A company cannot truly transform without innovating a new business model and the transformation of a company, done well, sets off a surge of innovations throughout the enterprise.

When Howard Schultz returned as CEO of Starbucks he knew he had to transform the entire business model and culture (the way we do things around here) to pull it out of a vicious downward cycle. He fundamentally changed the business from a ubiquitous coffee chain focused on the velocity of sales to a global lifestyle company that reignited the passion for quality and the commitment to human connection. To do that he had to help the company open up innovations in sourcing, social media, technology, customer service and product development (to name a few). As the company moved to transform its business model and culture, a surge of innovations began to spring up, for example:

• MyStarbucksIdea.com – a social media platform/online community that empowers customers to create, vote and discuss ideas for improving the Starbucks experience. Nearly 75,000 ideas were submitted in less than six months after its launch.
• VIA Instant Coffee – a product innovation that ‘reinvented a commodity’ and expanded the company’s reputation for being the coffee authority in a new, untapped market

Starbucks is now in a virtuous cycle of continuous transformation and innovation. If you look at companies that are winning in their field you will see this same virtuous cycle. We could bring up the particulars of Apple as another great example but you already know the Apple story.

Now it is important to note that the Transformation & Innovation dance is best set to music of Depth & Duration.

Depth:

There are three levels of depth for both transformation and innovation. There is “Surface Presentation” – looking better, branding differently, telling a better story. Going deeper, there is “Basic Performance” – improving the way you are organized and executing or improving the basic performance of what you offer, i.e., a fundamentally better technology. Finally there is “Deep Transformation” – making a ‘whole system’ change “of” the enterprise (not just a program change “in” the organization), and a game changing total redesign of the customer experience (think of the integrated iPod, iPhone, iPad system that turned multiple industries on their heads).  

The Depth Challenge – Don’t settle for “surface change” or even “performance improvement,” go for “deep transformation” in both changing the enterprise and creating innovations you bring to the market. This means you have to go for it. As they say, you can’t cross a chasm in two leaps.

Duration:

You can make a lot of positive changes quickly but true transformation and innovation requires staying with it for the long haul. With transformation, there is an initial break-thru period that sets the new direction in motion. But to truly manifest the full power of the transformation there must be a commitment to continuous transformations. And if there is not a rippling effect throughout all aspects of the enterprise for long periods of time, it is unlikely the break-thru transformation will take hold. The gravitational pull of the status quo has defeated many enterprise break-thru plans that failed to make a complete change “of” the enterprise. 

This same long-term view thinking holds true for innovation. One trick pony innovations may make a brief splash but the real innovation, that changes the game in your favor, depends on building a long-term series of disruptive innovations, innovations that redefine the marketplace (again… iPod, iPhone, iPad). There is an axiom in Silicon Valley that says: “the faster you have to go to market with new innovations, the further out you have to think”.

“Leaders of the future will be ones who know the dance of Transformation & Innovation and can teach it to all of their people.”

—Dan Beam  

To achieve success in this complex 3.0 world, companies are challenged to open their lens of thinking and envision new and innovative ways to leap ahead of their competition. Some of the world’s most admired brands – Apple, Virgin and Southwest Airlines to name a few – are also some of the most disruptive forces in modern business, setting new standards that fundamentally redefine their industries.

At BEAM, we often tell our clients that in order to truly transform their companies and sustain long-term growth, they have to “screw up the status quo” – shifting away from the ‘old’ ways of doing business to tap into what is emerging and relevant to their customers now. Lululemon, recently featured in an article in the Wall Street Journal, is an example of a company that has “screwed up” the apparel industry by courageously ‘zigging’ while other retailers are ‘zagging’. The article attempts to uncover the ‘secrets’ behind its success…

According to the article, Lululemon attributes part of its success to its small footprint and ‘scarcity model’ – producing a limited supply of stock to create high demand. Cultivating a sense of scarcity creates buzz in the marketplace and breeds excitement among ‘fanatical’ shoppers who are eager and willing to pay full price for merchandise. While other retailers have fallen victim to the destructive ‘vicious cycle’ of mark-downs – relying on discounting to drive sales – Lululemon has used its pricing power to its advantage, conditioning customers to snatch items off the shelves before they sell out.

