Starbucks Via – Defense or Disruption?
My brother called from the west coast to tell me that Starbucks was pushing its new Via coffee pretty hard in a store near his Silicon Valley office. His first assumption was that Starbucks was trying to keep customers that were cutting down on in-store coffee purchases. I believe he was part right. Starbucks has to enter new markets in order to support growth. The instant coffee market in the U.S. is not nearly what it is in other markets. 9% of coffee sold in the U.S. is instant vs. 40% in other major markets including Russia, Japan and the United Kingdom. Starbucks biggest competitor for instant coffee in the U.S. is non-consumption in the instant form, which sets up a big opportunity to win new customers. Howard Schultz revealed that the coffee took 20 years to develop which means Starbucks probably had an instant coffee ready to market long ago but they were waiting for the right time to play the card. The recession was the perfect trigger for the disruptive play. While many would be latte sippers might be opting for the $1 instant packets at their desks to save money, Starbucks is probably counting on the sizable market that doesn’t currently go to a Starbucks store to try the brand now that a low cost option is available. Keep in mind that disruption occurs when a lower cost alternative (often with fewer features) meets the needs of a large portion of the market that was previously under served. Yes, even with 16,000+ stores in 49 countries there are still many who have yet to sip the dark wonder from Seattle. Now that could change in an instant.
The Importance of Understanding Disruptive Innovation
The $2000 Nano Reaches New Buyers in India
The term “disruptive innovation” is starting to become more commonly used, especially in the tech sector. However, I am finding that many people I talk to don’t understand it well and few have incorporated it into their corporate culture or product development lexicon. Given the state of the economy and the rapidly changing business landscape, this will change. In fact, it is imperative for business survival and economic growth that disruptive innovation becomes not only well understood, but a key component of any prudent strategy.
Harvard professor Dr. Clayton Christensen first used the term “disruptive innovation” in his book “The Innovator’s Dilemma”. He describes disruptive innovation on his website as follows:
“Disruptive Innovation describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves ‘up market’, eventually displacing established competitors. An innovation that is disruptive allows a whole new population of consumers access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill. Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.”
At first, Dr. Christensen’s definition may seem to apply only to the broad consumer markets, but in actuality his “whole new population of consumers” can refer to any market a business happens to be in. While major disruptions are easier to spot such as the Nintendo Wii, Pure Digitals Flip Video Camera and Apple’s iPod, every market is disrupted on a regular basis and most often by a new entrant. And this is where the following imperatives comes in for almost every business owner:
- Get to know disruptive innovation. I recommend either one of Dr. Clayton’s books “The Innovators Dilemma” or “The Innovators Solution” and more recently Scott Anthony’s “The Silver Lining“.
- Incorporate processes that allow your entire workforce to help you identify opportunities for disruption in your existing market and beyond. A third party facilitated event is recommended as this will help guide thinking beyond the walls of your organization and help limit hierarchical control of the creative thought processes. This is precisely why we have developed Disruptathon, a course on disruptive innovation combined with a bar camp style event that leverages entire organizations to help identify and prioritize possibilities for disruption. (sorry for the shameless plug)
- Scott Anthony summed up a recent lecture in DC with this advice: Adaption is most critical. Try new things. Look for non consumers. Seek out ambiguity. Find intersections with industries you are not currently in. Go to the periphery where it’s uncomfortable and see what might come of it. Ask yourself if you are overshooting the market. Do it differently and make it better.
Scott’s advice makes me want to go out and buy a bunch of magazine’s I’ve never read before and perhaps visit a few of the hundreds of unique trade events that come through DC. How might an obscure design magazine help a medical device company or large mobile carrier? What can a software company learn by attending a conference of commercial building architects? I don’t know, but the process of exploration is probably where the answer is.
While many today may not understand disruptive innovation or have yet to incorporate it into their processes, this will change soon enough. As the economy recovers, new companies with more meaningful products will rise up from the ashes to replace incumbents who chose to slow down innovation spending during the down economy. This will force big companies to react by building disruptive innovation practices and trying as hard as they can to catch up with the speed of innovation. It’ll be fun to follow.
The Birth of Disruptathon
Today marks the official launch of Disruptathon. Like a newborn, it comes into this World with the hope of a long and happy life. Welcome.
