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64 THE PRACTICE OF INNOVATION

freighter methods which, much earlier, had been developed for trucks
and railroads.
The incongruity between perceived and actual reality typically char-
acterizes a whole industry or a whole service area. The solution, how-
ever, should again be small and simple, focused and highly specific.

III

THE INCONGRUITY BETWEEN
PERCEIVED AND ACTUAL CUSTOMER
VALUES AND EXPECTATIONS

In Chapter 3, I mentioned the case of television in Japan as an
example of the unexpected success. It is also a good example of the
incongruity between actual and perceived customer values and cus-
tomer expectations. Long before the Japanese industrialist told his
American audience that the poor in his country would not buy a TV
set because they could not afford it, the poor in the United States and
in Europe had already shown that TV satisfies expectations which
have little to do with traditional economics. But this highly intelligent
Japanese simply could not conceive that for customers—and espe-
cially for poor customers—the TV set is not just a “thing.” It repre-
sents access to a new world; access, perhaps, to a whole new life.
Similarly, Khrushchev could not conceive that the automobile is
not a “thing” when he said on his visit to the United States in 1956
that “Russians will never want to own automobiles; cheap taxis make
much more sense.” Any teenager could have told him that “wheels”
are not mere transportation but freedom, mobility, power, romance.
And Khrushchev’s misperception created one of the wildest entrepre-
neurial opportunities: the shortage of automobiles in Russia has
brought forth the biggest and liveliest black market.
These, it will be said, are again “cosmic” examples, not much use
to a businessman or to an executive in a hospital, a university, or a
trade association. But they are examples of a common phenomenon.
What follows is a different case, in its own way equally “cosmic” but
very definitely of operational significance.
One of the fastest-growing American financial institutions for the
last several years has been a securities firm located not in New York but
in a suburb of a Midwestern city. It now has two thousand branch offices