Lululemon has also strayed from conventional wisdom by eschewing traditional market research (such as tracking customer data and facilitating focus groups). Ms. Day, CEO of Lululemon, firmly believes that she can connect more deeply to the needs and desires of customers through direct observation – getting a true ‘feel’ for what is important to them. Folding tables are strategically positioned near the fitting rooms so employees can overhear customer complaints and shoppers are encouraged to write their feedback on chalkboards in the stores. The company has recognized that they can gather valuable information about their customers without the false reassurance of spreadsheets.

Lululemon’s unique business model has yielded results that have even surpassed the expectations of analysts. Now valued at $10.4 billion, the company’s sales have continued to grow for the 12^th consecutive quarter and Lululemon has booked a record of $1,800 in sales per square foot. Looks like “screwing up” isn’t so bad after all…

—Julia Hammerschlag

• Happy people talk about meaningful topics and have deep conversations with their friends and colleagues.

• The New York Times reports that research by Dr. Mehl, a psychologist at the University of Arizona, has found that deeper conversations make for happier people. Unhappy people have three times as many “small talk” conversations as happy people.

• To create game-changing innovations, we need the creative insights that come from our innermost intuitive explorations that often arise from deep conversations. This process of more meaningful discourse and successful creation can also create greater satisfaction and happiness.

Let’s look at a couple of examples from business:

• A deeper conversation about your customer –

With a recent client we shifted the planning discussion from just another listing of new product ideas to a deeper conversation about customer’s personal lives…what is important to them, how they live, what gives them joy. We then had the leaders broaden the conversation to cross-functional teams throughout the company who gave the customers names, developed a narrative of their lives, envisioned what kind of products will best meet their desires and needs, and developed the market messages that would resonate with them. This was all supported by research and more conversations with customers who fit this profile. The outcome of this enterprise-wide conversation was the development of a whole new, game-changing category of products that were meaningful to a new market segment. The business not only opened new growth opportunities, it broadened and deepened the appeal of its brand.

• A deeper conversation about your future –

With another client, we moved the focus of the strategic planning discussion from the superficial problem-solving pattern to one of a deeper conversation. Through this discussion, we found that they had been defining themselves by their products (always a danger sign). The future emerges, not from product or services, but from the essence of who you are and how you connect to the hearts and values of your customers. In uncovering this “essence of the business” from which the future will flow, our deeper conversation opened up a whole field of possibilities. As a result, the company is no longer defined by a single category of business but instead has a portfolio of businesses. This diversity of businesses has allowed them not only to adapt to the many ups and downs of the market, it has also enabled them to grow a company and brand that is one of the most respected and successful in their field.

Want to build a better future? Have a deeper conversation.

—Dan Beam



The New York Times reports that research by Dr. Mehl, a psychologist at the University of Arizona, has found that deeper conversations make for happier people. Unhappy people have three times as many “small talk” conversations as happy people.

This research got me thinking about conversations at work. Sure, there are often very “serious” conversations in the work world (“Sales are falling, what are you going to do about it?”) but how deeply meaningful are most conversations?

Our experience with thousands of groups shows that when we enable people to engage in deeper conversations they not only find them more satisfying, they also dive deeper into the intuitive pool where the gold coins of creativity await.

There are three levels of innovation – surface innovations (change the look of something), base innovations (change the basic way something works) and deep innovations (tap into the creative insights to fundamentally change the whole game). 

Whether an enterprise is changing its products, its messaging or the business model that will define its future, its leaders must dive beneath the surface.

So what kind of conversations have the people in your organization been having lately?

Happy Innovations!

—Dan Beam



In addition to the many popular books on happiness, with sources ranging from the Dalai Lama to Harvard professors, happiness is a topic of discussion in board and staff meetings. 

Over the last few years, working with a broad array of clients, we have seen that happiness is an idea whose time has come. When leaders do their long range planning and envisioning, they now express the desire and need to create happiness. This is more than quality of life or standards of living. They want happiness for their people and for the impact of what they produce and provide to the world.

No so long ago, planning teams in business and not-for-profit enterprises didn’t use this word to describe what they wanted for the future. They would have squirmed in their leather boardroom chairs if a word like happiness was brought up. Instead, they talked about the "hard-nosed" metrics of success…profit, pay-off, returns, volume, market penetration, etc.

It’s not that these previous metrics for measuring success have gone away, it is that when all is said and done happiness is the greater goal. And the big time leaders who are shaping the future increasingly state openly that happiness is what they want.

