Don't Make Me Hollah...

He was a droopy-eyed old timer, heavy around the middle, and when he strained in his folding chair to make change or rearrange his buckets you could see he had something wrong with one of his legs. But that didn’t prevent him from making serious eye contact with potential customers while bellowing like a beer vendor at Fenway Park.

“Don’t make me hollah, they’re only a dollah!” he would boom as I and hundreds of other commuters trudged past him to board our trains home. He was selling flower bouquets for a buck, and they were just the right size to carry on the train. Since he set up his cart at the main walkway to the platforms every weekday afternoon, anyone boarding a train had to walk right past him.

In the 1980s I walked by that guy most weekdays for almost five years, and I bought plenty of flowers from him, but I was young and preoccupied with my own issues so I never gave much thought to him or his business—and then I moved away. But recently, while planning a lesson on competition and competitive strategy, I started thinking about him and his business once again.

If you have studied economics at all, you probably know about Michael Porter and the work he has done on industry competition, particularly his “five forces” of competition model. You can watch him talk about that model here, but basically, Porter's five forces include competition from established and known rivals, new or emerging rivals, the threat of substitute products or services, as well as threats tied to the bargaining power of suppliers and customers. The weaker the forces, the more attractive the industry in terms of profitability.

As I remember it, the flower seller at North Station had no rivals on-site other than a more traditional flower shop inside the B&M terminal which offered a larger assortment of flower arrangements at much higher prices. I have no idea how he secured what seemed to be the exclusive right to sell flowers near the walkway to the train platforms, or why other competitors didn’t try to enter that space. Maybe he had competitors originally but drove them out of the market with low prices and superior location. Or maybe he had a special flower vendor’s license that was no longer available to potential competitors. I don’t know where he got his flowers, but I remember the wholesale flower exchange was not far away from the train station.

His sales transactions were quick, his product inexpensive. Impulse purchases were accommodated effortlessly--a commuter running for a train who decided to buy flowers from him could do so almost without breaking stride since he had just one price and he only accepted cash. Factor in the convenience and social usefulness of being able to purchase flowers at the last minute, particularly on birthdays, anniversaries and holidays, and it’s not hard to understand why buyers didn’t try to negotiate purchase prices with him.

I don’t have all the details, of course, but at least in my memory that flower vendor seemed to be operating in an ideal market featuring weak forces of competition, steady product supply, reliable and predictable product demand, low price sensitivity and the opportunity to make a profit. In other words, he was one lucky flower vendor! He had no real competition, so he didn’t need to worry about sources of competitive advantage, but I am sure he had a value proposition in his head built around what benefit he provided, to whom, and how he provided it better than anyone else. Using Geoffrey Moore’s template (from Crossing the Chasm) to outline his value proposition, I imagine it might have been something like this:

		Value Proposition
For	Target Customer	B&M Railroad commuters at North Station, Boston
Who	Need or Opportunity	who want to bring flowers home as a surprise, or gift, or symbol of love and affection
Our	Service/Category	we are the only flower stand directly on the walkway to the trains
That	Statement of Benefit	and we offer a wide selection of fresh flower arrangements—quick, one low cost, no waiting.

The good news is that after reminiscing for a while I was able to include the flower vendor scenario as a case study in the lesson I was developing. The bad news is that my efforts to get additional details about him came up empty. I’d still like to know which of Porter’s five forces of competition eventually impacted his business, when, and how, and what he did to manage them.

I plan to keep digging, but if you (or someone you know) commuted by train from Boston’s North Station in the late 1980s, please send me an email (dean.harring@gmail.com) describing whatever you remember about that flower seller, his competitors, and the North Station marketplace in which he operated. It would be great to know the rest of his story.


Dean K. Harring is a retired executive who now enjoys his time as an advisor, board member, educator, and watercolor painter.  He can be reached at dean.harring@gmail.com or through LinkedIn or Harring Watercolors

Innovate or Die. Really?

I have been thinking and reading about innovation recently, and I must say there certainly is no shortage of material on the topic—much of it with a critical slant.  That may surprise you, since no matter where you work I am sure your organization talks about innovation, believes it is already innovative, or at least plans to become innovative. Why?  Innovation is a trendy concept, it sounds cool, cutting-edge and entrepreneurial. Business schools have embraced it, and consultants have built practices around it. More importantly, many people believe the phrase “innovate or die” is absolutely true and that it applies to all businesses. So, as Dennis Berman points out in the Wall Street Journal: “Most CEOs now spray the word "innovation" as if it were an air freshener.”

