auto trade-in, auto financing, and the modern organization of a firm into staff and line functions are all innovations credited to General Motors. Together, these creative moves proved critical to challenging Ford’s dominance.

More recently, Steve Jobs at Apple built a defensible niche in personal computing, then upended two market leaders – Blackberry and Nokia – to re-make the smartphone industry. He wasn’t a technologist, but he set a clear, bold strategy and crafted a well-defined product vision. To deliver it, he recruited and enabled a highly talented team, pushing hard for excellence. He wasn’t beyond admitting failure, as with the Apple III, the early GUI entry called the Lisa, and the Apple Newton handheld computer. But he quickly pushed on to new frontiers.

How To Create Innovative Leaders

To understand how today’s innovative leaders think and behave, I teamed up with my co-authors Jennifer Luo Law and Hari Nair, currently at Philips and Procter & Gamble respectively, to interview 50 of them. We selected them based on the clear results they have achieved, and the innovative ways that they accomplished those results – and we made sure to cover a mix of industries, enterprise size, job functions, and geographies.

The findings are published in our book, The Innovative Leader: Step-By-Step Lessons from Top Innovators For You and Your Organization. What emerged from the interviews was a picture of six vectors along which innovative leaders excel. Together, the names of these vectors spell out a fitting acronym: CREATE.

These are the six traits that emerged from our research.

As a pre-condition for being an innovative leader, our interviewees stressed the importance of being connected to the people they serve, whether the company’s customers or employees. To be effective, leadership has to move the company in the right direction, and connection provides the basis for knowing which way to go.

Leaders look to understand the market firsthand. One of our interviewees, Microsoft CEO Satya Nadella, puts it elegantly and succinctly when he identifies the source of all innovation as “the most humane quality that we all have, which is empathy.”

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Of course, customer research can become an echo chamber for how the company already thinks. Kimberly Weiss, who leads the mortgage business at First National Bank of Omaha, recounted to us how she re-thought the ways her large institution gathers customer input. “We used to have a 40-question survey about all aspects of customer satisfaction during the mortgage process, like ‘How much did you like your loan processor?’ Well, what if they never really cared about their loan processor? We threw that out, and replaced it with a single question: ‘From 1 to 5, did we create an exceptional mortgage experience for you?’ If you answer 5, we ask why you answered that way. If you don’t, we ask why not. We want to know, in their words, what truly matters.”

Understanding the workforce also makes a big difference. When Joey Bergstein became the chief executive of Sabra Dipping Company, one of his early moves was to work the night shift in a hummus plant. Beyond reading the PowerPoints, he wanted to know firsthand why workers were leaving and how to ensure reliable operations. He told us, “You can ask people what’s going on, but you’ll get neutral answers. When you see it with your own two eyes, it heightens the sense of urgency and deepens your understanding for what is really happening.”

Role Model

A leader sets a tone for their organization, whether it’s a small team or the whole enterprise. People take their cues about how to act from those who lead them. Do the leaders observe and question before deciding on a solution? Do they push to consider several alternative courses of action? Do they think several steps ahead about opportunities and risks?

Jan Swartz knows about role modeling. As chief executive of Princess Cruises during the pandemic, she saw three of her 20 ships struck by outbreaks of Covid-19. Authorities wouldn’t allow them to dock, for fear of bringing the disease into their countries. Passengers and crew were fearful, and people on the ships were dying. Observers wondered if the cruise industry would have any future. It was incredibly, unrelentingly, bleak.

What did Swartz do? She left the company’s headquarters near Los Angeles to fly straight to the pandemic’s early epicenter in Asia. She wanted to demonstrate that a core Princess value is caring for people. While the company could do only so much to manage the outbreak, she conveyed through her own actions that both passengers and crew should always feel cared for.

Partly through role modeling, Swartz built a set of shared values. She recounted: “Everyone had to make decisions on the fly. But they all knew what our True North was, because we had articulated our core values incessantly. In the fog of war, people had the discretion to make decisions that they felt were based in those core values.”

