We hear a lot about how fast and how much the world is moving. But when companies pursue innovative ideas to cater to what they think is consumers’ fascination with the new and shiny, reactions can be mixed. The trap for marketers in this is that there are different types of “newness”: from the ‘new’ people queue for, talk about, and go mad on social networks over to the ‘new’ that bewilders, confuses, worries, or even confronts.
Part of the problem of course is that we’ve muddied the water on terms: new vs change vs improvement vs disruption vs innovation vs paradigms … Many of these ideas are used interchangeably. Several have also changed meaning over time or acquired specific associations.
Successful innovation can defy innovation theory
“Disruption” for example seems now to be dominated by debate over the rights and wrongs of Clayton Christensen’s Disruption Theory. Examining that debate in the Milken Institute Review, Frank Rose points out that even companies like Uber that are held up as disruptive do not conform with some of the base criteria of Christensen’s theory model.
The original theory was timely, catchy, adaptable to both large and small companies, and seemed to explain a dilemma that many companies would need to face up to in order to succeed – that the very things that were making them successful were, at the same time, sowing the potential seeds of their demise. The problem, according to Rose, is that disruption as Christensen explained it hasn’t followed its own ‘rules’. In fact, the very companies that should not have flourished under the theory did.
“In economics as in science, laws describe, theories explain. But over the past decade or so, disruption theory has failed to explain, among other things, the iPod, the iPhone, Whole Foods and Uber – four developments that have wrought havoc with established businesses. At this point it seems reasonable to wonder if disruption theory, as Christensen has formulated it, still holds, or whether it’s an artefact of mid-to-late-20th-century industrial development that no longer applies in an era of ubiquitous digital media and ever-more-sophisticated consumer electronics.”
There are of course other views. Professor Joshua Gans breaks innovation down into demand-side and supply-side. Demand-side disruption fails, he says, when successful firms stay too focused on the customers they have and underestimate the impact of market entrants that introduce innovations that target niche demands. Supply-side disruption fails when firms are so anchored to the competencies they know and trust and therefore become incapable of developing new ones.
The relationship between marketing innovation, disruption and improvement
My own simplified view is that disruption is a means of marketing innovation, and I draw a clear distinction between disruptive strategy that focuses on upheaval in order to gain market advantage, and improvement strategy, which is a much more reactive way of amending what businesses and brands are doing so that they better meet the needs and aspirations of their audiences.
Here’s how the composite parts come together for me.
Marketing innovation is about momentum because it focuses on how companies continue to adapt and shift themselves to be more competitive and more attractive. It includes all the ways that companies seek to introduce new thinking and ideas to the business. That’s the super-set.
Within that –
Disruption is life changing. It fundamentally shifts how people live. That idea is complicated though in the sense that people have different lives in different places, and therefore disruption is relative. What may be disruptive in one market or one region may be less so somewhere else.
Platform strategist Sangeet Paul Choudary has identified three structural characteristics of industries that he believes are ripe for disruption:
- Those companies that have depended on gatekeeping to give them privileged access to market demand, but are now losing control as information and access becomes more symmetrical. YouTube is changing who gets airtime.
- Companies that have enjoyed privileged access to supply – but are now finding their paradigms shifted as new models change what participation means. You don’t have to be a hotel today to let out a room, for example.
- Industries that have been deeply fragmented historically, where aggregation and scale can directly benefit the consumer. LinkedIn has redefined how to find talent.
Choudary’s characteristics suggest that disruption is market-led rather than company fuelled; that the opportunities to disrupt come about because of the shortcomings of current participants, and the astuteness of disruptors in seeing that and looking to solve those gaps for customers. And while his structures talk more to how start-ups think, there’s no reason why they couldn’t be adopted by an open-thinking incumbent. When companies successfully introduce disruptive change, they redefine living today.
Improvement on the other hand is life enhancing. It makes what people have better than it was. In the iterative economy, it is incumbent on every company to continue to improve what it offers via change. Improvements though leave much of what consumers recognise intact. They are the updates and upgrades that deliver often smaller rewards. They literally have people coming back to brands for more.
