Exploiting Chaos: 150 Ways to Spark Innovation During Times of Changeby Jeremy Gutsche
The hottest trend spotter in North America reveals powerful strategies for thriving in any economic climate.
Did you know that Hewlett-Packard, Disney, Hyatt, MTV, CNN, Microsoft, Burger King, and GE all started during periods of economic recession? Periods of uncertainty fuel tremendous opportunity, but the deck gets reshuffled and the rules of the game get
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The hottest trend spotter in North America reveals powerful strategies for thriving in any economic climate.
Did you know that Hewlett-Packard, Disney, Hyatt, MTV, CNN, Microsoft, Burger King, and GE all started during periods of economic recession? Periods of uncertainty fuel tremendous opportunity, but the deck gets reshuffled and the rules of the game get changed. EXPLOITING CHAOS is the ultimate business survival guide for all those looking to change the world. Topics include: SPARKING A REVOLUTION, TREND: HUNTING, ADAPTIVE INNOVATION and INFECTIOUS MESSAGING.
- Penguin Publishing Group
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Read an Excerpt
First, afew pagesofhistory *
*Did you know that IBM, GE, Wal-Mart, Dell, and Southwest Airlineswere referenced in 1,304 of the most recent 2,000 Harvard BusinessReview articles? 2 Holy crap! That’s excessive. In his book The BreakthroughCompany, Keith McFarland asked, “Does it stand to reason, however, thatjust 5 firms account for 50% of the business knowledge created over thepast 80 years?” Accordingly, Exploiting Chaos departs from normality tobring you examples applicable to both big businesses and new ventures.
Crisis creates opportunity
Prior to the Great Depression, the only cereal brand thatmattered was Post. After your great-grandfather silenced the piercing bellsof his wind-up alarm clock, he savored the delicious taste of Post Grape-Nuts. Launched in 1897, the cereal dominated the marketplace leading upto the 1930s.
As the Great Depression tightened its angry claws on America, Post founditself hungry for cash. The prominent cereal maker assumed they “owned”the market. How could anyone stop lusting for Grape-Nuts? Accordingly, advertisingbudgets were cut to weather the storm.
As the managers of Post reclined in their rawhide chairs, bracing for a sloweconomy, a hungry tiger lurked in the shadows. That tiger was the KelloggCompany. Their mascot, Tony the Tiger, had not yet appeared, but his insatiablespirit was already born.
While Post retreated, Kellogg doubled their ad spend.3 In 1933 their campaignsintroduced slogans like “Snap! Crackle! Pop!”4 and “You’ll feel better”5: motivational mantras during a gloomy era. The investment paid off.Americans loved the message and sales began to grow. Kellogg’s becamethe go-to pick for breakfast cereal and your great-grandfather abandonedhis beloved Post Grape-Nuts.
The upbeat impact of crisis is that competitors become mediocre,and the ambitious find ways to grow.
Sadly, the grape nuts didn’t help these men prevent the Great Depression.
You can thrive in times of loss
In Coriolanus, Shakespeare wrote, “when the sea was calm all boatsalike / Show’d mastership in floating.” Unfortunately, the seas are no longercalm. This will cause some ships to sink, but opportunity does not goaway. People still buy things, they just become more particular about whatthey need.
During the Great Depression, unemployment soared to 25%, 15,000 banksfailed, and Wall Street was no longer a place of glamour. Four dreadfulmonths into this depression, Henry R. Luce launched a pricey magazinetitled Fortune. At $1 an issue, the cover price surpassed the cost of a functionalwool sweater. Seemingly bad timing.
Eight years later, Fortune had grown its subscriber base to 460,000 people.By 1937 the magazine reported an annual profit of $500,000. Scaled for inflation,that amounts to more than 7 million modern-day dollars. That’s alot of wool sweaters.
Kellogg Professor Andrew J. Razeghi suggests, “Fortune worked for the verysame reason that all great new products work: it made a uniquely relevantcontribution to its customers’ lives (period).”6 Fortune was more than justa publication. It was a glimpse into the boardrooms of those that survived;Fortune was an answer.
