Avis shelling out a cool $500 million to buy Zipcar isn’t just the latest example of big companies getting a wake up call from disruptive innovation and visionary upstarts then writing big checks to make up ground, it’s also a great case study in a particular innovation approach that’s worth pursuing when growing a business.
Strategically speaking, call this growth strategy an inversion. Or more casually, perhaps, a spatula job.
An inversion takes the most glaring flaw in a strategic solution or weakness in a company portfolio strategy or category’s established paradigm and flips it on its head, creating a breakthrough innovation and new competitive advantage, business model or innovation platform.
Barring the occasional dirty ashtray, the defining negative characteristic in the age-old rental car experience has had nothing to do with the car or the trip you needed it for. It’s the trip to get the car. For the urban consumer, renting a car was the trip before the trip. It required premeditation, a pricey cab ride, and either lugging your luggage to the rental office, or looping back home and dodging the meter patrol long enough to load and go.
Insert spatula, roll wrist and flip.
The inversion zipcar pulled off is beautiful. Where incumbents in the category have focused on iterative improvements to make the trip to the rental office slightly less painful, Zipcar did away with the pre-trip trip altogether. Wrap it in a membership fee business model and fractional pricing where you can rent for a few hours rather than an arbitrary full day, and you’ve got a superior new paradigm that makes you wonder how we ever put up with the old one for so long. This move not only created differentiation, it also allowed new category-building consumer behavior to come into play.
Instead of a purely premeditated behavior (popping by the rental office without calling to check availability was always a risky bet), grabbing a car could now happen on impulse.
Fractional pricing meant that those quick-dash occasions that never seemed worth a full day rental suddenly came into play to grow the category. And the prospect of paying membership fees for the privilege of accessing a rental instantly went from inconceivable to downright attractive.
in the category have focused on iterative improvements
to make the trip to the rental office slightly less painful, Zipcar did away with the pre-trip trip.
Another poster child for just how far inversion can go is that $4.3 billion aquatic gem we mentioned earlier.
While health trends have poured healthy growth rates into the water business for some time, water has long had an Achilles’ heel relative to the other beverage categories with which it competes. It was a deadly boring one trick pony.
A dated category obsessed with a generic commodity benefit of pure refreshment, water had but two tangible levers of differentiation— proprietary source and packaging.
The inversion Vitaminwater pulled off is nothing short of spectacular. They said, “Ok, water’s weakness is that it’s so basic. So let’s use it as a base.”
Turning this weakness into a strength, Glacéau recast water as a carrier for a dynamic, delightful, ever-expanding array of tasty, colorful, functional, modern beverage experiences.
Along the way, they were able to say provenance doesn’t matter (no one knows or cares where Vitaminwater comes from, so they can make it anywhere).
They could break open new price points. And they can nimbly react to flavor and health trends in a way no brand in any other beverage category can. When an ingredient like coconut water pops, Vitaminwater can pounce on it. All that impact in a simple inversion—from ‘water is basic’ to ‘water is a base.’
In the end, what came of it was not just a more dynamic and interesting water, but arguably the single most dynamic and interesting brand in the entire beverage business today. The inversion ViataminWater pulled off is nothing short of spectacular. They said, “OK, water’s weakness is that it’s so basic. So let’s use it as a base. ”
Inversion poster child #3: Zappos. Through the early years of online shopping, there was a prevalent belief that some categories would face tough sledding in trying to lure consumers from brick and mortar shopping to digital. Apparel was seen as one of the tricky ones, as it didn’t fit the ‘look don’t touch’ nature of online buying. Worse yet, the ill-fitting shoe is apparel’s ultimate toe-busting torture test—enough, in the conventional wisdom, to frustrate consumers and investors alike, with return costs putting an uncomfortable pinch on the P&L.
Zappos pulled off an immaculate inversion. They turned returns from a pain point to the whole point.
Something not to mitigate, but to embrace, invite and celebrate. And a funny thing happened on the way to the dance.
A lot of consumers came to realize that choosing from an amazingly broad selection online, getting
a good price, trying them on at home and returning a pair or two was in many ways a less painful experience than the prevailing retail paradigm—driving to the mall, wading through a crowd, standing in a shop, waiting for surly gum-cracking help, hoping they have your size, waiting to find
out, and being disappointed when they don’t.
In the end, the question of fit didn’t give anyone fits, barring of course the brick and mortar guys.
Zappos pulled off an immaculate inversion. They turned returns from a pain point to the whole point.
That’s fine for the upstarts, but what about us big incumbents? These first examples of brilliant inversions were all pulled off by upstarts—nimble new entrants to their respective categories, able to write their own rules, unencumbered by legacies of entrenched infrastructure, business models and brand equity, or by the mind-numbing blight of paradigm creep.
Is it easier for upstarts? Only sort of. It’s easier for them to be different, but harder to get noticed and succeed at it. Within big incumbent players, the barriers to creating that level of disruption are often internal rather than external, but they can be overcome.
Starwood Hotels’ rewards program, Starwood Preferred Guest,
had long enjoyed a leadership position among hospitality loyalty programs, having bravely toppled paradigms like the much-despised blackout date.
But me-too competitors had eroded their edge over time. Starwood’s leadership wanted to re-open the competitive gap and did it via a powerful inversion that flipped a glaring category negative into a new competitive edge.
