We presented recently (June 15th &16th) at the Australian Medical Technology conference held in Sydney. The conference brought together some of the regions leading firms and discussed a wide range of issues.

I was fortunate to present, in conjunction with David James from Invetech and Travis Hardy from ARRK on Design for Manufacturing and how many firms use DFM to drive their bottom lines. The highlight was the amazing outcomes being achieved by those companies who have adopted this process and incorporated it into everything they do.

You can see how the conference was covered in the press and by Manufacturers Monthly.

Nairy also presented on the Pathway to Commercialisation as part of a session on the challenges organisations face when bringing a new innovative technology to market. This was a great session and really highlighted the need for a consistent and common language that can be used by scientists, technologists, Business Development and Marketing. The end game is a solution that the market rapidly adopts and which can be made at a margin that rewards the management team and shareholders. 

If you would like a copy of either presentation please don’t hesitate to contact us.

Did you ever buy a Polaroid instant camera?

Probably.

If you did, and many did, you probably marvelled at the film and the organic process involved in taking pictures.

You weren’t the only one. Polaroid film also gained a massive following amongst professional and amateur photographers who valued its unique characteristics. Specifically they loved the freedom the film gave them to create and interact with the images they were capturing.

Sadly, Polaroid went bust in the 90’s and last year, the last Polaroid film producing factory shut its doors in the States.

And that, as they say, was that.

Well not quite - as you will see from the link below.

http://www.the-impossible-project.com/

This is a wonderful example of entrepreneurship and something which we will believe  we will start to see more of.

It also goes to show you that one of the biggest risks in down sizing your work force, shutting a production facility and hoping it will go away is that it won’t.

In fact, your old employees may decide that they know the market, the production process, the value chain, in fact everything about delivering value to customers better than you, the management team.

And guess what, they may just be right!

Viva la entrepreneur!

In a previous blog - Innovation, invention and ideas we touched on the need to see ideas as being separate to innovation.

In a Fast Company interview, Ram Charan, management guru extraordinaire, succinctly defines both invention and innovation. And does so , in our opinion, superbly. It’s well worth the read.

It would seem that the Australian Federal Government is still under intense pressure to follow the tired and hopeless old formula to solving the hospital bed crisis. The Australian Medical Association is pressuring the Government to “immediately spend at least $3 billion on 3,750 new public hospital beds and the staff and infrastructure to service them”

“New equipment and upgraded emergency departments are absolutely necessary,” president Rosanna Capolingua said.

“But, unfortunately, it’s not much use having new equipment if you’ve still got patients in pain, waiting in corridors on stretchers because there aren’t enough beds to go around.”

As we mentioned in a previous blog. The disruptive solution already exists.  But like all disruptions, it is rare that an incumbent will the one to introduce it!

There is one really great thing about your major competitor. You know who they are.

Increasingly it would seem that the competitor that will put you out of business is the one you don’t even know about. As Bill Gates famously commented, Microsoft’s biggest threat is a guy in a garage somewhere inventing something that will put them out of business.

With this in mind you may recall our previous comments about the rise and rise of the mobile phone and the disruptive impact it has had on the GPS and digital camera markets. In this we mentioned that the greatest threat to these businesses came not from within their market, but from the adjacent mobile phone market.

• The GPS device market is now in free fall as phones grab more and more share (www.loopt.com), and
• The largest manufacturer of digital cameras is now a phone company

Well this looks like it is set to continue according to a recent article in the Melbourne Age. Now it would seem games manufacturers are starting to feel the heat as more and more games move onto mobile phone platforms. Despite Sony, Nintendo and Microsoft all have hand held games devices for some time, the outrageous success of Apple’s Apps store business model is starting to tip the scales in favour of the mobile phone.

There is something to be said for assessing ‘the business you are in’ from a customer perspective, rather than from your perspective. Rather than focusing on a product/technology, Apple are busy building and supporting a customer platform. In doing so they are showing that the consolidation of multiple solutions onto one platform produces greater value. By recognising that the mobile phone is the only truly indispensable mobile device and then using this as a platform to launch more apps, Apple has opened up a new segment for their iphone platform - the mobile game player.

