Edge Strategy: A New Mindset for Profitable Growth [Speed Summary]

• Edge Strategy: A New Mindset for Profitable Growth
• Author: Alan Lewis and Dan McKone
• Publisher:  Harvard Business Review Press
• Publication date: December 2015

If you’re not innovating on the Edge, then you’re taking up too much space. That’s the insight for innovators in Edge Strategy; A New Mindset for Profitable Growth by Alan Lewis and Dan McKone. The book starts with the sobering insight that innovation is rarely profitable – incremental innovations often involve churning out product variants that clutter markets, damage margins and cannibalise sales. At the other extreme, disruptive ‘Blue Ocean’ innovation is a high-risk and high-cost innovation strategy littered with failure. But there is a third option between ‘stick to the core’ and ‘blue ocean’ innovation, and that is to innovate at the Edge. An Edge innovation strategy involves re-thinking the boundaries of your business, and innovating close enough to existing activities to give you a competence-based advantage yet new enough to have significant upside. It’s cinemas selling popcorn, it’s supermarkets opening on-site restaurants, it’s Apple selling lessons, it’s car manufacturers selling leasing plans, it’s airlines selling insurance. Reporting the results of an three year international analysis of innovation strategies of 585 top brands, Lewis and McKone claim that those adopting an Edge innovation strategy have grown 39% more than their peers and delivered a 15% higher shareholder return. So what is exactly is the Edge?

How to Find Your Edge

The essence of Edge innovation is simple, and involves look to the edges of your current business and finding new ways to monetise your two core assets, your customers and your competencies.  It’s a lean innovation strategy that begins with two key exercises.

• Creating an Asset Inventory. List all the core assets and competencies of your business or brand and ask yourself, who else would pay for these assets or competences?
• Understanding the Job-to-Be-Done. Understand what people are trying to accomplish when they buy your core offer and ask yourself what else would they pay for to help them achieve this?

Three Edges

Once you’ve completed these these preparatory exercises, Lewis and Dan McKone recommend developing your peripheral business vision by focusing on three different kinds of Edge innovation opportunities.

• Product Edges: Innovation opportunities that lie in enhancing the overall value a consumer experiences when they buy your core product or service. Typically, these are add-ons or upgrades that people are willing to pay for. Think product accessories, premium seating at movies, fast-passes or back-stage passes at events. Product Edge innovation involves asking a simple question: What is the job to be done that my consumer is ultimately hoping to accomplish with my product, and would they give us permission to help more toward this end? In an analysis of product edge innovations, the authors found that successful product Edge innovations typically fall into one of six baskets

  Convenience – paid accessories or add-ons that save time and effort in your core offer; think Hertz offering prepaid fuel
  Comfort – paid accessories or add-ons that enhance the ease and enjoyability the core offer; think more leg-room options offered by airlines such as JetBlue
  Relief – paid accessories or add-ons that alleviate pain-points in the core core offer; think caller ID for phones
  Peace of mind – paid accessories or add-ons that ameliorate the anxiety associated with the core offer; think Apple Care warranty
  Passion – paid accessories or add-ons that expand the experience of the core core offer; think behind the scenes tours at Cirque du Soleil
  Knowledge – aid accessories or add-ons that enhance the core offer through education or training. Think one-to-one Apple lessons

• Journey Edges: Innovation opportunities that lie on the timeline-edge of your core product or service, either immediately before or afterwards. For example, Wholefoods supermarket spotted that people increasingly bought food for immediate consumption, so they opened a prepared food counter and put café areas in their stores. This Edge innovation resulted in a 10% boost in revenue that now generates nearly half the company’s profit. Likewise, accountancy firms have found that both before and after accounting, their clients require consulting services – and have set up Edge offers accordingly. More generally, wrapping pre- and post-purchase services around a core offer that turn “do it yourself” into “do it for me” (think Carphone Warehouse’s Geek Squad) are effective Journey Edge innovation opportunities.
• Enterprise Edges: Innovation opportunities that lie on the edge of your current core market. Innovating on the enterprise edge involves asking who else would pay for what you do well. Or more specifically, “Who besides a direct competitor would pay me for use of what we do well?” In reviewing its asset inventory, e-commerce giant Amazon identified that one of its core assets was its own scalable technology infrastructure, which it realised it could rent out to third parties. Amazon Web Services is now a major player in the cloud computing market. In consumer goods, P&G identified one of its core assets was an infrastructure for commercialising skincare and beauty products, prompting the company to buy Gillette to both extend from a primarily female focus to male grooming, and launch shaving products for women. Likewise, Toyota realised that the GPS data from its cars could be anonymised into traffic patterns and sold to government highway authorities and the travel industry.

The Brand Genetics Take

As an innovation agency with a tagline “forward thinking, future edge”, we were naturally drawn to the Edge Strategy. Our work often looks to the Edges of how people are consuming products today to look for emerging needs and opportunities. But the edge of consumption is not the only edge in town – the Edge Strategy focuses on lean edges closer to home – that are perhaps more readily commercialised. In a world where innovation needs to be efficient and well as effective, it may may compelling financial sense to monetise current customers and competences in new ways, rather that looking to acquire new customers and new competencies. Recommended.