What Would Richard Branson Do?
In my research company, we used to host brainstorming sessions in which we would discuss how a famous company or entrepreneur would solve the challenge on the table. We'd ask, 'What would Virgin's Richard Branson do if he was faced with our problem?' and we would riff on public relations stunts we could devise to get attention. Or we might ask, 'What would Microsoft do in our shoes?' and the discussion would turn to engaging third-party resellers.
Looking for inspiration from other industry leaders worked for Pomarfin, a smallish family-owned shoemaker based in Pomarkku, Finland. The company manufactured its shoes in nearby Estonia, where costs are lower than in Finland, but found itself competing with Asian companies with a manufacturing cost base around one-fifth that of Estonia. Squeezed for profits, Pomarfin had a decision to make: it could outsource the manufacturing of its shoes to Asia and simply become a brand or keeping its production in Europe and find a new way of differentiating the business.
Not wanting to walk away from its manufacturing roots, Pomarfin decided to compete in the emerging world of mass customization by making made-to-measure shoes for well-off men who hate shopping. Pomarfin envisioned installing a foot scanner in retail stores that sold its shoes. Retail clerks would scan the customer's foot, and the image would be uploaded to a server in Pomarfin's manufacturing plant that would then create and ship the customer a pair of shoes for his unique feet.
Pomarfin named its new made-to-order brand 'LeftFoot.' Once a customer scanned his foot with a LeftFoot machine, he could reorder a custom shoe through the LeftFoot website, cutting out the need to visit a retail store.
And therein lay the problem with LeftFoot's business model.
To introduce its shoes to new customers, LeftFoot needed retail partners to scan customers' feet. But retailers were not prepared to install a scanner in their stores only to lose their customers for life to a web-based competitor. LeftFoot began building its own retail stores but still needed traditional retailers to fully cover the market.
LeftFoot looked to other industries for ideas to solve its channel conflict problem with retailers. Inspired by the publishing and music business, LeftFoot offered to pay retailers a royalty for life for each new pair of LeftFoot shoes purchased by a customer the retailer sent its way. From the retailer's point of view, the offer was attractive because it needed only to scan the customer's foot once and could look forward to a lifetime of future payments from LeftFoot without having to stock inventory or pay staff to serve the customer—it was found money for retailers who signed on willingly. LeftFoot now has retailers set up throughout most of Europe and Asia.
I learned about LeftFoot from Lausanne-based Alexander Osterwalder, who has just co-written a book called Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Osterwalder used the example of LeftFoot as a company that had not only innovated its products but also started thinking differently about the way it brought those products to market.
What innovators do you think of when you're tackling a tough problem?
JOHN WARRILLOW | Columnist | Sellability
John Warrillow’s new book, The Automatic Customer: Creating a Subscription Business In Any Industry will be released on February 5, 2015. John is also the author of Built to Sell: Creating a Business That Can Thrive Without You and the founder of The Sellability Score, a company dedicated to helping business owners improve the value of their company.