15

CHAPTER FIFTEEN

MARKETPLACES, TRENDS,
AND INNOVATORS

By now, hopefully, you understand that by having a growth mindset and the belief that you are indeed creative, you can create or innovate something. But it has to be something the world needs or thinks it needs.

In this final chapter, I would like to leave you with some additional insights to get you started down the path of creativity and/or innovation. It’s not about waiting for that great idea that comes to you in a dream or wishing you could create something. It has to do with really examining what already exists—that is, understanding customers, focusing on problems, watching certain trends, studying marketplaces that are evolving, and learning about large target segments (e.g., baby boomers and millennials). Finally, just to get your creative juices flowing, I want to illustrate by explaining exactly how some of today’s household-name brands got started. What was their observation or insight that led them down the path of creativity or innovation in creating a successful company? What problem did they solve? Hopefully these insights can help you understand what I have been saying all along: that everyone is creative. It’s just a matter of mindset, knowledge, and focus.

IT’S NOT ABOUT IDEAS, IT’S ABOUT PROBLEMS

Before I landed in Silicon Valley in the early 1990s, I used to think ideas were what created companies. Once in the valley, I learned it’s not necessarily about ideas; it’s about gaps in the marketplace or solving problems that people need solved. A few years back, if you studied ecommerce, would you have seen the “gap” that Etsy (handcrafted products) filled? If you want to fire your creative juices and perhaps innovate something amazing, study a large marketplace and look at things from a different perspective. Reverse-engineer an existing product or service and what do you see? Can you look at Uber and Airbnb’s business models and see what might be coming next? Can you identify a gap or solution to a problem that large target segments like baby boomers and millennials are willing to pay for? Steve Jobs said it best: “You can’t connect the dots looking forward; you can only connect them looking backward.”

CUSTOMERS MATTER THE MOST

In my eighteen years of marketing, I never expected customers to tell me “exactly” what they wanted or even needed. But I listened for problems that they had. Then, with a careful combination of feedback and testing, along with understanding the customer’s marketplace and the current trends, you can design a solution that customers will buy to solve their problem or meet their need. If you are somehow wrong, customers will let you know pretty simply. They won’t buy the product or service. It’s not being creative or innovative for the sake of creativity or innovation. Your potential solution has to solve a problem from the customer perspective. Bottom line: Know more about the customers’ problems than they do.

DO YOU “SEE” THE TRENDS ALL AROUND YOU?

First, understand that in order to take advantage of a gap in the marketplace or to spot a problem customers are having, you have to understand the current trends that are affecting the marketplace. Are you tracking several of the trends that are occurring right now? Do you even see them? If not, here are the kinds of questions you should be asking yourself:

Will people continue to shop using their smartphones?

Will renting things hourly (e.g., cars, services, homes) continue to grow?

Is eating organic health food going to continue as a preference?

What other products can leverage GPS technology?

What else will the fourteen- to eighteen-year-olds consume via social media?

What’s the impact of 2 billion photos being uploaded to the Internet every day?

Do young people understand and grasp the importance of financial investing?

What needs to be improved regarding online dating services?

What fitness trends will evolve and which ones are emerging now?

LARGE TARGET SEGMENTS TO WATCH

If I were looking to creatively solve a problem that could lead to a potentially innovative solution that might launch a major company, I would only be concerned with two target segments: baby boomers and millennials. Baby boomers were born between 1946 and 1964. And these 71 million boomers own about 80 percent of the wealth in the United States and account for more than 40 percent of net household income. In other words, they have the money and they will spend it. Solve their problems and you could do amazingly well.

The second segment will be the largest in the United States by 2025. Millennials, born between 1982 and 1994, will number over 81 million by then. These consumers have several things going for them. Not only are they drivers of innovation (e.g., want everything yesterday, willing to pay for quality), but they will be part of the largest wealth transfer in history from their parents, the baby boomers. So, what do you know about these two segments? What are the trends impacting them? By connecting the dots backward, can you anticipate what they will need next? What are their current or future problems? Creatively “attack” either one of these target segments, solve a problem, and you might have the next great product or service.

