Purpose Innovation© – An answer for developing the next billion dollar, game changer type opportunities?

Out of the six dilemmas that were identified within our last blog , the one that has caught the attention of most folks was - the dilemma between customer (or user) centric innovation vs. vision centric innovation – and so, we thought of expounding upon that topic little more within today’s blog. While both of these innovations are equally important - the most successful innovative companies in the world today are the ones who have found a way to balance them properly (by assigning the appropriate emphasis to both) depending upon where they are in the life cycle or season of their business. In other words, the intuitive tactics of assigning the right weight factor emphasis to both innovations (in the form of 60:40 or 70:30 or 50:50 split) within the context of their business life cycle is what going to differentiate a company from their competitors. As it turns out, our purpose innovation© concept seem to exactly do the same – as it inherently helps companies to pick and choose the best of both worlds – i.e. choosing the best features of customer and vision centric innovations (with the right split weight factor emphasis) that is further custom- tailored to their business cycle.


The natural follow-on question is - how does Purpose Innovation do that from pragmatic standpoint? Let us take one of the key strategic challenges facing most companies today – creating the next billion dollar game changer opportunity - and see, if our purpose innovation© concept can help solve that puzzle. First things first… With the concept of purpose innovation being already covered in detail in one of our earlier blogs –we are going to just focus on putting purpose innovation© in to practice within today’s blog. We recommend our readers to read the earlier blog to get grounded on purpose innovation© concepts (Purpose Models, Purpose Bundles and Purpose Platforms etc.) - before reading today’s blog.

Now, back to the question of developing the next billion dollar opportunity, as a first step, let us introduce an index called Consumer Experience Threshold (CET) © index. CET index is an index that is designed to quantify the “value of experience” expected by consumers from a P&S category, not only based on the price they are willing to pay (i.e. baseline functional experience expectation), but also, based on what they are dreaming of experiencing (i.e. emotional and emerging experience expectations) from it, on top of its baseline functional experiences. In other words, when a P&S delivers more than the consumer’s baseline experience expectations (or more than its category median break-even CET), it is deemed to be an exceptional P&S - and, in our opinion, those brands that exceed the CET index, on a consistent basis are the ones that qualify to be the next billion dollar brand or opportunity.

• CET = Baseline Experience/Price +the dreaming component of Emotional & Emerging Experiences

Having said that, with all things being equal, it is important to highlight yet another fact that different P&S categories will have different CET indices – and so, it is important that a brand, not only to figures out a way to accurately calculate that CET index for its category, but also, find a way to go above that index consistently, for it to qualify to be the next billion dollar opportunity. As it turns out, there is another challenge here as well- that competition keeps pushing the CET index higher and higher on a daily basis (as consumer's experience expectations keeps going up as well), and so, the need of the hour is a mechanism to group the experiences of various P&S categories in the form of a framework, so that companies can devise ways to exceed their category CET indices on a consistent basis.

With that need in mind, we did a deeper dive analysis on the CET index concept using a CET framework as outlined on the top of the page. With the economy showing signs of improvement- more and more consumers are becoming experience minded when it comes to buying various P&S categories. Our research also suggests that more than 50% of the consumers are looking for better value experience deals when it comes to buying P&S’s - followed by another 30% who are willing to exchange their preferred brands for better experience providing brands. This does not mean that they are trying to buy cheap – rather they want to get the best possible experiences for the price they are willing to pay. Within the context of this insight, we did some more “deeper dive analysis” on the spending patterns of consumers across various P&S experience categories. The insights we garnered was all the more intriguing - that consumers have altered their spending patterns, not only based on the experience their brands provide, but also, based on the way they map their preferred P&S’s to the experience it provides. Based on this renewed insight, we grouped those experiences under five major experience categories and plotted them within the CET framework – with “Dollars Paid” on X axis and “degree of perceived Experience” in Y axis - as outlined below and on top of the page.

• Experience base liners – addressing the basic experiences quadrant -where these P&S’s barely break-even the CET median index and provide just the minimum baseline/functional experiences for a price point below the industry average - leaving an impression of “no gain, no pain” mindset in consumer’s minds.



• Experience Stalers – addressing the basic experiences quadrant -where these P&S’s barely break-even the CET median index and provide just the minimum baseline/functional experiences, but for a price point much above the industry average – and so, leaving an impression of “paid in full, yet no net gain” mindset in consumer’s minds.
  
  
• Experience Stars – addressing the star type experiences quadrant-where these P&S’s exceed the CET median index and provide both emotional and emerging experiences on top of the baseline/functional experiences for a price point above the industry average - leaving an impression of “paid in full, yet got dollar’s worth” mindset in consumer’s minds.