Disruptathon is an event who’s time has come. While many innovation events charge up to $6000 per person so attendees can rub shoulders with stars and listen to interesting ideas, most innovators are at home working on a dream while eating a diet of rice and beans. And in many cases, the results are astounding. Disruptive innovation is happening everyday in every town in America and beyond. New breakthrough software applications are being quietly coded and grabbing sizable market share as open source downloads, mobile application developers are quitting their jobs to support a handful of new mobile applications they’ve written in their spare time, new consumer products are invented, designed, packaged and sold globally by single moms and books are penned and published without agents or publishing deals while their authors are being celebrated by the reading community. These are the great innovators of our time and a welcome addition to our economic recovery.
At the soul of Disruptathon is a desire to seek out, celebrate and support these new innovators. To achieve this, we will be focusing on several vertical market segments starting with the mobile applications market. On October 30th we kick off the mobile apps Disruptathon in Washington, DC. The plan is to then hit many other major cities to meet top mobile apps developers. Planned stops include NYC, Seattle, San Francisco, Austin (SXSW), Atlanta and Chicago.
We expect to learn a lot over the coming months and getting better as we go will be part of the fun. One thing for certain is that we are going to meet some of the most interesting people on the planet. To learn more and register for an upcoming Mobile Apps event visit the Disruptathon website.
Special Movie Screening + Mobile Distribution Discussion – Friday 8/7 @5:30PM
This is an interesting opportunity.
The movie “Sleeping and Waking” was shot here in DC recently and is scheduled to release in October. Executive Producer Jeff Koepel has approached me with a desire to also launch the film globally on the iPhone, Android and Palm platforms.
To help Jeff and engage in a potentially industry shifting project we are hosting a special screening of the film followed by an open discussion about disrupting the current model for film distribution using the latest mobile platforms. TeqCorner has graciously offered to host the event next Friday. Doors open at 5:30PM and we’ll plan on starting the movie around 6. The event includes complimentary Beer/Wine and Appetizers.
The movie site is www.sleepingandwaking.com. Executive Producer Jeffrey Koepel will be providing the screening and participating in the strategy discussion.
Please RSVP in the comments box below and share your thoughts if you would.
Thanks,
Pete
Friday, August 7th 5:30-9PM Beer/Wine & Appetizers TeqCorner 1616 Anderson Road McLean, VA 3rd Floor Conference Room 703-473-2148 (Pete’s mobile)
My TelecomHUB Presentation
I was asked to give a talk at the TelecomHUB executive mixer at TeqCorner in McLean, Virginia. I used live links to guide the discussion as opposed to anything scripted. Enjoy.
- This is true if you fail to anticipate big changes. (all the time)
- Ten years ago I gave a talk to Telecom executives in Los Angeles about how kids in Japan were using their phones for texting and sending images. The overwhelming question I got was “why would I send a message when I can simply call somebody?”.
- In 2001 Jeremy Bruestle broke WEP which he claimed was easy and decided to publicly announce his findings as “the right thing to do”. Many saw this as exactly the opposite not understanding that knowing about the vulnerability was much more important than trying to hide it.
- Today millions of toddlers are using the latest devices catching the industry off guard.
- And Teens are using their iPod Touch as a free phone using wifi.
- Musicians like Corey Smith have a great life without the RIAA.
- And he can thank Shawn Fanning, founder of Napster.
- While the RIAA still sues citizens, 44,000 to date.
- George Hotz has had a different experience disrupting Apple and AT&T.
- And a new relationship is emerging. One of trust, transparency and authentic service which supports users interests.
- Because the generation coming up knows how to get what they want.
- The way we’re going to help them is to disrupt ourselves. It is our imperative. And we need it worse than they do.
- This requires breaking apart everything we do and putting it back together with the new consumer relationship in mind. Products, services, partnerships, distribution.
Thank you
Pete
The Bright Side of Tough Times
Innovation. It’s everywhere. But innovation doesn’t sell on the evening news when unemployment is at a 25 year high and yet another institution is receiving billions for trying to stay status quo. But it is what people are doing and I believe built into our DNA. When resources are scarce, we are an incredible species. It’s when resources are plentiful that we tend to get lazy and buy our way out of creative thinking.
Times are tough and I know many families are suffering, which is not a good thing. But new models for just about everything are emerging. Mother’s are inventing simpler products that are healthier for children. Food is getting healthier with less packaging. Unconferences and Camps are innovative new ways those with similar interests are coming together without any or very little financial obligation up front. The value is created during the event and as a result as opposed to the old conference model of finding all the content prior to the event and then selling it to industry. And families are downsizing and living in smaller houses, which is driving creative ways to store things.
