4 Steps to the Next Breakthrough Idea

By Herb Schaffner
Thousands of business books are published every year, so sometimes very good ones get overlooked. Seizing the White Space, by Mark Johnson, a management consultant, is one of those books that deserves a second look.

Published last year by Harvard Business School Press, the book offers a road map to innovation. Specifically, it is about"white space plays"--strategies to leap frog out of crowded markets into new, open spaces by radically changing your business model. Johnson, chairman of Innosight, a consulting and investing company that he co-founded with Harvard Business School professor Clayton M. Christensen, delivers a case-study rich guide that shows how changing your company's business model can enable you to dominate new markets. He calls this approach "business model innovation" and says a number of leading companies, from Dow Corning to Ryanair to Whole Foods, are using it to bypass traditional markets to sell products and services where few competitors can be found. It's what Ikea did when it left behind the traditional home furniture market of expensive, heirloom purchases to market low-cost, appealing and essentially disposable furniture with youthful designs.

If making a white space moves sound risky, that is because it can be. Companies need to first understand how to change their business model before they can successfully branch out. In his book, Johnson identifies the fundamental building blocks key to making this transformation:

1.) Rethink the customer value proposition: Stop trying to figure out what products customers are trying to buy or have bought in the future, and instead "work out what they are trying to get done in their lives in a given circumstance," Johnson writes. This requires taking time to understand and study particular customers, and walk in their shoes. That's what Ratan Tata, chairman of the Tata Group and a major Indian industrialist, did when he looked out an India's streets and highways. He saw a nation where lower-income families traveled by motor scooter and came up with a solution: to produce a car for a fraction of the price of other cars.

2.) Redefine your "profit formula," the economic blueprint that defines how a company will create value for itself and its shareholders. To make a successful white space move, you must calculate how big your company has to be to break even and then make a profit--and how fast you need turn over sales to achieve adequate returns. Amazon conquered a white space--online book retailing--in large part by combining Internet technology with just-in-time inventory management to slash the days it held publishers' books. Brick and mortar stores typically carried inventory and therefore publisher's costs, for 168 days; Amazon slashed that to 17 days. This allowed Amazon to shift the publishers' costs back to them, while carrying their customers' cash during the time it processed their order.

3.) Deploy the resources and 4.) create the processes necessary to realize your new vision. For example, Ryanair achieved their vision of an ultra low-cost airline by flying out of secondary airports, using non-unioned workers and maintaining a Spartan headquarters. In order to create the $2500 Nano car for the masses, Tata dramatically reduced the number of parts in the car, outsourced 90% of the components, and slashed the number of vendors it needed to make the car.

Do you think you could help your company make a white space play? What steps would you add to this list?

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