Extrapolation: The Mother Load of Service Innovation

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Archeologists excavating the pyramids discovered an unexpected treasure–wheat seeds that dated back to around 2,500 BC. As in the tradition of antiquity, the seeds were there for the dead Pharaoh to eat if he got hungry. The find would enable scientists to determine what variety of wheat was in use in the ancient world and could be invaluable for launching new strains of wheat. Out of curiosity the scientists planted the 4,500-year-old wheat seeds in fertile soil and an amazing thing happened. They grew!

The seed story has always amazed me. How could seeds that ancient still grow? But a friend pointed out that the morale of the story might not be the seeds but rather the fertile soil. “Every living thing on the planet,” he advised me, “has the capacity to do remarkable things if placed in ‘fertile soil.’’ Innovation is the germination of the seed of an idea into something special.

Innovation seekers have advised that the most fertile ground is a fear-free setting. It is hard for employees to focus on the originality of what might be when they are preoccupied with the oppression of what is. Others point to enlightened leadership as the magnet for creative breakthroughs and success-building insights. Recipes for cooking up innovation have also included such important ingredients as training, affirmation, necessity, burning platforms, and grand causes. Yet, the secret may be something as simple as extrapolation done in three-part harmony!



How did Blockbuster let Netflix dominate its space in the movie-rental business? How did Nikon trounce camera leader Kodak? As Harvard professor Ted Levitt advised in his classic HBR article, “Marketing Myopia,” innovation begins by properly defining your industry in terms of the hidden benefit it serves not the obvious output it produces. The popularity of TV, he points out, should have been created by Hollywood, not by NBC. But, the MGM’s and Paramount’s thought they were in the movie business not in the entertainment industry. Major hoteliers like Conrad Hilton completely missed the emergence of the motel with the growth of interstate highways. Upstarts like Holiday Inn, Ramada and Marriott owned that industry for decades.

Extrapolation in Three-Part Harmony

The etymology of the word “extrapolation” shows its ancestry comes from the word “to polish” or “refurbish.” Etymology is a fancy label for “where’d this word come from.” Unpacking the concept of extrapolation reveals three components—to infer, to predict, and to project—and you can almost hear that three-part harmony.

Innovation can be accidental or the brilliant “aha” of an insightful moment. Play-Doh was the accidental by-product of an effort to develop a wallpaper cleaner. The Slinky came about when scientists were trying to design a spring to support sensitive equipment on ships. And the technology that made Cool WhipÒ possible (that amazing whipped cream–like product that stays fluffy after being frozen) happened when a food chemist at General Foods accidentally left the blender on in the lab while he went to lunch. Incidentally, that same chemist holds patents for Tang, Pop Rocks, powdered egg whites, and quickset Jell-O!

Innovation can also be done as the point where inference and prediction intersect.

Inference involves shifting focus from the core offering to a key hidden benefit. The core offering of a vehicle might be transportation; but, the hidden benefit might be status. The 1982 Ford Fairlane 500 was the hardtop convertible targeted at middle-aged men who often give their cars female names. Some claimed the car was a clever combination of the comforting stability of a wife with the naughty thrill of a mistress. Sometimes the psychology of a customer benefit can be far more illuminating than the core need it meets.

Prediction is the extrapolation of a social trend imagining where it might end up if it continued on its present track. The Apple Watch is a wearable that can currently tell you the date and time (like all watches) as well as count your steps and monitor your heart rate. You can also use it for phone, text or to interact with Siri. So, what else might it do in the future? Add access to your medical records and physician and what do you get? Add access to your security system, financial records, vehicle maintenance and now what do you get? If you examined where your prediction of a social trend collided with the inference of your hidden benefit to customers, you are likely well on your way to a new service innovation.



Inference: What Business Are You In?

Charles Revson quit the cosmetic company he worked for when he did not get a promotion he thought he deserved. He started Revlon specializing in nail polish with a large array of colors. But, a brilliant inference led him to expand his company into manufacturing lipstick that matched his nail polish colors. From there he expanded into perfume and the rest is history. Today the company has revenue of over a billion dollars.

