Sunday, March 11, 2012

How To Be Creative

The image of the 'creative type' is a myth. Jonah Lehrer on why anyone can innovate—and why a hot shower, a cold beer or a trip to your colleague's desk might be the key to your next big idea.

Creativity can seem like magic. We look at people like Steve Jobs and Bob Dylan, and we conclude that they must possess supernatural powers denied to mere mortals like us, gifts that allow them to imagine what has never existed before. They're "creative types." We're not.
The myth of the "creative type" is just that--a myth, argues Jonah Lehrer. In an interview with WSJ's Gary Rosen he explains the evidence suggesting everyone has the potential to be the next Milton Glaser or Yo-Yo Ma.
But creativity is not magic, and there's no such thing as a creative type. Creativity is not a trait that we inherit in our genes or a blessing bestowed by the angels. It's a skill. Anyone can learn to be creative and to get better at it. New research is shedding light on what allows people to develop world-changing products and to solve the toughest problems. A surprisingly concrete set of lessons has emerged about what creativity is and how to spark it in ourselves and our work.
The science of creativity is relatively new. Until the Enlightenment, acts of imagination were always equated with higher powers. Being creative meant channeling the muses, giving voice to the gods. ("Inspiration" literally means "breathed upon.") Even in modern times, scientists have paid little attention to the sources of creativity.
But over the past decade, that has begun to change. Imagination was once thought to be a single thing, separate from other kinds of cognition. The latest research suggests that this assumption is false. It turns out that we use "creativity" as a catchall term for a variety of cognitive tools, each of which applies to particular sorts of problems and is coaxed to action in a particular way.
CREATING0310jp
It isn't a trait that we inherit in our genes or a blessing bestowed on us by the angels. It's a skill that anyone can learn and work to improve.
Does the challenge that we're facing require a moment of insight, a sudden leap in consciousness? Or can it be solved gradually, one piece at a time? The answer often determines whether we should drink a beer to relax or hop ourselves up on Red Bull, whether we take a long shower or stay late at the office.
The new research also suggests how best to approach the thorniest problems. We tend to assume that experts are the creative geniuses in their own fields. But big breakthroughs often depend on the naive daring of outsiders. For prompting creativity, few things are as important as time devoted to cross-pollination with fields outside our areas of expertise.
Let's start with the hardest problems, those challenges that at first blush seem impossible. Such problems are typically solved (if they are solved at all) in a moment of insight.
Consider the case of Arthur Fry, an engineer at 3M in the paper products division. In the winter of 1974, Mr. Fry attended a presentation by Sheldon Silver, an engineer working on adhesives. Mr. Silver had developed an extremely weak glue, a paste so feeble it could barely hold two pieces of paper together. Like everyone else in the room, Mr. Fry patiently listened to the presentation and then failed to come up with any practical applications for the compound. What good, after all, is a glue that doesn't stick?
On a frigid Sunday morning, however, the paste would re-enter Mr. Fry's thoughts, albeit in a rather unlikely context. He sang in the church choir and liked to put little pieces of paper in the hymnal to mark the songs he was supposed to sing. Unfortunately, the little pieces of paper often fell out, forcing Mr. Fry to spend the service frantically thumbing through the book, looking for the right page. It seemed like an unfixable problem, one of those ordinary hassles that we're forced to live with.
But then, during a particularly tedious sermon, Mr. Fry had an epiphany. He suddenly realized how he might make use of that weak glue: It could be applied to paper to create a reusable bookmark! Because the adhesive was barely sticky, it would adhere to the page but wouldn't tear it when removed. That revelation in the church would eventually result in one of the most widely used office products in the world: the Post-it Note.
Mr. Fry's invention was a classic moment of insight. Though such events seem to spring from nowhere, as if the cortex is surprising us with a breakthrough, scientists have begun studying how they occur. They do this by giving people "insight" puzzles, like the one that follows, and watching what happens in the brain:
A man has married 20 women in a small town. All of the women are still alive, and none of them is divorced. The man has broken no laws. Who is the man?
If you solved the question, the solution probably came to you in an incandescent flash: The man is a priest. Research led by Mark Beeman and John Kounios has identified where that flash probably came from. In the seconds before the insight appears, a brain area called the superior anterior temporal gyrus (aSTG) exhibits a sharp spike in activity. This region, located on the surface of the right hemisphere, excels at drawing together distantly related information, which is precisely what's needed when working on a hard creative problem.
Interestingly, Mr. Beeman and his colleagues have found that certain factors make people much more likely to have an insight, better able to detect the answers generated by the aSTG. For instance, exposing subjects to a short, humorous video—the scientists use a clip of Robin Williams doing stand-up—boosts the average success rate by about 20%.
Alcohol also works. Earlier this year, researchers at the University of Illinois at Chicago compared performance on insight puzzles between sober and intoxicated students. The scientists gave the subjects a battery of word problems known as remote associates, in which people have to find one additional word that goes with a triad of words. Here's a sample problem:
Pine Crab Sauce
In this case, the answer is "apple." (The compound words are pineapple, crab apple and apple sauce.) Drunk students solved nearly 30% more of these word problems than their sober peers.
What explains the creative benefits of relaxation and booze? The answer involves the surprising advantage of not paying attention. Although we live in an age that worships focus—we are always forcing ourselves to concentrate, chugging caffeine—this approach can inhibit the imagination. We might be focused, but we're probably focused on the wrong answer.
And this is why relaxation helps: It isn't until we're soothed in the shower or distracted by the stand-up comic that we're able to turn the spotlight of attention inward, eavesdropping on all those random associations unfolding in the far reaches of the brain's right hemisphere. When we need an insight, those associations are often the source of the answer.
This research also explains why so many major breakthroughs happen in the unlikeliest of places, whether it's Archimedes in the bathtub or the physicist Richard Feynman scribbling equations in a strip club, as he was known to do. It reveals the wisdom of Google putting ping-pong tables in the lobby and confirms the practical benefits of daydreaming. As Einstein once declared, "Creativity is the residue of time wasted."
Of course, not every creative challenge requires an epiphany; a relaxing shower won't solve every problem. Sometimes, we just need to keep on working, resisting the temptation of a beer-fueled nap.
There is nothing fun about this kind of creativity, which consists mostly of sweat and failure. It's the red pen on the page and the discarded sketch, the trashed prototype and the failed first draft. Nietzsche referred to this as the "rejecting process," noting that while creators like to brag about their big epiphanies, their everyday reality was much less romantic. "All great artists and thinkers are great workers," he wrote.
This relentless form of creativity is nicely exemplified by the legendary graphic designer Milton Glaser, who engraved the slogan "Art is Work" above his office door. Mr. Glaser's most famous design is a tribute to this work ethic. In 1975, he accepted an intimidating assignment: to create a new ad campaign that would rehabilitate the image of New York City, which at the time was falling apart.
Mr. Glaser began by experimenting with fonts, laying out the tourist slogan in a variety of friendly typefaces. After a few weeks of work, he settled on a charming design, with "I Love New York" in cursive, set against a plain white background. His proposal was quickly approved. "Everybody liked it," Mr. Glaser says. "And if I were a normal person, I'd stop thinking about the project. But I can't. Something about it just doesn't feel right."
So Mr. Glaser continued to ruminate on the design, devoting hours to a project that was supposedly finished. And then, after another few days of work, he was sitting in a taxi, stuck in midtown traffic. "I often carry spare pieces of paper in my pocket, and so I get the paper out and I start to draw," he remembers. "And I'm thinking and drawing and then I get it. I see the whole design in my head. I see the typeface and the big round red heart smack dab in the middle. I know that this is how it should go."