Of course an enhancement can prove a disruptive force over time. And as I pointed out earlier, while disruption is often associated with a start-up mentality, disruption doesn’t just happen at the start of the invention process. Great companies can become increasingly disruptive – using their influence once they are established to issue greater and greater challenges to how people live. Tech companies have done this: become increasingly disruptive in consumers’ lives as they have acquired the means and the profit bases to do so.
Why do companies look to shift paradigms?
So what’s motivating all this appetite for change? Tom Goodwin cites three key reasons companies look at innovation: its PR value; to learn from failure; and to seek to win knowing that with speed comes risk.
News-level innovation is easy and noticeable, he says but also superficial. It quickly gains traction in the business press and gains attention. In that sense, it’s an easy-win. But the correlation between that level of innovation and success is less clear. Companies that look to “fast-fail” rely on hit-and-miss to get them to where they need to get to. They place heavy reliance on the lessons from not succeeding, Goodwin points out, but they may or may not be that good at taking and applying those learnings. Improvement, in the way that Dollar Shave Club and Warby Parker have improved, also learns from failure, but in a different sense, by moving a known model on by challenging the norms but leaves at least some of the core assumptions intact in terms of what consumers recognise. (I talk more about why customers are receptive to this kind of change below.) Finally, truly innovative ideas, Goodwin argues, rebuild from the ground up and are attempted by companies that are “built for this age”. This is by far the most ambitious change.
Kodak shows innovation must be tied directly to culture
It’s tempting to believe that disruption is a Holy Grail; that those who disrupt massively and with energy will succeed, or at least better their chances of doing so. But look a little closer and you’ll see that disruption is something that companies can actually do well – and still fail. I love Bill Barnett’s story about Kodak. In 1996, a group at the company’s headquarters in Sao Paulo launched a project to provide a way to instantly share digital photographs with people you knew around the world. That’s right: the concept for Instagram was developed by a team at Kodak 16 years before Instagram was acquired by Facebook.
Disruption is something that companies can actually do well – and still fail
The assertion will surprise many, because Kodak is almost the poster-child for companies that failed to change fast enough. Interestingly, Kodak recognised the threat that digital photography posed ten years ahead, but failed to act on it. They even conducted a study on the likely impacts of the industry changes they had foreseen. “History proved the study’s conclusions to be remarkably accurate, both in the short and long term. The problem is that, during its 10-year window of opportunity, Kodak did little to prepare for the later disruption.”
I very much doubt that any company has that long to react to a heads-up today. But clearly the problem wasn’t time. It was attitude.
In fact, innovation is not the problem, says Barnett, it’s organisational momentum, or rather the lack of it. Kodak had some amazing ideas around their products. Where things go bad is when the innovations themselves are out of step with the traditional pace and attitudes of organisations and their cultures. The learnings from Kodak and others, he says, is that “Successful incumbents are often very innovative — too innovative for their own good. What is going on in these cases is success bias. … Disruption is not just about technology changing; it is about changing the logic of a business. Success with a new technology requires organizing for a new logic, and organizing in new ways requires that you forget the successes of your past.”
The eight success factors for innovation today
So how should companies look to innovate today? Marc de Jong, Nathan Marston, and Erik Roth have identified eight essentials for successful innovation:
- Aspiration – companies must rank innovation-fuelled growth as critical to their success, and their targets must reflect that priority
- Choice – they must invest in a portfolio of initiatives to deliver innovative ideas that are time and risk balanced as well as sufficiently resourced
- Discovery – they must look for value propositions that help customers win, based on distinctive business, market and/or technological insights
- Evolution – they must create new business models that are profitable, defendable and scalable
- Acceleration – they must be able to move faster and more decisively than their competitors
- Scalability – they must launch innovations at the right scale and to the right markets and segments
- Extension – they must create and capitalise on their existing networks
- Mobilisation – the innovations themselves must spring from a culture that is motivated to continue to innovate and is organised and rewarded to make that happen.
