Talk about innovation often centres on companies such as Google, Tesla, Uber and Amazon – awe-inspiring firms in turbulent, hi-tech industries that have invented and built something new.
However, there are ample stable and homogeneous industries that are not hi-tech, fast-changing and turbulent without new business models that appear and dissolve rapidly.
Take the consulting industry. Decades ago, top firms such as McKinsey, the Boston Consulting Group and Bain dominated the industry, and they still do. Moreover, these firms still do pretty much the same thing as they did 30 years ago (although they now place their bullet points on PowerPoint instead of overhead slides). Similarly, the hotel industry is remarkably stable and homogeneous – deciphering whether you’re staying in a hotel chain (such as a Westin) or a similarly priced other (such as a Hyatt) is really hard from inside a hotel room. And the hospitality industry too wasn’t much different 30 years ago.
Even the difference between the main competitors in industries that have seen change over the decades – retail banking, for example – are minimal. Those industries are often wonderful places for you to innovate – or otherwise witness someone else eventually disrupt you.
The limitations of the one-stop shop
Customers are often more heterogeneous than the companies that serve them. Trying to be a one-stop shop and attempting to appeal to a wide spectrum of customers, isn’t necessarily a smart strategy.
Consider the innovative hotel chain, citizenM, which was founded in the Netherlands in 2008. It offers affordable luxury in some of the most exciting cities in the world and focuses on just one particular group of customers: mobile citizens. The segment is made up of travel-savvy individuals seeking luxury they can afford. As such, citizenM does not offer corporate contracts or rent out rooms for conferences. Instead, it focuses solely on people travelling to London, Paris, Amsterdam or New York multiple times a year, for shopping, business, leisure and just for the fun of it.
The chain realised that mobile citizens would be willing to make trade-offs: no separate hotel bar, restaurant, spa facilities or concierge service, not even a front desk. So citizenM offers one very funky comfortable open space downstairs, where you can hang out, eat sushi or sip on a cappuccino, and a rather small but comfortable hi-tech bedroom upstairs. And all that comes at a reasonable price in the world’s most dynamic cities.
citizenM is aware that its small rooms and lack of traditional facilities are not for everyone, but, in the words of the co-founder Michael Levie, “We are perfectly fine with that”. By deliberately appealing to one particular group, the chain is perfectly geared towards its customers.
As I describe in my new book – “Breaking Bad Habits” (Harvard Business Review Press, 2017) –