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Innovation: Disruption in the first degree

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“Innovation” is a woolly beast. It has many disguises and aliases. To get face-to-face and down and dirty with innovation is no mean feat.

Let’s take a look at the Apple iPod, the hottest Christmas gift idea for the past few years. Is the iPod best described as an incremental innovation, a sustaining innovation, a discontinuous innovation or an evolutionary, reformulated, technologically earth-shattering innovation? Or is it perhaps the simplest and cleverest of all… a disruptive innovation?

A GOOD WIDGET WILL DO THAT

Disruptive innovation introduces to the market a “widget” that offers a key functionality possessing a previously under-valued attribute. The market has its socks knocked off; it is disrupted. Previously dominating technologies are left sitting on the shelf.

The mainframe computer was completely disrupted out of the market by the humble PC. The mainframers underestimated the importance of low price and small size to end users.

THE EVOLUTION OF MOBILE MUSIC…

The transistor radio, arguably the forefather of the iPod, burst onto the market in true disruptive style and soon became a household must-have. It didn’t offer anywhere near the high quality of sound that the vacuum tube radios of the 1950s emitted. But the key value offerings were size, (eventual) portability and price. Vacuum tube radios were the size of a 4-cylinder car, not something you could throw in your jacket pocket and take to the footy. And you didn’t need to forego a limb to afford a transistor radio.

The list goes on. What ultimately dominated the mainstream market:

  • The Concorde or the Boeing 747?
  • The Betamax system or the VHS VCR?
  • The Apple Macintosh or Windows PC?

Every time it was the technologically superior product that most definitely lost out.

NOT ONLY TECHNO…

The point of all this techno-focused babble is that the technologies themselves are not the drivers. The key is in understanding what existing and potential new customers truly value.

It was an impressive disruptive assault on the airline business when the low cost airlines came into play, most notably with Ryan Air and EasyJet in Europe, and Virgin Blue in Australia. The market fell in love with the simple, low price service. The widget in this case was the new business model, which addressed neglected consumer wants.

DON’T LISTEN TO YOUR BEST CUSTOMERS!

Intimate knowledge of the market – the existing segments within it and a perception of the potential segments that do not yet exist – is essential. Equally important is rejecting the temptation to sycophantically listen to your biggest and best customers. These customers will demand the mainframe computer to be bigger and better, the vacuum tube radio to emit even purer sound and the Concorde to go faster. Blind following of perceived customer needs is known as “overshoot” and is a terminal business disease. Yet businesses persist in refining products, processes and business models with ever-diminishing returns in response to client demand.

Get outside the box and keep your eyes open. You won’t discover the next innovative business idea by staying in the mainstream and listening to what you want to hear.

Don’t write off any segment of the market, high or low. Low-end disruptive innovation entails the value proposition of a product or process being significantly changed and then emerging from the low-end of the market.

High-end disruptive innovation is also a real opportunity for companies to challenge their existing customers and introduce offerings from the top end of town. If you get inside your customers’ heads and focus on the value your service or product creates for the customer, you gain a whole new perspective on what the customer actually needs (and what they will be willing to pay for). The tricky part is that the customer will not actually realise this. Making them to see the light can be a significant challenge, to say the least.

BACK TO THE iPOD…

In the first half of 2006, the iPod’s market share of portable music devices slumped dramatically due to a surge in the number of MP3-capable mobile phones being built. It is informal consensus that the sound quality of the mobile phone players is not as high as the iPod. The real question is: who cares?

Duncan Ely is a Senior Consultant with DC Strategy (formerly Deacons Consulting), a company widely recognised as the region’s leading Strategy, Franchising and International consulting group. DCS has developed the networks and brands of many of the region’s most successful businesses.

[email protected]

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