How Eliminating Industry Bottlenecks Can Lead To Innovation (And Competitive Advantage)
Editor’s note: This piece was originally published in 2015. It’s been so popular that we decided to update it in 2020.
What Is a Bottleneck in Business?
Most companies have a bottleneck of some sort. It could be a place somewhere in a manufacturing or business process where an obstacle clogs up the workflow, slowing progress to the next stage. The obstacle could be outdated technology, a desperate need for customer experience improvements, inefficient communication, inadequate staffing, or any number of other problems. No matter what’s slowing the flow, all bottlenecks are bad for business.
A bottleneck’s effect in business can be anything from lost revenues and defecting clients to a stressed-out, demoralized workplace. While it’s natural to want a fast fix, the best first step is actually to slow down and examine the situation carefully. Misidentifying a bottleneck and making changes in the wrong part of a process could uncork a whole new world of trouble.
It’s true unblocking a business constraint can have a positive impact on everything from profitability to workplace morale. But what about achieving more than an incremental increase? What about moving a business from off a plateau and launching it up to a peak ten times higher in the sky? To grow exponentially it’s necessary to unblock a bottleneck, but a different kind – one that is holding back not just a particular business but an entire industry.
What Is An Industry Bottleneck?
Industry bottlenecks are constraints that are a barrier to everyone in the industry – including competitors. These strangleholds stem from “givens,” die-hard, industry-wide beliefs about customer behavior, costs, price points and other dynamics. Barrett Ersek, whom I interviewed on my podcast, Commanding Business, calls such an industry bottleneck the X Factor. It can be defined as follows
“A creative innovation that leads to an unfair competitive advantage in your marketplace”
Eliminating Industry Bottlenecks Through Innovation
Barrett says that finding the industry X Factor and creating an innovation to unblock it can result in up to a 10x competitive advantage in the marketplace. And Barrett should know! In the early 2000s, he leveraged his $2 million dollar lawn care company into one eventually worth $10 million. His creative innovation was using satellite imagery, then cutting-edge, to measure lawns remotely for cost estimates instead of following the industry standard procedure of sending salespeople to measure in person. He saved so much on time and labor that he was able to slash customer acquisition cost from $275 per customer to $50. Barrett also greatly expanded his customer base because now he could measure lawns hundreds of miles away—instantly, and with no additional expense.
Writing in the Harvard Business Review (July-August 2015), Barrett Ersek, Eileen Weisenbach Keller and John Mullins cite examples of companies that refused to accept industry bottlenecks and found creative, profitable ways around them.
- Dublin-based Ryanair avoided the high landing fees considered part of doing business in Europe by using remote WWII airfields, enabling them to attract masses of customers with rock-bottom prices.
- India’s Airtel became the largest mobile operator in South Asia and the third-largest in the world partly through their decision to lease cell towers and equipment and outsource most business operations. Airtel’s creative innovation allowed them to deliver low-cost mobile service to customers in previously unserved, remote areas of India.
Innovating For Customer Experience Improvement
Not incidentally, Barrett Ersek’s creative innovation improved the customer experience by delivering estimates more quickly and efficiently, which meant speedier delivery of services. The breakthroughs of Ryanair and Airtel also benefited the customer. Uber made waiting in slow taxi lines merely an unhappy memory, and Apple iTunes let customers download only the songs they wanted without having to buy the whole album. McDonald’s brought fast food into the breakfast market with the Egg McMuffin, a sandwich commuters could munch with one hand while rushing to work. Just to name a few.
Why is customer experience improvement important? The answer is in this aforementioned pattern – The key to exponential innovation lies in improving the customer experience. Identifying an X Factor is best done by walking in the customer’s shoes, step-by-step. How can the experience be easier? Cheaper? Safer? More interesting? More worthwhile? More fun? More efficient? Are there steps that can be streamlined or eliminated?
Answering these questions opens the door to innovation, which is the key to leapfrogging the competition and gaining that massive advantage. The process starts with a simple question:
What is the biggest problem that needs to be fixed in the industry?
From there, a more specific question is created targeting the industry bottleneck. Getting the question right is even more important than the answer; if you get the question right, the answer is sure to follow. The answer to the question will undoubtedly lead to an innovation for the customer and their experience with the product.
4 Questions For A 10X Competitive Advantage
Breaking industry bottlenecks depends on disruption, which means breaking rules. But which rules? The authors of the Harvard Business Review article recommend considering industry practices that fall into four categories:
- An outdated customer experience, whether at point of purchase or use.
- A nonessential or superfluous expense common in your industry.
- Significant financial risk or psychological barrier to purchase for customers.
- Detrimental side effects of the product or service.
This information, combined with the insight above, should help any business get started eliminating the bottleneck effect in business. Need help finding your “X factor?” Praxent can help discover and develop the software innovations to turn it into exponential improvement.