Friday, May 17, 2013

The logical limits of product innovation

I wrote a blog piece recently entitled Breaking out of the m(old) for innovation, which attempted to point out that many innovation detractors have it all wrong.  Innovation isn't stalled because we've run out of ideas or out of steam.  There's a deeper issue at stake.  Innovation appears stalled in many industries because the product or service has reached its point of diminishing marginal returns for innovation.   In other words, for many products and services, the next big innovation will be a significant disruption.  You can tell when this is true by watching what is being "innovated" - the base product, or other ancillary features.

There are many reasons why it is easier to focus on channel, packaging or business model innovation rather than core product or service innovation.  As I noted previously, there may be a significant standard to overcome - the internal combustion engine or electricity distribution.  There may be a significant investment that's necessary to move to a new technology, or significant change resistors from customers.  Of course there's always fear of the new or unknown.

So, in order to bring this high falutin concept to regular mortals, we'll resort to the method that many characters use on the Simpsons to explain big ideas to Homer.  We'll relate it to beer.  And, after all, this is a blog post for a Friday.

Back to beer.  Coor's beer, specifically. 

Beer has been brewed for thousands of years.  We know a LOT about how to brew, flavor, package, preserve and distribute beer.  For a while Coors was exotic because it was hard to get east of the Mississippi.  A whole movie with Bert Reynolds was made celebrating the difficulty of obtaining the beer.

So, the question becomes, is there more innovation that can be applied to beer?  We've perfected the brewing of beer.  We've created thousands of types of beer - lager, stout, porter, hefeweizen (my favorite), bock, etc.   Have we reached the point of diminishing returns for beer innovation?  I think the signals are flashing "yes".  Here's why.

Coors recently ran an ad that highlighted the beer can.  The can had three significant attributes they wanted to call to attention.  First, the mountains on the can change color when the beer is cold.  Second, the can has a liner to keep the beer cold.  Third, the can has a new pop-top to improve airflow and drinkability.  All of these things may be labelled "innovation", but they are innovation in packaging, in marketing and in information signalling, not beer innovation.  When you see a brewer place more emphasis on innovation in the pop top than in the beer, then you know we've reached a limiting point.  The next big beer innovation will require a step change in brewing or chemistry.

Note that some of these "innovations" are a bit perverse.  Many beer drinkers will tell you that beer shouldn't be too cold, otherwise you lose the flavor.  And does anyone need a more technical pop-top?  Were there unacceptable incidents of beer spillage or individuals who failed to get the beer from can to mouth previously?

When product manufacturers start innovating the packaging, the information about the product, the channel or the business model, it's a good signal that they've reached a diminishing return on innovation in the product itself, and only a significant disruption will spark new product innovation in the sector. 

Innovation itself isn't stalled, it's simply on hold for the next disruptive evolutionary cycle.  Innovation isn't a smooth, continuous process but a spiky discontinuous process made up of long period of incremental innovation punctuated by short bursts of disruptive innovation.


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posted by Jeffrey Phillips at 7:00 AM

2 Comments:

Blogger James said...

Jeffrey,

An interesting point.

At the risk of a really poor joke, I guess what you are really describing "innovation by jerks".

James

5:27 AM  
Blogger Timothy J T Beatty said...

I dislike this article because it highlights that you pay very little attention to the beer industry. Coors Light has been the same since 1977. Therefore, innovation in the sense you are describing has been dead since that day. Moreover, Coors Light, Bud Light, Miller Light are all just terrible beers. How do you keep a terrible product selling? By keeping the packaging fresh and new. All three of these beers do the exact same thing. Miller has a vent tab on the top which was an "innovation". Bud is coming out with a bow-tie shaped can. All three of the features on the Coors can you describe have been tested on the Coors can for nearly a decade, and very similar commercials highlighting the can's features have been running for the same length of time. So I am shocked that you took notice of this one in particular.

Why improve the product when you can improve the packaging?

7:00 AM  

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