Monday, June 27, 2022

Why incremental innovation is so easy; disruptive is so difficult

 After years, no decades, of working in and on the margins of innovation, I think I had an epiphany recently.  It's interesting to know that the more you work in a field, you become more aware of the things that you don't know, rather than confident in the things that you do know.

For me, one epiphany that happened this week was when I was thinking about how valuable truly disruptive innovation is, and why it is done so rarely.  Then, there's the added question of why almost all disruptive innovation is typically undertaken by an industry upstart or outsider, rather than a company currently in the field.

For quite some time, it has been relatively obvious that the reason disruptive innovations are almost always an outcome of industry upstarts or outsiders is because the industry incumbents have a vested interest in the way things work now.  All of their thinking, training and systems are aligned and optimized to the way things work now.  Their staff and their management team are familiar and comfortable with how things work now.  This familiarity and comfort, along with good margins, creates blind spots that many executives choose to ignore, or in some cases aren't aware of.

But that never really answered the question of why so much innovation is incremental - adding a new feature to an existing product.  Yes, there is value in extending the life of an existing product, but at some point the extensions risk becoming parodies of the original product.  

Why incremental is easy

Incremental innovation is easier for several reasons.  First, you are working with a proven entity.  The product or service already exists and to some degree is already pressure tested in the marketplace.  So, there's little risk of an abject failure.  Second, the new idea doesn't stretch the bounds of the existing customer relationship.  Customers are familiar with the current product and can often make the lead to understand the new features of the augmented product or service.  You don't have to re-introduce the product or train the customer on a new product.

But the biggest reason that incremental innovation is easy, and why executives support it, is that it fits within the processes, distribution models, pricing models and customer expectations, in ways that disruptive innovation can't.  An incremental change to an existing product that enhances or extends the life of a current product does not create new pricing issues, new distribution concerns, new questions about shelf space or questions about reworking a business model.  New and disruptive ideas for new products and services don't simply create a new offering, but call into question the marketing, the social media support, the channels used to market and distribute the product, and in some cases even call into question the basic business and revenue model.

When you stop and think deeply about the amount of change that a new disruptive product creates, not just in product development but in manufacturing, distribution, marketing, channels, pricing and business models, you can see why disruptive innovation rarely begins in an established industry player.

Disruptive innovation cuts both ways

Truly disruptive ideas, therefore, cut both ways.  They disrupt existing markets, competitors and offerings, but can also disrupt existing business models, distribution channels and revenue models.  Thus, companies may want to create disruptive products but are often uncertain about the secondary and tertiary impacts of actually launching the disruptive product or service, because it does not fit into the carefully constructed frameworks of the previous products or services.

In other words, when you seek to introduce a disruptive product or service, you have to be prepared to rethink and rework your own channels, offerings, business models and revenue streams.  And this is something that few companies will do willingly.  Also, this is why almost all disruption happens from outside the industry.

Getting disruption done

What this says, meanwhile, is that companies SHOULD pursue disruptive innovation, but must carefully consider how to take a disruptive product to market.  In many cases, setting up a new business or a new distribution model may make more sense than trying to launch and support both the original existing product or service and the disruptive product or service at the same time.

Companies that want to pursue disruptive innovation (and most should) should be spinning out new businesses to take the disruptive products to market.  They'd gain in two ways.  First, knowing that a disruptive product or service is about to be launched, they can take steps to protect or at least prepare for the impact on their existing products, in ways that others in the industry can't.  Second, a new product or service housed in a new company that is not tethered to the bureaucracy, distribution channels and business models of the past can launch and support a new product or service in the way it should best be launched and marketed, without concerns about protecting the original products.

AddThis Social Bookmark Button
posted by Jeffrey Phillips at 9:30 AM 0 comments