When incremental improvements/innovations stop creating value
Updated: Jan 23, 2020
This is part 3 of a series of articles on innovation
In part 2 of the series (https://www.thinkhorizonconsulting.com/post/changing-the-known-sustaining-innovation-to-protect-the-core-business), I wrote about how organizations should go about innovating their core offering. This can take the shape of sustaining innovation (replacing your existing offering with a better product or even a significant technological innovation) or efficiency improvement (significantly improve cost or efficiency).
Logically, while this approach is sound and essential, there comes a point at which the core innovation stops being effective. I have struggled to find a theoretical approach that explains this phenomenon until I read the book The innovator’s solution by Christiansen and Raynor (Christensen, C. and Raynor, M. (2013). The innovator's solution. Boston, Massachusetts: Harvard Business Review Press.) While writing about getting the scope of business right, they explain the evolution of performance over time.
When products are launched, there exists a performance gap between the offer and what the customers ideally want. For example, when the smartphone was launched, it couldn’t do a lot of things we take for granted today; emails were slow to download, the graphic quality was OK, they were bulky, etc. The phones were still bought and used by quite a few. Over a period of time, the industry has seen a tremendous amount of incremental innovations/improvements, efficiency innovations, and technological innovations. Today the smartphone can do more than what any of us might want to do with it. Most people would use just a fraction of its capability. Clearly, we are now in an era when the smartphone is over-designed for most users!
This is a common trend in every industry; sustaining innovations ensure that we have much better products than when the product was launched and there is a point when the product does far more than what the customers need. Once this point is reached, customers no longer value innovations and improvements, even technological. They may be willing to buy it, but no longer pay a premium for it. For example, you could keep improving the iPhone further (maybe a camera that comes with a large sensor to rival pro-level cameras), but that is taking the phone to a performance level far greater than what most users want. As a result, the phone would no longer have the same demand.
Multiple industries have hit this point; you don’t need more than 3 blades in your Gillette razor, your toothpaste doesn’t need any more improvements, your camera doesn’t need more megapixels, your TV doesn’t need to be more than 4K resolution and so on
If you are in a market that is tiered and you are addressing a lower tier in the market, incremental innovations help you move up the market and address the higher tiers. If however, you are not in a tiered market or the tiers aren’t too far apart, incremental innovations will not help growth once over performance levels are reached.
How to judge if you need to look beyond incremental innovations? Here are some pointers.
The communication process justifying the superiority of the new product over existing becomes more complex.
Incremental innovations don’t require changes beyond packaging, marketing and peripheral modifications in manufacturing.
Both the old and new products can co-exist or if the demand for the older product refuses to die.
When social media posts lament the withdrawal of the old product.
Margins and market share don’t improve.
The product has become reliable and there are no customer complaints.
Krishnan is a consultant with more than 25 years of experience. His purpose is to help India and it's entrepreneurs be global leaders in innovation