Evolving

When Nadella took the reins at Microsoft, he rapidly pivoted the company to focus on cloud offerings. This paid off: within five years the company’s stock price had appreciated more than four-fold (having barely moved during the 14-year tenure of Nadella’s predecessor Steve Ballmer). The company seemed to be firing on all cylinders.

But Nadella knew that computing wouldn’t stand still, and in the midst of all the success he kept pushing for what’s next. In 2019, he tinkered on his own with emerging Generative AI models, and was astounded by their capabilities. Microsoft invested $1 billion in a tiny, 100-person start-up, called OpenAI. The move certainly worked out: Microsoft’s share price has nearly tripled again since that time.

Audacious

Innovative strategies may be executed in stages, but they’re seldom timid. Sometimes they require highly decisive action.

Ron Shaich has demonstrated this a few times. As the founder of the restaurant chain Au Bon Pain in 1978, he was a pioneer of what’s called fast casual dining. He grew the chain to hundreds of stores across the United States. But, like Nadella, he kept looking around corners too. Shaich had Au Bon Pain pay $23 million to buy a separate business with just 20 stores, the St. Louis Bread Company. As he looked deeply into his new firm’s economics, he made an audacious move. Au Bon Pain spun off its main business into a separate company, and Shaich doubled down on the St. Louis Bread Company. Later on, he sold that business – re-christened as Panera – for over $7 billion.

Three-Sixty Thinker

Creative strategy came up time and again in our interviews. It is a cornerstone of innovative leaders’ plans. Alfred P Sloan and Steve Jobs were each renowned for the strategies they shepherded. They looked well beyond the core product they sold to innovate in areas such as ecosystem partners, internal processes and customer experience.

These opportunities exist in even long-standing industries. The agribusiness giant Ofi (Olam Food Ingredients) has over $10 billion in annual revenue. Although food trading and processing is a low-growth industry, Ofi has expanded rapidly through consistently seeking what’s next. Its president Kamesh Ellajosyula told us, “I have been relentless and consistent with my message for change. No matter how many knocks I take, I will keep coming back, coming back, coming back. In this role, you have to be prepared for the long road.”

Coffee is one business line in which Ofi thought three-sixty. It examined the billions of pounds of coffee cherry flesh that it was throwing away every year. It turns out to be a superfruit rich in antioxidants – so now, Ofi is developing a new market for this one-time agricultural waste.

Enabler

Innovative leaders know that their success can’t depend just on them. Even executives famed for being autocratic, such as Steve Jobs, assemble a first-class cadre of lieutenants around them. They see innovation as a team sport.

Effective leaders find ways to inspire innovation throughout their organizations. As Laura Caron, the head of an innovative elementary school in Massachusetts, recounted to us: “Yesses beget yesses, which beget more good ideas. If I could give advice to my younger self, I would have been bolder to say more yesses to signal innovation faster.”

This also means finding appropriate innovation inspirations for people throughout the organization. “You want to be shown real examples of ‘people like you’ who are able to be an innovator,” Michelle Brennan, Johnson & Johnson’s company group chairman for Europe, Middle East, and Africa, advised us. “Highlight people who have had realistic wins, not just miracle wins.”

Getting Started With Create

Each of these traits takes time to cultivate, both within a single leader as well as throughout an enterprise. But the leaders we spoke with commonly talked about three endeavors for building innovation excellence.

First, they sought to set clear innovation aspirations. What strategy was their company following? Innovation is a means to an end, so what is the end? What sorts of innovations are desired? Laying out the direction for their firms enabled both coherent action and reduced frustration with innovation efforts that might get nixed for being off-target.

Second, they built mechanisms for good ideas to go somewhere. They wanted to avoid people becoming disillusioned by having their ideas linger without implementation. Even small wins could establish momentum for bigger triumphs later on.

Last, they cultivated behaviors for long-term success. Through building capabilities, recognizing innovation efforts, and connecting people across organizational silos, they helped to ensure that people could take ideas and run with them, making big ideas even bigger.