The logo that Mr. Glaser imagined in traffic has since become one of the most widely imitated works of graphic art in the world. And he only discovered the design because he refused to stop thinking about it.
But this raises an obvious question: If different kinds of creative problems benefit from different kinds of creative thinking, how can we ensure that we're thinking in the right way at the right time? When should we daydream and go for a relaxing stroll, and when should we keep on sketching and toying with possibilities?
The good news is that the human mind has a surprising natural ability to assess the kind of creativity we need. Researchers call these intuitions "feelings of knowing," and they occur when we suspect that we can find the answer, if only we keep on thinking. Numerous studies have demonstrated that, when it comes to problems that don't require insights, the mind is remarkably adept at assessing the likelihood that a problem can be solved—knowing whether we're getting "warmer" or not, without knowing the solution.
This ability to calculate progress is an important part of the creative process. When we don't feel that we're getting closer to the answer—we've hit the wall, so to speak—we probably need an insight. If there is no feeling of knowing, the most productive thing we can do is forget about work for a while. But when those feelings of knowing are telling us that we're getting close, we need to keep on struggling.
Of course, both moment-of-insight problems and nose-to-the-grindstone problems assume that we have the answers to the creative problems we're trying to solve somewhere in our heads. They're both just a matter of getting those answers out. Another kind of creative problem, though, is when you don't have the right kind of raw material kicking around in your head. If you're trying to be more creative, one of the most important things you can do is increase the volume and diversity of the information to which you are exposed.
Steve Jobs famously declared that "creativity is just connecting things." Although we think of inventors as dreaming up breakthroughs out of thin air, Mr. Jobs was pointing out that even the most far-fetched concepts are usually just new combinations of stuff that already exists. Under Mr. Jobs's leadership, for instance, Apple didn't invent MP3 players or tablet computers—the company just made them better, adding design features that were new to the product category.
And it isn't just Apple. The history of innovation bears out Mr. Jobs's theory. The Wright Brothers transferred their background as bicycle manufacturers to the invention of the airplane; their first flying craft was, in many respects, just a bicycle with wings. Johannes Gutenberg transformed his knowledge of wine presses into a printing machine capable of mass-producing words. Or look at Google: Larry Page and Sergey Brin came up with their famous search algorithm by applying the ranking method used for academic articles (more citations equals more influence) to the sprawl of the Internet.
How can people get better at making these kinds of connections? Mr. Jobs argued that the best inventors seek out "diverse experiences," collecting lots of dots that they later link together. Instead of developing a narrow specialization, they study, say, calligraphy (as Mr. Jobs famously did) or hang out with friends in different fields. Because they don't know where the answer will come from, they are willing to look for the answer everywhere.
Recent research confirms Mr. Jobs's wisdom. The sociologist Martin Ruef, for instance, analyzed the social and business relationships of 766 graduates of the Stanford Business School, all of whom had gone on to start their own companies. He found that those entrepreneurs with the most diverse friendships scored three times higher on a metric of innovation. Instead of getting stuck in the rut of conformity, they were able to translate their expansive social circle into profitable new concepts.
Many of the most innovative companies encourage their employees to develop these sorts of diverse networks, interacting with colleagues in totally unrelated fields. Google hosts an internal conference called Crazy Search Ideas—a sort of grown-up science fair with hundreds of posters from every conceivable field. At 3M, engineers are typically rotated to a new division every few years. Sometimes, these rotations bring big payoffs, such as when 3M realized that the problem of laptop battery life was really a problem of energy used up too quickly for illuminating the screen. 3M researchers applied their knowledge of see-through adhesives to create an optical film that focuses light outward, producing a screen that was 40% more efficient.
Such solutions are known as "mental restructurings," since the problem is only solved after someone asks a completely new kind of question. What's interesting is that expertise can inhibit such restructurings, making it harder to find the breakthrough. That's why it's important not just to bring new ideas back to your own field, but to actually try to solve problems in other fields—where your status as an outsider, and ability to ask naive questions, can be a tremendous advantage.
This principle is at work daily on InnoCentive, a crowdsourcing website for difficult scientific questions. The structure of the site is simple: Companies post their hardest R&D problems, attaching a monetary reward to each "challenge." The site features problems from hundreds of organization in eight different scientific categories, from agricultural science to mathematics. The challenges on the site are incredibly varied and include everything from a multinational food company looking for a "Reduced Fat Chocolate-Flavored Compound Coating" to an electronics firm trying to design a solar-powered computer.
The most impressive thing about InnoCentive, however, is its effectiveness. In 2007, Karim Lakhani, a professor at the Harvard Business School, began analyzing hundreds of challenges posted on the site. According to Mr. Lakhani's data, nearly 30% of the difficult problems posted on InnoCentive were solved within six months. Sometimes, the problems were solved within days of being posted online. The secret was outsider thinking: The problem solvers on InnoCentive were most effective at the margins of their own fields. Chemists didn't solve chemistry problems; they solved molecular biology problems. And vice versa. While these people were close enough to understand the challenge, they weren't so close that their knowledge held them back, causing them to run into the same stumbling blocks that held back their more expert peers.
It's this ability to attack problems as a beginner, to let go of all preconceptions and fear of failure, that's the key to creativity.
The composer Bruce Adolphe first met Yo-Yo Ma at the Juilliard School in New York City in 1970. Mr. Ma was just 15 years old at the time (though he'd already played for J.F.K. at the White House). Mr. Adolphe had just written his first cello piece. "Unfortunately, I had no idea what I was doing," Mr. Adolphe remembers. "I'd never written for the instrument before."
Mr. Adolphe had shown a draft of his composition to a Juilliard instructor, who informed him that the piece featured a chord that was impossible to play. Before Mr. Adolphe could correct the music, however, Mr. Ma decided to rehearse the composition in his dorm room. "Yo-Yo played through my piece, sight-reading the whole thing," Mr. Adolphe says. "And when that impossible chord came, he somehow found a way to play it."
Mr. Adolphe told Mr. Ma what the professor had said and asked how he had managed to play the impossible chord. They went through the piece again, and when Mr. Ma came to the impossible chord, Mr. Adolphe yelled "Stop!" They looked at Mr. Ma's left hand—it was contorted on the fingerboard, in a position that was nearly impossible to hold. "You're right," said Mr. Ma, "you really can't play that!" Yet, somehow, he did.
When Mr. Ma plays today, he still strives for that state of the beginner. "One needs to constantly remind oneself to play with the abandon of the child who is just learning the cello," Mr. Ma says. "Because why is that kid playing? He is playing for pleasure."
Creativity is a spark. It can be excruciating when we're rubbing two rocks together and getting nothing. And it can be intensely satisfying when the flame catches and a new idea sweeps around the world.
For the first time in human history, it's becoming possible to see how to throw off more sparks and how to make sure that more of them catch fire. And yet, we must also be honest: The creative process will never be easy, no matter how much we learn about it. Our inventions will always be shadowed by uncertainty, by the serendipity of brain cells making a new connection.
Every creative story is different. And yet every creative story is the same: There was nothing, now there is something. It's almost like magic.