THE SPARK THAT CREATES A COMPANY

As humans, we sometimes just lack confidence in achieving our full potential or truly believing in ourselves. How many times have you heard someone say, “I could never do that. I’m just not a leader. I am not creative enough. Me, an entrepreneur?” We have a tendency to place other people who are successful on a pedestal. Well, having met thousands of entrepreneurs or successful people, I am here to tell you that they are not special. They are like you and me. They just believe in themselves, have a growth mindset, and believe they will have an amazing life.

Just so you really understand how products or services really get created, I am going to share with you exactly how nine products or services got their start. No mystery. No legends. Just some simple facts so that you might believe that you do indeed have it within you to be more creative and innovative in your own life. With that belief in yourself, you just might create something amazing.

Dropbox

The idea for Dropbox was born on a bus to New York. Drew Houston had planned to work during the four-hour ride from Boston but forgot his USB memory stick, leaving him with a laptop and no code to mess with. Frustrated, he immediately started building technology to sync files over the Web. Over the next few months, he worked twenty-hour days to create the code that would allow the technology to work with any computer. Dropbox answered a new, vexing problem for a world where people carry a phone or two, and perhaps a tablet, but have files and photos stuck on multiple PCs, laptops, and mobiles. Along the way, he added a cofounder who had some serious technical smarts, Arash Ferdowsi.

Through a series of network connections, they arranged a meeting with a prominent venture capital (VC) firm. Sequoia’s senior partner, Michael Moritz, showed up at Houston and Ferdowsi’s apartment. “They were bleary-eyed,” recalls Moritz. Pizza boxes climbed the walls and blankets cluttered the corners. He told his partners to do the deal, and Dropbox landed $1.2 million. “I’ve seen a variety of companies attacking parts of this problem,” says Moritz. “I knew big companies would go after this solution. I was betting that they [the Dropbox founders] would have the intellect and stamina to beat everyone else.”

Netflix

Netflix was founded in Scotts Valley, California, in August 1997 by Reed Hastings and Marc Randolph, both veteran “new technology” entrepreneurs who wanted to rent and sell DVDs over the Internet. Randolph had previously helped start a computer mail-order company called Micro Warehouse and then served as vice president of marketing for Borland International, while onetime math teacher Hastings had founded Pure Software, which he had recently sold for $700 million. Hastings, who supplied the firm’s startup cash of $2.5 million, had reportedly hit upon the idea for rental-by-mail when he was forced to pay $40 in fines at a Blockbuster store after returning an overdue videotape of the film Apollo 13.

The DVD format had been introduced in the spring of that year and less than a thousand titles were then available. Although the hardware needed to play DVDs was fairly expensive and owned by relatively few Americans, Hastings and Randolph thought the disc had the clear potential to replace bulkier, lower-resolution videotape as the consumer format of choice. They had the previous experience of running a mail-order catalog business and thought it relatively simple to stock and mail DVDs to someone’s home. What they were really betting on was the timing of when consumers would adopt the new DVD player technology. And then, hopefully, Internet bandwidth would allow streaming. Well, it worked.

GoPro

It all started when Nick Woodman, at the age of 22, gave himself until age 30 to make it as an entrepreneur. Four years and one failed business later, he decided to take his savings and go on a five-month surfing trip around Australia and Indonesia for inspiration. But before he even left, Woodman stumbled on what would become the idea behind GoPro. “In preparation for that trip, I had this idea for a wrist camera that I could surf with to document my friends and I on the trip,” he said. “The irony was this trip was meant to inspire me for my next business and I had my business idea before I even left.” Woodman conceived the idea in 2001 simply as a wrist strap that could tether already existing cameras to surfers. After testing his first makeshift models on that surf trip to Australia and Indonesia, he later realized he would have to manufacture the camera, its housing, and the strap all together. Woodman didn’t set out to redefine the market for digital imaging. He just wanted to shoot decent surfing photos.

