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To Innovate—Break a Rule

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Today, every business feels the pressure to innovate. Innovation is touted daily in the headlines of business magazines, the presentations of consultants, and in the books and conferences of business visionaries.

We feel it in the parity of our pricing and during our strenuous attempts to articulate "unique value." And we witness it as emerging markets move from providers of low-cost labor to competitors, or as new technologies disrupt yet another competitive advantage.

Yes, OK! We need to innovate. But how?

Innovation seems so unmanageable—more akin to the artist searching for a muse than a business process. We dive into the "fuzzy front-end" of product development hoping that by talking to customers or anticipating trends we will find that source of inspiration, that flash of insight.

Here's a different suggestion: Break a rule! Do something that disrupts a fundamental tenet of your market or industry.


If you look back at some of the most successful examples of innovation, you'll observe that in many cases innovators didn't come up with some entirely new product or service, but instead directly challenged a sacrosanct practice of their industry and bested their competitors by changing the rules of the game.

Consider Barnes & Noble. Remember what it used to be like going to a bookstore? They were like libraries, only with worse customer service and more rules. Buying a book was like entering a temple with its own indecipherable rituals of categorization and secret language. There were no chairs, reading was discouraged, and we would never have thought about bringing in food or drink.

Yet Barnes & Noble created a multibillion dollar business out of this quiet corner of retail. Not only can you drink coffee in a comfortable chair while reading a book that you haven't bought yet, but you bought the coffee in the in-store cafe. The bookstore went from being a place of foreboding to a social destination—in large part because Barnes & Noble had the foresight and temerity to risk breaking many of the seemingly inviolate rules of its industry.

Starbucks is another retail example. Again, think back a few years. What kind of reception would you have had going to a coffee shop, ordering just coffee and hanging out for hours? At best you would have been made to feel like a bum; at worst you would have been kicked out for loitering. Today, Starbucks has become the universal meeting place of people everywhere. Loitering is encouraged. In fact, you don't even have to buy anything.

Why has Netflix been so successful? Not because you can get DVDs through the mail. Netflix identified and broke a rule that was sorely in need of breaking—late fees. Blockbuster made its money on something that customers hated but had been forced to accept as the way things are. As a result, Netflix soared while putting Blockbuster and the other retail chains on the defensive, forcing them to not only offer a similar rental-by-mail service but also drop late fees at their stores as well.

So what is a rule?

A rule is a widely accepted business convention that is so common and constant that it seems like an immutable natural law. Take, for example, banker's hours: something so universal that it's idiom for a short working day. Now consider Commerce Bank. It grew its business into "America's Most Convenient Bank" by being open on Sundays and late on weekdays.

It not only identified an opportunity to exploit retail banking's notoriously poor customer service but also picked one of its most dramatic and memorable examples to shock the marketplace.

Why is breaking a rule a valuable approach to innovation?

It's easier than coming up with the next "big idea." Of course, we'd all love to invent our industry's minivan or iPod. But those don't come easily. Breaking a rule has a certain pragmatism. While not easy, it offers a tangible place to start. I am convinced that every market has rules waiting to be broken.

Successfully breaking a rule gives you a position of leadership. Being on the offensive inherently places your competition on the defense and scrambling for a "me-too" offering (think Blockbuster's response to Netflix), which only emphasizes your position of leadership.

Breaking a rule creates barriers to entry. In many cases, there are rules for which you have a particular competitive advantage. For example, Netflix's personalization technology has yet to be matched by Blockbuster, and Commerce Bank could, from the outset, design retail spaces according to their customer service promise.

Breaking a rule signals to customers that you're on their side. JetBlue broke multiple airline industry conventions as it pursued the seemingly contradictory strategy of being a low-cost carrier and the airline that brings "humanity back to air travel." Remember the ads that said "go ahead use the call button," or "its okay to ask for another soda"? JetBlue weren't just showcasing a benefit but also poking a thumb in the eye to the competition. These were provocations to an industry lumbering under the weight of outmoded conventions and attitudes.

How do you do it?

Rules come in innumerable forms: service levels, pricing models, distribution, product features, and customer experiences. Clearly, rules can only be broken that are operationally and financially realistic, but I recommend approaching the task openly, with three questions in mind:

  1. What are the natural laws of your business? The practices that are so familiar and regular they are almost unnoticeable? This is perhaps the most difficult task, because by definition it requires seeing your business clearly, without the bias of "business as usual."

  2. A rule must be relevant. Backroom processes and cost-reducing efficiencies don't count unless they translate into something profoundly meaningful for your customers. Ask: Which affects them the most? Are there ones that most obviously frustrate or irritate our customers? (A really clear indicator here is this: What do you fight with your customers most about?). At this stage, focused customer research can be useful, particularly if you can test alternative service/product models.

  3. Which practices, if changed, could have the most disruptive impact on the marketplace? What would really change the rules of the game? Breaking a rule isn't just about creating new value, it's about repositioning yourself. The question is as much about marketing as product/service innovation. It should send a dramatic signal that you do business differently. Even if few Commerce Bank customers go on Sundays, being open seven days a week gives immediate credibility to their "most convenient" market position.

Ultimately, one of the greatest enablers of innovation is shedding assumptions. The fear of every business is being blind to both 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.


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Thomas Ordahl is with Group 1066, LLC (www.Group1066.com), a strategic marketing firm.

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