Overview:
- New start-ups are testing, launching, and iterating on new product ideas with speed
- Rapid product delivery, feedback-centred growth, and constant innovation are fundamental to staying competitive in today’s business environment
- Large corporations can struggle to adopt industry shifts toward lean innovation and speed due to bureaucratic diseconomies of scale
- Firms can leverage intrapreneurship, improved internal processes, and change platforms to increase innovation and compete with fast growing start-ups more effectively
Helen Yin founded Inoki Bathhouse in February 2021 after recognizing the market potential of her personal favourite destressing strategy. Since launching her first product line and online store in April, Helen has received over two thousand purchase requests and is actively growing the brand through customer feedback.
What is Inoki Bathhouse?
Inoki Bathhouse is an all-natural bath business transporting the exotic bathhouse experience to the comfort of individuals’ homes across North America. Helen started experimenting with herbal teas and organic ingredients in her own kitchen to create Inoki’s MVP, The Garden Bathhouse Kit. Click here to read the full story behind the brand.
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From Proven Personal Remedy to New Business
After creating a minimum viable product on February 10th, Helen released a product demonstration video on viral media platform TikTok in under three weeks. Within a few hours, she gained 700 000 views, 2300 purchase requests, and 17 000 followers on Tik Tok.
That same week, she created 30 Garden Bathhouse Kits and sold them to early adopters. After receiving positive feedback online and researching the 11 billion dollar self-care industry growth during 2020, she knew that there was market potential for her bath kits. She created three bathhouse formulations, an online store, and social media pages within days.
Inoki’s continuing growth is not a result of pure luck or even a fabulous product, but rather a go-to-market strategy that allows for rapid product/market fit through iteration. This section breaks down the lean growth strategies implemented in Inoki’s short lifespan and the immediate results.
1. Rapid Product Delivery Optimizes Return on Investment
Typically, delayed viable product/service launches can allow competitors to enter the market or cause customers to lose interest. Research shows that rapid product delivery allows for increased sales, higher profit margins, lower development costs, larger market share, and greater market responsiveness.
From having an idea on February 10th, to showcasing the Garden Bathhouse experience online to customers just three weeks later, Inoki’s rapid MVP delivery generated instant excitement from early adopters. Product demonstration makes brand vision tangible, discourages potential competitors, and optimizes return on investment.
Further, Inoki’s direct to consumer model augments product delivery speed by eliminating lengthy supply chains. Over the last 2-5 years and especially through out COVID-19, the acceleration of e-commerce has led to the increasing popularity of small brands. These brands can cut down on the traditional beauty product development timeline of almost two years, which would include months for R&D, product testing, approvals, and manufacturing.
On the other hand, small online brands are able to imitate the executive presence of big brands extremely well through digital media, while scaling up quickly due to low overhead costs. Increased trust in small businesses due to their speed, quality, and agility has created momentum for small businesses and a threat for large corporations that previously held the affinity of customers.
2. Lean Go-To-Market Model Creates Rapid Product/Market Fit Through Feedback
Chief Product Officer at Eventbrite and experienced growth marketer, Casey Winters, discusses the middle ground between the “Reis Model” and the “Rabois Model” for creating optimal product/market fit.
The models offer two extremes. The Reis Model focuses on constant iteration, speed, and flexible vision. On the other hand, the Rabois Model focuses on thoroughly developing a product and vision before going to market.
While the Rabois model tends to be implemented at larger companies, the Reis model has been increasingly successful as companies seek competitiveness in a rapidly changing environment. Winters believes that the sweet spot to building a fast growing, customer-first brand is using best practices from both models. Having strong vision and brand personality (Rabois) combined with lots of feedback-based iteration (Reis) can unlock new growth.
Through the initial launch, Inoki created a platform for two-way communication for feedback from clients. Early adopters were encouraged to provide honest feedback on social media and invited to 15 minute interviews. Consistent surveys and polls allowed customers to make key business decisions around packaging, product design, and marketing. Instead of investing thousands of dollars upfront and recognizing costly mistakes later on, this process allowed for low-cost improvements and unlocked new product ideas.
- Product Ingredients: Inoki was able to switch to gluten-free and allergy-friendly ingredients and adjust the quantities of scents before securing a mass supply chain. Currently, Helen is testing out new oil-based product iterations, an idea that came from a customer interview.