The interesting question is, how did the consumer electronics business leaders (a market dominated by huge companies such as Sony, Canon, Nikon, and Panasonic) not see the emerging trends of social media photos and video sharing? The industry’s leaders were busy trying to stuff more bells, whistles, and megapixels into shiny cameras for the masses. GoPro was focused on creating a “sharing experiences” device. First, it focused on a market niche—surfing and action sports—and now it is for everyone.

Fitbit

Fitbit got its start after founders James Park and Eric Friedman sold their peer-to-peer photo-sharing company Windup Labs to CNET in 2005. While pondering their next move, Park, a former cross-country runner and avid swimmer, realized two things: that years of startup life had left him in terrible shape, and that he had the resources to come up with a solution. In early 2007, the two men launched their fitness gadget company in San Francisco’s financial district, with Park as CEO and Friedman as CTO. They both saw the potential for using sensors in small, wearable devices, but better than that, they saw a huge marketplace of people who wanted to be healthier. They raised $400,000 but soon realized that that wasn’t enough, so they did the rounds of potential investors with little more than a circuit board in a wooden box. But the idea was good, and when Fitbit addressed the TechCrunch50 conference in 2008, Park and Friedman hoped to get fifty preorders, although Friedman suspected the actual number would be nearer five. In fact, in one day, they took 2,000 preorders. There was one problem: Neither one of them knew anything about manufacturing. So they spent three months in Asia getting an education in manufacturing and engineering. They solved a myriad of problems and started selling online. The rest is history.

Nest

The story of the Nest Learning Thermostat begins as most innovations do: with a ticked-off engineer. Former Apple senior vice president Tony Fadell was building a high-end energy-efficient home near Tahoe, California, in 2010 where no expense was spared. The home included cutting-edge technology including solar panels and geothermal heating. However, the best thermostat available was still just a poorly constructed white plastic box. With all of the innovation in home appliances, why hadn’t the thermostat kept up?

So what happens when you take the DNA of Apple and design items for the home? How important, creatively, is it to tap into dormant frustrations and solve them? According to Fadell, “Sometimes you look at a problem and think, ‘Actually, I don’t think we could do better than somebody else.’ Then it doesn’t make sense. In this case, we knew we could do better. We knew we could innovate. About 10 million thermostats are sold every year, so it’s an enormous market. But there’s this kind of higher cause: people can save energy, save money, and we do something good for the environment.” Fadell quickly recruited some old friends, including engineer Matt Rogers, to help explore the reinvention of the thermostat. “It started as our frustration and the more we talked to other people, the more we heard their frustration,” Rogers says. “That was the tipping point.” They designed a prototype, got to a minimum viable product, and started selling. In 2014, Nest was sold to Google for over $3 billion.

Vitaminwater

J. Darius Bikoff, a self-proclaimed health nut born on September 21, 1961, first conceived of the idea of vitamin-enhanced water in 1996. According to him, he was feeling “run-down” and concerned he was catching a cold, so he took some vitamin C and drank some mineral water. As he consumed the items, he started thinking about the idea of having them together instead of having to take them separately. He founded Energy Brands in May 1996 using his personal savings and contracting with an aquifer in Connecticut for the base water used. He was confident that his water would be successful because he noticed the marketplace was growing for healthier consumer drinks and thought perhaps people would drink less soda and more water.

The individual products carried the glacéau name, with the company’s first product being glacéau smartwater. By 2002, glacéau was the top-selling enhanced water brand in the United States, with the company’s vitaminwater being its bestselling product. In 2006, the company earned $350 million in revenues. In 2007, Coco-Cola bought the company for $4.2 billion in cash.

Uber

The idea for Uber came to Travis Kalanick when he was trying to find a cab to attend a 2008 LeWeb conference in Paris, but he could not find one. Kalanick cites “Paris” as the inspiration for Uber. At the tech conference, he had a fateful conversation with StumbleUpon founder Garrett Camp. Camp told him about his idea for a luxury car service that was convenient and didn’t have to cost $800 for a ride, a price he once paid. Kalanick was in, and the two started UberCab the next year.