Innovation is not about market timing. It is about creatingsomething that fulfills an unmet need.
Reinvent what people want
Eras of change give birth to unconventional ideas. In 1913 R.J.Reynolds rolled out one of these ideas: the prepackaged cigarette. Therewas widespread belief that this idea would fail; after all, the act of rollingcigarettes was part of a seductive ritual for many smokers. Would peopletrade quality and tradition for cheaply packaged goods and convenience?
Undaunted, Reynolds created a marketing machine to birth his newidea. The company launched their new product with one of the first major“teaser” campaigns in American history. Their mysterious slogan, “thecamels are coming,” bubbled throughout the media.
The camels are coming? What the hell does that mean?
When the product first hit shelves, a circus camel named “Old Joe” wasescorted through city streets to hand out free cigarettes. Within a year,Reynolds sold 425 million packs, making his idea the most remarkablebreakthrough in the history of consumer products. For the next 15 years,nothing seemed more rewarding than the puff of a seemingly healthy unfilteredCamel cigarette. “Is enjoyment good for you? You bet it is.”Today this advertising copy seems preposterous, but the success story iseye opening.
Revolutionary ideas defy the mold of convention.
Keep your finger on thepulse of pop culture
Organizations are inclined to protect what they acquire.This leads breakthrough companies to create the sort of structure that inhibitschange. Structure distances us from the pulse of pop culture.Intoxicated by his own success, R.J. Reynolds lost touch with the trendsin marketing. In the 1920s advertising became psychological. Unregulatedmarketers played on fear.
Listerine mouthwash warned, “Halitosis makes you unpopular.”Hoover Vacuums worried, “Dirty Rugs Are Dangerous—How Do You CleanYours?”7 Seriously, how dangerous can carpet really be?
With a supercharged ad budget, Camel’s rival, Lucky Strike, combinedHollywood aspirations with the pervasive fear of getting fat. Their adsshowcased celebrities who touted cigarettes as the “modern way to diet!”They advised, “Light a lucky when fattening sweets tempt you.”
Their aggressive strategy puffed a cloud of smoke into Camel’s unquestionedlead. Lucky Strike became the #1 brand by 1929, and shortly afterward,Camel dropped again, to #3.8
Then the Great Depression began.
Icons falter if they do not reinvent in periods of change.
Learn the gameand start to play
Most innovation anecdotes celebrate the triumph of the underdog.This adds fuel to the common misconception that people in largeorganizations cannot revive the dwindling fire of their heritage. However,with brand recognition and deep pockets, monolithic organizations arebetter equipped to enter new markets, they just lack the adaptive mindsetto facilitate entrepreneurial change.
In 1930 fallen market shares and the Great Depression gave R.J. Reynoldsan opportunity to spark change. They began to experiment with fearmarketing, claiming, “More Doctors Smoke Camels Than Any Other Cigarettes.”Sounds healthy to me. In a time when health impacts were lessknown, the message created subconscious fear: if doctors only smoke Camels,should I be worried about my brand?
Lucky Strike countered with, “20,679 physicians say ‘Luckies are less irritating.’”
It didn’t matter. By this time R.J. Reynolds was a step ahead.
In 1933 Camel started using athletes to associate their image with vitality.Superstar jocks endorsed,“They don’t get your wind,”
“It takes healthy nerves… to win the World Series,” and“21 out of 23 St. Louis Cardinals Smoke Camels!”
By 1935, the once-aging giant had reclaimed its #1 position.
It is never too late to learn.
“It is not the strongest of the speciesthat survives, nor the most intelligent,but rather the one most adaptable tochange.” —Charles Darwin
The world of business is in a constant state of evolution. Greatorganizations fade. Fast-moving start-ups step into their place.In The Innovator’s Dilemma, Clay Christensen studied the evolution of thedisk drive industry, where leaps in technology led to physically smallerhard drives.9 This caused nerds around the world to rejoice. Also, it exemplifiedthe difficulty of change.
In theory, the leap from one size tothe next doesn’t seem monumental.You might expect the sameleaders to remain over time. However,when the world changed,leaders lost their place.
