Launch p2.2: Systematized Innovation
“All great truths begin as blasphemies.”
Innovation Principles
Netflix was a disruptive innovation. Uber was massively disruptive. We all want to come up with the next disruptive startup, right? But, how many of us are clear on what that actually means? Well, to qualify as “disruptive”, an innovation should leverage existing technologies while generating revenue via new business models (Figure 1). Disruption has become a catch-all for something that displaces incumbent dominance, but it does have a technical definition and I’m only being semantic here because it’s important to understand the forces at play and, most importantly, how you can manipulate them to your advantage. You can only do that if you are aware of the levers to pull. Interestingly, doesn’t it seem like the dominant companies today — that began as disruptors — were initially not taken seriously? In fact, most were likely just seen as invalid nuisances. Clearly the incumbents knew best about what their clients needed. And, yet, here we are living the new truth, even as it seems that things may be rapidly evolving to a newer truth in the midst of an AI evolutionary bottleneck. This AI mass extinction event is creating a powerful filter that may reshape the biodiversity of markets by forcing rapid adaptation and causing extinction. There will be winners. There will be losers. What’s certain is that society will change.
If you’re either feverishly adapting, or building something de novo, then you should consider how to optimize your offering for a market that is itself evolving. Let’s dive into some considerations. First, let’s begin with your innovation models:
Figure 1. You Need an Innovation Strategy.
Neither Netflix nor Uber had to create any new fundamental technical capabilities. They both leveraged the web, software, and concepts that already existed to cobble together a new service. But they decimated the competition by changing the rules on how these services would be offered, paid, and delivered. Blockbuster and Taxis stood zero chance at adjusting their business models to compete in a new marketplace that delivered goods in novel ways that customers quickly embraced – especially when the new services eliminated shortcomings that consumers were forced to accept beforehand (who remembers the disappointment of unavailable movies at Blockbuster, or dealing with rude taxi drivers? (I mean, not me — I’m far too young (gulp!) — but I’ve heard!)).
Your systemized innovation approach should be clear on what models work for you and how they affect your overall innovation strategy. By being clear about your innovation model you can break down components into manageable bits, parallelize development of those components, and address the critical activities along your critical path. Different innovation strategies come with different challenges. There is no strategy that is “best”. It really depends on your needs and opportunities, your market, and even your time in history (there are plenty of great ideas that were “before their time”).
Regardless of your innovation strategy, there are additional levers to master when thinking about how to build a protective “moat” around your offering. The Ten Types of Innovation by Keeley et al (Figure 2) breaks down ten important vectors that, when combined, create significant obstacles to replication.
Figure 2.Ten Types of Innovation
What chance did taxis have to defend their market when Uber effectively changed the whole playing field, from how their service was configured to how it delivered an entirely different experience to people who needed to get from point A to point B with the least amount of friction (Figure 3)? The taxi industry was blindsided and now had to compete with the disruptive foundations of the sharing economy to boot! Taxi companies sued, but by then the war outcome was clear. Uber spread like wildfire. We consumers never looked back.
Figure 3. Disruptive innovations in Uber’s original offering and business model.
Note how masterfully Uber blindsided the competition using novel offerings that went beyond features and technology. Also note how once it established dominance, Uber didn’t simply put itself on cruise control (pun), but rather it started applying other types of innovation to flood the market with offerings that leveraged their new network and sharing economy (enter Uber Eats). Innovation isn’t just about the product. Understand all of the forces that drive markets, and use them to your advantage, or they will undoubtedly be used against you.
What can evolution tell us about innovation types and strategies? When I think about apex predators in the wild I struggle to think of a single one that isn’t fundamentally better across multiple vectors when compared with their competition. Tigers don’t prey on ungulates because they are stronger, faster, more stealthy, have deadly teeth and claws, or because their senses are primed to detect, stalk, and ambush their victims with precision. They do so because they have all of those properties, and because they can use them in combination to overwhelm the defense mechanisms of all other animals in their habitat. Well, they did for millions of years until humans came around with a radical innovation strategy that swiftly reduced the tiger’s historic range by >90%, and has rendered it almost extinct. Unfortunately, asking tigers to alter their mission statement is no small feat when it might involve re-engineering millennia of biological specialization. But maybe taxi companies can learn from the wild to see how they might innovate their way out of obsolescence.
