Different strokes of innovation
What can we learn from innovations in photography?
Taking a photograph of your little daughter cutting cake is a breeze today, whip out your phone and you are ready to shoot a nice picture and post it on Instagram.
However, it wasn’t so easy in the past. Photography was a specialist business. You needed to be a professional with large equipment and specialist processing techniques to take photographs. This made it expensive and a luxury
Kodak changed it with the films and the not-so-cheap film cameras. Suddenly, many more began to use cameras and get films developed fairly affordably, to make it into the homes of the affluent.
And then came the age of digital cameras, the point and shoot cameras found resonance with the middle class and you saw them in many homes. It also enabled many to become professional photographers, especially wedding and product photographers.
However, it was the mobile phone cameras which were truly disruptive. It enabled ordinary folks to become photographers and effectively killed the DSLRs.
Every innovation has very interesting learning. With film cameras came a new business model. Kodak made more money selling films and chemicals than cameras. With the first digital cameras came the era of cloud printing of photos and home photo printers. As digital cameras evolved we had the era of flickr and google photos.
Today with phone cameras, we have a revolution of computational photography.
Does the industry evolution teach you something about how to structure your innovation?
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Tony Ulwick's book, Jobs-To-Be-Done (2018) has always been a great inspiration for me. This is empathy and customer focused as anyone can be.
More than anything, the title Jobs to be done says what an innovator needs to prioritize: how will the customer use your offer?
Innovation starts with an existing job to be done and can have five distinct approaches.
How can I improve the existing product, and improve market share and profitability?
How can I create differentiation by creating an offer that is far superior and also more profitable?
How can I be disruptive by creating a vast new market for a cheaper and basic product?
How can I dominate the market with a superior offering that is cheap and wins every type of customer?
Finally, are there offerings with limited requirements, that can be targeted at niche customers at a premium?
The simplest thing to do is take the existing offer and improve it for the existing customers. This could mean an incrementally better product either at the same price, marginally lower or higher price.
What this will enable is a higher market share in the existing market. Usually, this is the horizon 1 business and is essential to extend the life of the current process.
Examples of this are all over the market
Car with a better engine, more mileage, more bells and whistles
A new variant of shampoo with exotic herbs or sea salt and the likes
Laptop with a higher clock speed, more ram, bigger and brighter screen etc.
Camera with more megapixels, a lens with longer reach etc.
Credit cards with a higher credit limit, lounge access, increased bonus points etc
Bank accounts with personal wealth managers, exclusive branches, coffee in lounges etc.
TV with larger screen size, louder speakers, more brightness, thinner dimensions and so on
These are sustaining innovations and before long competitors will catch up. All these innovations do is add features, reduce or increase costs and generally extend the life cycle of the offer, while helping the customer do the job he wants to do, with relatively little change.
The second approach is quite popular, where you create a product that is vastly superior and costs significantly more (obviously more profitable) and includes some sort of patented elements / technological development that creates boundaries.
This is not about brand premium, but about enabling customers to get some job done that the generic offering can’t do. Let me illustrate with an example.
Digital cameras existed and the market was pretty crowded. But then the leaders' Canon and Nikon, developed the Full Frame camera for a niche customer, who wanted more, higher resolution, faster shutters, greater clarity etc. These were for professionals, wedding photographers, sports photographers etc., who made a living out of photography and a missed photo was a career-ruining event. The full frame cameras did things that the standard DSLR used by most couldn’t and enabled them to make money. These were sold at significantly higher prices (and margins) to select customers.
Such an innovation creates a differentiation strategy and includes product innovation incorporated into the existing products and are usually protected by IP rights. While the product does earn a premium margin, the customer base tends to be smaller, even if it brings into play new segments of customers who ignored the mainstream product.
The automotive industry is full of such examples, Ferrari, Lamborghini, and Rolls Royce being prime examples. Their customers don’t buy these cars for the job to be done by common folks, which is to commute from one place to another.
Electric cars are currently in this space, they provide better environmental performance at a significant price premium.
Note: This innovation strategy is not to be confused with premium branding. Premium branding often offers only an improved performance on the emotional job to be done. They provide the customer a “superior ego feel” and little more than that.
Disruptive innovation is the act of creating whole new markets by helping customers at the bottom of the pyramid to get the job done. These innovations are achieved by launching products and services that are otherwise over-engineered for most users at a significantly lower price.
Two examples are very good at illustrating this. Example 1 is camera phones which have killed the market for DSLRs. These have been a massive disruption that has provided no-frill photography capabilities to a vast population. Even now, DSLRs, even the cheapest ones, offer performance that camera phones can’t achieve. But then the users don’t require the increased performance and are happy using the camera phones, which are way cheaper and convenient. Most cameras still don’t fit into your pant pockets!
The second example is the advent of flexible plastic packaging that has enabled FMCG companies to produce one-time use packs for things ranging from shampoos to jams. While these sachets have done huge harm to the environment, they brought products within reach of the poor, which they could never even aspire otherwise to use.
In most cases, disruptive innovations meet high-quality and reliability requirements as well. Products that sacrificed quality and reliability never succeed in the disruption game. Just ask Tata Motors. The Nano car was considered a disruptive product, but then it didn’t meet the quality and reliability requirements that even the bottom of the pyramid would find acceptable.
Dominant innovations are what all organizations want. These are significantly cheaper products but also can deliver far superior performance.
One of the best examples is the Unified Payment Interface (UPI) that India has launched and is today the largest payment interface in the world. It offers most of the users digital payments at zero cost and enables payments as small as 10 cents. Over 5.8 Billion UPI transactions happened in June 2022 alone. It’s a product that is truly dominating the Indian financial system.
Other examples exist as well. Mirrorless cameras are a technology breakthrough that offers superior camera performance at a significantly lower cost. Online retail has become the dominant retail challenge offering products at significantly lower costs and far superior customer experience. The list is only growing.
Dominant innovation is usually led by technological breakthroughs. However, in many instances, it also results in new business models that make simple cost reduction insufficient.
This is not true innovation but more of an effective strategy. Can you find a way to charge significantly more to do some specific job very well, even if it isn't good enough for most customers?
The manufacturers of Humvee know that they can develop a specialized vehicle for the military that’s of no good use to the rest and sell it at higher prices. The manufacturers of bulletproof cars would agree as well with this strategy.
In fact, there are plenty of customers that require secure products who would pay a premium and sacrifice many a performance just to but security. These can vary from vests, phones, cars, glasses etc.
If you can exploit this requirement, by all means, explore it.
A key take away is that innovation requires careful consideration of the customer needs and how it can be met.
If you would like to explore this topic further, feel free to reach out for a free 60 minute consultation using the link https://bit.ly/TalktoKRN
Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email: email@example.com
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