What this allows is a complete disruption within the games industry - changing the way developers are remunerated, the way people play games, where they play them and how they purchase them. The difference between product disruption, where a new product may disrupt one part of the value chain, and a new platform is that only a platform has the potential to disrupt the entire value chain.

The trick is to ensure that your company is the one with the disruptive platform. The risk is being blind sided by a platform that puts you out of business.

For some time we have heard media, political opposition parties and lobby and community groups complain about the hospital bed crisis.

Put simply, there are not enough Hospital beds for those patients who need them.

However,  the solution that is often put forward - building new hospitals, commissioning new wards, creating new beds is not the answer.

In fact, there is already a powerful disruptive solution in existence that would do a ‘good enough job’ and more than likely provide better outcomes for patients, medical staff, insurance companies and the Government. But first some background.

We are expecting our third child. Now when my wife finally gives birth, she will do so in a hospital. And it will be in a hospital that she will be receiving some of the very best care available. However, within a day or two, providing she is recovering well, she will be asked to leave hospital. That’s right, only two or three days after a major medical undertaking, she will be asked to leave the well resourced hospital with its highly skilled team of nurses and doctors, its technology and equipment.

Why? Because at this stage of her care she is a liability. At this stage, while her medical condition is significant, the powers that be, both medical and financial have decided that she no longer requires critical care.

So where is she going? is she going Home? No.

A Disruptive solution to non-critical care

What happens next is a reflection of some wonderfully logical and yet, disruptive, thinking. More than likely what will happen is this. A well appointed luxury car will drive her from her maternity hospital to the Park Hyatt, yes, the one and the same, where she will rest - with babe - in the care of the nursing team there.

Amazing!

Apparently, it makes  more financial sense to care for a  mother and new baby in a five star hotel than it does in a Maternity hospital!

The fact that this makes sense (and money) to the private health insurer, her medical team, the hospital and to the hotel is a testament to the power of this solution. And let me tell you, it sure makes sense to my darling wife!

Segmenting Patients

This solution to the maternity bed issue raises a fascinating learning for the broader healthcare industry.

Firstly, it calls for a clear need to re-segment patients not by their medical condition, their age or even their healthcare provider, it requires a segmentation of their needs, or specifically, the “job” that they are trying to get done. (for more information on the Jobs approach visit the Cogentum site). Do they require intensive care, do they require hospital based care, do they require respite care, do they require monitoring? Understanding the needs that drive the selection of an appropriate solution in granular detail will allow us to determine the most logical solution. And the solution may not necessarily be a bed in a hospital ward.

As the ageing population begins to put more and more strain on the healthcare system, the need for new and more innovative solutions grows. What the maternity solution suggests is that patients requiring respite or monitoring may not be best served through a hospital solution.

If a hotel can provide a better, or at least a good enough solution at a comparable cost to the private or public health insurer, then it may well be a better solution for society and the economy as a whole. The Flow on advantage is that this solution would also free up hospital beds for those who actually need hospital based care.

By changing the focus of the problem from one of healthcare to one of “room optimisation” we have been able to solve multiple problems owned by multiple stakeholders. The Hospital, as mentioned, would have more beds available for acute care patients. The Hotel has close to full occupancy which improves its ROA and the insurer is minimising payments and delivering better health outcomes.

Finally, we noted a couple of years ago that International Hotel chain Accor reached an agreement to take over the running of the Qantas club lounge’s at major airports. This was a brilliant example of leveraging core capabilities (hospitality) into new markets. If this is working and producing the required returns, one wonders how long it will be before hotel groups start to take a good long look at the healthcare industry.

As the travel industry starts to feel the impact of a slowing economy and tightening discretionary spending - both tourism and commercial - the healthcare system could well provide the recession proof income stream the Hospitality industry will be crying out for.

Michael R Johnson

Like Wow, Wipeout!

The classic Australian rock group Hoodoo Guru’s song from the mid 80’s pretty much captures the nature of the current financial crisis. As a result of this mayhem there is now little doubt that we are about to enter a major down turn. How far down, no one really knows. But what we do know is that there is always a bottom. And as sure as winter is followed by spring, there is an up. So the question arises how to survive winter?

There are some key drivers that management teams should adhere to during what will be a trying period.

