Innovation and cost-cutting — so often considered magnetic opposites — can be a powerful duo, capable of reshaping markets and creating long-term competitive advantages, say Stephen Wunker and Jennifer Luo Law, co-authors of “Costovation: Innovation That Gives Your Customers Exactly What They Want – and Nothing More.”
“Costovation is not about luring customers with a bargain and leaving them feeling cheated. It’s stripping away meaningless excesses to improve the customer experience at a lower price,” the authors state. They hold up Planet Fitness as a well-known costovation success story. The low-cost health club chain topped seven million members by ditching the towels, pools and personal trainers, and providing easily accessible workout equipment for a nominal fee.
Costovation defies assumptions about the way things should be done. It requires examining your company and your industry as if you are an outsider. The authors recommend listing 15 to 20 common assumptions about your product or service category and industry (the more basic and long-held, the better). Then ask yourself what would happen if each assumption were suspended.
“Consider what would happen if you eliminated 90 percent of the features in your offering. Is there a customer type or customer occasion that might find this stripped-down version even better?”
In their research for the book, Wunker and Law identified three common traits among companies that excel at costovation:
Breakthrough perspective – They threw out assumptions and viewed their market and their customers in a way that no one else had.
Relentless focus – Whether concentrating on market segment or a particular part of their business, there is always a steadfast focus that guides these companies through the many decisions and tradeoffs they must make.
Willingness to blur boundaries – A company’s product or service is the obvious place to innovate, but truly successful costovation companies take magnifying glasses to how their offerings are made, delivered and sold. Costovation occurs across different areas of the business.
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