Leaders in the Disk Drive Market:
1980 - 14" Drives Contol Data, IBM, Memorex
1984 - 8" Drives Shugart, Micropolis, Priam
1988 - 6¼" Drives Seagate, Miniscribe, Maxtor
1993 - 3½" Drives Conner, Quantum, Maxtor
1995 0 2½" Drives Prairetek, Quantum, Conner
Small shifts can disrupt the market.
Even the clevermust adapt
If the disk drive industry is simple, the semiconductor marketis complex. Semiconductors are so difficult to make that the leadingplayers boast billion-dollar research budgets.
These budgets are supposed to create barriers to entry, barriers that protectthe giants while preventing new companies from entering the market.However, just like in the simple disk drive market, shifts in technologycause new leaders to emerge.10
Leaders in the Computer Chip Market:1955 - Vacuum Tubes RCA, Sylvania, General Electric
1955 - Transistors Hughes, Transitron, Philco
1965 - Semiconductors Texas Instruments, Fairchild, Motorola
1975 - Integrated Circuits Texas Instruments, Fairchild, National
1985 - VLSI Circuits Motorola, Texas Instruments, NEC
1995 - Submicron Intel, NEC, Motorola
RCA, for example, was once double the size of IBM. They were rockstars inthe vacuum tube market, but apparently people don’t buy vacuum tubesanymore. RCA struggled with change, and eventually, the company wasdisplaced. (Mental note: stop selling vacuum tubes.)
Your focus should not be on protecting what you have, but ratheron adapting to the next big thing.
You cannot escapedisruptive evolution
There are no industries or professions immune to the effectsof disruptive change, the sort of change that enables new business modelsand topples corporate tycoons. Our generation is fundamentally reinventingthe way human beings interact.
Broadcast Television… … … Viral Videos
Newspapers… … … Blogs
Album Sales… … … Concert Tours
Physical Stores… … … e-Commerce
Advertising… … … Shockvertising
America… … … China
Japan… … … India
New York… … … Moscow
Men… … … Women
Email… … … Social Media
Phone Calls… … … Facebook Status Updates
Public Libraries… … … Wikipedia
Classroom Method… … … Virtual Learning
Recruiting… … … Offshore Outsourcing
Medical Doctors… … … Nurse Practitioners
Accountants… … … Online Filing
Lawyers Online… … … Legal Forms
Loan Officers… … … Automated Lending
Oil on Canvas… … … Digital Imagery
Studio Photography… … … Photoshopping
Don’t become aboiled frog
Viral videos, e-commerce the blogosphere, email, social media,crowd sourcing, and a lack of self-censorship: these are the shifts topplingmajor corporations today.
The sneaky thing is that these shifts are nothappening overnight; rather, they areslowly creeping up on us.
It’s kind of like boiling a frog.
If you place a frog into a pot of boiling water, he’ll immediately hop out.And he’ll be pissed off. If you place a frog into a pot of lukewarm water andslowly dial up the heat, he will keep swimming until he’s boiled alive.Like us, the frog is more sensitive to shocking change. If change is moderate,urgency becomes less apparent. Before we know it—hey, what’s thatsmell?—we’re cooked.
Peter Drucker, regarded as the father of modern management, noted thefollowing at age 94: “We now accept the fact that learning is a lifelong processof keeping abreast of change. And the most pressing task is to teach peoplehow to learn.”11
The key to adaptation is recognizing the ongoing need formoderate change.
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Meet the Author
Jeremy Gutsche, MBA, CFA, is an innovation expert, host of Trend Hunter TV, one of North America's most requested keynote speakers, and the founder of TrendHunter.com, the world's largest network for trend spotting and innovation, boasting an audience of roughly 10 million monthly views. Routinely sourced by the media, Jeremy's broad appeal ranges from The Economist and The Financial Times to Entertainment Tonight and FOX News. He has been described as "a new breed of trend spotter" by The Guardian, "an eagle eye" by Global TV, an "Oracle" by The Globe and Mail and "on the forefront of cool" by MTV.
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