We could debate whether every innovation needs all eight of these factors to succeed or whether, to my point earlier about relative disruption/innovation within markets, different situations will need different ratios of the eight, but as a checklist for what is required to push interesting ideas out into the market in progressive and competitive ways, it seems comprehensive, if a little daunting.
Coming at innovation strategy from a different angle
The key issue I have with most if not all of the above is that everyone has looked at ideas/innovations/disruption from the point of view of the initiator. I’m not convinced that’s where success is necessarily decided.
I think if we take most of the changes described above, and look at them from how a customer might engage with them, we can categorise ‘new’ into three groups.
- “New for me” – the exciting changes; the new developments and extensions that people can’t wait to share; the changes that generate dopamine. Technology, media, gaming, fashion, books etc – the life-enhancing things that people can bring into and add to their world that make it more lively and interesting. These changes are easy to introduce because they fit easily and well into the “upgrade culture”. People are waiting for them. Pretty much, announce and they will come. These changes fit easily into the PR level of innovation that Goodwin describes.
- “New to me” – the changes that move things into people’s world and in doing so make life less familiar; things that they now need to learn or remember to do or look for; things that challenge people’s habits. New labels, new policies, new pricing structures, new buying rituals. A number of brands, like JC Penney for example, learnt to their cost that when you adjust what people feel comfortable with, they take time and coaxing to shift. I call this phenomenon “spooling”. It’s the time that consumers take to catch up, adjust and get used to what a brand has done. If a business gets ahead of its consumers and doesn’t take them on the journey, reactions can be adverse and significant. New Coke is the most famous example of this. The outcry over the drink wasn’t really about what the drink was. It was actually about what the drink wasn’t anymore. To bring about these changes effectively, brands need to lead consumers through the change – explaining fully, urging quietly and encouraging patiently while people sort it out in their own minds. These changes can be positioned effectively as answers to incumbent products that ‘fail’ the consumer.
- “New at me” – the changes, often in attitudes, that challenge people and businesses at close to a visceral level because they test the very boundaries, moral and physical, that people, communities and even societies have established for themselves. Social justice issues can fall into this category by way of example. Change in this space is slow, obstinate and often beset with scepticism and resentment. Consumers require discussion, debate and above all time to work through what is being proposed, why it’s needed, how they feel about that and whether they are willing to participate. (This interesting article for example looks at why consumers have been so slow to engage with climate change.) These are platform level changes. They shift the very paradigms within which communities work, but once such sea-changes are made, there is no going back. That’s why, as Hilton Barbour and I suggested in this article, there is absolutely a place for purpose in driving change and innovation.
The best changes are perfectly pitched to the level of “new” they introduce
The most surprising changes are those that make challenging change exciting or that elevate a small change into something that people hanker for. In other words, the change itself, whether it is a paradigm change or an improvement, is aligned with an emotion that people are drawn to. (For more on this, check out my 10 reactions to innovation.)
Where marketers can go wrong very quickly is to mismatch how a change is introduced with how a change is greeted. Retailers sometimes do this, with things like improvements – they introduce a packaging or a formula change that they think is exciting only to find that it’s greeted by buyers as an inconvenience they need to adjust to. Or they can mis-pace their product development by bringing out a product that continues the familiar at the very time that people want something exciting and different.
Both pale by way of impact, however, to brands that introduce changes that challenge people in an “at me” way but were not framed in that manner. That dichotomy of size-of-issue versus pace-of-change is one that NGOs often struggle with for example. They seek to introduce what feels to many like far-reaching change quickly because for the NGO the matter is urgent. For the recipient of the message though, the consideration time is much longer, and people react adversely because they hate feeling rushed or pressured. Their response is to dismiss the call for the new as wrong, whereas what they might wish to be doing is rethinking their business model.
If you’re bringing a change to market this next year, be very aware of what sort of ‘new’ it is for the people who buy from you, and plan your communications accordingly. New is in the eye of the beholder, and success comes down to matching the appetite for change with the extent of the change being offered. That’s the real challenge of innovation strategy.