Food hubs: How small farmers get to market

Employees at the Local Food Hub. (Photo by USDA.)

Ask most small and mid-sized farmers who sell food to a local audience what they like least about their job and they will probably say marketing and distribution. Driving long hours to sit at farmers markets (or managing someone else who does) is always a risk that can result in unsold leftovers. And even when you have a guaranteed market — like in the case of community-supported agriculture (CSA) and restaurant sales — the effort involved diverts time and energy from the actual work of farming.
Enter food hubs. A key component of the USDA’s Know Your Farmer, Know Your Food initiative, food hubs operate on the simple principle that farmers, like everyone else, are stronger when they work together. Food hubs are networks that allow regional growers to collaborate on marketing and distribution. The term applies to a broad range of operations, from multi-farm CSAs to Craigslist-like virtual markets where buyers and producers can connect. But each model is motivated by the belief that individual farms can’t survive in a vacuum.
“When everybody was a farmer, there was all sorts of infrastructure to support family-scale farming, and that’s all gone,” said Amanda Oborne, director of FoodHub, an online resource that connects growers, buyers, and distributors in the western U.S. “Food hubs are a huge part of the answer to rebuilding that infrastructure.”
“Talking, getting together — that in and of itself is a new thing for a lot of growers,” said Dru Rivers, whose Full Belly Farm in California’s Capay Valley is part of the Capay Valley Farm Shop. “The food hub brings together this region, rather than [us farmers] competing against each other.”
Capay Valley Farm Shop partners with 26 institutions around the Bay Area (about 100 miles away from the valley), from schools to cafes to companies like Ideo and Adobe, to offer “farmshares,” CSA boxes containing not just one farm’s produce but an assortment of the best offerings from the shop’s network of 35 farms. Last year the farm shop started offering wholesale produce as well, selling to company kitchens and neighborhood markets.
“The collaboration allows everyone to market together, so there’s one truck that goes to the city, and one delivery route,” Rivers said. “Some of us are much better farmers than we are marketers, so [it’s] a tremendous help, and allows the farmers to focus on what they’re good at.”
Local Food Hub, in the Charlottesville, Va., area, concentrates solely on distributing wholesale produce to its 150 buyers, which include public schools, hospitals, and nursing homes, as well as restaurants and grocery stores. “We really try to focus on those big institutional markets that small farmers have been traditionally locked out of,” explained Emily Manley, Local Food Hub’s director of outreach and development.
Many of those institutions feel the customer demand for local food but don’t know how best to meet it. “If the purchasing manager [at a hospital] can call up Sysco and get all the tomatoes he needs, he doesn’t want to call up a bunch of different farmers and coordinate with each,” Manley explained. “We do all the logistics.”
Farmers tend to be risk-averse by necessity, and Manley likes being able to offer them a solid commitment. “We say, here’s where there’s opportunity; we’ll commit to buying this amount of squash from you every week. Just having that information is key to being more efficient and growing more food.”
By making regional distribution easier for farmers who usually have to compete with cheap produce trucked and shipped from afar, food hubs also pump dollars back into the local economy. Local Food Hub has invested over $1 million in direct farm purchases in its two and a half years of existence.
Beyond the direct economic benefits, connecting eaters with local growers helps cultivate a sense of regional pride and solidarity. “We have a real attachment to making sure our valley continues to have its rural, agricultural heritage,” Rivers said. “We want food to be recognized from a region, not just one farm.”
Bruce Johnson at Dragonfly Farm sells his pastured meat through the Fall Line Farms food hub. (Photo by USDA.)
Virtual hubs, like FoodHub, FarmsReach, and Local Dirt, offer a more interactive way for growers and eaters to connect, allowing them to specify exactly what they’re looking for, the same way apartment hunters can filter their Craigslist results by neighborhood, price, or number of bedrooms. “Our point really is to make it all transparent,” Oborne said.
Food hubs maintain the transparency that draws eaters to farmers markets and CSA programs, while ramping up the efficiency necessary to get fresh, local food to a wider audience. Thomas Nelson, one of the community members who founded the Capay Valley Farm Shop, describes food hubs as “the center of the new rural economy. Once you begin to put that infrastructure in place,” he adds, “it gives new farmers more confidence that they have the support they need to succeed.”
Which is why it’s great to see the USDA taking food hubs seriously, offering funding [PDF], doing research, and collaborating with groups like the National Good Food Network to provide webinars and other resources to help food hubs get off the ground. The local food supply won’t keep pace with demand unless new, young farmers feel that encouragement. Even veteran growers sense the tide turning.
“I’ve been farming here for 28 years,” Rivers said. “Having this new venture makes it exciting again.”

If You Want To Craft Your Customers’ Memories, Start With The Checkout Process

Our memories of an event are overwhelmingly shaped by its last moments. So why do so many services conclude with the worst part of an experience: paying for it?
If you had to relive a painful event for either 60 or 90 seconds, you’d choose the shorter period, right? It seems so obvious that we usually don’t even bother to ask the question. But, remarkably enough, experiments have shown that you’d be overwhelmingly more likely to pick the longer episode if, the first time around, you sensed even a slight lessening of the pain in the final moments of the experience. It seems that we tend to remember, and judge, an overall experience based on the intensity of our sensation at its end relative to its peak intensity. And we tend to ignore the duration of the experience. So, for instance, we’ll rate a mediocre vacation more highly overall if our final experience of it is overwhelmingly positive. And vice versa: We tend to discount a great holiday almost entirely if it is in some way tarnished toward its conclusion.
For those of us who work in service design and innovation for a living, this has profound implications. After all, it is one of our orthodoxies, part of the designer credo, that user experience is paramount. But what if it isn’t? What if user memory is at least as important--if not more so? What if memorable experiences are determined not by the value of the experiences themselves but by the value of the memories they provoke? Does this mean that we need to rethink our work? In some cases, I think it might.
Take the design of the average retail experience. Typically, the least compelling part for customers is the financial transaction, the point at which they actually have to pay for their purchases. In most cases, regardless of whether those purchases are products, such as clothes and groceries, or services, like meals and haircuts, the exchange of money tends to happen at the very end of the experience as a whole. So if we are truly most impacted by what happens to us last, it would seem that many of these experiences provide customers with the worst possible memory of them.

One of the world’s most creative chefs, Grant Achatz, is tackling this problem head-on with his latest restaurant, Next. Like a theater that puts on a new show every few months, Next presents themed menus that get completely overhauled four times a year. For the restaurant’s opening theme, “Paris 1906,” diners relived the legendary cuisine of French master Auguste Escoffier at the Ritz hotel. That was followed by a “Tour of Thailand,” after which came “Childhood,” a trip down memory lane replete with PB&J sandwiches, macaroni and cheese, and superhero lunch boxes. Diners book tickets online in advance as they become available. The tickets cover the cost of the meal (which, like a show, is presented as a whole, not a la carte), taxes, tip, and (optionally) wine pairings. Once the ticket has been bought, there is no bill to be settled at the end of the dinner.
This method of payment not only improves Next’s planning and budgeting abilities but also extends the pleasurable aspects of the experience for the diners all the way through to them leaving the restaurant and very likely heightens their memories of it. Reading the reviews on Yelp, it becomes clear how willing customers are to embrace these innovations (nearly every single reviewer appears to be a repeat diner at Next) and how evocative their recollections of them become.
Meanwhile in retail, Apple has not only replaced the checkout and cashier paradigm in most stores with “on the floor” payment offered by any available staffer, it now provides an option to bypass the human transaction entirely. Its November 2011 release of version 2.0 of the Apple Store app enables shoppers in any of its U.S. retail locations to use EasyPay on their iPhone 4 to purchase Apple accessories electronically. This means that Apple owners can choose whether they even want to engage with a store associate at all. Apple’s efforts to improve the final part of the retail experience, by giving their customers payment options that include using their own beloved iPhone, serve to reinforce positive memories and, perhaps, influence future purchasing decisions.
Of course, not every coffee, meal, grocery run, or shopping trip needs to be made into an experience. Sometimes, maybe most times, people just need their caffeine fix or a to-go sandwich, snacks for the kids, or some office supplies. But in every case, the transaction can feel easy and pleasant, in which case they’ll likely return, or difficult and unsatisfactory, in which case they most likely won’t. In higher-stakes experiences--whether they have a reputation for being painful (dentist’s visit) or pleasurable (vacation)--we should consider designing them to maximize these rules to transform people’s memories and influence whether they are game to repeat the experience or prefer to find an alternative. Where once this may have been the domain of a user experience (UX) specialist, now maybe there’s a role for an expert in user memory (UM) as well.

