Decision 2 What Is Your Business Promise?

When GoPro launched its first video camera in 2006, it wasn’t obvious that the world needed another consumer camcorder.¹ Long-established and well-known companies—including Canon, JVC, Panasonic, and, above all, Sony—dominated that market. It was even less clear that a new camera, in particular one that was technically inferior to the competition, had any chance of success. Yet, less than a decade later, with annual revenues over $1.6 billion, GoPro sold more video cameras—6.6 million—than anyone else.² How did it do that? It found a unique promise—to help customers capture their greatest adventures—and used that promise to drive its portfolio of complementary innovations.

Every organization pursuing the Third Way will face a critical decision after it has defined its key product or service. “How will our customers get value from this product?” The answer will decide the innovations you pursue and the success you achieve. Choosing a compelling, specific, and energizing promise will help you select the right innovations to deliver that promise. Choosing the wrong promise, as we’ll see, can doom the product line and even the entire company.

The worst option at this stage is to make no decision at all. Many companies proceed straight to identifying specific potential innovations, everything they might do. Then they select and pursue the best of these. Though some innovations may succeed, the overall results of this scattershot approach are likely to disappoint because, all together, they don’t add up to much—just a haphazard collection of this and that, a potpourri of new stuff.

For the Third Way to work as we’ve described, the individual innovations must work together as a coherent system in which the parts not only complement the key product but also build on each other for maximum impact. This will only happen if some overall intention or goal serves as the glue that binds them to each other and to the key product.

Consequently, decision 2—what is your business promise?—focuses not on which complementary innovations you will implement but on the selection of the innovation promise, the glue, that will link and align all of them. The story of GoPro clearly illustrates the importance of this step.

GoPro Action Cameras

Founded in 2002 by Nick Woodman, a surfer who wanted to capture his experience of riding a wave, GoPro launched its first camera in 2004, a waterproof still camera that you could strap to your surfboard.³ As of this writing, the company offers a line of affordable, rugged, waterproof cameras ranging in price from $129.99 to $499.99.⁴ Most important, GoPro offers accessories that make adventure recording possible: portable power packs, smart remotes, hand grips, memory cards, repair kits, and, above all, mounts for nearly all settings and occasions.^* Using the appropriate mount, a surfer can wear the camera or mount it on a surfboard as he or she rides a wave, a family can enjoy again and again its volleyball game on the beach, a biker can capture a ride over rough terrain, and on and on. GoPro removed the bane of traditional photography and video recording—that the person recording the event had to be a spectator filming the action from the outside. Now, with GoPro’s cameras and complementary innovations, the camera can come along and record your adventure as you experience it.^†

Early adopters, of course, were extreme sports enthusiasts, but word spread and users quickly included amateurs of all kinds, as well as special users such as the US military, police forces, rock bands, and professional sports teams.

But GoPro delivered even more. It recognized that its users wanted to go beyond recording and reexperiencing their adventures; they wanted to record, replay, and share them with others.

And so, a key part of GoPro’s promise and appeal was that it made sharing adventures easy. For that purpose, it provided two free software packages. The first, GoPro App, lets you control your camera remotely, play back and share the adventures you recorded, and watch “best-of” videos on the GoPro Channel on YouTube. The second free package, GoPro Studio, lets you create GoPro videos, set to music if you wished, on your desktop or laptop and share them on the GoPro Channel. And GoPro integrated its different software packages, making it very easy to move finished videos from the PC to a smartphone, an important step for the millennial market.

To encourage sharing, GoPro offered prizes worth $500 to $5,000—a total of $5 million each year—to creators of action-oriented content that could range from extreme sports to trick shots, talented pets, unusual locations, family adventures, and more. By 2016, users had downloaded the GoPro App twenty-one million times. And, on average, the number of videos uploaded to the GoPro Channel from GoPro Studio had risen to fifty thousand each day.