Create is a foundation for innovative leaders, and links to broader efforts to enable organizations as a whole. By adopting Create as their personal approach, leaders ensure on-target, effective, ambitious innovation. That’s what fast-moving times require.

Contributed to Branding Strategy Insider by Stephen Wunker, Managing Director of New Markets Advisors and Author of The Innovative Leader.

At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change, including defining a vision that propels their businesses and brands forward. Please email us to learn how we can help you compete differently.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

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Loyal customers are often less costly to serve and buy higher-priced offerings. They are certainly less costly to acquire for a given purchase. They refer other customers. And employees prefer to serve them, too. Loyalty Rules, as the title of that book stated.

What does this have to do with innovation? It tells you where innovation can be most fruitful.

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In a paper that we wrote with Deloitte a few years back, we explored 10 Types of Innovation that companies can pursue. Just 1 of these 10 is solely about the product (and, by the way, that type is often unprofitable). Other types include the sales channel, service, and the customer experience.

It’s often through these other types of innovation that loyalty is won. Ordinary products can underlie an extraordinary business if you excel via different avenues.

When I think about business loyalty, I often consider the commercial printer that our firm uses, Choice Graphics. When we have a print job, we always go to Choice, without seeking other bids. Perhaps we could save a few dollars if we really search, but they’ve won us through their proactive advice, expertise, and super-speedy service in a pinch.

When it comes to printing, I don’t know what I don’t know – but Choice does. Our preference for them has absolutely nothing to do with the type of printing presses they run in the back of the building. Their innovations are in their service and business processes, not in their product – despite the end output being quite rooted in that product.

Have you calculated the profitability of your loyal vs. one-off customers? Do you know what drives their loyalty? Do you know the ROI on investments that build their loyalty?

Product innovations that win new customers are great. Business innovations that cement loyalty can be much better.

Contributed to Branding Strategy Insider by Stephen Wunker, Managing Director of New Markets Advisors and Author of The Innovative Leader.

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Clay, whom I worked with for six years, advocated that companies in the midst of being disrupted should separate out new business units that could freely respond using distinct business models. If those new units competed with the core business, so be it.

I’d tell him that was unrealistic – it’s a huge decision to make, it goes against many self-interests in a company, and it ignores the competitive advantages corporate parentage can bring.

With years of hindsight, I’ve come to think the right course is actually a mash-up of these approaches, and it’s been illustrated this week by the New York Times.

The Old Grey Lady, as staffers call her, didn’t respond to the internet disruption very well. But recent moves have been different. It’s built out – largely through acquisitions – new value propositions that work best online, such as with its product recommendation site Wirecutter, its word game Wordle, and its site for sports news, The Athletic.

Sounds like Clay’s suggested approach, right? Not really. While each of these sites can acquire subscribers directly, the Times has invested heavily in pushing an All Access bundle. And it’s working. There are now approximately 10 million of these subscribers, up about 1 million from a year ago. The goal for 2027 is 15 million. The newsrooms are distinct entities, but the monetization is done cohesively.

The Times also can make clear decisions about winners and losers in this set-up. This week, it closed its sports desk – a storied institution that covered the greats for over 100 years. Its 40 journalists were less than a tenth those of The Athletic, a site that wasn’t founded until 2015.

What are the lessons?

1. When you’re being disrupted, sometimes the surest way to embrace the disruption is to purchase it or invest in it. This also avoids the internal battles of creating a new, potentially competitive, business unit organically.
2. The advantages of corporate parentage can come a bit later, as you sort out how these business models can work best together. You should have the goal in mind from the get-go, but the implementation of these details can come over time.
3. The best options may involve a combination of separation and integration, as the Times has accomplished.

If the Times is still called The Old Grey Lady, she’s certainly become a nimble one. Here’s to all our companies being so spry at 172-years-young!

Contributed to Branding Strategy Insider by Stephen Wunker, Managing Director of New Markets Advisors and Author of The Innovative Leader.

The Blake Project Can Help You Create A Bolder Competitive Future In The Jobs To Be Done Workshop

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

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