Saturday, March 10, 2012

What is Design Thinking and Why Do Entrepreneurs Need to Care?


Design thinking seems to be all the rage in business and entrepreneurship circles, but the momentum has been building for over 13 years. In 1999 I was in the Doctoral program at the University of Colorado-Boulder studying strategy and entrepreneurship. While procrastinating on reading 400 pages of scholarly research articles for a seminar the next day, I flipped through channels one night in my tiny apartment passively watching mindless TV (on a 19” screen!). It was 10:30 pm and the familiar voice of Ted Koppel’s Nightline caught my attention. I heard Koppel say, “Tonight, the deep dive – one company’s secret weapon for innovation.”
He had me at deep dive! I was enthralled with the show, the company, and the methodology. I immediately ordered an educational copy of the program (on VHS!) and showed it to my undergraduate entrepreneurship class the following week. After using the video in my course, more than half of the class had dreams of working for one company. IDEO. With that type of student enthusiasm I thought to myself, “There is really something here for entrepreneurs.”
Since then I’ve been playing around with elements of design thinking in my entrepreneurship courses to help students create better ideas and identify bolder opportunities. Even at the executive level I’ve starting using design thinking because it creates an incredible “mindshift” among executives. Design is no longer a support function; it’s strategic.
For those of you unfamiliar with what is rumored to be the best selling Nightline video of all time you may view an excerpt here. The Nightline premise was simple. IDEO was challenged to reinvent the shopping cart in 10 days. The outcome was impressive but the methodology was inspirational. The principles of the method have since become known as design thinking.
For entrepreneurs I use design thinking to generate bold ideas. I borrow from Tim Brown, author of Change by Design and CEO of IDEO, and highlight three parts of the design thinking process.
    1. Inspiration: Observing users in their own environment to identify latent needs. Takeaway: See the world differently in order to capitalize on needs that your competition hasn’t taken the time to recognize.
    2. Ideation: Developing new ideas based on observations to address latent needs. Takeaway: Don’t depend on your customers for the big ideas.
    3. Implementation: Testing assumptions of new ideas to continuously shape them into viable opportunities. Takeaway: Fail quickly and often not to kill an idea but to make it better.
In a paper recently published with my colleague, Patti Greene, we stated, “Design is a process of divergence and convergence requiring skills in observation, synthesis, searching and generating alternatives, critical thinking, feedback, visual representation, creativity, problem-solving, and value creation. Teaching entrepreneurship through a design lens can help students identify and act on unique venture opportunities using a toolkit of observation, fieldwork, and understanding value creation across multiple stakeholder groups” (p. 65) But what is most compelling about the approach popularized by IDEO is this notion of human-centered design.
Human-centered design involves a different starting point in the creation process. In typical scenarios where new ideas are being vetted we often jump to answer two questions: Can it be done? Will it make money? A design thinking approach forces you to answer an entirely different question in the beginning while not even addressing feasibility and economic viability.
The first question is: What do people need? This isn’t marketing 101 where I encourage you to talk to customers and ask them what they need. This is, however, anthropology 101 where you observe people in their environments to understand their lives, develop empathy, and uncover latent needs. Latent needs are those needs that we have that we don’t even know we have. They lie dormant until something comes along that encourages these needs to surface. Think iPad. Human-centeredness is what separates design thinking from other innovation methodologies. It has the ability to produce radical innovation rather than incremental innovation.
The beauty of design thinking is that it works best under conditions of uncertainty—when you really don’t know where to start. It’s a methodology that is very messy in practice but does allow for a systematic approach to creating new opportunities. In my opinion, every entrepreneur is a designer.

Why You Should Think Like a Fortune 500 CEO from Day 1- and Other Branding Lessons from Grasshopper.

If you’re an entrepreneur and use a phone system for business (other than your personal cell) you’re probably using Grasshopper. At the very least, you’ve probably heard of the virtual phone system that enable entrepreneurs to work from anywhere while maintaining a professional presence.
Since first launching in 2003, Grasshopper has become the brand synonymous with “phone” for entrepreneurs.  How exactly did the company manage to dominate the category like that?  Yes, lots of hard work, but after speaking with Grasshopper Co-Founder and CEO Siamak Taghaddos, here are a few other take-aways that struck me from their story.
  1. Think like a Fortune 500 company from Day 1.   When I asked Taghaddos about his marketing in the earliest days and how it changed over time, he shared with me that he never viewed the company as a startup. Even from Day 1, the brand was built with the mindset of “what would a Fortune 500 company do?”  They took risks with marketing and explored channels that were still new and innovative. They sought to be first movers and were not too concerned with sticking to the tried and true.  And yes, they bootstrapped the company back then and 9 years later, continue to build it quite successfully without outside capital.
  2. If you’re going to re-brand, go bold or go home. Around 2008, after being in business for 5 years and already hitting the Inc. 500, Taghaddos and his business partner, Co-Founder and CTO David Hauser, looked into the future and saw potential trouble on the horizon. The economy was faltering, they didn’t think their growth trajectory was sustainable, and perhaps most troubling of all, they thought the name of their business at that time (Got Vmail) would ultimately limit their growth. Got Vmail was difficult to remember, which made it hard to share via word of mouth.   Developing a brand and then realizing you picked the wrong name is not an uncommon situation for entrepreneurs.  Businesses evolve and sometimes companies simply outgrow the names they initially chose. What to do if you find yourself in that situation?  Well, if you’re Grasshopper, you use the anticipated slowdown as a chance to boldly unleash an innovative re-branding campaign.  In honor of their new name, Grasshopper sent 25,000 chocolate dipped grasshoppers to a list of 5000 entrepreneurial influencers. If that doesn’t get people talking, I don’t know what will.  The result? The cost per acquisition for their advertising went down by 50 percent as their word of mouth referrals increased by the same amount.  Amazing!
  3. Keep your marketing relevant by staying relevant in your community. Grasshopper is one of those companies that is built for entrepreneurs by entrepreneurs.   Thus, they whole-heartedly embrace the entrepreneurial community both by what they do and how they do it.  For example, they seek out opportunities to support organizations focused on entrepreneurship such as the Young Entrepreneurship Council and the fantastic work it does (I, too, am a member).  They were also instrumental in the declaration of the first-ever National Entrepreneurs Day on November 19, 2010.  They look for opportunities to chime in on conversations related to entrepreneurship and look for ways to support the community when possible. Plus, knowing they are speaking to entrepreneurs,  they have fun with their marketing (Check out some of their YouTube videos!)
So, while I’ve never had a desire to eat a chocolate dipped grasshoppers myself, hats off to Taghaddos, Hauser and the rest of their team for the creativity they continue to infuse into their brand.  It’s no wonder this is a business that people want to continue to talk about

