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Saturday, November 28, 2009

4 types of Innovation: Sustainables vs Disruptives

In her post "Innovation Matters: Balancing Sustained Versus Disruptive Innovation" Ann Handley quotes Eric Zeitoun's 4 point definition of two important Innovation Typologies, Continuity intelligently named Sustainable in today's jargon versus Disruptive. This is one of the most concise definitions I have come across.

The four distinct types of Innovations are:

1.Product optimization (which seeks to optimize a product or service’s usage)
2.Brand extension (stretches a brand’s equity into adjacent spaces)
3.Target ownership (to own a greater share of a specific target’s wallet across multiple segments, whether the segment is attitudinal, psycho-graphic or demographic)
4.Category leadership (to sustain or achieve leadership by re-shaping consumer attitudes and behaviors in a given segment or industry).

Innovation types 1. and 2. (referred to as “sustained innovations”) usually tend to build off of an existing frame of reference. Therefore, although safer, they are likely to only generate limited incremental value.

Innovation types 3. and 4. (referred to as “disruptive innovations”) on the other hand can yield much larger growth, but they are also more capital intensive and more unpredictable. Indeed because they have the power to shift the paradigm, they can set new standards and change consumer behaviors, but they require significant time and dollar investments.

Tips to "weather" current recession and pit falls management must try to avoid are outlined in an equally concise manner.

The easy conclusion could be to argue that in a period of recession, marketers should focus on “sustained innovation” because senior management is more likely to sign off on an inexpensive innovation initiative, which can repay for itself in the short term. Unfortunately, what could sound like a really good idea may turn out to be a really dangerous one.

"Recessions usually act in a two-step process as filters or regulators that purge weaker players from the marketplace. The structurally weak players are typically the first to go. These are the companies whose business model is fundamentally flawed or those whose cost structure cannot suffer tighter margins."

Then follows the players whose relevance keeps eroding over time. These players tend to suffer more towards the end of a recession cycle, and generally get hit when they think they have reached the end of the tunnel.

Why do these companies lose relevance? They do so because of their inability to shape, grasp or influence societal shifts, and a lack of vision or willingness to take risks. Organizations that are not willing to constantly invest in ‘disruptive innovation’ quickly become irrelevant and vulnerable in a recession. So what does this mean in terms of innovation? It means that marketers need to find smarter ways to invest in ‘disruptive innovation,’ rather than simply pull the plug. Recessions should be viewed as an opportunity to re-assess the effectiveness of innovation processes. To do this, you must:

•Have a clear strategic goal for your innovation. Make sure it fits into your marketing strategy and your business strategy.
•Create a focused ideation process that accelerates the pace of the consumer’s validation of ideas and prototypes ideas at a lower cost.

Read the full article...
- Innovation Matters: Balancing Sustained Versus Disruptive Innovation Marketing Profs Daily Fix Blog (view on Google Sidewiki)

PS. These concepts take an ominous connotation when brought into the environmental, climate change realms whereby the use of "sustainability" tends to lead one's thouhgts. Then that's "Marketeering" for you.

Ann Handley, MarketingProfs Daily Fix
Let me thank Dee Gardner dgmsouth who brought my attention to this article via Twitter.

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