By mid-2016, GoPro had shipped a total of eighteen million cameras and was represented in more than forty thousand retail outlets in more than one hundred countries. As the company noted, “Our customers include some of the world’s most active and passionate people. The volume and quality of their shared GoPro content, coupled with their enthusiasm for our brand, are virally driving awareness and demand for our products.”⁵

Sony and other leading makers of video cameras did not watch passively as all this happened. They either created or strengthened their own lines of action camcorders. In many cases, their cameras were technically superior. Sony’s action video cameras, for example, were often better in such key areas as picture sharpness, image stabilization, audio quality, and GPS capabilities.

Though Sony and other competitors improved their cameras, they failed to match GoPro’s range of complements that made real action recording and sharing possible. Their line of camera mounts, which were critical for action videography, were inadequate and hard to find. They offered little or inferior software for preparing and exporting videos. And their content-sharing communities couldn’t come close to GoPro’s. Sony’s YouTube channel had fewer than one hundred thousand subscribers, while GoPro’s had more than three million.⁶ Furthermore, even when these competitors offered video editing software and social media outlets, the connection between the product and the service was difficult and error-prone.⁷

As a result, GoPro’s 2015 revenue of $1.62 billion represented a five-year average annual growth rate of 91 percent, while revenue at Sony’s Digital Imaging Products group declined at a rate of 14 percent.⁸ For roughly the same period, GoPro’s share of the action camera market was 42 percent, compared with Sony’s share of 8 percent.⁹

After establishing itself as a leading maker of action cameras, GoPro seemed to be moving toward a new phase in its development as a company. Sales of its latest camera model were disappointing, in part because of pricing mistakes. GoPro’s sales, profits, and stock price declined, and in response, the company has been trying to expand the market for action cameras to include those who want to capture family adventures. Its website and the GoPro Channel have more than ever highlighted videos with family content, it now targets many of its contests at families, and its marketing efforts increasingly feature family vacations and pets.

In addition, and perhaps more significantly, GoPro is actively moving to position itself as a media company by packaging and licensing in various ways the best of its vast library of video content that users have exported to the GoPro Channel. “The camera is just the tool to get to content,” said Adam Dornbusch, GoPro’s head of content distribution.¹⁰ If it succeeds in this new effort, it will offer another example, like Apple with the iPod and iPhone, of developing what began as a complementary innovation into a whole new line of business.

Whatever GoPro does now and whatever the outcome, its remarkably successful first decade illustrates the appeal of a compelling promise that addresses an important desire of target customers. Its success reminds us that in the Third Way, it’s not the key product alone that is attractive but the product surrounded by complements that fulfill the promise of the product. It is this system of key product and complements that matters, and the promise is what turns it all into an appealing proposition. This promise is the heart of the Third Way and the source of its potential as a competitive weapon.

Every company we’ve described so far has had a clear and appealing promise. For CarMax, it was to make buying a used car a pleasant, trustworthy experience. For Apple in 2001, it was enabling users to manage their digital lives. For Gatorade, it was providing the fuel needed for peak performance. For LEGO, it was to play out a compelling story using brick-based construction sets.

A promise is useful in another way as well. It not only helps to communicate the value of the product outward to customers, but also helps communication inside the organization, guiding the whole company as it decides where to innovate.

If you get the promise wrong, the results can be catastrophic. Frederick’s of Hollywood and Victoria’s Secret both approached the same market with similar products, but had very different promises. These different promises led to the generation of very different complementary products. The result was disastrous for Fredericks, a story we’ll come back to later in this chapter.

Our aim in this chapter is to make clear what a promise is and how teams can go about choosing one by studying buyers and their experience with your product. We will outline the steps that help you identify possible promises and the tests that help you choose a good one to pursue. This is a well-studied area that we will summarize and help you explore further by providing references for further study.

A Closer Look at the Promise

A promise is a commitment that you make to your key customer: “If you buy our product, it will …” It helps your customer understand how to purchase, use, and get value from your product. It also commits you internally to deliver on that pledge.¹¹ Strong, appealing promises share some basic characteristics.

