Four rules to innovate by

Allow me to dispel a myth surrounding Disruptive Innovation: you do not need to work in a start-up to develop Disruptive Innovations.

In fact, recent research has shown that large incumbent firms are just as likely to intoduce Disruptive Innovations as new lean entrants.

My point is that the type of business you’re in or its size is irrelevant to achieving the desired outcome. Therefore regardless of your organisation, job description or experience you can drive forward the innovation agenda.

Rule one: know your customers, but more importantly, know those who will never be your customer

Businesses produce a product (which may be a service). Individuals or businesses then consume that product. As time progresses, the business improves the product to enhance it’s performance. They make it smaller, cheaper, shinier, faster, more reliable etc. This is called a sustaining innovation.

It’s what Apple is currently doing with the iPhone and iPad when it makes it smaller or faster. It’s attempting to meet increasing performance demands from its customer base with improvements in the base product.

However as the product performance improves, the low-end of the market remains or becomes left out. They can’t afford the latest innovations and so don’t purchase at all. Depending on the market this could be a major group. If you can create a product that matches their performance expectation (features, performance and price) then you’ve disrupted the market by bringing a whole new group of people into it. 

Consider who does not buy what you and your competitors offer? What performance attributes are important to them? What is the minimum set of features they need and how cheaply can this be produced for?

Alternatively, consider a market you’re keen to advance in to and examine the same questions in that market.

Rule two: monitor the market

Whilst competitor research is nothing new for marketers, monitoring the innovation radar is somewhat different. 

Firstly you need to identify markets that don’t exist where there is a market. By a market I’m referring to a set of business competing in terms of the same performance measures.

To draw on Apple again, the smartphone market is competing around camera megapixels, screen resolution/clarity, price, apps, processor speed, memory. Finding new performance measures that consumers value and then exploiting those measures is a non-market disruptive innovation. 

Secondly monitor start-ups in your supply chain. Specifically watch out for firms that are winning new rounds of funding or being acquired by bigger players. This acquisition of capability represents a shift in the market that you need to be ready for.

Rule three: prototype with emerging technology

Innovations can relate to technology, business models and products. However new technologies increase the likelihood of disruptive innovations in business model or products. Therefore businesses should prototype rapidly with new technologies to see what could be achieved.

The key point with this prototyping is not to expect a massive breakthrough. Do expect a result from it though (new product, faster development time, ability to cut cost).

If that result doesn’t come learn from what you did and move on. Failing fast is ok.

Rule four: Innovate with your partners

Upstream and downstream partners can offer major opportunities to find innovations. Talk with them regularly. Be an iconoclast, ready and eager to tear down the way things were normally done to find a simpler or better way. Look for opportunites to co-develop and prototype market ideas. Turn the opportunity to innovate over to your customers. Returning to the Apple analogy; the iPhone’s success must be largely attributed to the apps that were developed for it. Apple created a set of partners and gave them the freedom and tools to innovate on their platform.

Recent examples of Disruptive Innovation

I’ve scanned recent news stories and announcements to find examples of innovations that could one day be disruptive.

An innovation is not simply disruptive by being new or different. To be disruptive it must challnege the prevailing market performance expectations.

ANAR billboard that targets children 

ANAR designed a bill board that changed when viewed at a child’s height. A great example of focussing on a different consumer group.

Tata Nano car 

The world’s cheapest car. An example of a low-end disruptive product innovation that targets those who couldn’t afford cars with a set of performance attributes that the mass market of car buyers would find unappealing.

Adobe Creative Cloud 

Business model innovation from Adobe that allows designers to pay monthly rather than make a large one off capital payment.

Barclays Family Springboard mortgage 

Excellent product innovation from Barclays that introduces a new set of performance measures for an existing product. Parents can invest in their children’s property purchase and get their cash back plus interest in a three year period.

Nokia’s phones for emerging markets 

Whilst Apple and Samsung are battling it out in the smart phone market Nokia has been beavering away at creating low-end disruptive innovations for emerging markets with cheap handsets that offer incredible battery life.

Amazon Redshift 

A technology innovation from Werner Vogel’s team of geniuses at Amazon Web Services. Previously setting up a scalable data warehouse was expensive and time consuming. Now Amazon allow you to fire up a Petabyte scale data warehouse with nothing more than a credit card and a free copy of SQL Workbench.

Dollar Shave Club 

A simple idea that provides razor blades on a subscription basis.

What exactly is a Disruptive Innovation?

Being new or different does not make your innovation disruptive.

To truly be disruptive the innovation must actually be disrupting an existing market. In terms of classical management theory on the matter, this means that the innovation is targetting either low-end consumers in a market or creating new markets for those who previously did not consume in the existing market.

This coincides with the entreprenurial theory that markets are mortal and that to become immortal, firms must shift into new markets or ideally create new markets.

Disruptive Innovations are not necessarily technological. They also include business model, manufacturing and product innovation – although these are often brought to pass by the emergence of new technologies. Certainly this has been the case with Spotify and iTunes who utilised high speed internet and technology innovations to create businesses that disrupted the traditional model of music sales.

Having spent the last few months researching this topic (particualy innovation in the retail market) I feel confident in saying that firms must innovate or be disrupted. Our role as marketers is understand customers and markets and utilise the resources of the business in meeting those needs.