Innovation by Subtraction
We tend to think that the best way to innovate is to add new features to our products or services. What can we add that increases the appeal of our offering? This route can easily lead to extra cost, feature overload and customer fatigue. Sometimes a better answer lies in subtraction.
Michael O’Leary, the founder of Ryanair, looked at the business process of passenger flights and built a new model 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?’
(Editor’s note: In the U.S., JetBlue, Virgin America and Southwest Airlines operate using a very similar model)
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.
Sometimes you can get the customer to do something that you do right now. The supermarket was a remarkable innovation in the 1920s. The key new idea was to get the customer to serve themselves rather than having an assistant serve them. A modern updating of the idea is provided by IKEA. Not only do customers act as assemblers in putting the furniture together, they also act as store men in collecting the flat packs from the warehouse.
The whole do-it-yourself business was built on the back of getting individuals to do what tradesmen had done for them in the past. eBay has built a business that runs like clockwork by getting the clients to place their own advertisements, hold their own stock, sell their own goods and give each other recommendations. It is a triumph of transferring services to clients.
Next time you face the challenge of how to refresh your product don’t just think about adding new features or services. Think about what you can cut out of the process or product. How can you make things simpler, less costly and more appealing to customers?
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