BASED ON A COMPELLING CUSTOMER NEED.  First and above all, a promise should be based on some deep insight into the basic needs of key customers, especially needs not satisfied by others. The CarMax promise of a hassle-free and trustworthy car-buying experience was compelling for those who needed a used car. Gatorade recognized athletes’ need for nutrition and hydration to perform their best. Basing a promise on a compelling need is the best way to ensure that it will be a stable base to build on—customer needs change much less rapidly than technological capabilities or competitor shortcomings, two other commonly used drivers of innovation.

SPECIFY A DIRECTION BUT NOT SPECIFIC INNOVATIONS  In the Third Way, a promise is a lens that helps you focus your search for innovation. It says where you will go to find innovations rather than what you will do. It acts as a test or standard against which possible innovations can be assessed; those that don’t fit are discarded. Its purpose is to focus effort on the area where your key product is most likely to succeed with your key customers.

Like a corporate strategy, which is a statement of where and how a firm will compete, a promise says where and for what purpose you will innovate. A promise does not specify what you will actually do—those choices you will make in decision 3, where they will be guided and focused by the promise you choose here.

CREATE A COMPETITIVE ADVANTAGE  The strongest promises set their products, and the companies that produce them, apart from competitors and competitive products. The customer need they satisfy is one that no competitor satisfies or satisfies as well. Again, every example of the Third Way we’ve provided matches this characteristic, and if any one of these companies suddenly disappeared, its customers would have trouble finding other ways to satisfy the need it filled.

REFLECT AND ENHANCE YOUR BRAND  Key product promises must be consistent with your corporate brand, but a promise is more specific. We see brands as externally directed statements of what the customer should expect to receive when buying and using a company’s products. A promise is more specific than a brand and provides more direction, both internally and externally. A promise focuses on the customer’s perspective and gives the company a clear and specific filter to use when choosing complementary innovations. Like a brand, a promise should also be stable, but as the key product and its key customers change, so will the promise.

Procter & Gamble Reexamines Its Promise for Pampers

Procter & Gamble is a well-known consumer brand that the company has worked very hard to connect to quality, safety, and effectiveness. The products that P&G sells—such as Tide, Ivory, and Pampers—benefit from the power of this brand, and the product features and marketing messages for those products have to be consistent with this overall brand. But the overall P&G brand isn’t specific enough to be used as a promise—it’s too general to guide the generation and selection of complementary products and services. So in 1997, when sales of Pampers were suffering from global competition, Pampers team members developed a new promise that provided the direction they needed to innovate.

In the 1990s, the Pampers promise was clear and simple: Pampers keeps your baby drier.¹² This message had served Pampers well during the early days of disposable diapers, when the comparison was between a disposable diaper and a cloth diaper. But as competitors entered the market, many other disposable diapers kept babies just as dry, at lower cost. The promise still focused on an important customer need, but it no longer created a competitive advantage. The Pampers market share declined.

In 1997, Jim Stengel took over the Pampers brand globally for P&G and began an intensive effort to create a business promise that would guide the development of Pampers products, services, and marketing messages. He and his group did this by immersing themselves in the lives of new mothers to understand their concerns.

What they quickly saw was how narrow their view of their market had become. Mothers cared about whether their babies were dry and comfortable, but cared much more about their children’s healthy development and growth. The Pampers team realized that its diapers and complementary products such as wipes did more than just keep babies dry—they kept babies more comfortable and helped keep their skin healthier. All this facilitated the infant’s mental and physical development.

Pampers developed a promise for its product: it would partner with moms in their babies’ development. This promise guided its website design, promotional giveaways, product positioning, and even the choice of lotions in baby wipes, a complementary product. Advertising emphasized how the product helped a baby sleep through the night and how good that was for a baby’s health and development. The team began reaching out to hospitals to provide take-home packs for new mothers. The giveaways contained diapers and wipes and explained how to keep babies healthy and happy, as well as how to choose the diaper that would fit the baby best. The company even partnered with UNICEF to donate vaccinations to babies in developing countries—one for every pack of Pampers sold.