• Experience Super Stars – addressing the super star type experiences quadrant -where these P&S’s score exceed the CET index and provide both emotional and emerging experiences on top of the baseline/functional experiences for a price point below the industry average - leaving an impression of “Got a deal, yet exceeded $’s worth” mindset in consumer’s minds.



• Experience balancers – addressing the “optimum experience” quadrant – where a P&S or a bundle of P&S’s together provide both emotional and emerging experiences on top of the baseline/functional experiences for a price point, just around the the industry average - leaving an impression of “Got a deal, and got $’s worth” mindset in consumer’s minds.

Interestingly enough, four of these experience categories fell perfectly in to the four quadrants of the framework with an exception of one category called experience balancers– which got placed in the centre of the framework covering all the four quadrants. What does this tell us? There is a new need of “purpose experience based composite brand equation” evolving when it comes to consumer’s experience expectations. This new need - is indeed an emerging insight – and so, it is time to accept this new composite brand experience based purpose bundle (i.e. bundling products and services in the form of purpose bundles) and devise an appropriate purpose innovation strategy to answer these emerging experience patterns of 21st century consumers.

Granted, the CET indices vary from category to category and industry to industry – and so, those brands that exceed their category CET median index consistently are the ones that qualify to be the next billion dollar brand. This is where our purpose innovation concept looks very promising as it helps companies to create the next billion dollar composite opportunity using the same rationale used by the alchemy equation (1+1=3 ) that is commonly used to justify the synergistic M&A business cases. In other words, by combining various "multiple experience providing" P&S’s from both related and unrelated industry verticals with various degrees of CET indexes in the form of purpose bundles would definitely help participant companies to exceed composite CET median indexes on a consistent basis. In other words, the next billion dollar opportunity may not necessarily come from a single category brand – rather it could be a composite brand in the form a purpose bundle covering multiple P&S categories across multiple related and unrelated industry verticals.

For example, a Health and Wellness/Green minded consumer (who is also a passive participant of the Purpose innovation platform), will get a better experience deal when they purchase a dynamic purpose bundle of “health insurance along with a variety of H&W based durables and non durable P&S and GYM workout services” in a price that is in proportion to their purpose scores. The causal chain relationship rationale here is that- those consumers, who eat healthy organic food, apply natural beauty treatments to their bodies and exercise well will have a healthy life - and hence they deserve a better health insurance premium and so on and so forth. In other words, stronger the power of purpose themes (e.g. H&W, Green, Externality etc.) that binds the purpose bundle components together, the stronger the affinity (or causal chain relationship) within the sub components of the purpose bundles – which will eventually make this composite brand to be viewed as a single category brand in the hearts and minds of consumers .

I am sure someone is asking - how does this Purpose Innovation concept along with purpose bundles, purpose models and composite brands (& the corresponding CET framework) help solve the earlier dilemma between customer centric innovation and vision centric innovations? As it turns out, customer centric innovation, by and large helps companies only to meet just the base line experience expectations (i.e. Experience base liner and Experience staler quadrants) whereas vision centric innovations is the one that help companies to exceed the base line expectations to become Experience Stars and/or Experience Super Stars, as we can clearly see in the CET framework picture on the top of the page. This does not mean that companies need to pick one approach vs. the other; rather they need to do both in the words of Inder Sidhu and Roger Martin – as focusing on vision centric innovation without customer centric mindset, will invariably result in “out of context” super star experiences without the minimum functional/ base line experiences – and vice versa.

At the same time, we should not limit our innovative thinking just to meet the needs and wants of the typical consumers (as 80% of consumers by and large look for solutions to solve only their today’s needs); rather we need to derive our inspirations from the remaining 20% of the creative consumers – as part of the vision centric innovation. In a way one can also call the vision centric innovation as customer centric innovation in steroids (or glorified customer centric innovation) - and this where our purpose innovation concept comes in to the picture as it derives its best features from both customer and vision centric innovation approaches- as outlined in the center of the CEM framework picture.

In the final analysis, it is important to highlight the fact that history is filled with many such examples of billion dollar game changer opportunities – but, if you study them all in detail, there are not many of them in the recent years, with the exception of few within the consumer gadget product categories. Part of the reason is that most consumer’s needs and wants have already been met my multiple products and services within a given category, and in a way, most P&S categories are highly crowded with products of similar functions without much differentiation. Hence, the need of the hour is an alternate, out of the box, differentiated approach called Purpose Innovation© – and, in our opinion, it is one of the compelling ways to create the next billion dollar game changer opportunities for corporations.