Using Great Storytelling To Grow Your Business



Every two months, I pull together a community of innovators. We meet somewhere in New York City, usually a boardroom overlooking a park or cityscape. But last month we all found our way into an acting studio operated by The TAI Group to learn about storytelling.
The members of this group certainly already know something about the topic. They are senior executives at some of the largest corporations, partners in some of the most prestigious consulting and private equity firms, and several cutting-edge entrepreneurs. But the more you know, the more you realize there is to learn, and this group wanted to learn more about how to use effective storytelling to drive change in and grow their organizations.
The experience shocked me, to be honest. I considered myself an expert and snobbishly thought there was little more to learn. How wrong I was. Here are my two key takeaways from this session. Apply them today at your next meeting or phone call and I am willing to bet you will have a better result.
1) Use lots of LOTS. Our facilitator, Gary Lyons, senior coach at The TAI Group, told us a story and had us dissect what we remembered. Do this, and you will realize your audience is often checked out, comatose, or unable to hear or remember what you are saying. The key to engage them is to use lots of “language of the senses,” or LOTS. When telling a story, share with us what you see, smell, feel, taste, and hear. When you trigger a sense in someone, you bring them into the story with you.
2) Build on your story spine. At McKinsey, I was taught to open presentations with a standard structure: situation, complication, question, answer. TAI suggests you use a five-step structure and do so not just to open your presentation, but throughout your talk. They call it the "story spine": reality is introduced, conflict arrives, there is a struggle, the conflict is resolved, a new reality exists. These two tools caused a profound shift in our abilities to tell effective stories.
Not convinced? Let me try the story spine with lots of LOTS then:
Reality introduced: A dark room is filled with 20 executives and entrepreneurs resting on chairs in rows facing two director chairs. The door closes, snuffing out the faint sound of New York traffic.
Conflict introduced: Our facilitator, Gary, begins scratching markers on flip charts. He is there to teach us about storytelling. But all I can think about is, "This is a highly accomplished group; they know all of this already. Will we learn anything new?"
Struggle: Gary tells us to use “language of the senses,” but someone complains, "You can't talk like that at a board meeting," to which Gary points out that if you talk differently than people expect you to, they are more likely to listen and remember.
Conflict resolved: Gary gently bats back every concern this Type A group lobs at him, patiently walking us through the journey. By the end he has us on the edge of our seats.
New reality: We close with a “before and after” exercise. One of our members gets up to practice a pitch; he is raising money for an energy tech venture. He starts speaking, but I just can't follow. When he finishes, I realize I have not heard a word. Gary coaches him--lots of LOTS, story spine, look us in the eye, take us in--and the speaker tries again. Now it is all waterfalls of electricity pouring down the mountain, the opportunity to create something and break through with passion. I heard every word, and so much more.
That is the impact that two tools can have in your ability to tell stories--about the company you are building, the project you are leading, the life you live. You can enroll people more completely and emotionally in your mission. Here is how you can put it to use now:
1) Think of a presentation or pitch you will be giving in the next seven days.
2) Write out your presentation as a story, longhand, on paper, using the story spine.
3) Brainstorm a list of LOTS (language of the senses) you want to embed into your story.

10 Quick Creativity Hacks

JONAH LEHRER
1. Color Me Blue
A 2009 study found that subjects solved twice as many insight puzzles when surrounded by the color blue, since it leads to more relaxed and associative thinking. Red, on other hand, makes people more alert and aware, so it is a better backdrop for solving analytic problems.
2. Get Groggy
According to a study published last month, people at their least alert time of day—think of a night person early in the morning—performed far better on various creative puzzles, sometimes improving their success rate by 50%. Grogginess has creative perks.

CREATIVEJmp1
#3 Don't Be Afraid to Daydream
3. Daydream Away
Research led by Jonathan Schooler at the University of California, Santa Barbara, has found that people who daydream more score higher on various tests of creativity.
4. Think Like A Child
When subjects are told to imagine themselves as 7-year-olds, they score significantly higher on tests of divergent thinking, such as trying to invent alternative uses for an old car tire.
5. Laugh It Up

CREATIVEJmp2
When people are exposed to a short video of stand-up comedy, they solve about 20% more insight puzzles.
When people are exposed to a short video of stand-up comedy, they solve about 20% more insight puzzles.
6. Imagine That You Are Far Away
Research conducted at Indiana University found that people were much better at solving insight puzzles when they were told that the puzzles came from Greece or California, and not from a local lab.
7. Keep It Generic
One way to increase problem-solving ability is to change the verbs used to describe the problem. When the verbs are extremely specific, people think in narrow terms. In contrast, the use of more generic verbs—say, "moving" instead of "driving"—can lead to dramatic increases in the number of problems solved.
According to a new study, volunteers performed significantly better on a standard test of creativity when they were seated outside a 5-footsquare workspace, perhaps because they internalized the metaphor of thinking outside the box. The lesson? Your cubicle is holding you back.
8. Work Outside the Box
According to new study, volunteers performed significantly better on a standard test of creativity when they were seated outside a 5-foot-square workspace, perhaps because they internalized the metaphor of thinking outside the box. The lesson? Your cubicle is holding you back.
9. See the World
According to research led by Adam Galinsky, students who have lived abroad were much more likely to solve a classic insight puzzle. Their experience of another culture endowed them with a valuable open-mindedness. This effect also applies to professionals: Fashion-house directors who have lived in many countries produce clothing that their peers rate as far more creative.
10. Move to a Metropolis
Physicists at the Santa Fe Institute have found that moving from a small city to one that is twice as large leads inventors to produce, on average, about 15% more patents.

Now you can buy a prefab IKEA house

Image by ideabox.
Oregon architecture firm ideabox is producing this prefab tiny house, which comes pre-installed with IKEA cabinets, flooring, and closets. The “activ” house is about 750 square feet and costs $86,500, and you can pick the color scheme of IKEA accoutrements that you prefer. And unlike most IKEA stuff, it doesn’t come flat-packed and there’s no assembly required.

The Zipcar Of Electric Scooters Is Coming To San Francisco

Want to get across town fast? Try a quick ride on one of Scoot’s scooters, soon to be available for rent around the city.
If you’ve always wanted to be part of a scooter gang (Heck’s Angels, anyone?) but don’t want to invest in a scooter, we’ve got great news: The Zipcar of electric scooters is about to be unleashed.
Scoot Networks, a startup that emerged from the Greenstart cleantech accelerator, launched this week with the aim of bringing the joys of zipping around on a scooter to the masses. "We were looking at collaborative consumption and electric vehicles, and hit on the opportunity of using these affordable and efficient electric scooters in a European-style bike sharing system, and adding to that all the smarts and technology you find in Silicon Valley," explains CEO Michael Keating.
The system, which is being rolled out to San Francisco-based companies for private fleets, lets users locate nearby scooters with their smartphone and claim the one they want (as with Zipcar, each scooter lives at a certain location). After it’s docked into the scooter, the phone unlocks the vehicle and acts like a virtual dashboard, providing a map as well as information on speed and range. The scooters have a top speed of 30 MPH and a range of 20 to 30 miles--enough to go roundtrip from any one point in San Francisco to any other point. They charge up once they’re returned to their parking spots. For now, users have to return the scooters to their original location. Once the service scales up, Scoot expects that users will be able to make one-way trips and drop the vehicles off at more convenient spots.
Once the corporate clients test out Scoot Networks, it will start to deploy scooters for public use at public transit stops. And after that, it will be rolled out widely across the city. The service will have 20 networked scooters by April and if all goes well, hundreds by the end of the year.
Heavy users will pay a monthly fee that costs about as much as a Muni pass ($62) plus a few cab rides. Occasional users will get a single-use rate that competes aggressively on price with cabs.
While California residents have to get a moped endorsement on their driver’s license to operate a scooter that they own, riding a rented scooters doesn’t require any special certification. Still, Scoot plans to offer training for new riders.
Keating isn’t too worried about having to maintain a large fleet of scooters. Scoot imports its scooters from China, which manufactures about 10 million of the electric vehicles each year, almost all of which are snapped up by its scooter-crazed emerging middle class. That volume of production allows the service to pay less than $1,000 for each vehicle.
"We’re able to take advantage of the huge investment China has made in electric vehicles," says Keating. As a result, Scoot expects that it will simply turn over its fleet every year--perhaps not the most sustainable option, but one that will ensure customers don’t have to worry about faltering vehicles.
Scoot chose San Francisco as its launch city for a variety of reasons: There’s a lot of transportation innovation happening in the city, taxis are expensive and hard to find, the hilliness of the city can make it difficult to bike, traffic makes it hard to drive, and public transport is lacking. If the service succeeds in the Bay Area, it will expand to other cities across the U.S. "[Scooters] are the cheapest form of motorized transportation in the world," says Keating. "We would like to see this go everywhere."