The inference came because he considered the real business he was in rather than focusing what he manufactured. Most people might have said, “We are in the beauty products industry.” Revson asked such key questions as: What hidden need are our beauty products meeting for our consumers? Why do consumers want to be beautiful? His famous quote revealed his insight: “In the factory we manufacture cosmetics; in the store we sell hope.” With “hope” as the goal rather than beauty products, Revlon’s slogan became taglines like, “Love is on,” “Addicted to love,” and “Inspiring romance around the world.” Even products had names like “Love Pat” for compact powder makeup. Just to leap ahead, that was in 1940 just as TV was invading homes and men were at war.

Ray Kroc purchased a few restaurants in 1961 from the McDonald’s brothers. He had experimented with his “Speedee Service System” while an employee, intuiting that customers wanted quick service, not just a tasty burger. The production process used by diners and restaurants were not designed with speed in mind. Once he had control of the company, Kroc implemented standard cooking times, methods, portion size that ensured every burger would be identical no matter the restaurant. The consistency gave customers trust. Now, hold that thought and we will return to how prediction changed everything.

Prediction: What Social Trend Can You Track

A map confiscated from an enemy courier revealed the location of shallow caves each containing a cache of weapons used to re-supply enemy troops. However, when a wise Army lieutenant sent the captured map to a friend he knew could provide a deeper assessment of the terrain covered by the map, he learned that each cave was located on a similar site—same type of soil, same typology, and at the same elevation. Checking other areas comparable to the cave sites produced another major discovery: there were many more caves not marked on the map that contained even larger collections of weapons.

Today’s customers change too rapidly to rely solely on what they reported. Instead it is important to anticipate where they might be going. In the words of one infantry captain, “Any military unit can figure out where their enemy is. Victory comes with figuring out where the enemy will be.” Ray Kroc, seeing the explosion of travel with the increase in the interstate highway system, quickly expanded his restaurant chain. His marque proclaimed “500,000 hamburgers sold,” giving security to travelers uncomfortable with local diners along the highway that they knew nothing about.

Let’s look at the success of Uber. Ask twenty travelers to characterize the ride from the airport to the hotel in the typical taxi and you get similar answers—uneven, sometimes a dingy taxi with an indifferent cabbie who prefers to talk on the phone to a friend or listen to his preference of music and then gets huffy if he fails to get a tip for an unpleasant ride. Ask those same twenty travelers what they would prefer and you get the features of a chauffeured limousine—well-dressed driver in a polished new car with a sense of personalization and respect. And, when you arrive, you simply go about your business without fussing with payment. So, there is the Uber inference—cabbie to “chauffeur.”

But, there had to be a prediction in the Uber success mix. In Uber’s case the social trend was the “hard-to-miss” proliferation of smartphones. Two-thirds of Americans own a smartphone, according to Pew Research. And, there are well over a million phone apps. Smartphones and apps enabled Uber to have the capacity for customers to interact with Uber drivers including GPS tracking capability for precise arrival times. By preloading credit card data in their Uber app, passengers can arrive and go on their way getting a copy of the receipts minutes after arrival. Since passengers can rate drivers on their smartphone, only drivers with consistently high ratings are allowed to keep their Uber licenses.



Projection: Cross-Pollinating Inference with Prediction

The service innovation we know of as Uber came by cross-pollinating their inference (“chauffeur”) with their prediction (smartphone/app explosion). Obviously, more details were in the mix, but the seeds of the innovation grew from this extrapolation. If you examine similar service innovations—Bass Pro Shops and Cabala’s bring Disneyesque to outdoor provision retail; Nordstrom brings concierge to clothes buying; or Netflix brings “Amazon” to movie rental—you see a similar process—germinating a hidden need with an emerging social trend.

Seeding innovation is like growing a garden or crop. It takes more then the seeds of ideas. Too often organizations, in their quest for marketplace ingenuity, put their focus on the seeds (their core offering). But, when the hidden benefit to customers is mixed with an emerging social trend it can yield a bountiful new way to grow customer loyalty. It takes smart inference and up-to-date customer intelligence. In the words of former Intel CEO Andy Grove, “Breakthroughs come for an intuitive judgment of what customers want if they knew to think about it.”

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