The result was a complete recovery of the business. Market share rebounded, and sales more than tripled over the following years. A strong promise gave the Pampers team the guidance to reposition its products, focus its marketing efforts, and create complementary products and promotions that revitalized the brand.

The Customer Context – Key to a Compelling Promise

The essential foundation for picking a strong promise is a deep understanding of your key customers and how and why they use your key product. The challenge is that learning from customers is difficult. When asked, “What do you want?” they typically do little more than recommend what they’ve seen in competitive products (see the sidebar “Common Field Research Mistakes”).

Why does this happen? Because customers typically cannot see beyond their own experience and cannot envision other ways a product could be used. They rarely know about new technology or other factors that might create new possibilities for the product. And even if they do, it can be difficult to envision how existing technologies and components can be combined in new ways. As a result, customers usually mention incremental, me-too improvements, rather than anything new and daring.

Nonetheless, learning from customers is critical to Third Way success. And so we begin with guidelines for the kind of customer learning that will help you choose a powerful promise.

Learning from customers requires you to go well beyond simply listening. To do this, broaden the scope of what you’re trying to understand. Instead of focusing solely or mostly on the customer, seek to understand the full context in which your customer recognizes the need for your product, then finds, buys, uses, and finally disposes of it.¹³

The value of any product or service is not some sort of inherent worth, but is what it adds in a specific setting. As the architect Eero Saarinen said: “Always design a thing by considering it in its next larger context—a chair in a room, a room in a house, a house in an environment, an environment in a city plan.” How you value a chair, for example, cannot be determined without knowing where it will be used. A plush lounge chair has little value in the context of a kitchen, while a kitchen stool has little value in your office. In the same way, you cannot understand your customer’s need for your product without understanding that customer’s world and how and where your product fits into it.

Understanding intimately the human context in which a product is used can help reveal not only the most compelling promise for that product but also the complementary innovations that will make it even more appealing. Without exploring the context in which athletes used its product, would Gatorade have found their need for nutrition products before and after exercise?

After studying the companies that do this approach well, we’ve seen four best practices that we urge you to adopt.

ADOPT A “DATING, NOT FIGHTING” MINDSET.  Developing this deep understanding requires a mindset that can cut against the grain of thinking in many organizations. Too often, those responsible for innovation focus on the competition and how to beat them. They seek to out-innovate the enemy. The problem with this way of thinking is that it leads you to focus on what the competition is doing rather than what the customer needs.

The better approach was summed up by Bob Wells, senior vice president of communications for Sherwin-Williams: “We’ve always looked at business more like dating than like war … In war, you’re focused on beating the competition. In dating, you’re focused on strengthening a relationship. That difference in perspective has a million knock-on effects for how decisions get made.”¹⁴

TO UNDERSTAND TIGERS, GO TO THE JUNGLE, NOT THE ZOO.  The need to understand the context in which a customer uses your product suggests another important practice: going to that world and observing customers as they actually use your product. Thoughtful observation can lead to insights into customer needs that customers themselves don’t yet recognize or cannot yet articulate.

LEARN FROM YOUR MOST EXTREME CUSTOMERS.  If you are able to identify heavy users of your product, compare their responses with those of regular users. Are the heavy users attracted by some product feature that others usually overlook? Are they using the product in unusual ways that might appeal to others? Look for ways of growing regular customers into heavy users.

The reverse of this piece of advice is also true: talk to and observe potential customers who don’t use your product. Why don’t they? What gets in the way? Sometimes, talking to these “virgins” can show you barriers to adoption that you didn’t know existed.

WHEN IN THE FIELD, PRACTICE “VUJA DE.”  Déjà vu is the feeling that you’ve been somewhere before, even when you haven’t. “Vuja de” is the opposite—going to a place you’ve been many times, but seeing it with fresh eyes.¹⁵ By doing so, you’ll see the annoyances and frustrations that your customers have learned to live with and adjusted to. Each of these irritations represents an opportunity for improvement.

