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Tuesday, June 12, 2012

Innovation – Big and Small


When in 6th grade, on the walk home with friends, we would stop at a local store and buy a soda (for 5¢) - I'd often think how nice it would be to have an ice cold bottle of water instead of the sweet soda.

With the popularity of bottled water today, was mine an innovative idea? No – it was just a thought, because there was no action to bring it to reality.

When Alexander Bell (and others) perfected the telephone – that was innovative because the idea was developed and something new was introduced. When the rotary dial gave way to push buttons it was a feature change – just a now 'tool' to do the same job of dialing the phone – but when the wireless phone was developed, it dramatically changed how (and where) we used the telephone.

Likewise, making a mobile phone smaller or introducing the flip phone were simply changes in features, but the smartphone was a creative development that added something new – pocket-size access to email, text messages, and internet. - Innovative.

Sticky notes, non-stick frying pans, digital recordings and personal players, and Google search are all innovative. Each was a creative idea that was developed, introduced as something new, and permitted us to do something differently. Innovation 2.0 (further updates and changes) is often just adding features, not renewing or altering the original.

The formula for innovation is: Idea + Development + Introduction = Something New and Useful. Although successful market penetration is not specifically part of the formula (e.g., the Ford Edsel was quite innovative but was a dud in the market); innovation does offer the possibility for rewards ($$) to the innovator.

Today there is an additional – radical – kind of innovation which also has three elements:
  • Take something now existing and eliminate all but the core functionality
  • Chop the price dramatically
  • Expand the market reach by 100X, or 1000X or more.

Currently, we see this happening in cellular communications – new entrants into the crowded market are offering unlimited calls, text messaging, and data/internet, you buy your own phone, and no contract for $20-$30 per month. These carriers are selling via the internet, at Wal-Mart and similar places – not at free standing storefronts in malls and urban centers. The trade-off for giving up some 'cool' features and putting up with some limitation of coverage areas is deemed worth the user saving up to $1,000 per year in mobile phone bills.

Disruptive innovation has the potential to completely alter established markets and create new leaders at high volumes, lower prices, and profitable margins. The former leaders are forced to 'change or perish' – once begun, disruptive innovation eliminates “business as usual”. Later, as innovation 2.0 feature creep sets in for the new leaders, another opportunity may develop to do it all over again by another disruptive innovator.

Although I have used product illustrations, the concept applies whether product-based or service-based, for profit, non-profit, or government entities that can remove features to get to important core elements, reduce cost/barriers to access, and expand the user base.

As we are struggling with flagging sales, disappearing budgets, pressure from customers, users, and the public, and lack of desired results with past tactical changes, perhaps a disruptive innovation approach is a valid path to take. Get less frills, pay less for the result, and more will benefit through increased access.

Welcome to the New Normal!

What innovative approach could offer a solution for that vexing problem?
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