Knower & Learning Innovation Case Study
Here's where the entire industry, 1.2 trillion dollar industry, was about 10 years ago. Every single person at every level believed the following false set up. If we eliminate contracts, then everyone will leave us. Belief every level, 1.2 trillion dollar industry. The belief was, and here's pretty good logic: "Here's the free phone." This is the Venus flytrap model of sales. "Here's the free phone." Lure you in...bright, shiny object. And, the jaws clamp down on the two year contract. and then we shut off the lights. We ignore you for two years. You have a terrible experience and then we lure you back in with a bright, shiny object. Again, every two years and people hated it. That's why they'd like the dentist more than us. But how to eliminate contracts if we know everybody hates them, but we also know, it's what keeps them. What we want is to eliminate contracts, and what we don't want is everybody to leave us. It leaves a brief window of potential possibility. Is that possible? Cou...
ld we somehow figure out a way to eliminate contracts and not have everybody leave us? Been working with my team over, probably, six, eight months. We came up with a new model. Instead of the stick model of the universe, we punish you if you try to leave. We created a carrot model of the universe where we reward you if you stay. Very different psychological framework. I'm not gonna punish you if you leave. We're gonna reward you to stay. If you build a bank of rewards, like having money in the bank, are you gonna leave your bank? Probably not. So, we created a reward system, and we also, eventually, separated the phone investment from your wireless contract, eventually eliminated it. So, we eliminated contracts. Separated the phone from that purchase. Created a reward system. Launched it. And retention was higher, so more people stayed. People spent more, and they were much happier. So we actually did the seeming impossible. We eliminated contracts and reduced term simultaneously. And so, probably none of you here, or out there, now have a phone contract. So, you're welcome. [audience Laughs] T-Mobile followed us about eight months later, and then all the others followed suit. And, here we have it. So, 1.2 trillion dollar industry changed from simply changing the conversation from impossibility to possibility. So, language is really important.
How long did that take, that process?
From the idea generation, market research, to launch was about 20 months. And it was a very significant investment because contracts drove everything, right? The contract into the system drove logistics that meant we need a new phone. It drove commissions. It drove sales payments. It drove setting up of the phone in the system. The contract drove everything. So, to eliminate that meant we no longer had this trigger point. It took us quite some time to figure it out. And, actually, the answer, like always, is sitting right in front of us. We created a non-contract contract. So, it was a trigger that was the same as a contract. It triggered all those things. It just wasn't actually a legal, binding contract. So the system, we just faked the system. We could not see that for months. We were like, "I don't know if we can do this. "It's gonna be way too expensive." Kind of interesting. Thanks for the question.