This article originally appeared on HBR.org (subscription may be required).
Executive teams often struggle to land innovations that will significantly grow the business. A chronic problem is their emphasis on searching for breakthrough innovation—the creation of a truly new, highly valued product or service that could redefine their industry and lead to unprecedented revenue growth. “Where’s our iPhone?” they wonder.
Almost by definition, breakthroughs are rare. When they do occur, they usually come from insurgent entrepreneurs who founded companies such as Nest or Netflix (today), or Eastman Kodak or Ford Motor (over a century ago). Rarer still are breakthrough innovations from established enterprises, Apple’s iPhone being an obvious exception. Breakthroughs may be worth pursuing, but most companies benefit more from incremental innovation efforts that add new forms of consumer value to their present products and services. The trick is to determine what elements to add in order to boost the perceived value of your offering. You don’t want to expend resources adding features that consumers don’t care about.
What do customers want? Bain's Elements of Value® represent the deeper aspirations behind the purchasing decisions of B2B and B2C customers. Our insights explore the ways companies can go beyond price to offer more value.
While what constitutes “value” can be nuanced and vary from person to person, my colleagues and I have identified 30 universal building blocks of value that meet fundamental human needs. These are basic attributes of a product or service that address four kinds of needs: function, emotion, life changes, and social impact. Functional elements, for example, include saving time, reducing risk, and organizing. This latter element is central to brands like The Container Store and to Intuit’s TurboTax, because both help consumers deal with complexities in their world.
In our September 2016 HBR article, “The Elements of Value,” my colleagues and I discuss the power of the 30 elements in the marketplace and describe how companies can select and integrate innovations into their products to provide value that consumers actually want. Companies that deliver well on multiple elements of value tend to have stronger customer loyalty and higher revenue growth rates, as Bain & Company’s analysis shows. The research documents 50 companies that deliberately added elements over time to improve their propositions, either to turn around a flagging business or to accelerate growth.
In financial services, for example, Charles Schwab has outperformed many other investment companies by excelling on four elements of value: variety (a wide range of investment products), providing access (multiple contact and advice channels available around the clock), making money (generates income for customers), and quality (numerous Lipper Fund Awards for investment performance).
Since 2013 Schwab has added several new elements of value to its services. Schwab’s Accountability Guarantee reduces risk by refunding fees if clients are not fully satisfied with the product. Its Intelligent Portfolios tool informs customers about the status of their portfolios and provides investment advisory services with no advisory fees. StreetSmart Edge reduces effort with an online trading platform to simplify complex trading and provide an intuitive experience for active traders. And its low-fee college savings plans provide heirloom value to parents saving for their children’s college education.
Likewise, in the retail pharmacy industry, CVS Health has embarked on a health initiatives strategy by adding new elements of value for consumers, including providing access, saving time, wellness, and therapeutic value. For example, CVS Health bought Target’s pharmacies, adding over 1,600 locations in 47 states. Many consumers now have more convenient locations, which helps them save time. The company has expanded access to health care through its MinuteClinics, providing both basic medical services, such as general exams, summer camp physicals, vaccinations, and the like, as well as assorted wellness services, such as contraceptive care and smoking cessation.
Other companies have judiciously added elements of value to their core proposition. Throughout 2015 Uber added services to integrate multiple aspects of consumers’ lives, from delivering meals and groceries to providing flu shots. Discover added a feature that allows cardholders to instantly freeze and unfreeze their accounts without canceling their cards, reducing risk and reducing anxiety for cardholders. And Spotify added a feature for runners in 2015 that detects their pace and finds music to match it, hitting on elements of wellness and motivation.
The search for elusive breakthroughs can make the entire innovation process intimidating and discouraging. To help, think about which new elements of value will resonate with your customers and which can be delivered effectively by your company. Judiciously adding elements can bring new life and growth to existing products as well as build customer loyalty—with far less risk and lower costs than hunting for breakthroughs.
Eric Almquist is a partner with Bain & Company’s Customer Strategy & Marketing practice and the global head of consumer insights for Bain.