Keep your customer close. How well do you know your customer? Pretty well? Well think again. Customers will be redefining ‘value’, redefining what they see as ’service’ and totally changing what they believe is essential versus ‘good enough’. In recessionary periods, Companies who understand their customers and clearly understand how they define value will steal considerable market share from those who persist with delivering the same old thing.

Growing organically. That big M&A? Probably off the agenda. As is the IPO and the trade sale to the multinational. While there is a strong argument that companies will now be viewed as being priced at levels that reflect once in a generation opportunity, management teams will need to demonstrate their ability to grow in these new times. What we have just experienced firsthand is that anyone can do well on a rising tide, but true management ability and growth strategy shines in both ebb and falling tides. That requires not only organic growth experience - ie. sales and marketing nous - but the hard evidence to support the development of these new strategies.

The Disruptive business model. Knowing your customer is key. Knowing how to deliver what they want and only what they want could be the difference between success and failure. We suspect that this will result in many businesses taking a long hard look at their existing business models and costs structure to see where thing can be done better and more efficiently. However, this course of action requires clear evidence not gut feel, as one sure fire way to hasten any demise is to start cutting costs without understanding what your customer actually wants. Once again, the key is clearly understanding your customer and building a model around this knowledge.

It’s all about the channel. How good is your relationship with your channel? Well there’s a fair chance you are about to find out. Channel loyalty and efficiency is a critical part of a successful go-to-market strategy. No more so than in times when working capital is under pressure. Ensuring you have the ability to price, deliver and support your channel will be vital.

Product Portfolio Management. Is your product a luxury brand or a functional one? Now is a good time to assess the ‘real’ value that your products deliver. If they are weighted towards luxury then it could be time to readjust in favour of those that offer functionality and comfort as consumers seek value and product optimization rather than opulence and ‘one trick’ products. As this new market begins to be redefined by climate change and liquidity, value for money and increased functionality will be vital to driving revenue growth.

Evidence rules. Exactly how many downturns have we all lived through? How many like this? All that experience, intuition and gut feel. Well, that is all they are. When it comes to developing new strategies to grow and invest, in high risk, unknown markets, evidence will provide you with the confidence you need to proceed. Evidence and insight of what customers want will ultimately allow you to steer a steady and less risky course to growth.

Priced on Value. 24 months interest free? May want to look at your pricing strategy again as consumers re-evaluate price and pricing deals to gain a full understanding of the liability that comes with many pricing offers. One of the biggest winners potentially from the current crisis will be ‘transparent pricing’ models. Models that allow what consumers believe is realistic pricing to occur. As a result, expect to see an increase in EBay trade and also the growth of ‘true markets’ where producers meet sellers.

Cocooning. The Home is my castle once more. During periods of uncertainty, anything that can be seen to reinforce family values, security, is welcomed. Once again, how well do you know your customers? Enjoyment and happiness will come from friends and family not from material possessions and discretionary spending. Anything that helps your customers to connect and identify with their community and their friends will resonate.

What do you stand for? What is your company, your brand, your solution all about? Can it be articulated? Clearly? Is it relevant to the changing market? It is critical that when a market changes by this degree, that a company and the management team recognize the need to change as well. Assuming that your offer, mission and vision from the previous six months is still relevant to customers whose needs have now radically changed, is arrogant at best, fatal at worst.

Flexibility. Finally, no one knows for sure where this will all end up. But one thing is for sure. The world does go on. Markets, societies and economies change, sometimes radically. Just look at the change Russia has gone through in the last 20 years. Ensuring your organization and your people can recognize change, synthesize the implication of change and deal with it personally and organizationally is vital. There is a long list of those who failed to navigate this road successfully; however, there is an even more impressive list of companies who emerged out of previous periods of chaos to be household names today.

Sometimes a great idea has no market.

What? I hear you say? Burn him at the stake the heretic!

But it’s true, not all great ideas have a market!

The failure of retractable syringes to gain a foothold is a case in point. One company we know of developed a great piece of technology that allowed the needle to be drawn back into the shaft of the syringe after use. This simple and brilliant design prevented the syringe from inadvertently injuring people.

A great idea. And a wonderful solution to what would seem to be a very important and unmet need.

