Thinking | Articles

The Hangar, the Coat Hanger, and the 2-Sided Solution

The only ideas that make it through stage gate process are those that solve big needs of both the consumer and the business. In this second piece, we’ll look at what 2-sided innovation solutions look like, and why building your ideas that way transforms the odds of getting your initiative to market.

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Mark Payne

President, Founder | Partner

Farenheit 212


This is the first in a series originally published November 25, 2014 on Innovation Excellence.

TOUCHING DOWN

Asia is a vast region with dramatic extremes in climate, from the deep freeze up North to toasty equatorial beaches. When South Koreans feel the bite of winter, they head south to Bali or the region’s other tropical hot spots. Heading out the door, they pull on bulky down parkas for the trip to the airport and carry them everywhere they go, car to plane to taxi to beach side hotel, despite having no use for them until they leave the airport on their return home.

Two of Korea’s leading airlines stepped forward with what at face value appears to be a delightful bit of customer-coddling innovation: a coat valet service. Flyers can check their coats at the gate in Seoul and collect them on return. No more schlepping of useless and unwieldy bulk to the beach.

But this innovation isn’t just a feel good play at winning customer affection, it’s a textbook 2-sided innovation, as it not only brings added value to consumers, but also solves big operational and financial pain points of the business.

Before this valet service came along, travelers on every winter flight would tuck their carry-on bags in the overhead bins, then stuff in their bulky down coats, filling the bins prematurely, with many passengers still in line behind them yet to board. The inevitable result was chaos. Stressed-out customers would move up and down the aisle hunting for overhead space, bringing the boarding process to a halt. They’d try to smash big bags into small spaces, creating tension among passengers as they crushed one another’s belongings. Fighting the current of the boarding queue, stressed out flight crews would make a last-ditch attempt to rearrange bags and optimize bin space, and eventually have to carry bags off the plane.

As painful as this was for the customer experience, it hurt the business too, in a host of ways. Savvy travelers keep an eye on the on-time departure rates of various airlines. Delayed departures mean lost customers, and inefficient use of manpower. Planes idling on the tarmac through a protracted boarding process waste fuel. And delays in getting outbound aircraft off the gate have a domino effect on inbound flights, which can’t unload until the gate clears. For a business with such a heavy cost structure, where even minor inefficiencies crimp the P&L, those fat coats were a big two-sided problem.

Coat valet service is a brilliant two-sided solution, putting big smiles on the faces of passengers, the heads of operations, and the CFOs alike. Customers are ecstatic at being relieved of their bulky burden. The boarding process is as smooth as the beach sand in Bali. And while the first few days of the service are free, the airlines charge for extended coat storage, so they’re getting paid as well. That’s the kind of win-win we all want.

FUNNEL VISION

Now that we know what a two-sided innovation solution looks like, let’s look at why building innovations this way can transform the odds of your project tasting success. It’s all about the triage that happens in the innovation funnel.

Most of the innovation initiatives in a sizable company are, theoretically at least, born with a decent shot at surviving the gauntlet and coming to fruition. But any healthy innovation funnel has more fledgling initiatives than the company has resources to take it to market. As any given project moves into and through the company funnel, it quickly sheds the protective bubble wrap that comes with “hey, we’re just getting started.” Soon, it is competing, implicitly or explicitly, with other initiatives vying for a piece of finite company resources. The deeper you move down the funnel, the more Darwinist the competition gets.

By the midpoint of the funnel, any initiative that can’t find a meaningful consumer need and a potential way to solve it has died off or been squeezed out by the ones that can. The tapered shape of the funnel asserts itself. There simply isn’t room for everything to keep moving forward, particularly as the cost and risk level tend to go higher the deeper an idea is in the funnel. This is where the shortcomings of a pure user-centered design approach tend to bubble up. Having found and solved an unmet consumer need is just table stakes to enter the competition for resources in the funnel’s back half. The consumer solution is necessary, but not at all sufficient to survive the gauntlet ahead.

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In the latter stages of the funnel, commercial attractiveness moves to the forefront of the criteria determining what gets the green light for launch (or doesn’t). Picture dozens of product ideas built on meaningful consumer needs crowding around the skinny end of the funnel where only a few can fit through. The ones that win out are those that couple that consumer solution with solid answers to mission-critical questions about attractiveness to the business: like how does this innovation align with the long term strategic goals of the company, how does it create new competitive advantage, how will we get it made and make money, what’s our right to win the battle this innovation opens up, how does this innovation leverage our existing asset base, and what’s the risk profile?

In the Darwinist competition for finite resources, whether those questions might eventually be solvable is purely academic. If they aren’t yet solved at each point where you need more funding or renewed permission to forge ahead, your idea is vulnerable to getting left behind any competing idea that’s already got those questions solved.

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You can try, of course, to scramble at the back end of the process to retrofit a commercial solution to an idea built without one, but it’s a bit like shopping for a caterer on the morning of your wedding day. You might get lucky and pull it off, but the odds are against you. The unraveling of many innovation initiatives can be directly attributed to waiting too long to build the commercial side of the solution.

Don’t get me wrong. User-centered design thinking is a huge leap forward from what came before. And it’s actually doing exactly what it was designed to do—create compelling consumer-relevant product ideas for companies or investors to consider. The disconnect is that somewhere along the line that was muddled with the real job that innovation models need to do—which is not to merely generate interesting possibilities, but to deliver tangible ideas out of the innovation funnel, onto the street and the balance sheet.

Here are a few keys to shaping two-sided solutions that up the odds of your inspiration making it through the funnel and coming to fruition:

1. Two-sided thinking starts day one

Don’t wait and leave the commercial factors to the tail end of the process. Bring a two-sided perspective to the beginning, the middle and the end. Explore the pain points of the consumer and the business with equal intensity before you start formulating and building ideas, then along the way as ideas take shape.

2. Find connections between consumer problems and business problems

Look for your equivalent of the way Korean Air found an intersection between consumer frustration and an operational nightmare. You’ll be amazed at the ideas you’ll ignite by looking for intersections like that.

3. Build win-win ideas at the crossroads

Go in with the explicit intent of finding ideas that deliver big value to both sides of the equation. As you design, filter, and hone ideas, recognize that anything that fails to solve both sides of the equation probably won’t make it to market.

4. Sweat more at the front end, less at the back

Taking a two-sided approach means more work at the front end than just putting the blinders on and working with tunnel vision on half of the equation. But it makes life much easier at the back end when decisions get made on what goes to market.

5. Nail your two-sided elevator pitch

The consumer has a big problem with X. Our company has a big problem with Y. This idea solves their problem and ours. When you serve up two-sided solutions to company gatekeepers, you’ll be amazed by how the lights ahead of you turn green, your initiative gets the funding and it leaves other contending programs in its wake. It’s a big win for consumers, the business, and probably your career.

 


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About the author:

Mark Payne

As co-founder and president of the leading innovation consultancy Fahrenheit 212, Mark Payne has spearheaded innovation projects that have created over $3 billion in revenue for Fortune 500 companies, entrepreneurial emerging businesses, and private equity firms. As the architect of the firm’s Money + Magic philosophy, its outcome-based business model and its breakthrough Two-Sided Innovation […]

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