What do Amazon, Airbnb, IKEA, and Uber all have in common? If you said four very successful companies, that would be true. But would you also say they were the most innovative companies in the world? Maybe not.
But these four companies innovate in one way that is better than all their competition. They all innovate to zero.
Innovate to zero? What’s that? When it comes to finding success in a crowded marketplace, innovating to zero is about bringing your company costs down to nothing—or close to nothing—in one or more areas (e.g., energy, overhead, or labor). When you’re not the only product or service in the marketplace, you have to be the most efficient to thrive.
In a recent BigSpeak podcast, keynote speaker and co-creator of Skype, Jonas Kjellberg, spoke about how it’s essential for all startups to innovate to zero, or what he calls the zero game. While working for Skype, Kjellberg helped bring costs down to zero so the company could compete with other telecommunication services who were more developed. They saved on costs by using the existing Internet to send voice calls and cutting out customer service altogether.
Amazon, IKEA, Airbnb, and Uber all have their own story of innovating to zero to become number one.
Many people might not remember that when Jeff Bezos started Amazon the company was just an online bookstore. You could only buy books through the website. It didn’t sell music, stream video, or create original content.
Amazon didn’t have exclusive authors to promote. It sold the same books you could find in the two book chains that dominated the book sale market—Borders and Barnes & Noble.
On its face, how could Amazon compete with two giant book chains selling the same products, and thrive? Answer: Bezos innovated to zero. Amazon eliminated brick and mortar stores from its model of selling books. There was no land to buy, rent to pay, energy or labor costs for bookstores. By selling through the website alone, Bezos had cut the retail cost down to zero and was able to compete with the retail brands. And we all know the result of that battle.
Your first college furniture was probably something you bought and built from IKEA. But did you know that IKEA didn’t start as a furniture company? IKEA was mostly a mail order company when Ingvar Kamprad started the company in 1943 at age 17. Five years later, IKEA began to sell furniture and their first furniture retail location opened in Sweden in 1958.
Shipping furniture was costly. So Kamprad innovated to zero. He found people were willing to pick up the furniture, take it home, and assemble it themselves if the product cost less. Then he innovated to zero again when he came up with the revolutionary idea of “flat-pack furniture” that we all know and love/hate today, which makes the furniture even cheaper to ship (and a brain teaser to assemble).
Originally, Airbnb co-founders Brian Chesky, Joe Gebbia, and Nathan Blecharczyk thought the idea of renting space in their San Francisco loft was a great way to supplement their rent. Later, they discovered this rental model would also be a great way to provide room for people in a tight hotel market in San Francisco.
But how could they compete with established hotel brands? Simple. They innovated to zero. By eliminating the need for brick and mortar hotels and 24-hour staff (and putting those services on third-party apartment or homeowner), the company was able to compete in the hotel market and thrive.
Uber, the ride-hailing service, changed the way we travel. Before Uber, the only way to get around in an area with limited public services was owning your own vehicle, renting a car, or paying for an expensive driving service, such as taxis or limousines. The co-founders of Uber, Garrett Camp and Travis Kalanick, thought there had to be a cheaper way to ride.
Instead of buying a fleet of rental cars or taxis, Camp and Kalanick innovated to zero. They had independent drivers supply the cars and pay for fuel, while they provided the connecting service. In this manner, Uber was able to thrive in the crowded market of rental cars and driving services.
So when you’re coming up with your next great company idea, Kjellberg suggests first figuring out how to bring your costs down to zero in one or more areas. The more costs you can reduce or bring to zero, the more you will be able to not only compete but to disrupt an established market.