Secrets Behind Innovation of AirBnB, Gillette, Netflix and Amazon

Service Innovation is about how we deliver the service differently. It’s about incremental innovation which is not necessarily making a major change but taking the existing product or service and making some improvements to it or adding initial service to that offering. More than 50% of innovations are business model innovations.

Julia Novik, Innovation Coach and Founder of Canada Health Net spoke about period of time when she worked in the pharmaceutical company and they had a product that wasn’t selling well and as she started doing her research going out to their customers, going out to clinics and hospitals, talking to patients, she realized the reasons it wasn’t selling well were: 1) it was very unaffordable and expensive for patients because they had to pay out of pocket, and 2) they were very sick patients, cystic fibrosis patients, and they had to go see physicians so many times a year that going for another medication pickup was a little bit too much for a lot of these patients, so they sometimes would just avoid and not even take that particular medication.

“So we had to go about how do we deliver that particular product differently. We created an online pharmacy contract and partnership and we not only reduced the cost of medication for patients but we made it extremely convenient for them to go online with a prescription they had, order their medication and it would come right to their home,” says Julia Novik about the decision they made.

“So those are business model innovations. You know Airbnb,” she continues. “They really changed how we travel. Most of us don’t want to stay in fancy Marriott hotels anymore when we can have a nice apartment or a condo that we can get from somebody through Airbnb in another country. So it’s just a different way of innovating.”

Julia Novik highlighted the incremental innovation which is taking not necessarily a major change but taking existing product or service and making some improvements to it or adding additional service to that offering. It comes from internal needs of organization.

“Let’s say that they need a new technology and then disruptive innovation,” she explains. “Disruptive innovation is probably the most complex way of innovating because what happens is you disrupt the whole industry, you change the way people buy this particular product. It doesn’t have to be a major innovation where it takes 14 years to develop a new drug and bring to the market. It could be smaller, much more incremental things. Such as instead of making a patient take three doses of this medication a day we were able to formulate it into one a day, so you’ve created a lot more convenience for your patient or we’ve discovered that this particular medication is good not only for what we thought it was good for but it also cures additional another type of condition that patients have.”

She said that those were incremental ways of innovating. The incremental ways of these companies slowly but surely changing the way their products are. Like Gillette in terms of how they have few blades now. It’s started only with one.

“Breakthrough innovation is how you improve the way you go about doing things in your industry or in your particular company,” Julia Novik continues. “EMR which is now used in majority of hospitals and clinics has changed the way physicians interact with patients. They now have access and before they even get to see the patient they can access your records, they can see the history of your disease and any other tests that you’ve had over the last year for instance. So now EMR has become something that physicians use and create patient portals where they can interact with the patients and answer questions. So it’s good. It’s a major breakthrough which is developing further and further about how the medicine and how healthcare will be delivered.”

She explains that disruptive innovations completely changed the way that industries work and killed the competitors.

“Amazon. It’s interesting what’s happening with Amazon,” concludes Julia Novik. “How is it going to impact a retail space. They’ve started with selling books online, look at everything under the Sun that they’re selling right now. What’s interesting, I’ve been reading about innovations and they say that in top 500 fortune companies more than 50% of innovations are business model innovations. So these are companies like Amazon, Starbucks, Airbnb, Netflix. These have reshaped the way they deliver the products and services, they haven’t really innovated in a sense of coming up with a breakthrough product or a service. It’s a business model shifting game. Think of Uber. Who would have thought that we wouldn’t be taking taxis and this is what innovation is: you have to actually try it, without trying it it’s not an innovation. The jobs are being shifted to other types of labor skills. We see that in every industry,  again I go back to health care because that’s where I’ve been stuck for 12 years, but thinking of the physicians in the future there will be areas where physicians are not going to be needed. The machine will be able to read and give you the analysis of your results, so these nice fancy highly paid jobs… that’s the AI will take over a lot of our skills. So anyways that’s for another topic.”