Co-Opetition - Adam M. Brandenburger [75]
Individual, Inc. has been improving not only its product but also how fast it can improve its product. It has developed a better ability to interpret feedback. Experience has allowed it to fine-tune the parameters of its learning algorithm, and so it learns about a client faster now than when it began the service.
By learning about its clients’ preferences, and by learning how to learn faster. Individual, Inc. preserves its added value.
The Individual, Inc. strategy can also work for bookstores, magazines, video rental stores, even dating services—indeed, for any business where the trick is matching a wide range of options to diverse customer wants. On the Internet, firefly.com asks people to fill out a survey about their tastes in music and then makes recommendations based on what other people with similar preferences are listening to. Amazon.com allows book buyers to see what related books are in the “shopping bags” of like-minded customers. In a similar fashion, when a traditional bookstore gives a customer a recommendation, there’s an opportunity to follow up and discover why the book did or didn’t please. That way, the bookstore can make a better recommendation the next time. A rival store can sell, the same book, but without the feedback the first store has, it can’t replicate the good advice. At least, it can’t until it has also learned about the customer. And if the customer is happy with the first store, it may not get that chance.
The Harvard Business Review asks its readers to rate each article. The magazine uses this feedback to improve its selection of material. The result is a magazine better tailored to its readers, who, in turn, become more loyal. We want to develop a loyal readership, too. That’s why we hope you’ll give us feedback on this book. (Our Internet addresses are on the back cover.)
Rapid product improvement works for Individual, Inc. It can work for bookstores and magazines. It certainly works for Intel, which has a strategy of jumping to the next-generation chip even before its competitors have finished cloning the current generation. But it isn’t a panacea. With some products, it simply isn’t realistic to think that you can keep coming up with improvements.
Take soap. Here, you’re lucky if you come up with one innovation. There aren’t that many ways of improving soap. This was a very real problem for Minnetonka, a small Minnesota company that came up with a new type of soap.37 How could Minnetonka prevent the likes of Procter & Gamble and Lever Brothers from copying its idea?
Pumping Up Profits In 1964 entrepreneur Robert Taylor took $3,000 of his savings and founded Minnetonka. Over the following two decades, Taylor took the company from being a niche producer of novelty toiletries to being a market innovator and player in the soap, toothpaste, and personal fragrance businesses. Among Minnetonka’s widely known products are Softsoap liquid soap, Check-Up toothpaste, and the Calvin Klein fragrances Obsession and Eternity.
Taylor wasn’t afraid to experiment. One spring alone, Minnetonka brought out seventy-eight new products. It’s the “spaghetti test” strategy. You throw things up against the wall and see what sticks. Tom Peters calls this the “antistrategy” strategy: don’t analyze, just see what works and do more of it. Taylor was essentially test-marketing a whole series of products, looking for a “hit” product with which to enter the mass consumer market. And he found one.
In 1977 came the Incredible Soap Machine, which dispensed liquid soap from a plastic pump bottle. It quickly became Minnetonka’s best-selling product. Minnetonka was onto something. The Incredible Soap Machine eliminated the puddle of soap ooze messing up guest bathrooms across America. Here was an opportunity to enter the mass market for soap.
The Incredible Soap Machine was renamed Softsoap, and sales began