To Innovate Break a Rule

Every business today is under pressure to innovate. In the business press, consultants’ presentations, books, and conferences, business visionaries are constantly promoting innovation.

We can feel it when we compare our prices and try to explain our “unique value.” We see it when emerging markets shift from being providers of low-cost labor to competitors or when new technologies disrupt another competitive advantage.

Yes, OK! Innovation is needed. How?

Innovation can seem unmanageable, more like an artist looking for inspiration than a business. We plunge into the “fuzzy” front end of product development, hoping to find inspiration by talking with customers or anticipating trends.

Here’s another suggestion: Break the rule! Disrupt a fundamental principle of your industry or market.

When you examine some of the most innovative examples, you will see that innovators did not come up with a completely new product or service. Instead, they challenged an industry practice and beat their competitors by changing rules.

Consider Barnes & Noble. What was it like to go to a bookshop in the past? Like libraries, but with more rules and worse customer service. It was like buying a book in a temple, with its own rituals and secret languages. We would not have brought in food or drinks, as reading was discouraged.

Barnes & Noble has created a multi-billion dollar retail business from this quiet corner. You can drink coffee while reading a book you haven’t yet purchased, and you can also buy it in the store cafe. Barnes & Noble’s foresight to break many rules that were deemed inviolable by the industry allowed the bookstore to become a destination for socializing.

Starbucks is yet another example of a retail store. Think back a few more years. Imagine going to a cafe, ordering only coffee, and staying there for hours. You would have felt like a slob at best, and you could have been thrown out of the coffee shop for loitering. Starbucks is now the place where people from all over the world meet. Loitering in Starbucks is encouraged. You don’t have to purchase anything.

Why is Netflix so popular? It’s not because you can order DVDs by mail. Netflix broke a rule that was long overdue to be broken: late fees. Blockbuster’s profits came from something customers disliked but were forced to accept. Netflix’s popularity soared, putting Blockbuster and other retail chains on the defensive. They were forced to offer a similar service of renting by mail, as well as drop late fees in their stores.

What is a rule, then?

A rule is an accepted business convention so widespread and constant that it appears to be a natural law. Consider, for instance, the banker’s hour: a term so common that it has become an idiom to describe a short workday. Consider Commerce Bank. By staying open late and on Sundays, it grew to become “America’s most convenient bank.”

The company not only saw an opportunity to take advantage of the notoriously bad customer service in retail banking, but it also chose one of its most memorable and dramatic examples to shock consumers.

How can breaking rules be a good way to innovate?

This is easier than thinking up the next “big Idea.” We’d all love it if we could invent the iPod or minivan for our industry. These things don’t happen easily. It is pragmatism to break a rule. It is not an easy task, but it provides a solid starting point. I am convinced there are rules in every market that need to be broken.

You can gain a leadership position by successfully breaking a rule. Your competition will be forced to defend themselves and come up with a similar offering. (Think of Blockbuster’s reaction to Netflix). This only enhances your leadership position.

By breaking a rule, you create barriers to entry. There are many rules where you can gain a competitive edge. Blockbuster has not yet matched Netflix’s technology of personalization, while Commerce Bank can design its retail spaces according to the customer service promises they make.

By breaking a rule, you show your customers that you are on their side. JetBlue violated multiple airline conventions in its seemingly contradictory quest to be both a low-cost airline and an airline that “brings humanity back to air travel.” Remember those ads that said, “Go ahead and use the call button” or “It’s OK to ask for another drink”? JetBlue wasn’t only highlighting a benefit but was also poking fun at the competition. These were provocations for an industry that was stumbling under the weight and conventions of outdated attitudes.

How do you do it?

There are many different types of rules: service levels and pricing models, distribution channels, product features, and s. Rules can be broken if they are financially and operationally realistic. I suggest approaching the task with an open mind, asking three questions:

  1. What are the natural laws that govern your business? What are the practices so common and routine that they go unnoticed? It is difficult to see your business objectively, as it means removing the “business-as-usual” bias.
  2. Relevance is key. Cost-saving efficiencies and backroom processes are not relevant unless they have a profound impact on your customers. Which of these rules affects your customers the most? Do there are any that frustrate or irritate customers the most? This is a really clear indication: what do you most often fight about with your customers? Focused customer research is useful at this stage, especially if you are able to test different service/product models.
  3. What practices would have the greatest impact on the market if they were changed? What would change the game’s rules? It’s not just about creating value; it’s also about repositioning. It’s as much a question of marketing as it is about product/service innovations. This should be a powerful signal to your customers that you are different. Even if very few Commerce Bank customers visit on Sundays, the fact that they are open seven days per week lends credibility to their position as “most convenient.”

In the end, one of the most important factors in enabling innovation is to let go of assumptions. Every business fears being blind to opportunity and risk. Breaking a rule gives us a way to view the marketplace–something tangible to grab onto–so we can then tear it apart.

Leave a Reply

Your email address will not be published. Required fields are marked *