And why is this important? It makes us happy. When times are tough, we find it easier to create a better world and help each other more. Perhaps this time we’ll carry some of this goodness into the next bubble. I hope so.
Pete
What Apple Didn’t Know?
At least, I don’t think they knew. And if they did, they might have made a very simple feature change for the iPhone and iPod touch; a way to disable the ‘home’ button while still running an application. Why is this important? Ask any parent. My wife and I have had iPhones for two years now and while we are sans crumb snatchers, our nieces and nephews (ages 0+) have been very quick on the uptake. That’s right, children under the age of one have figured out how to navigate pictures and play with applications. The second we walk in the door for a visit, the kids let us know what we’re good for. How could any good aunt or uncle resist?
Sabrina, a first grade teacher and literacy specialist, had the bright idea to develop learning literacy applications for the 0-5 year old market. One of the key feature requirements would be to lock the home button while providing a way for a parent to undo the lock. However, it’s not possible without jail breaking the iPhone first. As the horror stories mount of children deleting emails, contacts, photos, etc. I expect changes. There are physical devices to prevent baby tampering but these are probably purchased after something bad has already happened and lacks elegance.
Baby driven applications on doing very well in the iTunes store. This entire market of non-phone users and non-spenders will account for a significant piece of the revenue pie. I don’t recall seeing anything about babies and toddlers mentioned in the iPhone launch. Maybe this was on purpose, but maybe not.
I am speaking at an event in Northern Virginia next week and have decided to focus on this topic. And I need your help. Send me your testimonials, horror stories, pictures of kids using your iPhone, etc. and I would be most grateful.
Thanks!
Pete
Ovi – The Next Mobile Me?
Nokia’s recent announcement and launch of their own cloud based media and information management service called “Ovi” is a good thing. But it will be interesting to see if it catches on in the United States. I have my doubts in the near-term. Not about Nokia, just about the market in general. Cloud based services have not caught on with consumers yet. Apple’s MobileMe is a good example. I’m a subscriber but I’m toying with the idea of not renewing. I just don’t use it. I’ve got my iPhone, I sync it with my Mac and all is good. I share photo’s on Flickr and Picasa, videos on Vimeo or simply from within my Flip Video application.
What Nokia is trying to do is smart. As a device manufacturer they realize the importance of moving into the applications and services market. Devices with plenty of horsepower will soon be a commodity but the relationship with the consumer will never be. Cloud based services are still in a deep fog and how they end up enabling a better and more valuable consumer experience remains to be seen. One thing Apple can already learn from Nokia is to make their service free and figure out how to monetize the relationship in a better way. Until then, I’m probably going to opt out for now.
Update: When looking at the several free cloud based services that compare to MobileMe I overlooked a critical element; privacy. I renewed MobileMe because it works and most importantly provides a level of privacy not matched elsewhere.
My Meetup Testimonial
In January I started the Washington DC iPhone/Android Developers and Marketers Meetup group. My motivation was to drive innovation and help stimulate the economy through bringing smart minds together. It’s working.
The group is four months old on Monday. We’re at 130 members which include developers at all levels, startups, major companies, carriers, venture capitalists, economists and media. We’ve formed eight committees and assigned co-chairs to make sure every member gets exactly what they are looking for.
Our May 11th meeting, in partnership with Mobile Mondays, is at the Finnish Embassy where Nokia, Google and the inventor of iFart will be sharing success stories for mobile applications. A little different from the pizza joint ten of us met at in January.
I commend Meetup for developing a great model. This group is young but we are impacting industry, driving innovation and supporting the recovering economy. And bringing perfect strangers together and making lasting connections makes the world a better place, too.
Check it out, here.
Mastering Mobility
As a golfer I love the Masters. Allright, I could do without the piano and violin music on CBS. And as founder of the Washington iPhone/Android/Smartphone developers and marketers group I am also interested in the mobile applications market. When looking up scores today on the Masters website I immediately noticed a prominent ad for the iPhone Masters application which makes it easy to follow the action in real-time (sans music!). I think this is an interesting development that might not get that much attention. The target audience for the Mastes is a middle-late aged male who is likely to be the CEO or executive at his company. I would guess that many in this market segment don’t currently understand the value of the mobile applications space. Perhaps after they download the Masters application they will. I wonder how many developers are going to called into the big bosses office this coming week to answers questions about how “XYZ” company can get their applications to work on the iPhone or other platforms. Okay, back to the fake chirping birds….