As one board member from a mega corporation expressed… “Why shouldn’t we be setting a goal of happiness when the conservative President Sarkozy of France is suggesting that countries consider establishing happiness metrics to measure the success?”

Yes, and why not invite your enterprise to explore how happiness could be a goal worth establishing?

—Dan Beam



Let’s look a little closer at the challenging task of category cultivation and preventing business model myopia. Business Model Myopia (BMM) is caused by looking through the limited lens of the current business model.

Business Model Myopia Examples:

Through our work within the Silicon Valley, we have seen first mover brands enjoy an early advantage in defining a category. Palm and RIO mp3 players come to mind. They both enjoyed early success and dominant market share. The issue was that they didn’t define their category broad enough, they viewed changes through their current business model lens and, while they innovated the product, they didn’t innovate the category. It took Apple to show the industry how to recreate the category, focus on innovative customer solutions and take a whole systems view of the category. The broadened category, in turn, changed the music and entertainment industry and the phone/mobile computing industry.

Even a 150+ year iconic brand like Levi’s can fail to grasp this point. For a long time Levi’s defined the jeans category and was the nation’s largest apparel brand. Then, in the late 80's and 90's it began to focus primarily on lagging indicators (product sales, which looked good at first) but failed to act on leading indicators (brand relevance). Had Levi’s acted on its brand relevance indicators and challenged itself to innovate the category they may have better handled the urban hip hop surge or designer jeans and other category invasions. And maybe Levi’s would not have been reduced to less than a third of what it once was.

The Lesson: If you're leading the category your job is to reinvent the category before someone else does it for you.

This type of current business model myopia is a common disease with once big time industry leaders. To name a few—Kodak, Sears, Xerox, Chevy, Newsweek. When those suffering from BMM look at innovations through their current business model they can’t see the vast opportunities of new innovations, even ones they invented…like Kodak’s Digital Photography or Xerox’s graphic user interface or computer mouse (these innovations didn’t fit their business model of film photography or document copier manufacturer).

The key is to look, not through the narrow lens of the current business model, but through the broad lens of an expanding, re-invented new category. Then the enterprise must broaden the definition of its brand (Apple is no longer just a computer company) or expand its family of brands to take advantage of the innovative opportunities (Toyota Prius).

Expanding a category takes new resource devotion. This means the enterprise must milk or in some cases kill the current cash cows of its current business model to free up human and financial resources to expand the category. Maybe if several years back Sears had been visionary and brave enough to reinvent the direct selling catgory for the digital age it might have become the Amazon of today.

To be a major value-creating winner in the future, each enterprise must move out of the comfort of its current business model. It must challenge itself to envision an expanded, innovating category and shape its future business model to capitalize on the opportunities the newly defined category offers.

This is brand and business building at its best. 

—Dan & Meredith Beam

The best way to do this is to shift your focus to selling solutions and creating and leading a category.

If you go beyond products to sell solutions, and if you create a new category for these solutions, you will discover new ways to build your brand and create the greatest enterprise value.

Why Solutions?

People don’t really want things – they want a solution that delivers a desired experience, such as one that solves a problem for them.

As Scott Bedbury, former head of marketing for Nike and later Starbucks, said… “A product is an artifact around which an experience is created.”

Think about it. People don’t want rubber shoes, they want the experience of flying down the basketball court like Michael Jordan or Kobe Bryant…or to at least to feel like they could do that when they wear their Nikes.

Even people who buy industrial products don’t want things. They want solutions.

A chemical company we worked with sold chemical solvents to clean industrial machinery. The problem they were facing was that their customers weren’t handling the solvents properly, they were wasting them and flushing them into the water system – costing a lot of money. The solvent maker came to realize that the solution their customers sought was “clean machines”. So they changed their business model. They quit selling solvents and started selling “clean”. They set up a service to clean client machines and correctly recycle the solvents. The recycling saved money, the chemical company made more revenue from selling solutions and their customers were happier.

Think beyond products to experiences and solutions. 

Why Lead a Category?

Category creators and leaders gain the upper hand and the biggest pay-offs. They also open themselves to greater opportunity.

