If you are looking for product or process innovations then try some mathematical operators – add, subtract and differentiate. What can you add to your product, what can you take away and how can you differentiate? Let’s look at how Ryanair used this approach to take on the established airlines.
Michael O’Leary, the founder of Ryanair looked at the whole business process of passenger flights and built a new model. He started by subtracting all the frills that meant extra cost. He subtracted:
* Travel agents – you book direct over the Internet so the middlemen and their costs are cut out.
* Tickets – you show your passport and quote your reference number. Subtracting tickets saves costs.
* Allocated seating – you choose a seat when you get on the plane – just like on a train or bus.
* Free drinks and snacks. If you want a drink you have to buy it.
* Customer care – Ryanair has one-tenth the number of customer care attendants per passenger mile compared to BA. If you have a complaint the answer is generally – ‘hard-luck but what did you expect with such a cheap flight?’
Then O’Leary added some new ideas with the aiming of supplementing revenues:
* Advertising on the outside of airplanes
* Ancillary deals with hotels, car hire and bus companies whose tickets are sold on Ryanair flights
Finally, Ryanair differentiated its approach with:
* Smaller regional airports who offered low prices to get the traffic volume that Ryanair could bring.
* Cheap in-house marketing featuring controversial advertising (one ad featured the pope) and outrageous PR stunts.
* Buying aircraft cheaply – by choosing times such as just after 9/11 when demand and prices were very low.
What can you take away from your current business process in order to save cost and simplify operations? Can you unbundle your product into separate components? Can you strip out costs or processes that not all customers want? Can you bypass a middleman on the route to your customer – as Direct Line, Amazon and Ryanair did? Egg and First Direct offered on-line banking and made it cost effective by cutting out all the branches that burden the traditional banks
What can you add to increase the value and attractiveness of your proposition? Is there an equivalent to a little bag of salt added to a packet of crisps that would make your product more tasty for consumers? Linda Brava is the Finnish classical violinist who appeared on Baywatch and in Playboy. By adding glamour to violin virtuosity she created a unique brand.
What can you do to differentiate your approach? If you are competing with strong well-established market leaders then a me-too approach will not get you far. Coca-Cola and Pepsi dominate the soft drinks market. When Virgin competed head on with Virgin Cola they struggled. The successful new entrants have used lateral approaches and differentiated themselves – Snapple with fruit drinks, Tango with black cans and in your face advertising and Red Bull with a stimulant mixer.
Sometimes you can combine all three techniques – Mercedes added Swatch designers to create the most differentiated and unusual town vehicle – the Smart car. They subtracted something that had previously been considered non-negotiable – half the length of an average car.
Next time you are faced with the challenge of how to refresh your product offering think mathematics. The way to multiply your sales is by addition, subtraction and differentiation.
This post was previously published on Destination-Innovation and is republished here with permission from the author.
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