- Clean-up Experience: After receiving feedback on some unclear use instructions, Helen was able to quickly revamp the electronic QR instructions and social media to reflect the changes. She can easily make online adjustments overtime, completely independent of costly, time-consuming changes on physical product packaging.
- Rebranding: Design is an ongoing process for Inoki Bathhouse, as its logo, product design, and social media design have changed multiple times over the span of three months. Often, design changes are made through customer surveys, creating a strong community that appreciates being included in the brand development process.
Inoki’s market delivery of the product created a rapid feedback cycle to determine the key functionalities important to the market, adapt to needed functionality over time, and discover untapped market potential. This iteration-based delivery optimized the product/market fit over time and increased customer engagement with the brand.
3. Rapid Website Delivery Augments Effective Customer Acquisition Funnel
The average time for industry-standard website delivery is around 14 weeks. This is not including the time it takes for internal corporate approvals, an average of 13 days for small companies (<100 employees) and over 20 days for large companies (<1,000 employees). These process statistics by Harvard Business Review only account for non-budgeted approvals and become lengthier when budget and cross-functional approvals are involved for new projects.
Inoki Bathhouse was able to develop and launch a viable online website within seven business days through Shopify, while simultaneously developing social media accounts to generate awareness. This created an effective customer acquisition pipeline to drive sales at launch by driving traffic from social media directly to a landing page.
With Shopify’s 54% YOY growth in 2020, the spirit of entrepreneurship and the growth of e-commerce were high. Over 457 Billion new consumers shopped from a Shopify merchant, 52% up from last year, and the number of merchants grew on the platform by 62%. Fast website delivery has been an industry shift, and companies that fail to compete with the speed of Shopify merchants can easily fall behind.
4. Storytelling Drives an Emotional Connection Between Brand and Customer
Beyond speed and innovation, the brand is synonymous with Helen’s personality (energetic and passionate). Every brand communication is inspired by Helen’s travels around the world, journey as a first generation immigrant, and mental health challenges that led to her creation of the product. Moreover, brand communications often include a behind-the-scenes look at her life as a business founder (packing, website creation, late-night hustle). Customers feel connected to the brand when the marketing showcases a narrative beyond the product itself and contextualizes the brand in relation to the founder’s background and motivation. Not only is storytelling highly effective in generating sales and customer loyalty, but it is extremely low-cost compared to top-down marketing strategies.
- Authenticity: Inoki is not only extremely transparent about product ingredients and packaging contents, but with the founder and all the work behind the scenes. In past videos, Helen has shared personal stories about her family and on her website, takes a deep dive into the experiences that led her to finding her Ikigai (Japanese for “A Reason For Being”), Inoki Bathhouse. Not every brand has to tell a personal story like Helen’s to be authentic, but rather ensure that the messaging is intentional to the culture and community.
- Imagery: It is the oldest trick in the book: a picture is worth a thousand words! By having a tangible MVP, Inoki did not have to use abstract marketing before releasing a product. Photography was done in-house, at Helen’s apartment, utilizing natural light and decor. With the rise of cell-phone media for Instagram and Tik Tok posts, good marketing does not need to be expensive. Today’s empowered customer often feels more connected to brands with grassroots and editorial style media strategies rather than hyper-commercialized products.
- Mission-Driven: While on a mission to improve the mental health and wellbeing of clients, Inoki is also committed to working with ethical suppliers and contributing 1% of all proceeds to environmental change. Combined with a brand’s exchange-value driven through storytelling and its intrinsic product/service value, consumers are becoming extremely cognizant of the actions businesses take to support social causes. With rising customer acquisition costs and increasing social and environmental consequences for unethical business practices, social responsibility is no longer a choice. A few examples of industry leaders embodying the global shift towards social and environmental change include Tesla, Nike, Target, and Patagonia.
- Proof: It is no secret that user-generated content, influencer marketing, and business reviews are leading avenues for word-of-mouth growth. Helen displays user generated content from customers enjoying her product on social media and showcases various reviews on her website. Proof is an example of low-cost storytelling that allows customers to feel connected to the brand’s broader community.