There are three steps in this second decision (see figure 5-2). As with the overall Third Way process, we depict these steps as a sequential flow, but in practice you may find yourself going back and forth between them. The first step is to map the customer context.

Step 1: Map the Full Customer Context

The first step in finding a great promise is to map the three chains of activities that will illuminate the customer context around your key product: (1) the way your key customers use the product, (2) the way they buy the product and other related items, and (3) the way you deliver your product or service—that is, the activities you undertake to conceive, design, make, distribute, sell, maintain, and even perhaps help dispose of the product. We’ve labeled these three chains, respectively, follow the customer, follow the money, and follow the product. When studied together, all three can reveal entirely different insights about your customers’ needs and how you are meeting or might meet them.

We think of this three-phase analysis as unfolding in two dimensions, as shown in figure 5-3. Two of the activity chains (shown crossing diagonally in figure 5-3) are related to your customers’ efforts to find, buy, use, and get value from your products. Once these are understood, you’ll need to analyze and improve your own activity chain––the set of activities to produce and deliver your product to the customer.¹⁶

For some types of products and services, following customers as they use the product will be much more productive; for others, following the flow of funds—that is, where money changes hands—will yield more and better insights. And analyzing how, where, and when your product touches (or could touch) the customer in the first two chains can reveal even more possibilities.

For example, in the Preface to this book, we told the story of The Sherwin-Williams Company, and how the company offers a portfolio of products and services that make its paint more valuable to its customers, the painting contractor. Following the customer would document the activities such as planning the job, scheduling the work, acquiring the supplies, preparing the work site, priming, painting, inspecting the final result, and cleaning up after. Following the money focuses on the transactions where funds are promised or exchanged. Analyzing this chain of activities would show the process of bidding the work, agreeing on a price, hiring labor, acquiring supplies, completing the job, getting paid by the homeowner, and paying the workers. These two activity chains intersect at different times and in different ways, but each provides a lens through which to view the customer’s world, and each improves the understanding of that world.

Once those two customer activity chains are clearly understood, following the product, the vertical dimension in figure 5-3, would show the ways in which Sherwin-Williams connects with the painting contractor, and would provide a third lens through which to view the process. Mapping these activities would show not only how the Sherwin-Williams products are produced and delivered, but also how partner’s products such as brushes, tarps, tape, and other supplies are acquired and sold. This third lens is especially helpful for showing the different touch points between Sherwin-Williams and the contractor and how that relationship can be improved.

The purpose of these three analyses is to reveal opportunities to meet customer needs in some new and better way. Uncovering those opportunities, and then evaluating and synthesizing them, will lead you to your promise. Then, as you will discover in the next decision, this analysis will also help you identify specific complementary innovations that satisfy the promise.

Follow the Customer

The first step and the foundation for all that follows is to lay out the complete set of activities starting when your customers first sense a need for your product and then find, buy, use, maintain, repair, and then dispose of it. This customer activity chain is the core of the customer context.

The key to following the customer is to look behind your customers’ activities and understand what they’re trying to accomplish with your product at every step along the way as they find and use it. Customers often cannot express, explain, or even know what they want or need. How can they, if they don’t know what’s possible? But they can tell you something even more useful: the job they’re trying to do, the outcome they’re trying to accomplish, and the result they want to achieve, when they use your product. Once their overall goal or job has been identified, every step in the chain of activities leading up to completing that job can be evaluated in light of the ultimate result being sought.

This jobs-to-be-done approach, as it has come to be called, arose from Theodore Levitt’s still-relevant Harvard Business Review article “Marketing Myopia,” which first appeared over a half-century ago.¹⁷ In it, Levitt argued that people buy a product not for itself but as a means to accomplish some task. The now-classic example of this concept is that people don’t buy a drill because they want a drill; they buy a drill because they want a hole.¹⁸

The appeal and power of this approach is that many products force the user to compromise because they don’t do the complete job the user wants done. That’s frustrating because it forces users to cobble together their own solutions around the product. The Third Way is an ideal method for dealing with this situation. By knowing what outcome your key customers are trying to achieve, you can begin to discern needs they cannot yet express directly. By adding complementary innovations around the product, you can provide a solution that does the whole job.

