Are Retailers Stifling Innovation?

Have you seen the new milk jugs? (Link) It seems that Wal-Mart and Costco having been rolling out a major change to the iconic gallon milk jug.

The benefits to the retailer supply chain are obvious. Because the new jugs can be simply stacked on each other with only a slip sheet in between fillers no longer have to manage, clean, and pay for the crates that are required to ship the current gallon milk.

For the consumer the benefits are less obvious. While milk in new jugs cost 15% less than the old one the consumer must pay a price. It seems that the new jugs don’t poor as well. According to the NYTimes the milk jugs, “make consumers feel like novices at the simple task of pouring a glass of milk.”

Changing your product in order to benefit yourself despite the fact that your customer has neither asked for the change or expressly benefits from it seems to be a trend lately.

Last May Wal-Mart pushed the laundry detergent manufacturers to concentrate their formulations so that the bottles could be downsized 50%. (Link) The smaller bottles save on part, shipping, and stocking costs. And the retail price difference between the old bottle and the new one? Zero.

Companies have always been looking to cost reduce their products without effecting consumer perception. Plastic lids on yogurt and the amount of Oreos in a box come to mind. But these changes are different in that they have been ordered by the retailer.

Retailers have always had their hands in the consumer product pot: asking for multi-packs, or a shorter bottle to fit a particular shelving set. But historically their requests have been restricted to packaging. The detergent and milk changes are different in that they affected the product. In the detergent case the formula had to change and the new milk jug does not poor as well.

It seems that things have tipped even a bit more favorably for the all mighty retailer, and this could be bad for innovation. Retailers are not about solving the customer's problems. They are about giving the customer a pleasant shopping experience, everything else is a cost to be eliminated.

Image: counton2extras.com

Yesterday's Innovation

Back in the mid-90's the presentation method of choice was still the overhead projector. Modern projectors and the computers that fed them were expensive and therefore reserved for the executive conference rooms.

That meant that working sessions and presentations required sheets of overhead transparencies and a pocketful of colored markers. You were careful to get the right markers so that you wouldn't get ink all over your hands.

Image: www.answers.com

Innovative Theft

According to LancasterOnline.com, 11 of the HVAC units pictured above were stolen recently. (Link)

Ephrata police Sgt Philip Snavely was quoted as saying that the thieves probably used a large truck to steal the units. Sgt Philip did not speculate on the use of a fork lift during the heist.

Usually when someone wants a buck they just knock off a convenience store. It seems as if these guys planned ahead.

Image via LancasterOnline.com

Changing Consumer Landscape

There are some interesting trends developing for today's consumer's that are going to effect future buying habits in the United States.

Pension, What Pension?
In 1979, when the oldest Gen Xers were teenagers, the sole retirement plan for 62% of workers was a traditional pension, according to the Employee Benefit Research Institute (EBRI). By 2005, when most of the Gen Xers had joined the workforce, that number had flipped: 63% of employees found themselves covered only by voluntary 401(k) plans. So much for the corporate safety net. 5/20 USAToday

Savings, What Savings?
According to the EBRI, more than one in three workers ages 35 to 44 aren't setting aside any money for retirement. Among those ages 25 to 34, 45% aren't saving. 5/20 USAToday

Salary, What Salary?
Gen Xers also face this harsh reality: The standard of living that most of them have so far managed to achieve falls short of their own parents' standard at the same age. The median income for men now in their 30s, when adjusted for inflation, is 12% lower than what their dads earned three decades earlier, a report by the Economic Mobility Project, an initiative of The Pew Charitable Trusts, concluded. 5/23 USAToday Link

Contrast this to the period between 1880 to the First World War when the average standard of living in America rose 50 percent. (Book: Why Most Things Fail by Paul Ormond)

Debt? Yeah, We Got That
A 2007 study by the Project on Student Debt found that graduates in 2006 left school with about $21,100 in student loans. Now add in consumer debt: The average undergraduate leaves school with about $2,200 in credit-card debt, while graduate students carry more than $5,800, according student-loan provider Nellie Mae. 6/18 WSJ Link

In the macroscopic sense this adds up to a generation that is on it's own for retirement, isn't saving, isn't able to afford as much as previous generations, and has a lot of debt.

The big "So What?" in all of this is that the American consumer economy cannot consume as the same levels (per unit basis) going forward as it has in the past and this will change how our economy is currently structured.

How will it change? I don't know, but it will be interesting to see how it all plays out.

Hard Drive Disruption

By Mark Rosenthal of The Lean Thinker

Toshiba Offers Laptop with 128GB Solid State Drive (Link)

The interesting lines in the article are:

[  "SSDs are attractive because, with no moving parts, they can be more
rugged and quieter than hard drives, have faster startups because no
spin-up is needed, can have very low read and write latency times, and,
for some models, can be more energy-efficient."  ]

Yup. These are the disruptive elements of the technology. In the niche
market of very small and light computational equipment, these
advantages outweigh the cost-per-storage unit downside of solid state drives.
Thus, these markets are the incubator. What started with phones and
cameras is now moving to laptop computers.


