Experian Was Being Disrupted by Fintech Startups. Then They Turned the Tables
When Jeff Softley moved his family from Chicago to California, he had no idea what lay ahead. Early on, he took a wrong turn, and before they knew it, he and his wife were completely lost, ending up in a bad neighborhood. The experience was so unnerving that she nearly decided to call it quits right then and there.
Things weren’t much better at work. He had come to run analytics for Experian’s consumer division, also known as FreeCreditScore.com. The basics of the business were to drive traffic to the site by giving consumers access to their credit score and then try to provide them with services such as credit monitoring.
Yet the business was being disrupted by venture-backed fintech startups that didn’t need to turn a profit and could offer many of the same services for free. By the time Jeff arrived, the division had sixteen quarters of declining revenue and things looked bleak. Today, Softley leads a $1.5 billion juggernaut. The story of how he did it is something we all can learn from.
How You Get Disrupted
In the 1990s, a newly minted professor at Harvard Business School named Clayton Christensen began studying why good companies fail. What he found was surprising: these businesses weren’t failing because they lost direction but rather because they adhered closely to traditional business principles — listening to customers, investing in R&D, and improving their products.
As he researched further he realized that, under certain circumstances, a market becomes over-served, the basis of competition changes and firms become vulnerable to a new type of competitor. In his 1997 book, The Innovator’s Dilemma, he coined the term disruptive technology to describe what he saw.
That was exactly what Jeff Softley encountered at Experian. FreeCreditScore.com had a straightforward business model based on value exchange. It gave customers information about their credit and then offered them paid services. Yet when fintech startups started offering many of the same services for free, the basic logic of the business unraveled.
When that happens, most of the skills that make you successful as a manager quickly become irrelevant. You can keep your team motivated, make sure you are servicing your customers well and executing flawlessly, but when you’ve been disrupted none of that matters. You have to figure out a way to do something different.
Defining The Problem Space
Probably the biggest misconception about innovation is that it’s about ideas. It’s not. It’s about solving problems. And your ability to innovate is largely a function of how you define problems and how you define what a good solution would look like. Once you do that, coming up with ideas is rarely a problem.
For Jeff and his team, the problem was clear. The underlying logic of the business model had been disrupted and now they found themselves in the unenviable position of trying to sell something for a profit that competitors were offering to customers for free. Now, that was no longer tenable as a viable business model.
They needed to define a new vision for the business. During a weekend strategy session, they clarified their north star. “We needed to build products that were first to market, best to market or the only place on planet earth that you could get them,” Jeff would later tell me. “We needed to build things that other people could not build to stay competitive.”
The team had earlier done a series of ideation exercises and had populated a wall with over a hundred sticky notes with all sorts of possibilities. Some of them were straightforward and predictable, others were more far-fetched and some were downright kooky. Yet once both the problem space and solution space had been defined, Jeff had a moment of clarity.
He went over to the wall and picked off a sticky note. It had just two words on it: “Score Boost.”
Changing The Basis Of Competition
They had initially come up with the Score Boost concept a few years earlier and, in theory, was relatively simple: Allow consumers to share information about themselves to instantly improve their credit score. But in practice, it would be difficult to bring it to life. The technological infrastructure inside the organization needed to be upgraded, the e-commerce platform needed to be rebuilt, and the free business model needed to be established.
In other words, Jeff and his team would need to access capabilities outside their control. Yet in every enterprise, there is always competition for resources and a failing consumer business inside an organization that had historically been focused on serving large corporations was at a disadvantage. They would have to be smart about how they moved forward.
In his memoir, Creativity Inc, Pixar CEO Ed Catmull compared new ideas to “ugly babies,” because they start out “awkward and unformed, vulnerable and incomplete.” Ugly babies don’t need massive exposure and a big launch, they need to be protected and nurtured. So rather than trying to instantly launch Score Boost as a fully blown initiative, he first started with a Keystone Change, which he could do quickly and without outside resources.
They decided to remove the paywall they had established and see what happened. Incredibly, by dropping initial fees they saw the number of member-base double from four million to eight million in six months, which showed the potential of the new approach. “That evidence became a business case,” Jeff would later tell me, “that business case became a platform, that platform now underlies our business that has more than 70 million customers.”
That was really the path forward. Today, Experian Boost and its famous cow commercials has become somewhat of a household name
How Goliath Can Sometime Wins
As Robert Gordon explains in The Rise and Fall of American Growth, the turn of the 20th century was a time of great change. New innovations like electricity, indoor plumbing and the automobile were changing the way people lived, worked and shopped. New supermarkets and department stores were edging out the old corner markets and dry goods dealers.
While this created great opportunities, it also created problems. Merchants needed to extend credit no longer knew their customers personally and so there was a great need to verify consumers’ trustworthiness. Experian built a great business being a trustworthy gatekeeper of data that helped those businesses evaluate the credit of hundreds of millions of people.
Yet when its consumer business was disrupted by fintech startups, Jeff Softley saw that the same data and technology infrastructure the company had built to serve large enterprises, could also be put to work to empower consumers to improve their access to credit and measurably improve their lives.
Somewhere along the line we got it into our heads that large firms can’t innovate and should strive to act like startups. The truth is that they are very different types of organizations and need to innovate differently. While large firms can’t move as fast, they have other advantages. Rather than try to act like startups, they need to leverage other assets.
While it’s true that venture-backed startups have a lot of advantages, large enterprises also have deep expertise, proven technology and customer relationships they can put to work for them. You can’t innovate by copying your competitors. Good strategy is always a process of discovery, to identify a relative strength you can bring to bear against the relative weakness of your competition.
Greg Satell is Co-Founder of ChangeOS, a transformation & change advisory, an international keynote speaker, host of the Changemaker Mindset podcast, bestselling author of Cascades: How to Create a Movement that Drives Transformational Change and Mapping Innovation, as well as over 50 articles in Harvard Business Review. You can learn more about Greg on his website, GregSatell.com, follow him on Twitter @DigitalTonto, his YouTube Channel and connect on LinkedIn.
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