However, the concept failed to take off and late last year the company was de-listed from the stock exchange. Sadly this is not an unfamiliar story. The question is why?

The Jobs framework

Through our use of the Jobs based framework( based on Clayton Christensen’s seminal work) we can provide a potential analysis and hypothesis as to what went wrong. And please note, this is a hypothesis only.

Our guess is that the developers of this product focused primarily on one major and obvious problem - preventing ‘injury by a needle after it has being used’

By doing so they ignored other potential opportunities and also what could have  been potentially ‘fatal flaws’.

In this case the jobs framework seeks to understand all the things people who use syringes, and people who deal with syringes are trying to get done when getting rid of a used syringe. Importantly, not only does it identify what they are trying to get done, it also allows people to prioritise these jobs in terms of how well they are being solved.

Now the hypothesis of the technologists in our syringe example, is that getting rid of the needle was all important. However, storing the used syringes safely, removing used syringes from sight, keeping the cost of a syringe low are all other important jobs that need to be solved at the same time. By providing only one part of the solution the retractable syringe developer opened themselves up to classic disruption and that is exactly what happened.

An existing player in the disposal market launched a Smart yellow box. It has a hole in the top, you plonk the sharp in and done.

By placing them everywhere they made disposal easier. By offering to empty them they extended their existing business model into a new market. By solving the problem with a box, they defeated the new technology because there was simply no need for it.

While the retractable syringe was a great idea, there was simply no market for it.

Classic disruption.

This is wonderful example of disruptive innovation. Low end technology doing a good enough job. The problem simply did not warrant a high end solution. The power of the jobs framework is that it allows you to unpack the ‘unmet’ needs of a market at a granular level, but with an objective perspective.

Michael R Johnson

We blogged recently about Coke and their attempt at entering the energy drinks market.

Well since then we have noted two interesting developments.

1. Frucor - the owner of V - one of the leading energy drinks in the Australian/NZ market has ‘apparently’ been put on the market by its owners - Groupe Danone of France. While this represents an interesting move by Danone in this market, watching what CCA does in response will be fascinating. Sometimes, no matter how big and well resourced you are, innovation won’t work. The initial Mother product fell squarely into this category. So now that one of the leading brands is ‘on the market’, it would have to cross the mind of the CCA board that here is a far easier way to avoid the pitfalls of the Mother experience and bring to bear CCA’s capabilities and resources.
2. Now having said that, before they spend further funds entering what seems to be a very attractive market, they might want to keep an eye on a recent study that indicated “that just one can of the popular stimulant energy drink Red Bull can increase the risk of heart attack or stroke, even in young people,“

This throws a real spin on the whole energy drinks market opportunity. Rather than unpacking a multi-million dollar revenue stream, players could be opening up a real can of worms. Strategically responding to issues like this will test even the greatest management team. Ensuring they manage their brand to ensure long term growth and protect their enormous brand equity will be vital.

When assessing innovation risk, ie. the risk profile of an innovation project, and in particular the risk surrounding any new technology, not everything is or can be known. Having a process that at the bare minimum identifies what you don’t know ( with apologies to Donald Rumsfeld) is absolutely vital.

Michael R Johnson

If you haven’t had a chance to read ‘The Long Tail‘ it could well be time to do so.

Why? Well at its core lies the concept that the web has killed the 80:20 rule. (Hope that’s accurate please let me know if it isn’t!).

What does that mean? Well it means that with the case of Amazon, there will always be someone, from somewhere wanting to buy a book, also, there is enough of these one off purchases to actually make up more than the peak profits from the the best seller list. In other words there is more value in the tail of the bell curve that there is in the peak. Startling!

Now why the Long Tail should be an imperative part of your knowledge base is that Angus and Robertson right here in Australia have just launched their print on demand service.  For the first time, books that are out of print and are hard to get are no longer that!

This is a great piece of dirsuptive innovation and has long been mooted, so it is good to see that it has finally arrived.

What makes this fascinating is that we are starting to see other areas where a similar attack on the traditional supply chain is starting to get traction. There is about to be a massive revolution in 3D printing that will totally change the way manufacturers, retailers and designers work. And significantly, the impact will revolutionise working capital.

Michael R Johnson