- Viral Media: Lastly, free viral media platform TikTok is what spearheaded Inoki’s initial market traction, creating 2300+ purchase requests. Though an unreliable method on its own due to short-term, algorithmic volatility, when combined with using Instagram’s under tapped “Reels” feature, and connecting with more sustainable Facebook, Instagram, and website accounts, businesses can easily reach mass audiences at a low cost. Authenticity, proof, and cause-driven practises must be effectively translated to consumers at various touch points in order to build community and dialogue.
From the TikTok that kick-started its initial growth, to intricate storytelling and eco-friendly initiatives, the brand creates a community of like-minded individuals focussed on reimagining relaxation, selling more than just a bath experience. Authenticity and socially-driven mission evoke positive emotion and resonate with customers; ultimately, this drives sales and customer loyalty.
Beyond Inoki: The Importance of Lean Growth and Innovation
Inoki is not the only company prioritizing rapid innovation, constant iteration, and authentic storytelling. The most successful brands today can innovate incredibly fast and eliminate waste.
Since even before Eric Reis’ documentation of The Lean Startup model in 2011, strong companies have always leveraged similar techniques. Similar to Inoki, Dropbox launched its MVP through a three-minute product demonstration video. After receiving positive feedback, the company eventually launched a beta version and now has over 500 million users. Foremost automotive manufacturer, Toyota, has been a leader in lean, just-in-time processes since the 1900s.
Today’s most successful large companies have grown through innovation and authentic storytelling: Apple, Disney, Amazon, Ben and Jerry’s, Nike, and many more. The companies that have kept their spot on the S&P 500 have been able to keep up with the pace of technological innovation in the 21st century while iterating based on consumer demand. On the other hand, 88% of Fortune 500 companies from 1955 either do not exist today or have fallen off the list. While fast innovation might have been a differentiator 100 years ago, it is merely a leveler today.
Challenges of Implementing Strategies for Open Innovation and Lean Growth
There are unavoidable challenges when it comes to organizing massive amounts of human, physical, and financial resources. A Bain and Co. study of Fortune 500 executives revealed that management deemed their businesses too complex to implement lean. As a result, Harvard Business Review cites that large companies suffer from “managerial diseconomies of scale”, where there is twice as much bureaucratic drag at companies with over 5000 employees than companies with less than 100 employees.
In these settings, a number of challenges present themselves when it comes to cutting down waste and driving innovation which must be analyzed in order to address solutions. Harvard Business Review surveyed over 7000 business people and these were the results:
Beliefs Around Bureaucracy
While 57% of first-line employees cited bureaucracy as a detriment to their organization, only 27% of CEOs expressed the same concern. Vertical structures of power can create cognitive dissonance amongst upper management about whether there needs to be change and innovation in the first place.
Politics
70% of big-company members observed political behaviours, such as blame-shifting and turf-battles, “Often”. These behaviors often lead to lengthier decision making, lower productivity, and less innovation. Observance of politics increased by about 10% when a company had over 1,000 employees.
Resistance to Innovation
Over 80% of respondents said that an unconventional idea would probably be treated with resistance by management. Over 96% of front-line employees at companies with over 1,000 employees said it would be difficult for them to launch a new initiative. Notably, industry leaders such as Google and Amazon recognize the importance of bottom-up innovation and give all employees time to work on personal projects.
Slow Internal Processes
Respondents spent almost 50% of their time dealing with approvals and internal tasks that had no long term value. Approval processes and mundane, everyday tasks decrease time for innovation, forward thinking, and rapid market launches.
Growing Bureaucracy and Hierarchy
Over two thirds of respondents said that their company was becoming more bureaucratic, and the average respondent worked at a company with over six management layers. On the other hand, industry leaders such as Spotify are embracing flatter organizational styles to reduce time spent on unnecessary tasks, drive more innovation, and improve employee morale.
Lack of External Participatory Diversity
Large organizations often source innovation from senior management and common whitepapers. However, the most innovative organizations will usually crowdsource ideas from employees, customers, competitors, and beyond. Inoki Bathhouse, for example, has discovered new product opportunities from conducting in-depth client interviews.
“You need to be experimenting a lot more. You need to be prototyping a lot more. You need ways to incubate ideas in a very different fashion. You have to search for ideas in a different place."