As their vision evolved, they changed what was essentially a limousine service into an on-demand cab alternative accessible through a smartphone app. They secured $1.25 million in seed funding and launched as Uber in San Francisco in 2010. In December of that year, Kalanick became CEO. The two vowed then and there to solve the problem with a revolutionary new app. The premise was dead simple: Push a button and get a car. From there, the money came pouring in, including $10 million in funding in February 2011 from Benchmark, which valued Uber at $60 million. “I had this idea of looking at a smartphone as a remote control for real life, and this was the best example I had ever seen,” said venture capitalist Matt Cohler.

Chipotle

Be careful of what you prepare and eat—you just might create a company. Chipotle founder Steve Ells attended the Culinary Institute of America in Hyde Park, New York. Afterward, he became a line cook for Jeremiah Tower at Stars in San Francisco. There, Ells observed the popularity of the taquerias and San Francisco burritos in the Mission District. One day, while sitting in a local neighborhood taqueria called Zona Rosa, he watched how the line crew took care of a lot of people in very short order. He took out a napkin and jotted down what he thought the average check was and how many people were going through the line, and he timed it. Wow, he thought, this thing makes a lot of money—it could be a little cash cow that could fund my real restaurant.

In 1993, Ells took what he learned in San Francisco and opened the first Chipotle in Denver in a former Dolly Madison Ice Cream store near the University of Denver campus, using an $85,000 loan from his father. Ells and his father calculated that the store would need to sell 107 burritos per day to be profitable. After one month, the original restaurant was selling over 1,000 burritos a day. The restaurant quickly gained traction with its fast yet quality food service and began to gain a cult following. Flash forward to 2015. Chipotle did $4.5 billion in sales.

Airbnb

Shortly after moving to San Francisco in October 2007, Brian Chesky and Joe Gebbia created the initial concept for AirBed & Breakfast during the industrial design conference held by the Industrial Designers Society of America. Their original website offered short-term living quarters, breakfast, and a unique business networking opportunity for attendees who were unable to book a hotel in the saturated market. At the time, roommates Chesky and Gebbia could not afford the rent for their loft in San Francisco. So, they made their living room into a bed-and-breakfast, accommodating three guests on air mattresses and providing a homemade breakfast.

During the company’s initial stages, the founders focused on high-profile events where alternative lodging was scarce. The site Airbedandbreakfast.com officially launched on August 11, 2008.

To help fund the site, the founders created special-edition breakfast cereals, with presidential candidates Barack Obama and John McCain as the inspiration for “Obama O’s” and “Cap’n McCains.” In two months, they sold 800 boxes of cereal at $40 each, which generated more than $30,000 for the company’s incubation and attracted Y Combinator’s Paul Graham. After its inauguration, the site expanded to include properties in the market between hotels and Couchsurfing. One year later, there were fifteen people working from Chesky and Gebbia’s loft apartment on Rausch Street in San Francisco. To make room for employees, Brian Chesky gave up his bedroom and lived through the AirBed & Breakfast service until the company moved into its first office space. Fast-forward seven years and the company is now AirBnb—a household name that has surpassed industry legacy Hilton Hotels in nights booked. As of spring 2014, the platform had 10 million guests and 550,000 properties listed worldwide, along with a $10 billion valuation—making Airbnb worth more than legacy players like Wyndham and Hyatt.

SO, HOW DOES IT END?

The people profiled in this chapter were not born to do what they did. They may or may not be special. They may not even consciously think they are very creative or innovative in the artistic sense of the word. But they are. They also believe in themselves. They looked at a problem and figured out how to solve it. So can you. Hopefully, after reading this book and adopting some of the beliefs and tools, you will heighten and sharpen your creativity skills. Let me remind you of the critical elements of being creative and perhaps innovative:

A Growth Mindset: one that believes you should be learning for the rest of your life

A Great Environment: one where leadership and culture fuel creativity

An Amazing Habitat: being in a place where creativity is reflected, rewarded, and demonstrated every day

Brainstorming Tools: sharpen your “creativity” by using these brainstorming tools

You are creative. Believe that and you will hopefully have an amazing career and life. One where you are having so much fun, the lines are blurred between work and play.