[   "But Richard Shim, an analyst with industry research firm IDC, said
that, even as SSDs increase in size and popularity, they will continue
to coexist with hard drives "even five years from now."   ]

Mr. Shim is really going out on a limb here, and this is why:

[   "While 128GB is acceptable in a laptop for some users, he noted
that there are now terabyte laptops, and hard drives will continue for the
foreseeable future to beat SSDs in cost per gigabyte and overall
capacity."   ]


Who the hell cares about a terabyte laptop?
RIGHT NOW, a typical laptop needs 120-180 gigs, and is comfortably
underloaded at that, even with a full suite of business applications.

Hard drives will continue to increase in size and capacity, but they
are already over-delivering on the needs of the mainstream personal
computer. Sure, in mass storage applications, cost per gig and overall
capacity deliver, but not on laptops.

Meanwhile, laptops continue to disrupt desktop machines. What is
holding them back is that there is no standard component level architecture
like there is with desktop machines. Each manufacturer has its own
proprietary stuff. If that barrier ever breaks, then desktop machines will
vanish overnight for all but massive computational requirements such as
high-end graphics processing and cad. Even then, we don't know where
distributed computation is going for those applications, mainly because
the monolithic operating system (winders) is heavily biased toward
single user/ single machine.

Central Innovation Problems

Innovation is an extremely simple concept; Think of a good idea, develop it until there is something to sell, and then sell it to people.

There are two central problems with the process. The first is getting getting really good ideas, the ones that people really want, into the development process and then keeping them there. The second problem is that often times the transactional friction in the development process requires a tremendous amount of energy (labor, cash, and time) to get products out the door.

The good thing about capitalism is that it allows for companies to continually try new things, the winners succeeding and the losers dieing off. Such is the case with the classic innovation problems. A Fortune article on P&G is an example of how one company is coming up with new ways to get good ideas (Link). P&G is lessening their reliance on focus groups, increasing the number of hours that they spend in the customer's environment, and trying to make 50% of the new ideas come from people outside the company. All of this seems to be working with the product hit rate (the percentage of new products that deliver a return above the cost of capital) by 20 points to 90%.

This will be an interesting trend to watch to see if there is a new wave of Marketing tools (could this be the lean revolution ala Marketing) hits or misses in the coming years.

Olympic Park In Beijing

Images via Jeff Zhan

Yesterday's Innovation

The new improvements made today gently push yesterday's improvements to the back. Today Grassroot's introduces a new feature entitled Yesterday's Innovation where we acknowledge the things that are, or are about to become, obsolete.

Image: usconsolate.org

Neat Idea

I am a big fan of metrics. As Bo Schembechler said you are either getting better or you're getting worse. Metrics tell you which way you are going.

In my quest to make the metrics easy to understand I came across this gem of a site: ExcelUser.com. They've got some straight forward tutorials on how to display your data in a unique way that is easy to understand. For example, here's a link on how to make the bullet chart above.

Image: ExcelUser

Chicago Innovation Awards

The folks who run the Chicago Innovation Awards are accepting nominations for innovative Chicago area companies that have introduced innovative new products or services. (See here)

This is the first that I've heard of a regional innovation award and I think it's a great idea. What better way to bring folks together to celebrate the best of the area?

From The Bad Design Files

I rode in the PT Cruiser for the first time the other day. After looking for 30 seconds at how to open the windows someone had to tell me where the window buttons were; on the dash. Specifically they are on the center console between the air vents (see below).

There is a fine line between unique and dysfunctional. Obviously the PT Cruiser designers were going for edgy and different, trying to create and Apple-esque aura. The problem is that Apple's product are extremely intuitive and therefore easy to use. Window buttons on the dash are awkward because everyone looks at the door when they want to open the window. So, when going for cool the PT Cruiser designers got cumbersome.

Car Image: dragtimes.com
Dash Image: About.com

Whale Facts

Things that quite possibly only interest me.

The NFL Players Association estimates at least 60 percent of athletes go broke within their first five years after retirement. 6/2 Orlando Sentinel

In 2007, 18% of workers had taken a retirement-plan loan within the past year, up from 11% in 2006, says a recent survey by Transamerica Center for Retirement Studies. 6/2 WSJ

February 2007 was the fourth consecutive month in which miles driven in the USA fell, an analysis of Federal Highway Administration data show. There hasn't been a similar decline since 1979, when shortages created long lines at pumps. 5/8 USA Today

According to a report due to be released Wednesday (5/14) by the National Center for Health Statistics, nearly one out of every six homes in the USA - 15.8% - had only wireless telephones during the second half of 2007, up from 6.1% during the same period in 2004.

The trend is strongest among young adults: 34.5% of people 25-29 years old lived in households with only wireless phones. For those 30-44, the rate drops to 15.5%. It's 2.2% for those 65 and over.

The report from the National Center for Health Statistics - part of the Centers for Disease Control and Prevention - also found that one out of every eight homes, 13.1%, received all or almost all calls on wireless phones even though there was a land line in the home. 5/14 USA Today

Neat Idea

Here's a neat twist on the merry-go-round concept from the folks at Elephant Play.

The equipment is extraordinarily well designed. The units rotation is dampened in order to limit it's speed. The outside netting ensures that children are contained as they rotate. The entire unit rotates as a single piece in order to avoid catching clothing. The craftsmanship on the unit is also superb as there are no loose fittings or mis-matched joints.

Here are some of the other items that they make.

Stock Images: Elephant Play