Idle time vs. tweet frequency

 

3 steps to differentiated open innovation

There are a number of open innovation (crowd-sourcing, swarm-sourcing, idea connectors, idea and IP brokers, un-conferences etc.) platforms out there, and several more getting designed, conceptualized and deployed every month.  Already, there seems to be a differentiation fatigue (everybody looks similar!) This is surprising because the concept of open innovation platforms is quite nascent still; there is tremendous opportunity for differentiated offerings both in scale and scope, as well as in the definition of “open innovation” itself.

For all existing open innovation platforms (or budding ones), the following 3 steps may help in building the differentiation factor in:

1. Get the right crowd on to the platform
• differentiate on what you define as “crowd”
• differentiate on what you find to be “right”
• differentiate on how the crowd interacts with the “platform”
2. Enable the crowd to create new value
• differentiate on how the crowd connects with problems
• differentiate on how problems are connected with solutions
• differentiate on solution relevance
3. Fairly apportion/ share/ divide the value created on top of the platform
• differentiate on how you define and measure value
• differentiate on the method of sharing value

If an open innovation platform can work out unique differentiated recipes using the above 3 ingredients, and sustain it cycle on cycle, idea after idea, it should do pretty well. The recipes can be protected with business method patents, so it makes eminent sense to be unique rather than come up with veiled imitations.

Airlines – new revenues waiting to be captured

There was a time (before the advent of Air Deccan) in India when airlines were out of reach (physically as well as psychologically) of the common man. Regular travel logic (for an upper middle class profile of person)would be as follows:

1. If journey time > 5-6 hours, see if a train ticket is available, if yes, you are done.
2. If a train ticket is unavailable (probability of this happening would increase the closer you get to the day of travel), try to get hold of a bus ticket, as the next resort.
3. If buses are also running full (around weekends and festival days), and if travel is really critical, book an air ticket (Not getting an air ticket was impossible).

(Just to put things in perspective, a Bangalore-Mumbai airline ticket would cost a minimum of Rs. 6000. In comparison, a 3-Tier Air-conditioned train ticket would cost Rs. 1000 (6 times less). A bus ticket would cost between Rs. 600 and Rs. 1200, depending on the type of bus. A 3-Tier non air conditioned train ticket would cost Rs. 330 (18 times less). Of course, the journey time was much longer – 24 hours as compared to 1.5 hours by aeroplane. There was one comparatively lesser known option – an international flight that would fly through Bangalore-Mumbai, but at the unearthly hour of 2.30 AM, that would be available at Rs. 3000.)

 

Then, the concept of the low cost airline was introduced, airline tickets were available in the price range of Rs. 1000 to Rs. 3000 also, for those who were willing to plan and book early. The fuel surcharge was fairly low then – Rs. 221 for a domestic flight. This really opened up the skies to a vast majority, most people didn’t mind upgrading from trains to aeroplanes, in fact the logic changed as follows:

1. Check out availability of low cost aeroplane ticket, if available you are done.
2. If not and if journey time > 5-6 hours, see if a train ticket is available.
3. If a train ticket is unavailable (probability of this happening would increase the closer you get to the day of travel), try to get hold of a bus ticket, as the next resort.
4. If buses are also running full (around weekends and festival days), and if travel is really critical, book a full fare air ticket (Not getting an air ticket was impossible).

Clearly, many travellers were shifting over to airlines right at Step 1.

The promise of hordes of new travellers led to an airline services explosion – many new carriers, new aeroplanes, plenty of new routes, new improved airports, infrastructure and innovative time-based pricing. Bottom line – capacity expanded like  never before. Needless to say, huge amounts of investment was made in anticipation of future need.

Simultaneously, fuel prices were going up. Infrastructure cesses were being levied. From a total of Rs. 221, these additional fees, in a period of 2 years, rose up to Rs. 1900! Ticket prices (total) moved into the Rs. 3000 to Rs. 5000 bracket.

The cost-benefit ratio threshold in the eyes of the customer was breached. Customers started skipping Step 1 above more often than before. Traffic reduced considerably.

What did the airlines do?

1. Predictably, airlines started looking at their cost structures. There was a movement from low frills to no frills. This made a very minor dent to the cost structure. Airlines continued to sink.

2. The next (again predictable) strategy was consolidation. Why did you need two passenger freight buses, two baggage counters, two booking counters, two inspectors . . .? Lets combine and share the costs! Again this made a small dent. Not too much.

3. It was apparent that while cost was being reduced to the minimum possible, overall capacity remained unchanged. New aeroplanes ordered a couple of years back were now getting added to the fleet. Capacity had increased, but demand had gone down. There have been calls from experts to reduce capacity – reduce the fleet. Predictably, all solutions are about cutting costs.

How about adding new revenues? No one seems to have a clue. Where are the travellers?

 

Lets see if we can find some of them by taking a re-look at the travelling logic of an upper middle class profile person (a small part of the overall travel value stream):

1. Check out availability of low cost aeroplane ticket, if available you are done.
2. If not and if journey time > 5-6 hours, see if a train ticket is available.
3. If a train ticket is unavailable (probability of this happening would increase the closer you get to the day of travel), try to get hold of a bus ticket, as the next resort.
4. If buses are also running full (around weekends and festival days), and if travel is really critical, book a full fare air ticket.
5. If travel can be deferred, postponed or cancelled, explore that.

Well, Step 1 - airline tickets are not “really” low cost any more. Have to go down to Step 2 before taking a decision.

Step 2 - trains are getting filled rather quickly now. The waiting list on one train, just for the air-conditioned classes rises to about a 100 by the penultimate day, and there are 5 regular trains between Bangalore-Mumbai!). So, you have about 500 customers, who have booked a waitlisted ticket before moving on to explore other options. Many more (conservatively 5 times more), at this stage, choose not to get on the waitlisted queue. That’s a total of about 2500 un-served customers, an an average, every day on one long distance route.

Step 3 – out of the 2500, about 500 customers book a bus ticket. Bus journeys are back breaking, if the journey takes longer than 8-10 hours.  Plus buses are difficult for those traveling with families (including kids). Customers would love an alternative, even at a slightly higher cost (but not too high).

The remaining 2000, left with no option, either cancel/ postpone the trip. A small number of customers go on to book a full fare airline ticket.

Can airlines convert these 2000 guys? Any ideas on how to make this happen? I have a few, but they will need to wait for my next post.

The search for simplification

 

My typical conversation with a new acquaintance asking about my startup:

Other person: What does your company do?

Me: We help companies solve complex problems, uncover hidden opportunities, design innovative business strategies, design around competitor patents, utilize value networks . . .

Other Person: What is your focus area?

Me: Er all of them . . . Strategy, Ideas, Inventions, Networks, Value . . .

Other Person: (Question mark on his forehead which means “give me one word so that I can choose a bucket”?

Me: Innovation research and consulting

Other Person: Oh! Like McKinsey – management consulting . . . (Light on the face which says “I got it now”)