Monday, February 02, 2015

There's more innovation opportunity than you think

Just recently we were working with a client and our combined OVO/client team had created a number of really good ideas to develop as new products and services.  When we presented them to the senior executive sponsoring the activity, his response was mixed.  Some he liked, some he was uncertain about, and some targeted a market that is valuable but which also has a lot of embedded competitors.  His comment about innovation in that last space was basically to say there may not be a lot of room for innovation, perhaps the incumbents had the space locked up.  While I understood his concern, the comment was a bit deflating for the team.  Later, as the team debriefed the meeting, his concern came up.  My response was:  I'm sure many competitors and new entrants felt the same way about Blockbuster back in the days before NetFlix.  My point being that how we define an opportunity may lead us to ignore a valuable market opportunity, but changing how the market or segment is served may open what appears to be a closed or highly competitive market.

Because, after all, what did Redbox and NetFlix and eventually real time streaming of movies actually do?  In the end the consumer gets what they want, entertainment and content.  How they get it, the business model, channel and customer experience may have changed, but the ultimate service or product changed very little.  If we were to go back and think about disrupting Blockbuster when they had a shop on every corner, and a (relatively) deep selection of movies to choose from, we'd be crazy to enter and compete in the same way.  That wouldn't be innovation, but you see what I mean.  But by defining the market differently, by thinking about new channels, new experiences and solving problems that the customer had, even in the face of high competition from Blockbuster, NetFlix completely eliminated Blockbuster as a competitor, even thought Blockbuster had access to the same content and was trying to solve the same need.  The problem was that the customers ultimately cared less about obtaining the content from a corner store, and more about the breadth of offerings and convenience of returning movies through the mail.  Blockbuster built their franchise on a corner store model, and NetFlix innovated by pointing out that with a little foresight and planning you could see all the same content without ever going to the store, to choose movies or to return them.

Of course, you'll say to yourself, this is a classic reframing problem.  I should be in the "transportation" business, not the "wagon" business.  While this reframing exercise may seem a bit trite, it forces you to ask:  how should I compete to win those customers?  What does my competitor or the incumbent offer that the customer doesn't need?  What is in the currrent business model I could change or even remove?  The SIT and TRIZ folks will call this subtraction - what can I take away and have an equivalent or valuable product.  What can I change or add to the existing model that subverts it?  Removing the hassle of going to the store to acquire and worse return movies made it more convenient for consumers.

Everyone wants to find a "blue ocean" - a segment or space where there aren't any competitors.  What no one seems to realize is that even in the most competitive markets and segments there is plenty of innovation possibility, but to discover it we may need to reframe the problem or change the game.  Often the incumbents don't want to change - their models and channels are based on what they've built.  Innovators, entrepreneurs and newcomers aren't invested in the way things work, they are interested in introducing new perspectives or frameworks that subvert the dominant paradigm.  Sorry just had to work that in.  Too often managers and executives recoil from innovation in a highly competitive space, when perhaps it's exactly where they should spend their innovation efforts.  But because they compete for the same customers and deliver much of the same value proposition, they don't necessarily have to do so in the same business model, pricing, channels or customer experience models.  That's what we need them to see - we can innovate in these spaces, but only by reframing the problem, changing the business model or channels.  But when we win at doing that, we dissolve the incumbents competitive advantages at the same time. 
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posted by Jeffrey Phillips at 7:47 AM


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