Sunday, April 24, 2011

What do burgers, focus groups and web conferencing have in common?


What do burgers, focus groups and Web conferencing have in common? All are crowded, competitive spaces that might be considered to be commodity markets. Most of the products are relatively similar with little differentiation among competitors.

Conventional wisdom might suggest that these markets have limited opportunity for new entries unless sold at a lower price. Yet even the most commoditized markets offer opportunities for innovation, new business models and superior execution.

Several Colorado companies like Smash-burger, Qualvu, and ReadyTalk have changed the paradigm in their categories. Each of these companies has enjoyed significant growth during the recent recession.

Enter a niche with a better experience.

Smashburger found that while the hamburger was America's favorite food, people were dissatisfied with the general fare offered by the major competitors in the market. So it developed a way to deliver a more flavorful, juicy, fresh burger - smashing the burger to the grill to seal in the juices.
However, its success was not just about entering the "better burger" niche. Smashburger found that consumers also wanted a better experience - a fast casual sit-down dining experience with very friendly service in a smaller, high-energy setting. Better burgers and a better experience are just the start.
The company has demonstrated the ability to scale with superior execution in its hiring, training and rewards for great service, as well as by tracking data and metrics to ensure consistent delivery. It has become the fastest three-year start for a restaurant company - in history.

A disruptive innovation with
"home video."

Clayton Christensen, author of "The Innovator's Dilemma," coined the term "disruptive innovation" to describe innovations that improve a product or service in ways that the market does not expect, typically by lowering price or designing for a different set of consumers.

Characteristics of disruptive businesses, at least in their initial stages, can include lower margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.

Qualvu changed the way that focus groups are performed. By putting video cameras (now in most smart phones) in the hands of consumers to provide feedback and testimonials about consumer products, it can develop, execute, upload and analyze a focus group with the customer's desired demographics - virtually overnight - at significant savings.

Consumer products companies, such as Procter & Gamble, Johnson & Johnson and Adidas, can achieve faster turnaround, more cost-effective research and video testimonials from real people where and when the products are used.

Using "homemade videos" for research would not be something that would occur to established market research firms who are more likely to disregard this segment of the market in lieu of the traditional methods, giving Qualvu a window of opportunity.

A new business model - Free.
ReadyTalk entered a crowded conferencing arena with a new approach. It had developed technology for Web conferencing that had a much lower cost than audio. ReadyTalk decided to provide the Web conferencing service for free along with the audio conferencing as a way to differentiate itself in the market among the large competitors and to buy market share.

At the same time, ReadyTalk saw that the actual cost of audio conferencing was significantly lower than the per-minute fees being charged by the major providers. So it priced its audio product significantly below the then-prevailing rates. ReadyTalk was able to develop customers and gain market share with its lower pricing and free Web conferencing services model.

Ultimately, as the market matured, demand flipped, and the market required more Web conferencing services. ReadyTalk was then in a position to change its pricing model and charge customers for Web conferencing services. The company enjoyed 483 percent growth between 2004 and 2009 and added another 35 percent growth in 2010.

Clayton Christensen explains the opportunities for these companies this way: "Because companies tend to innovate faster than their customers' lives change, most organizations eventually produce products or services that are too good, too expensive and too inconvenient for many customers ...unwittingly opening the door for disruptive innovation and new business models."

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