GoPro’s success can be traced to its deep understanding of what customers were trying to do with their products. From the process of mounting the camera, to planning which parts of the experience to record, to editing the video, GoPro has developed an integrated set of products, accessories, and tools that support the entire process (figure 5-4).

To document the customer activity chain, break down the user’s activities into separate steps, describe each, and then ask users what job they’re trying to accomplish with each. Finally, question the user to gather two additional pieces of information about each of the steps in the chain. First, rank the importance of each step to getting that job done. Each step can range from crucially important to entirely optional. Second, rank how satisfied the user is with the way that step is getting done now. This information will come from observing customers, asking what purpose or job they are seeking to do, and then having them rate each step for importance and satisfaction.¹⁹

Follow the Money

Once you understand how your customers first develop a need for your key product and then find and use it, the next step is to identify where and why money changes hands. Following the money will map a different but related set of activities—the consumption chain—and will help you understand where value is recognized by any of the parties involved. Obviously, the key point in this chain is where the customer pays for your product. But there may be other places in the chain where the customer pays someone other than you for something related. You encounter this whenever you order something online; once you’ve placed the product you want into your online cart, the vendor—say, Amazon—shows you several related products and says, “Customers who bought this product also bought these other products.” If you buy, for example, a vacuum cleaner, you’ll be urged to buy the disposable filters and bags that fit that vacuum.

As with following the customer, you’ll want to get out into the field to understand what really happens, but here you’re focusing on the flow of funds. Who is spending what with whom? What are all the different transactions that take place over the customers’ entire experience with your (or your competitor’s) product? What is exchanged for how much at each step? And, as with following the customer, you’ll want to rate the importance of each step, and the customer’s satisfaction with that step.

In some cases, this approach will lead to great insights that follow-the-customer research might miss. We have found with business-to-business situations and with more complex consumer products, that following the money can yield profound insights.

For example, when CarMax did its initial research, the team would not have learned much from following the customer. Tracking the customer’s use and maintenance of the vehicle might have led to ideas for new features for the vehicle, something that would be important for automakers to understand but not for the CarMax management team.²⁰ Instead, it found that the follow-the-money approach led to the real opportunity. The flow of funds and exchange of goods and services was an intensely frustrating process for buyers of used cars, and CarMax successfully created a business that removed those frustrations (figure 5-5).

While some of the insights gained from following the flow of funds will overlap with those gained from following the customer’s use of the product, the two approaches often result in different insights. Each is a unique lens that lets you view the same customer’s behavior in different ways.

For a lengthy list of possible steps and some recommendations for researchers, see the work of Ian MacMillan and Rita McGrath, two academics who have spent years understanding how to map the consumption chain.²¹

Follow the Product

In this final step of understanding the customer context, you will map the value chain, the activities performed by your company around your key product—from designing it to producing, marketing, distributing, selling, delivering, supporting, and even helping to dispose of it.²² As you try to identify possible promises in the steps that follow, this knowledge will be invaluable. It will allow you to identify where your internal processes touch the customer’s, and where they don’t touch but should. In short, it will help you identify where you currently add value for the customer and where there are opportunities to add even more.

We won’t spend time in this chapter reviewing the extensive literature on value chain analysis—it’s the most mature and best-known type of analysis. Readers interested in learning more are urged to consult Michael Porter’s books or the more recent work of Larry Keeley and his colleagues.²³

Step 2: Look for Opportunities

Once you’ve completed your analysis of the three activity chains around your key product—the customer activity chain (follow the customer), the consumption chain (follow the money), and the value chain (follow the product)—the next step is to identify opportunities for improvement, each of which could suggest a possible promise.

Every Step Is a Potential Opportunity

A key insight we’ve stressed again and again is the value of thinking beyond the product itself. As you study the customer’s world, think of every customer activity as an opportunity to innovate, a chance to make your product more useful and appealing and to set it apart from the competition.