Friday, March 9, 2012

Philippines police to plant 10 million trees in one year

 
Photo by Todd Shaffer.
Police officers in the Philippines are trading their guns and billy clubs for weapons of mass construction: shovels, watering cans, and gardening gloves. That’s because they’re partnering with the country’s Department of Environmental and Natural Resources to combat climate change and deforestation. Their Green Ops mission? Plant 10 million treesin one year.
The push to reforest the Philippines comes on the heels of a recent executive order by President Benigno Aquino, known as the National Greening Program, which aims to rehabilitate nearly 500 thousand acres of previously cleared forest cover by February 2013.

Indeed, the tree-planting police operation comes not a moment too soon: The Philippines has one of the highest deforestation rates in the world. While trees used to cover all of the country’s islands, only 35 percent of the Philippines’ forests remain today.
Each of the Philippine National Police’s 140,000 officers will need to plant six seedlings a month for the next year in order to meet the country’s ambitious tree goal. Looks like the officers’ green thumbs will be getting a lot more action than their trigger fingers.

Kitchain: A Modular Mobile Kitchen For Big Communal Meals

What’s better than cooking and eating with friends? Cooking and eating with lots of friends. This new project lets you bring the home cooking and eating experience anywhere, and create a communal eating experience wherever you are.



Planning a large dinner party? Or a very large dinner party? Or a small dinner party, for that matter?

Check out Kitchain, a modular kitchen system for communal meals. Kitchain is made up of several different units, each with its own function, which can be linked to create a cooking and dining area for groups of any size. There are units for range-top cooking and for grilling, each complete with a toolkit of cookware and utensils. There’s also a bar, a mini-market, a cash register, and a cleaning-up station. You just pick the elements you want, link them together with dining tables, and enjoy one of humanity’s most longstanding traditions: sharing a meal with friends old and new.

Kitchain, designed by Benedetta Maxia and António Louro, was originally created for the Belluard Bollwerk festival in 2011. This month it was set up at the Artefact arts festival in Leuven, Belgium, where it seems to have been a hit. It’s not for sale, but you can reserve it for your own event through the project’s website. The Kitchain crew will come and cook for you or you can ask them to set it up in “DIY” mode so people can prepare their own food.

Storytelling--The Secret Key to Leadership

Why storytelling?
Nothing else works.



Slides leave listeners dazed. Prose remains unread. Reasons don’t change behavior. When it comes to inspiring people to embrace some strange new change in behavior, storytelling isn’t just better than the other tools. It’s the only thing that works.
The basics of leadership storytelling was the topic of my talk at the TEDx conference in Utrecht on November 8, 2011 on moral persuasion. In the talk:
  • I explained how Al Gore went from being Mr. Boring to Mr. Excitement and in the process won an Emmy, an Oscar and a Nobel Peace Prize.
  • I told how I stumbled on the power of leadership storytelling while working at the World Bank.
  • I noted that most leadership stories don’t work. The stories that most leaders tell are ineffective or even counterproductive.
  • I described the four main characteristics of leadership stories that do work:
  1. Why the story must be authentically true, and the danger of telling “Titanic” stories.
  2. The neuroscience of why Hollywood is right: although negative stories are useful for getting attention, to inspire action stories must be positive in tone.
  3. Why leadership stories need to be told in a minimalist form, and why there are two listeners for every participant.
  4. How complex ideas are communicated by contrasting the story of the situation before the change idea and the story of the situation after the change idea, with a story about radical management that shows why Apple [AAPL], Amazon [AMZN] and Salesforce [CRM] are prospering, while old firms like Wal-Mart [WMT] and General Electric [GE] are struggling.

Turning Old Boxes Into New Toys (Imagination No Longer Required)

Anyone who’s ever unwrapped presents at Christmas knows how much kids love to play with the packing and boxes, often more than the contents. One company, Box Play for Kids, is taking that one step further by turning throwaway household items into imaginative toys with a series of well-designed stickers.
Egg cartons lying around? Then you also have caterpillars and pianos. Discarded cereal boxes double as record players, while milk cartons are clearly pigs, cows, fire trucks, and choo-choo trains. If old cardboard tubes are your thing, you are in luck. With no assembly required, you can now have a shark, bowling pins, baseball bats, and a dalmatian puppy (that never needs to be walked). That’s a lot of cardboard you can reuse, and a lot fewer disposable toys you can buy.
There’s no age recommendations for Box Play’s stickers (although their motto reads "For Kids"), but they’re presumably designed for--and were more or less conceived of--by children. Box Play’s founders, two designers with decades of experience in package design, branding, and advertising, are raising a girl named Chloe whose fascination with stickers and old boxes sparked the idea.
To make their products as environmentally responsible as possible, all the stickers are made from 100% recycled and uncoated paper, so kids can add their own little personal flair before those boxes get sent back to the trash or recycle bin. You can pick up your own set at their website, or at stores, for about $4 and $12 each.

Six Attributes of Successful Entrepreneurs

I recently read an article in The New York Times about a program that had been proving for many years what lots of people had long suspected — that SAT scores are not necessarily great predictors of college success. The piece got me thinking about my own observations about the relationship between college success and entrepreneurial success. Or perhaps I should say the lack of a relationship.
Choosing entrepreneurship might be one of the most simple and pure adventures you can take. No permission needed, no essays to write, no tests to take, no interviews to get through, no one to tell you what to do or what not to do — and of course no one else to take the credit or blame.
You need only the possibly crazy notion that someone wants to pay you money for your goods or services — and the guts to quit your job, sign the lease, borrow some money, spend the money and tell your spouse, parents, and/or parole officer. For some, this is invigorating. For others it is intimidating. It can be both. Certainly, it is very different from the more predictable paths of going to graduate school or getting a job.
As I said, in my 30 years in business, I have never seen a relationship between being a good student and being a successful entrepreneur. If anything, there might be some correlation between people who were bored or annoyed with school and people who succeed in their own businesses. I have my own theory that I have shared with college classes over the years — often at schools that would not have admitted me as a student but are happy to have me speak to their students.
I always enjoy telling the soon-to-be graduates that if they decide to go into business for themselves, the straight-A students will no longer have the advantage. While it certainly doesn’t hurt to be smart, I find that it is not enough — just as being tall isn’t enough to make you a basketball player. I believe successful entrepreneurs are likely to have six attributes that they don’t test for in school. Many people don’t know if they have these attributes until they take the leap.
1. Ambition. Most people believe they are ambitious, I think. But there is ambitious, and then there is 70-hour-a-week obsessive, driven, hungry ambitious. Can you make it if you are just kind of ambitious? Probably, in some cases. But most successful entrepreneurs I know paid some serious dues. They did not want to be successful, they needed to be successful.
2. Creativity. I’m not talking about painting a picture or writing a love song. I’m talking about coming up with innovative ideas about marketing, management or finance (preferably not too creative in finance). Not all business schools do enough to encourage creativity, but it can really bloom in a business and have a huge impact on its success.
3.  Tenacity. I did not know this when I started, but tenacity is critical to starting and staying in business. Rookie entrepreneurs make many mistakes, and they have to be fixed. Plus, bad things and bad economies happen, and they have to be survived. Being stubborn can be a terrible attribute to have in school — but a great asset in business.
4. Risk tolerance. It is almost impossible to go into business without taking risk, and  it doesn’t necessarily get better along the way. Bigger buildings, more employees, more expensive computer systems, the list goes on and on. Some people can’t handle having a credit card balance, and other people can borrow big money without hesitation. Some people obsess about everything that can go wrong, some people don’t think about it or are confident they can deal with whatever happens. Nature or nurture? Don’t know. Doesn’t really matter. What does matter is that you know your own tolerance. Again, this is not tested in school.
5. Intuition. Some people are just better at seeing what is coming down the road and coming up with the right answers to vague questions. Think Steve Jobs. Even just a little bit of Steve Jobs can go a long way.
6. Personality. You remember the person who was always the life of the party in college but almost didn’t graduate? That person might be a successful entrepreneur (or might be living in a van down by the river). The meek may inherit the earth, but they are probably not going to be entrepreneurs. For an entrepreneur, an optimistic personality is a gift — and an occupational hazard.
That’s my list. It is the product of many years of observation and self-analysis. It is not scientific. I can’t prove any of this. But no animals were harmed, and the government was not involved. Let me know what you think — especially if you are a successful (or unsuccessful) entrepreneur.