William Taylor, co-founder of Fast Company magazine and blogger on the Harvard Business Review Blog Network, described it this way in his 12/6/13 blog Stop Me Before I “Innovate” Again:

“Words matter — in business and in life. I’ve always found that companies that aspire to do extraordinary things, leaders who aim to challenge the limits of what’s possible in their fields, develop a “vocabulary of competition” that captures the impact they’re trying to have, the difference they’re trying to make, the future they’re hoping to create. Almost none of these companies and leaders use the word “innovation” to describe their strategy — implicitly or explicitly, they understand that it has been sapped of all substance. Instead, they offer rich and vivid descriptions of what they hope to do, where they hope to get, and why it matters.”

Ginanpiero Pteriglieri, an associate professor of organizational behavior at Insead, puts an even sharper point on it in remarks quoted in The Experts blog in the Wall Street Journal:

“Innovation is a strong contender for the crown of business buzzword of the decade. The term has all it takes. It is ubiquitous, mysterious and, like its acolyte "leadership," it works alone and pairs well with many adjectives. Is there a problem that transformational leadership and disruptive innovation aren't invoked to solve? Is there a company whose failure is not explained by a lack of both?”

Business buzzword of the decade? Wow. In that race, the competition is steep, and the contenders are many.  By the way, a great place to check out a good collection of the “jargon monoxide” (a term coined by Polly LaBarre) contenders is The Ridiculous Business Jargon Dictionary where you can browse terms ranging from “above board” to “zero-zero split.” 

Whether or not you believe it is appropriate or well deserved, the property-casualty insurance industry isn’t often described as innovative.  Complacent and risk-averse, stolid, stodgy, and conservative are descriptors more commonly used. But let’s step back a minute—what is innovation, and how critical is it to the success of a property-casualty insurance company?

Innovation is often described as the implementation of something new—a product, a service, a process, an alliance, a market, or an experience—that creates value. So while the innovation process may begin with big ideas, it takes execution and results before it qualifies as innovation. Or, as Dr. Lewis Duncan, president of Rollins College, put it: “Innovation is the ability to convert ideas into invoices.” 

Of course, there are also other flavors of value out there to be harvested through innovation—lower costs, higher margins, new or more attractive products or services, more engaged employees, new customers, new distribution channels, happier customers, more loyal customers, enhanced reputation, etc.  Yet for property-casualty insurers who believe they are operating in essentially closed markets characterized by a high level of maturity and stability, the decision about innovating often turns on their competitive situation.  If they believe they are competing successfully (however they define that term), they may elect to avoid the costs of innovation and to focus instead on engineering incremental operating improvements, tweaking their products and operations and processes so they can continue to function competitively.

But if a company is not competing successfully, or if they aspire to grow and be profitable but that just isn’t happening, they need to step back and analyze what isn’t working, why, and what needs to be done to improve results. That’s an opportunity for innovation, for sure, but it also offers a convenient excuse to avoid or abandon any initiative or process that is new (or unwelcome or costly) and to “get back to basics.”  Getting back to basics means different things to different people, of course, but it usually involves a return to a time-tested and proven method of doing something, like implementation of well-established and widely understood industry methods and best practices. You might characterize it as the converse of innovation. Truth be told--it is much easier and more comfortable to get back to basics than it is to get innovative and develop something new to create value. And it just might be enough for an insurance company to get things back on track if their inability to compete had its roots in substandard or underperforming products, practices, services, or operations.

I do always wonder, when an insurance company goes public with its plans to embark upon an ambitious, multi-year program of operational transformation (first cousin of innovation), just how long it will take before they lose their nerve and push the “back to basics” button. I have experienced it, and I have watched others go through it, and it isn’t really that unexpected.  Innovation is often a costly undertaking that generates uncomfortable, disruptive change with no guarantee of success,  That is particularly true when the “value” that is expected to result is difficult to measure and demonstrate convincingly since it arises from something other than “invoices.”  If you have lived through any type of claims-related transformation or innovation, you know exactly what I mean.

Still, I am not convinced that all property-casualty insurance companies are necessarily entangled in an “innovate or die” predicament, at least not yet. Plenty of companies manage to stick to the basics, focus on execution, play around the edges with incremental improvements, and the market allows them to survive and sometimes even prosper.  Yet we all know there are insurance companies out there who are constantly pushing the envelope and doing whatever it takes to create value—they just don’t spend a lot of time bragging about how innovative they are or broadcasting what they are doing. Instead, they are busy trying to create distinctive marketplace advantages that resonate with customers and to give themselves an edge in pricing, costs, products or services.  Why? So they can operate with higher profit margins and grow by attracting customers away from their competitors. So even though innovation for property casualty insurers probably isn’t really a matter of life and death today, it can impact an insurer’s quality of life and general well being. Kind of like diet and exercise can for humans, I suppose.

Narrow the focus to property casualty claims operations, however, and I think the “innovate or die” predicament becomes a bit more pressing and complicated; but that’s a tale for another day.

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on Property Casualty insurance claims and operations. He can be reached at dean.harring@theclm.org or through www.linkedin.com/in/deanharring/