"I’ll ask companies where they get ideas for innovation from, and they’ll say, 'We get them from everywhere.' But then as you probe more deeply, you realize they get them from the same sources, the same customers, the same suppliers."
"If you’re talking to the same people all the time, you’re going to get the same ideas that you had last year or the year before. You’re not going to get anything new. Ask yourself who you’re not talking to. What suppliers are you not talking to? What regions are you not listening to?” - Gary Pisano, Harvard Business School
How Can Large Firms Innovate More Effectively?
At Onova, we believe in leveraging open innovation and intrapreneurship to help large companies innovate like start-ups.
“Most of us don’t understand all the offerings at, say, our bank or perhaps the local Starbucks, and you have an environment ripe for Lean. Lean eliminates the waste in our business, frees up resources, and empowers employees to drive the business.” - Barry Cross, Smith School of Business at Queen’s University
Frictionless and Intentional Approval Processes
Lean internal processes increase time for innovation and forward-thinking projects, create a culture or productivity and speed, and increase employee satisfaction. Frictionless, intentional, and fast approval processes motivate employees to “go for it” and decrease bureaucratic stagnation for new projects.
Foster Collaboration and Transparency Between Employees
High levels of company collaboration lead to increased productivity and project focus by about 64%. While it is important to value individual performance, it can be just as valuable to reward team performance and teamwork. Strong collaboration should lead to transparency across both horizontal and vertical teams. As most companies have six or more management tiers, fostering transparency and honestly encourages all members to contribute unconventional ideas and provide feedback that can improve internal and external company processes.
Create a Platform For Change and Innovation
Before any employee genuinely feels comfortable stepping outside of their daily role to help improve an organization, they must have the headspace and resources to do so. For this reason, companies often implement Change Programs; however, over 70% of programs implemented fail. Change programs emphasize a top-down approach where management implements a new program, event, or system. Just like the Rabois go-to-market strategy, a model focused on hierarchical, systemic control seems to be increasingly ineffective with the rise of flatter organizations, smarter consumers, and autonomy-seeking employees. “Change Platforms'' should be considered as an alternative, as they are more inviting, grassroots strategies for change. The purpose of a Change Platform is to utilize intrapreneurs within the firm to lead innovation from the bottom-up through collaborative projects such as ideating events or team projects. This could also mean inviting individuals to enjoy free time for personal projects. The bottom line is that employees are increasingly aware of bureaucracy and protective of their own time, so they need an inviting, for forced, platform to innovate.
Leverage Employee Innovation in Real Market Solutions
Creating smoother processes will result in a plethora of ideas, better innovations, and potential successes. New ideas should be rewarded with potential to be used in real market solutions, as this creates opportunity for customer feedback and increases employee engagement through autonomy over their own ideas.
Tolerate Risk and Failure
Those who disagree with a culture of intrapreneurship might say that it is too risky or distracting from day-to-day business operations. However, if implemented with efficient internal processes, employees will have more time. In fact, improved employee satisfaction is linked to higher productivity, creating time for both innovation and daily tasks. Secondly, failure is an inevitable part of innovation that often leads to the best breakthroughs. Fortune 500 leaders have experienced dozens of product failures: Coca Cola’s New Coke, Microsoft Zune, and Apple Newton PDA, just to name a few. Tolerance for failure and risk, within reason, drives companies forward.
“All it takes is one big success to pay for dozens of failures.” - Michael Cusumano, MIT Sloan Business School
Final Insights
By creating a culture of open innovation and streamlining lengthy processes, large companies can more effectively compete with the influx of start-ups, such as Inoki Bathhouse, that are rapidly testing and launching new products within weeks.
By freeing up wasted time on internal procedures and minimizing bureaucratic drag, resources can be diverted from short term tasks to the development of forward-thinking ideas. Though the leap to lean processes and increased innovation can seem risky, it is not any more risky than remaining stagnant in today’s fast-paced business environment. Fostering a culture of speed, innovation, and productivity is the foundation to building a sustainable business model, no matter a company’s size, product/service, or mission.
Onova is a modern consultancy that creates strategies for large scale innovation at Fortune 500 companies. Check out our methodology here. Drop us a line here.
As for Inoki Bathhouse, the team is busy creating an end-to-end bath experience that puts people first. Follow the brand on Instagram and TikTok to stay up to date with future product launches and news.