Wednesday, March 7, 2012

Among Online Entrepreneurs, Subscriptions Are All the Rage

After Alex Zhardanovsky sold his online ad company, AzoogleAds, he went looking for a new business concept. His search took him from skin care to weight-loss products to prize giveaways. The answer that finally came to him — pet food — was inspired by sheer inconvenience. “If you’re a dog owner like I am, you go out and buy food every three or four weeks,” Mr. Zhardanovsky said. “But you usually don’t realize you need it until you’re out.”

Mr. Zhardanovsky, 34, was well aware that an online pet supply store, Pets.com, had been one of the more celebrated flameouts of the dot-com bubble. But he had an idea to build the business by taking a different approach to sales. While selling online ads, he had seen other companies, like Netflix, persuade consumers to lock in monthly fees for repeat orders. Those companies, he believed, were generally more successful and thus bought more of his ads. For his new business, Mr. Zhardanovsky’s plan was to sell pet food on a subscription basis. He figured that other pet owners had experienced the same frustrations keeping the food stocked and might be willing to sign up for a monthly delivery service as well. “Dogs never stop needing to eat,” he said.
To test his theory, Mr. Zhardanovsky and his co-founder, Joe Speiser, set up a Web page in 2009 with a form that asked customers if they would be interested in signing up for regular deliveries. They then placed a few ads online and waited to see what happened. “We had an overwhelmingly positive response from our customers who wanted to sign up for the service,” said Mr. Zhardanovsky, who lives in New York City and who proceeded to introduce PetFlow in 2010.
Customers who sign up to receive regular deliveries of pet food can determine how much they get and how often it comes through PetFlow’s Web site. They can also suspend or change delivery locations when they move or go on vacation. So far, Mr. Zhardanovsky said, only about 1.5 percent of his subscription customers drop the service each month — and many do so only because the pet has died.
In its first month, July 2010, the company shipped about 60 orders; by January of this year, that number had leapt to 27,000. In 2011, PetFlow exceeded $13 million in revenue — with 60 percent of its sales coming on a subscription basis — and it projects revenue will exceed $30 million this year. “I’ve come to appreciate,” Mr. Zhardanovsky said, “that subscription models are, in so many ways, the holy grail of business.”
They are far from a new concept. Consider magazines, for example, or the record clubs that employed so-called negative-option billing (the record was delivered and you were charged unless you told the club you did not want it). But lately, more businesses have come up with creative ways to use the Internet to sell products that have not traditionally been sold by subscription. H.Bloom, which operates in New York, Chicago and Washington, sells flowers by subscription; Trunk Club sells clothing by subscription (if you do not like what the store sends, you can return it). Amazon encourages customers to place standing orders for products like power bars or paper towels.
“C.E.O.’s are beginning to appreciate the value of recurring revenue in a way I’ve never seen before,” said Jim Schleckser, who heads the CEO Project, an executive coaching firm based in Washington. “I think that the software industry adopted it, which caught people’s attention. Now you’re seeing companies in just about every kind of industry embracing it.”
It is not hard to see the appeal of recurring revenue, but some of the benefits may be less obvious. “This is the best business model you can ever have because we can place inventory purchases against future sales,” Mr. Zhardanovsky said. “I will be shipping out 24,000 products next month whether I land a new customer or not. I already know how many bags of Blue Buffalo brand chicken-flavored dog food I have sold in the next 60 days.”
That predictability allows PetFlow to maintain lower inventory levels and to negotiate better deals with suppliers, who appreciate that PetFlow does not discount its sales and that its customers are much less likely than others to switch to a different brand. “We have 60 percent of our customers telling us that they used to shop at Petco or PetSmart,” Mr. Zhardanovsky said. “Which means we’re taking a lot of people out of the traditional retail channel.”
Subscription sales also mean that the money a business spends to bring customers to its site through, say, Google AdWords, can be amortized over the months or years that they remain a customer, said Brian Lee, who helped found ShoeDazzle (along with Kim Kardashian). ShoeDazzle sells shoes on a subscription basis.
“A subscription model allows you to establish long-term relationships with customers as opposed to selling them one pair of shoes and hoping they come back,” said Mr. Lee, who also was a founder of LegalZoom. It was his experience at LegalZoom, a legal-document business based on single transactions, that prompted Mr. Lee to look for recurring revenue: “I wanted to start a business where you didn’t have to worry as much about whether the customer would come back.” The idea of using a subscription model to sell shoes came to him, he said, after he realized how many shoes his wife was buying on a regular basis.
Subscription models and recurring revenue also tend to impress investors — a lesson learned by Jessica Kim, founder and chief executive of BabbaCo, which is based in Chicago and sells children’s activity products. When Ms. Kim started her business in 2008, she sold wholesale products like car-seat covers and inflatable play mats. But after she was accepted into Excelerate Labs, a business-incubator program in Chicago, she got some advice from Paul Lee, one of the program’s mentors. “He told me that he noticed we had such a strong connection with our community of customers and suggested a subscription-based model,” Ms. Kim said. “That’s when it hit me that subscription models are a great way to build lifetime relationships with our customers.”
Ms. Kim came up with the idea of sending out a monthly “BabbaBox,” a box of projects, activities and books that are tied to a theme and that parents can complete with their children. The change to a subscription model had an immediate impact; Ms. Kim’s business grew more in the five months after she made the switch than it had in the previous three years combined. Just as important, Ms. Kim landed several prominent investors as a result of the change, including Mr. Lee, who is a partner in Lightbank, which was started by Eric Lefkofsky, a co-founder of Groupon.
Given the experiences of companies like PetFlow, ShoeDazzle and BabbaCo, it is tempting to wonder why not every company is trying a subscription model. And, in fact, Brian Lee, the founder of ShoeDazzle, said he frequently heard pitches from entrepreneurs who wanted to create the ShoeDazzle of wine or underwear or some other product. “I think subscription models work best in two instances,” he said. “Where the product is a necessity or when it’s an absolute passion. It stops making sense when you try to do something like a tree-of-the-month club, which doesn’t fit either of those categories.”

