Being second gettting tougher
Merle Crawford (1980) describes four types of innovation strategy in his typology:
Inventive: The firm seeks technological leadership vis-à-vis product packaging, positioning etc. It tries to be first to market with the product.
Adaptive: The firms chooses to wait and let others lead, and then to quickly adapt or modify the product. By means of “innovative imitation,” it seeks to be second but best.
Economic: The firm builds strength by producing what others have created, but by do so more economically. It tries to be the low-cost producer, particularly in the early maturity phase of the life cycle.
Innovative applications: The firm utilizes established technology, but applies it creatively to new uses.
The second one of these, Adaptive, is similar to Ansoff and Stewart's "follow-the-leader" strategy in that firms pursuing this innovation strategy generally pile into an industry when a market for a particular product is clearly present (or appears to be clearly present). Here in Taiwan, you see a lot of this. This innovation strategy must be getting more difficult, though, because product life cycles are getting shorter and shorter, reducing that window of opportunity for these firms.
Just look at the MP3 player industry for example: just the other day Apple introduced a cheaper, low-end Nano for US$149. You have to expect that Apple is subsidizing these players (the hardware) in the same way Microsoft is subsidizing its gaming machines. The real money comes from iTunes for Apple, not the players themselves.
innovation in Asia
Inventive: The firm seeks technological leadership vis-à-vis product packaging, positioning etc. It tries to be first to market with the product.
Adaptive: The firms chooses to wait and let others lead, and then to quickly adapt or modify the product. By means of “innovative imitation,” it seeks to be second but best.
Economic: The firm builds strength by producing what others have created, but by do so more economically. It tries to be the low-cost producer, particularly in the early maturity phase of the life cycle.
Innovative applications: The firm utilizes established technology, but applies it creatively to new uses.
The second one of these, Adaptive, is similar to Ansoff and Stewart's "follow-the-leader" strategy in that firms pursuing this innovation strategy generally pile into an industry when a market for a particular product is clearly present (or appears to be clearly present). Here in Taiwan, you see a lot of this. This innovation strategy must be getting more difficult, though, because product life cycles are getting shorter and shorter, reducing that window of opportunity for these firms.
Just look at the MP3 player industry for example: just the other day Apple introduced a cheaper, low-end Nano for US$149. You have to expect that Apple is subsidizing these players (the hardware) in the same way Microsoft is subsidizing its gaming machines. The real money comes from iTunes for Apple, not the players themselves.
innovation in Asia
Labels: innovation
posted by Gordon Graham at 11:06 PM
5 Comments:
Gordon, I'm not sure how strategies #2 and 3 can be defined as innovative. I guess I don't see producing a low-cost version of a product as being innovative, I see it as a viable and calculated business strategy. If these are defined as innovative, wouldn't any successful business approach meet this definition?
Hi Brent! I would say that producing a product cheaply (3) is indeed innovative. I can totally see your point that (2) appears to be less innovative, but it requires responsiveness. This is one of the problems in any discussion on innovation: what is innovative? I'm still trying to get my head around that one. Any ideas?
I'm also struggling a little with what exactly is the definition of innovation. Gordon Moore on his blog (http://geoffmoore.blogs.com/) got in an argument about whether innovation is inherently disruptive. The mere fact that "disruptive innovation" is a concept detailed in "The Innovator's Dilemma" tells me that innovation doesn't necessarily have to be disruptive or you wouldn't need the qualifying term.
I read the blog you cited there and you can see that he describes many types of innovation. The types Geoff Moore mentioned, in addition to disruptive innovation, were: application innovation, product innovation, platform innovation, line extension innovation, design innovation, marketing innovation, experiential innovation, value engineering innovation, integration innovation, process innovation, value migration innovation, and acquisition innovation. As you can see there are a zillion "types" of innovation, but if you look closely all these types merely identify where the innovation occurs. You could add "elevator innovation" if you wished, which would translate to making your customer experience "better" or running the elevator cheaply; or, ideally, both of these. It boils down to whether you look at innovation broadly or narrowly: most of these are narrow definitions. Then there is degree: are you making the "elevetor experience" a little better (clean) or much much better (fast and uncrowded) ... of course, "better" is subjective, and determined by the customer.
I think there is still a lot of confusion between disruptive innovation and radical innovation. This is how I see the difference between the two: technical improvements along a dimension that valued by a firm's most demanding customers can be small (incremantal/continous/evolutionary) or large (radical, discontinuous/revolutionary). Firms doing this are pursuing a sustaining innovation strategy. Firms are often forced to follow this strategy because of their cost base, and the way people are rewarded.
A disruptive innovation strategy, on the other hand, involves another, different dimension, one that is not valued by the firm's most demanding, high margin, customers. Often this involves offering a "better than nothing" product for a market that were previously non-consumers previously.
An innovation doesn't have to be disruptive. In fact,innovations usually are tiny ("uncool"), and hardly even noticable. All these small innovations in aggregate can make a huge difference, though. Wow! That was a long post.
Right, I agree with you and Geoffrey that most innovation is not disruptive. I think we both also agree that defining what exactly is innovation (is changing the color of a product innovative? Maybe sometimes yes. How about making a car faster? Maybe yes, maybe no). Maybe we need to poll everyone with innovation in their blog title about how they define "innovation" (or to what gets applied the term "innovative").
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