Richard Owen of Satmetrix opened the conference on the theme of "innovation," by describing how disruptive innovation has, in fact, disrupted both industries and individual company fortunes. Richard also offered some suggestions on how established players can connect NPS with effective innovation processes.
The Opening Battle
Netflix versus Blockbuster. We all know who won the battle, but Richard forced us back in time first, to acknowledge the innovation that formed the basis for Blockbuster’s original success.
In its heyday, Blockbuster was an innovator: from its rental model to its innovative use of information technology. But these innovations were soon displaced by additional innovation, specifically from Reed Hastings at Netflix.
"The murder weapon might have been bad profits. The NetFlix takeover of the movie industry started from Reed Hastings being charged a late fee on returning a movie," Richard explained. This illustrates how the great opportunities for innovation can be hiding in your bad profits. Isn’t it better for you to address them first? Or will you wait until a competitor comes along and innovates past you.
In Blockbuster’s case, they did eventually recognize that late fees were bad profits. But only in response to the deterioration of their business. By then, it was too late.
Bad Profits and Expectations
The challenge most companies face, as Richard pointed out, is that even customers may not recognize something as bad profits until something that serves the customer needs better comes along.
Owen: "People didn’t used to complain about Blockbuster’s late fees because it’s what customers expected."
The same thing goes for banks and airlines. Late fees and constraining policies are what customers expect, but the big innovators go after what customers "want," not what they expect. Richard referred back to his presentation at last year’s conference, where he introduced this topic of understanding industry expectations and trying to exceed them. This is battlefield of innovators.
How Can Established Companies Innovate?
From Richard’s perspective, Netflix is unusual in its ability to innovate. Their second big innovation has been video streaming. But no one expected this of Netflix. "Who would have thought that a company whose core capability was inventory management and logistics could transform its business model to move toward the technologies required for video streaming?"
Richard pointed out that it is considerably rare to see one company disrupt an industry with this kind of innovation not only once, but twice. So, what other ways are there to "win the battle?"
He contrasted "the disruptive entrepreneur" with another model of innovation that large companies should become good at: that of customer-focused incremental innovation, developed through great listening.
Richard connected it to Net Promoter this way: "What if a competitor saw our Net Promoter data and could tackle things we do that customers believe are bad profits?" The answer to this question will help you uncover ways to innovate, and keep you ahead of customer expectations. It can help you get beyond what customers expect, to what customers want…and create a lot more promoters for your business.
You will find that there are groups of promoters who are committed to your business, and will help you innovate. But it’s not just the super-promoters who can lead you to innovations. The people who are super-detractors can also be great sources of innovation. When someone gives you a zero, it means they have very strong views on your business. And with the right people at your company listening, you might just win the battle, and the war.
Good listening, and good luck!
