Costovation

About the Authors

Stephen Wunker leads New Markets Advisors, a firm dedicated to empowering companies to innovate and grow. With a vast experience in the field of innovation and growth strategies, Wunker has published widely in journals such as Forbes and Harvard Business Review. His television appearances include Bloomberg and the BBC, highlighting his expertise and influence in the industry.

Jennifer Luo Law is an Associate Principal at New Markets Advisors, where she specializes in new market assessment and "Jobs to be Done" customer research. Her insights and strategic approaches have been integral to the development and implementation of innovative market strategies.

Main Idea

The core concept of Costovation is the revolutionary approach to innovation that simultaneously compresses costs and delights customers. It broadens the definition of innovation beyond mere product development to encompass the entire business model. This method involves challenging existing assumptions, understanding market needs afresh, and focusing relentlessly on what customers truly value. Costovation aims to find untapped opportunities by combining cost-cutting with breakthrough innovations, enabling companies to outsmart and underspend their competitors while maintaining or even enhancing customer satisfaction.

Table of Contents

1. Introduction to Costovation
2. Three Traits of Costovation
3. Costovation Strategy Playbook
4. The Greater Context
5. Conclusion

Introduction to Costovation

Costovation is about achieving groundbreaking innovation while significantly reducing costs. This concept challenges the traditional view that innovation and cost-cutting are mutually exclusive. By focusing on essential customer needs and cutting out unnecessary features and expenses, companies can deliver exceptional value efficiently.

"Costovation is a type of innovation that significantly compresses costs while still wowing customers." - Stephen Wunker

For example, Yotel, a hotel chain found in international airports, offers comfortable beds, excellent showers, strong Wi-Fi, and fast check-in, all at a lower cost by eliminating unnecessary amenities. This model provides travelers exactly what they need without the frills, demonstrating the essence of costovation.

Three Traits of Costovation

Successful costovation strategies share three main traits: breakthrough perspective, relentless focus, and a willingness to blur boundaries.

Breakthrough Perspective

Seeing the market differently from competitors is the first step toward costovation. John Zimmer and Logan Green, founders of Lyft, revolutionized carpooling by leveraging smartphones to offer on-demand rides, transforming the industry and making transportation cheaper and more convenient.

"Breakthrough innovation begins with breakthrough perspective." - Stephen Wunker

To develop a unique perspective, companies can:

• Examine the industry from afar to identify outdated assumptions.
• Study individual components of their offerings to ensure each contributes to overall goals.
• View operations through the eyes of the customer.
• Reframe customer and supplier relationships to enhance value for all parties involved.

Relentless Focus

Costovation requires a clear strategic objective and consistent prioritization. Companies must decide what to cut and what to keep, focusing only on what truly matters to their customers.

"Costovation is about relentless prioritization." - Stephen Wunker

Zappos, for example, focuses on customer service rather than competing on price, offering perks like free overnight shipping to differentiate itself.

Willingness to Blur Boundaries

Innovation often extends beyond product development to operational changes. Companies must be willing to innovate in areas like manufacturing, delivery, sales, and partnerships.

Picard, a French grocery retailer, exemplifies this by focusing on frozen foods, streamlining operations, and offering gourmet products at competitive prices. This multifaceted innovation creates a unique market position.

Costovation Strategy Playbook

Implementing costovation involves various strategies across product development, manufacturing, delivery, sales, and partnerships.

The Product and Service

Using technology to innovate products can reduce costs and enhance customer satisfaction. For instance, Saildrone, an autonomous vessel, collects ocean data at a fraction of the cost of traditional methods, demonstrating cost-effective innovation.

Manufacturing

Operational innovations can streamline production processes. Cal Cedar's creation of DuraFlame logs from cedar waste is a prime example of turning waste into a profitable product.

Delivery

Innovations in delivery can improve efficiency and reduce costs. Hindustan Unilever's Shakti Amma program leverages local entrepreneurs to distribute products in rural India, bypassing traditional delivery challenges.