In a collaborative body of work with Fahrenheit 212, Starwood developed an innovation that challenged a prevailing dynamic of the loyalty paradigm that was a source of immense customer frustration.
While loyalty programs’ primary role in the world is to bestow benefits on customers for extended periods of high activity, there’s a dark side.
They punish long-time high-value customers if their activity drops off in a given period—which is often a function of professional or personal life changes, rather than a sign of defection to competitors.
Heaping pain on your most profitable customers is rarely a winning formula, but that’s what everyone in the category had been doing. Starwood toppled that paradigm with a classic inversion, embodied in a new program called SPG Lifetime.
By replacing traditional 12-month visitation metrics with new ones based on lifetime cumulative customer value, Starwood became the first hospitality brand whose loyalty program reflects the true meaning of loyalty—an enduring mutual commitment—ensuring that a high-value customer’s status would never be diminished by short term fluctuations in their visitation. The pain point of the downgrade
is flipped on its head by a new paradigm that says once you’ve earned your way up our program, we’ll be loyal to you for life.
Where VitaminWater and Zappos were nimble upstarts and Starwood was an established category leader innovating within its core business, there’s another context where an inversion can have big impact—cases where a big company is looking for a way to enter a business it’s not in today.
Samsung is pulling off this kind of inversion in a play that will transform the face of commercial refrigeration.
Products like frozen prepared foods and beverages that are sold via commercial refrigeration systems are typically more valued and profitable than their ambient peers elsewhere in the store.
But there’s one area where they struggle. In most parts of the store, consumers are interacting with products, picking them up, reading labels, and checking them out up close.
But for chilled and frozen products sold behind glass, the door that keeps the cold in keeps the customer out, or at least a bit removed.
For consumers, finding what they’re after is a challenge, and manufacturers have a hard time getting their new stuff noticed, particularly in the freezer, where the windows frost over with repeated opening.
Poor visibility and a barrier to customers interacting with products has kept this highly profitable portion of the food and beverage industry from realizing its full potential.
By replacing ordinary fridge glass with an amazing new translucent LCD technology that lets consumers see what’s behind the LCD panel, Samsung and its refrigeration OEM partners will catapult retail freezers and fridges from being the least visible, intimate and interactive display areas in the store to suddenly being the most.
Next-generation commercial refrigeration units will allow the brands and products behind
the glass to come to life with interactive displays overlaid on the glass of the fridge, giving consumers new ease of finding what they’re after, new nutritional information, special offers and
a more dynamic experience, while bringing retailers and manufacturers an entirely new platform for engaging a consumer and closing a sale in the aisle. A part of grocery with the poorest levels of visibility and customer intimacy in the store suddenly leaps to best in class.
Last and not least, we can’t help but give a nod to the inversion Apple pulled off. Forgotten in the parade of stunning successes that commenced with Steve Jobs’ second coming at Apple is the string of failures and near bankruptcy of the prior decade, both of which were largely attributable to Apple’s greatest weakness as a computer company—a staunch insistence that they maintain 100% control over every aspect of both the hardware and software. In the computer business, that was a near fatal flaw, as it gave them an untenable cost structure, sluggishness in responding to leaps in technology, and troubled relationships with retailers and developers.
The inversion came about when they set their sights on markets beyond computers where the integration they had long obsessed over would actually have enduring value.
Where controlling both the hardware and software was a flaw for a computer company, it was a killer app when igniting seamless, category-defining, new-to-the- world user experiences in new markets like music players, smart phones and tablets.
The lesson here is that if you look at them in the right way, the glaring gaps and weaknesses of your business or your category can provide a fertile ground for breakthrough innovation.
Grab the spatula, roll that wrist, and watch big new possibilities come into view.
Where controlling both the hardware and software was a flaw for a computer company, it was a killer app when igniting seamless, category-defining, new-to-the-world user experiences in new markets like music players, smart phones and tablets.
Here’s a handy six pack of ways to help bring the power of inversions to your innovation efforts:
1. For starters, know that the best you can hope for from small improvements on your category’s weaknesses is a less irritated customer. Aim higher, knowing that if you pull off an inversion, you’ll be rolling in new differentiation, customer bliss and market power.
2. List out the most glaring negatives associated with your business or your category today, then start applying the mental spatula, looking for the flip. Ask how that negative can be flipped to an amazing new positive.
3. Ask yourself what late mover advantage looks like in your business, even if you’re the big incumbent. It’s Innovation 101, but ask yourself and your innovation team that classic question—if we were starting this business today, would it look anything like the way it looks now? How would it be different? The answer may point to a great opportunity to turn the paradigm upside down.
4. Know that the big flip rarely happens by accident… it’s far more likely if you’re actively looking for it. Glaring category negatives are often hidden in plain sight or accepted as incontrovertible givens. Look hardest at the things you most take for granted. You’ll be amazed by what you see.
5. Don’t be afraid to have your future compete with your present. Assume that somebody in your business (or someone jumping in later) will fix what’s fundamentally broken. It might as well be you. A healthy disrespect for present reality is an innovator’s best friend, and the key to winning in the long run.
6. With all due respect to the importance of core competencies, don’t neglect the potency of core incompetencies. The things you do worst may hold the keys to your next great leap. Give them some high-quality consideration time at the fuzzy front end. You’ll be amazed what possibilities come into view.