Sunday, March 4, 2012

Making a new product takes lots of time, money

 This undated photo provided by Procter & Gamble Co., shows a mock-living room where Procter & Gamble tests consumer behavior with its products, at Beckett Ridge Innovation Center. (AP Photo/Procter & Gamble Co.)
This undated photo provided by Procter & Gamble Co., shows a mock-living room where Procter & Gamble tests consumer behavior with its products, at Beckett Ridge Innovation Center. (AP Photo/Procter & Gamble Co.)
NEW YORK - It took eight years, 450 product sketches, 6,000 consumer tests and hundreds of millions of dollars for Procter & Gamble to create something that it hopes will be destroyed in the wash.
Tide Pods are palm-size, liquid detergent-filled tablets that are designed to be tossed in the washer to take the measuring cups , and messiness , out of laundry. P&G says the product, which hit store shelves last month, is its biggest innovation in laundry in about a quarter of a century.
Tide Pods aren't the sexiest of inventions, but they illustrate how mature companies that are looking for growth often have to tweak things as mundane as soap and detergent. The story behind Tide Pods provides a window into the time, money and brainpower that goes into doing that.
P&G, the maker of everything from Pampers diapers to Pantene shampoo, has built its 175-year history on creating things people need and then improving them. (Think: Ivory soap in 1879; Swiffer Sweeper in 1999.) Each year, the maker of everything from Pampers diapers to Pantene shampoo spends $2 billion on research and development. The company also rolls out 27 products annually, or more than two a month, worldwide.
The focus on innovation has paid off. P&G says 98 percent of American households have at least one of its products in cupboards, broom closets or bathrooms.
And while about 15 to 20 percent of all new products succeed, P&G has claimed a 50 percent success rate. Four of the top 10 new consumer products in 2010 were made by P&G, according to research firm SymphonyIRI.
"What they've gotten very good at is being able to understand consumer expectations," says Robert Passikoff, president of Brand Keys Inc., a New York customer research firm.
But improving things like window cleaner and toilet paper can take years. It also can cost hundreds of millions of dollars , or up to 100 percent of first-year sales , to develop, make and market them. And even then, new products are a tough sale to consumers.
"You have to develop a product that is meaningfully better than the ones out there, which is tough because generally speaking consumer products work pretty well," says Ali Dibadj, an analyst at Bernstein Research who follows P&G. "You then have to convince the consumer to try the product ... and then get that consumer to break their old habit to make a new one."
FIRST LOAD: A PRODUCT IS BORN
The $6.5 billion laundry detergent sector has been ripe for a new product. With the exception of fruity scents and suds that work in cold water, detergent hasn't changed much since P&G rolled out Liquid Tide in 1984.
Liquid Tide, which costs about $15 for 32 loads, is the best-selling detergent, according to SymphonyIRI, the research firm. But cheaper rivals have been gaining: For instance, the number of units sold of Church & Dwight's Arm & Hammer Oxi-Clean Laundry, the No. 2 detergent brand that costs $8 for 35 loads, rose 13 percent in the past year. Unit sales of Liquid Tide were flat.
In 2004, P&G decided to try to freshen up the category. Surveys and observations of 6,000 consumers found that more than a third dreaded doing laundry. A big reason: nearly a quarter said their laundry was in the basement, requiring apartment dwellers to lug a seven-pound detergent bottle up and down stairs.
Researchers also found that people rewashed loads about 20 percent of the time because they thought detergent didn't get their laundry clean enough.
And many were confused about which detergent to use when they wash in different ways: In regular washers and high-efficiency machines; big loads and small ones; and in hot and cold water.
"We knew people felt laundry was complicated," says Alex Keith, vice president of P&G's unit that makes laundry detergents and fabric softeners.
So P&G set about to create a product that weighed less, cleaned better and could be used with any washing machine, any size load and in water at any temperature.
Pod-like products had been on the market before. P&G introduced tablets filled with powder detergent in 2000, but yanked them from stores shelves two years later. The problem was that powder tablets didn't always dissolve completely, leading to messiness. They also only worked in hot water.
To make sure Tide Pods would dissolve in hot and cold water, P&G turned to MonoSol, a company that makes water soluble films. The firm developed a polyvinyl alcohol film that not only dissolves in any temperature water, but even in sweaty palms. The film also is strong , it won't break even when stretched over the top of a can of marbles and shaken , but soft to the touch.
The film created another problem, though. Detergents, which mostly consist of water, would cause the pod to melt before it even gets into the wash. So P&G made a detergent that is 10 percent water , compared with Liquid Tide, which is 50 percent water.
Next, scientists had to figure out how to combine cleansers, brighteners and fabric softeners into one product, while keeping them separate until the pod dissolves in the wash. Doing so would ensure each liquid would work better. After 450 product sketches, P&G developed a proprietary technology that sections the pod into three chambers for all three liquids.
The result? A soft ball with three separate bubbles filled with liquids in Tide's trademark white, blue and orange colors.
INNOVATE, RINSE, REPEAT
Making the product was half the battle. Consumer testing is at the heart of product development for P&G, which has more than 25 facilities across the globe where people can use the things it makes.
The Beckett Ridge Innovation Center, located about 30 minutes from P&G's Cincinnati headquarters, is one of them. Inside, there's a 3,000-square-foot grocery store packed with everything from Charmin diapers to Cascade dishwashing liquid. There's also a 2,000-square-foot mock clapboard house where researchers analyze how people do laundry, wash dishes, take showers and change babies' diapers.
About 50 P&G researchers work at the center, watching and videotaping about 20,000 shoppers each year in their "natural" environment. The testers are picked by third-party companies and paid based on the task they complete.
"When we watch consumers in action, we can see things they can't otherwise explain or articulate," says Jessica Hall White, director of P&G's unit that makes fabric care brands like Tide, Gain and Downy.
When P&G researchers had consumers test Tide Pods at the center, they found that 97 percent were satisfied with their experience, compared with about 68 percent who felt that way beforehand while using regular detergent. People also liked how Tide Pods felt in their hands.
When it came to packaging, P&G took a more futuristic approach to testing. The company used three screens at the Innovation Center to project 3D images of a virtual grocery store. There, testers could see early designs of Tide Pod packaging on the virtual store shelves alongside regular detergents.
Researchers learned that people sometimes looked over the product. So P&G determined that in order to stand out, Tide Pods needed to have see-through packaging. The company developed a clear fishbowl-like container that shows the pods clearly.
The product was developed. The consumer tests were done. The packaging was complete. Next, it was time to get Tide Pods to market. P&G was poised to be the first to have its product priced at $20.89 for 57 pods in stores by September of last year.
But the company ran into problems making the pods, which require different manufacturing equipment than what's used to make regular detergent. At the same time, P&G was flooded with orders from supermarkets and retailers.
P&G declined to give details on the manufacturing problems it had, but it says the issues forced it to push back the launch date of Tide Pods by five months to February. In the hyper-competitive world of consumer products, that might as well be an eternity.
Tide Pods entered a market that was already getting crowded. Henkel's Purex UltraPacks and Sun Products' All Mighty Pacs came out in February, too. And Church and Dwight plans to launch its Toss `N Done Power Packs, made of crystals , this month.
All of the products , all more expensive than liquid or powder detergents , are priced similarly. An analysis by research firm Janney Capital Markets found that Tide Pods' average price per pod is 27 cents, compared with Church & Dwight's and Sun Product's at 25 cents and Henkel's at 31 cents.
But P&G has a big advantage. The Tide brand is one of the most recognized in the world.
With pricing so close, P&G hopes to win over shoppers with performance and brand recognition. The company says it expects Tide Pods to ring up $300 million in sales during its first year.
San Marco, a Janney Capital analyst, says P&G is at a slight disadvantage because it wasn't first to market its product. But he believes its Tide Pods product is likely to hit its first-year sales goal.
"It seems when Procter does anything in the laundry category it makes a huge wave," he says.
Still, P&G isn't taking chances. The company spent an estimated $150 million on a marketing campaign to roll out Tide Pods. The first commercial debuted during the Academy Awards, one of TV's biggest events.
The tagline for the ad: "Pop In. Stand Out."