You don’t have to look far to see this is true. The second largest market cap company today is Apple. It doesn’t just make products, it opens new categories with its innovations…iPod, iPhone, iPad and most recently iCloud. Their whole systems innovative solutions focus, coupled with category leadership, enabled them to leap beyond old definitions of computers and allowed them to keep expanding the boundaries of the category. In turn Apple wins top honors as the most admired brand today.

Go through your favorite list of most admired brands…Amazon, Facebook, IBM, P&G, and you will find that they are category creators, expanders and reinventors.

To explore this topic further, go to our blog “Avoiding Business Model Myopia and Building a Category Leading Brand”. Then take a look around your industry or field and discover where you have opportunities to focus on solutions and create an expanding category. 

—Dan & Meredith Beam

We find that most don’t.

It is not unusual for us to walk into a new client’s offices and ask them what their values are and get a reply like— “Oh, they’re something about excellence, integrity and, I think, teamwork. I don’t remember exactly, but I know I have a copy of them somewhere. I’ll send them to you.”

Even if they know them, they don’t seem to invoke much meaning.

Just in case you haven’t defined your values statements yet, you can always borrow Enron’s—Integrity, Respect, Communication, Excellence.

Now, ask people in an organization…”What seems to be really important around here?’’ You get real replies like—”Make your numbers at any cost” or “No surprises for the boss” or “Grow, grow, grow” or “Never let down a customer” or “Collaborate to innovate.”

So what are the real values of an enterprise?

Just to be clear…it’s okay to have character values like integrity or respect, but they have to be real, they have to be lived and they have to be a part of the dominant discourse in your organization or you are better off dropping them from your official employee handbook. People hate insincerity and hypocrisy.

The thing we find most important is to discover the true core values and make sure they are the ones that will drive your company's success over the long haul. If you find “Make your numbers at any cost” or “No surprises for the boss” are not the most important operating values you want instilled in organization, then you need to do some deeper work. You need to ensure that the four or five operating values that will make or break your long-term success are lived by everyone in your organization.

So, what’s important to you?

—Dan Beam



Sounds stupid doesn’t it?

Well, that is what organization leaders do when they assume that there is only one option for rewarding success and for motivating people to develop and improve their performance.

That one option for professional growth … climb the organization ladder … become a good performer … become a supervisor, then a manager, then a director, then a vice president and then you are successful. As one CEO asked us recently, “We only have thirty people in our organization and there are only four top positions. How do we motivate and promote people in this situation?”

The answer is simple: (1) Recognize that there are more options than the pyramid climbing career path and (2) Actually see the person before you and discover what success means to them and then together set a path for success that makes sense to what is important to them and to the success of your organization.

More Options:

Only a few people are actually motivated to climb to the top of a company’s organization chart. Many only do it because that is the only way their company provides more pay, more juicy assignments and more development as a professional.

There are at least four major patterns for success progression that organizations can utilize. Note: This model came from the research of Will McWhinney at the Fielding Institute. (Thanks, Will!)

1.    The Expert or Craftsman

Many people, such as surgeons, artists and scientists, are motivated to become better and better at their craft. This also holds true for many designers, engineers, or any person who identifies more with that profession than with a position or even company. They like more and more complex and juicy projects that allow them to hone their skills and improve their status as a top professional.

2.    The Episodic

Often sales people, venture capitalists or serial entrepreneurs are motivated by the thrill of the hunt. They love the next challenge and chance to add to their “pinball game score.” Give them new territory to explore and new challenges where they can score big.

3.    The Life-Long Developer

They may look at times like pyramid climbers because they often move up in positions, but they are really on a pathway of self-development. For example, one top insurance executive started out as a company lawyer and soon became in charge of the whole law department. Then he decided to take a lateral step to the line operation side of the business and soon became the top leader in one of the divisions. Later he became interested in organizational change and headed up a major change process for the whole company (this is where we met him). His pathway was not a straight line up the pyramid, He moved laterally, back and forward and upward across the organization. His motivation wasn’t titles, it was personal and professional growth that satisfied his diverse interests and his need to learn and explore his abilities.

4.    The Pyramid Climber

This is what most organizational charts and reward systems are designed to honor and reward. It is all about gaining more responsibility, bigger titles, higher pay and greater control of the performance of the organization.

Leaders will better serve their people and their entire enterprise performance if they begin to implement these major four pathways to success. Giving people more options for recognition, rewards and development will give the organization more options for successfully growing and innovating.

How many ladders does your organization have?   

—Dan Beam