Identify Actual and Potential Touch Points

Touch points are places where you, the seller, and the customer interact in some way. Note those places. Identify as well the places where your competitor or competitors interact with your customer.

Laying out all three chains, with interaction points noted, can generate a wealth of insight, much of it unique to your specific setting. We can only suggest some obvious questions to ask as you examine the three chains and how they interact.

Look at the points on the customer’s activity chains where you do not currently connect with the customer. Are any of those points opportunities to connect in some new way that improves the customer’s experience and strengthens your relationship?

Look especially at places where your competition connects with the customer but you do not. Should you create a connection? Can you improve on the competitor’s performance at that point?

Review the points where you already connect with the customer. Are there ways you can improve the buyer’s experience at those points?

As you follow customers through the steps in their value chain, look for other parties–– beyond you, the customer, and your competition––who play a role in that value chain. Is that role something you could and should assume?

As you follow the money, note places where something is bought and sold but where you’re not involved. Are there ways you can take part in (or take over) that transaction?

Mind the Gaps

Look now at the two rankings—for importance and satisfaction—assigned to each activity by the customers you surveyed. Look in particular at those activities ranked high in importance and low in satisfaction.

These are likely to be sore spots, sources of frustration and even anger for buyers. Unless you’re already involved in that activity, a high-importance/low-satisfaction rating signals an opportunity––if you can find ways to address it. If you are involved already, that combination of ratings is a warning that you need to do better.

If, in surveying customers, you asked the reason for any low-satisfaction rating, you should have some idea of how to improve. If you lack that information, you will need to revisit customers to understand the reason for their unhappiness.

Pay Attention to Major and Extreme Customers of the Key Product

If you were able to identify heavy users of your product, compare their responses to those of regular users. You may be able to find ways of growing regular customers into heavy users. Are these users attracted by some feature of the product that others usually overlook? Are they using it in unusual ways that might appeal to others? As we said earlier, be aware of the possibility that heavy users may be different from regular users in ways and for reasons that only apply to them.

Document Your Work for Use in Decision 3

Much of what you do and learn at this stage will feed directly into decision 3, where you choose a variety of complementary innovations that will make your key product more attractive. In fact, your search for a promise will generate many ideas for those complementary innovations. Record them as they come to mind, and look at them in decision 3. Those that fit the promise you ultimately choose will become candidates for complementary innovations.

There’s no magic formula for success in this step—no algorithm that will deliver a great promise. What’s needed is careful field work, detailed analysis, and thoughtful reflection. As you uncover opportunities, use them to generate possible promises. And spend time inside your company as well—your own employees will often have ideas for what needs to be improved and how your company can better deliver value to customers.

Step 3: Choose a Promise to Pursue

Once you’ve generated a list of possible promises, your task is to select one that will guide and unite all further efforts around the key product. There’s no quick and easy way to make this selection, but there are certain tests you can apply that will help you determine the strongest possible promise.

Once you’ve settled on your promise, you’ll be ready move to the next decision where you select the specific complementary innovations that, in combination with the key product, will fulfill that promise for your key customers. Much of the work you did here, in particular, the customer insights you gained by fleshing out the customer context, will be useful in your search for complementary innovations. This search and selection process is the subject of the next chapter.

The Power of a Promise: Why Victoria’s Secret Beat Frederick’s of Hollywood

An object lesson in the power of a good promise comes from the women’s lingerie industry.²⁴ Frederick’s of Hollywood and Victoria’s Secret each offered similar key products: intimate apparel for women. Both created a network of dedicated retail stores and used popular models to represent their brand promise (Frederick’s of Hollywood: Pamela Anderson and Brooke Burke; Victoria’s Secret: Heidi Klum, Tyra Banks, and Gisele Bundchen). Further, both have successfully innovated in their core product lines: Frederick’s of Hollywood invented the push-up bra, while Victoria’s Secret created the Miracle Bra.

