20 Strategies For Innovating Lower-Cost Business

Steve WunkerAugust 28, 20185 min

Branding Strategy Insider helps marketing oriented leaders and professionals like you build strong brands. BSI readers know, we regularly answer questions from marketers everywhere. Today we hear from Heather, a customer insights and innovation manager from Dallas, Texas who has this question about transformational innovation:

I’m excited about the innovation pipeline we are building out, but I’m concerned that we’re not thinking big enough. What is your advice for not just creating another version of what we have now, but rather changing the way the game is being played?

That’s a good question Heather, and you’re hitting on an issue nearly all organizations struggle with at some point.

For many, innovation is product-oriented. This means that innovation efforts almost always result in a shiny new offering that we can see and touch, like new menu offerings or next-generation car models. But many of these new products are unlikely to material change a company’s growth trajectory: Nielsen estimates that for every 100 new fast-moving consumer good products launched, 85 fail in the marketplace.

The kind of innovation that we usually think of when we think of “innovation” is just the tip of the iceberg. Underneath the visible surface of your business, there are enormous opportunities for operational innovation that can have profound and lasting impacts on the bottom line. That’s right—it is quite possible to create novel solutions for customers that also cut costs for you. We call these kinds of innovations “costovations.”

Costovations are bold, disciplined ideas that revolutionize parts of the business where the spotlight of innovation doesn’t often shine. Take Starbucks’ Mobile Order & Pay program, for instance, which commuters love because it cuts the time they spend waiting in line. For Starbucks, the upside is even greater: mobile ordering reduces staffing need at the register, freeing up baristas to make drinks—the real money-making part of the business. The result is stores that are more productive, accepting more orders per minute than they could previously.

Low-cost innovations are all around us. You could also look to Bridge International Academies, which makes private education in emerging markets affordable by centralizing school operations and curriculum development in regional headquarters. And then there’s Atlassian, the $5 billion Australian enterprise software company that has so perfected the art of self-service that it that has no sales department at all.

There are three key things to keep in mind as you bring costovation into your organization:

  • Be prepared to defy the assumptions that your industry makes about how business should be run. If you see the market in the same way that your competitors do, they you will solve problems in the same way too.
  • Commit to a having a singular focus. You need to get comfortable knowing that you can’t deliver anything and everything. Being forced to choose doesn’t have to be a bad thing—it could even become your strategic differentiator.
  • Push yourself to innovate on the inside of your business, not just the visible exterior of it.

To help get you started, we’ve listed twenty costovation strategies below. They are organized by functional area of the business, which we find to be a helpful, methodical approach to an otherwise expansive mandate.

Innovating The Offering Itself

  1. Simplify your product. Which features truly matter, and which ones don’t?
  2. Constantly scan for new technology that can enable you to excel in totally new ways—and at lower costs. Also keep an eye out for new applications of familiar technologies in different industries and contexts.
  3. Take your customers behind the scenes. Letting them participate in operational processes may actually enrich the customer experience.
  4. Explore the platform business model. Let others contribute to and share in your growth.

Innovating How You MAKE The Offering

  1. Facilitate a network of transactions, instead of focusing on just the goods.
  2. Leverage external innovation to lower the costs and risks around new product development.
  3. Delay customization later in the manufacturing process.
  4. Use modularization to speed up build time.
  5. Rethink waste. Create new uses for it, incorporate it back into your product, or have it stand out as an offering on its own.
  6. Staff people where they matter most. Technology may have shifted where that place is.

Innovating How You MOVE The Offering

  1. Sell straight to the customer. Vertically integrate your business to bypass middlemen.
  2. Look closely at last-mile delivery—typically the costliest step in a parcel’s journey. Are you treating that special function any differently?

Innovating How You SELL The Offering

  1. Don’t underestimate the power of self-service. Some products can sell themselves.
  2. Tap into people’s desires to help others. Inspire customers to become your customer-service agents.
  3. Unbundle your pricing, isolating the most expensive parts of the business or customer experience. Have customers elect to cut those costs for themselves.
  4. Explore the possibilities for asking for payment upfront to declutter your sales channels and lower inventory.
  5. Question the way your industry views real estate. How can location, number of stores, or store size be an opportunity for innovation?

Innovating With Your Ecosystem Partners

  1. Share costs in your supply chain if you have extra capacity (e.g., in transportation or warehousing).
  2. Match up with organizations that have “opposite” or complementing supply chains (e.g., seasonality).
  3. Treat your suppliers like customers. Grow your accounts by helping your value chain become more productive.

Contributed to Branding Strategy Insider by: Steve Wunker and Jennifer Law. You can find much more on these concepts in their new book Costovation.

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