That, however, was where the similarities ended. While Frederick’s, founded in 1947, was the market leader for almost forty years, Victoria’s Secret developed a very different promise and drove Frederick’s physical stores out of the market. In 2013, Victoria’s Secret announced a net income of $753 million, with $10 billion in revenue. That same year, Frederick’s of Hollywood reported a net loss of $23.5 million against $86.5 million in revenue. Frederick’s was taken private in May 2014 and closed its last physical store in 2015.

Given that Frederick’s of Hollywood was the market leader and the two companies initially pursued the same market strategy, this reversal of fortunes is remarkable. Like Frederick’s, the Victoria’s Secret image in its early years was “more burlesque than Main Street.”²⁵ However, the company was bought out by L Brands in 1983 and quickly changed its focus. While the previous owner had believed that men bought lingerie for the women in their lives, extensive field research by the company revealed that women often found the lingerie that men bought them unappealing and uncomfortable.²⁶ Victoria’s Secret refocused its products, introducing “new colors, patterns and styles that promised sexiness packaged in a tasteful, glamorous way and with the snob appeal of European luxury.”²⁷

This redefinition continued and expanded in 2000, when Sharen Turney, CEO of Victoria’s Secret Direct, changed the racy Victoria’s Secret catalog to something closer to a Vogue lifestyle layout, while Grace Nichols, CEO of Victoria’s Secret Stores, similarly transformed the look and feel of the stores away from a Victorian bordello to a luxury shopping experience that emphasized romance and passion.²⁸ Frederick’s stores, on the other hand, remained evocative of a boudoir costume shop, with their signature red color scheme and scantily clad mannequins in come-hither poses.²⁹

Frederick’s of Hollywood amplified this sleazier image when it began offering lascivious undergarments and sex toys as well as push-up bras, panties, and corsets. Victoria’s Secret went the other direction, introducing products ranging from swimwear to CDs featuring romantic classical music. In 1989, the company announced its expansion into toiletries and fragrances, released its own line of fragrances in 1991, and entered the $3.5 billion cosmetic industry in 1998.

Thus, although both companies were built around the same core, lingerie, they based their innovation on very different business promises. Frederick’s remained lascivious; Victoria’s Secret projected refined sensuality and romance.

And Victoria’s Secret has not been content to rest on its scantily clad laurels.³⁰ The company continues to experiment with different types of complements, from pajamas to swimwear and sportswear. In 2005, the company opened its first airport store, in London’s Heathrow airport, and in 2010 began aggressively expanding its network of airport stores. These airport stores, and similar outlets located in tourist destinations, are notable because of what they don’t sell: the company’s lingerie products! The stores are much smaller than the mall stores, and feature Victoria’s Secret fragrances, cosmetics, and other complementary products.

Frederick’s of Hollywood, imprisoned by a weak business promise, closed its last store in April 2015 and is now solely web-based.³¹ Driven by a more popular promise that led to an entirely different set of complementary innovations, Victoria’s Secret continues to thrive and grow with an impressive 35 percent market share. A better promise has made Victoria’s Secret the only name that matters in lingerie today.

Three Takeaways for Chapter 5

Your promise communicates the compelling customer need that your key product and its complements will fulfill. A good promise should be specific, differentiating, stable, and exciting for your team.

Three overlapping but distinctly different types of analysis will give you a rich understanding of the customer context: follow the customer, follow the money, and follow the product. These three types of analysis will illuminate the customer activity chain, consumption chain, and value chain, respectively.

Analysis of the three chains will help you uncover unmet customer needs and discover new opportunities, allowing you to generate and test different alternatives for the promise.

^*Our favorite: a user-created mount that mounts a GoPro camera on a hula hoop, giving a hoop’s-eye view of the hula hooper. See “DIY Hula Hoop Mount for your GoPro,” DIYGoPro, December 20, 2013, www.diygopro.com/diy-hula-hoop-mount-gopro.

^† GoPro also designed a wrench to help customers tighten the bolts used to attach GoPro cameras to the different mounts. The wrench doubles as a bottle opener, helping customers not only to prepare for an adventure, but also to celebrate after.