Die Die Must Innovate!

Attended a talk at SMU recently by a visiting Professor Thomas S Robertson, who is some fancy professor at Emory University.

Couple of interesting ideas about one of the most widely used marketing theories known as the Diffusion of Innovation. The premise behind Prof Robertson's talk was that Innovation must take off rapidly in order to succeed.

Essentially, in the continuum of innovation, there are 3 categories of innovators:

1) Enhancements - eg added functionality built into versions 2.0, 3.0 and so on for software.

2) Migrations - eg new generation of technology like High Definition TV.

3) Emerging Technology - completely new technology which makes previous versions obsolete, eg Digital cameras versus film.

The need for innovation is nicely summed up by Sony's President Kunitake Ando:

"I think Sony's mission is to make our own products obsolete. Otherwise somebody else will do it."

The key to making innovation work is to adopt a market driving mentality. In other words, we need to anticipate customer needs (market sensing) rather than engage in unending market research (although there is a time and place for that too).

Sometimes innovation fails. Often, the problem is not that the technology is lousy. Rather, it is the failure to look into other factors of market success. For example, suboptimal design decisions to prevent cannibalisation of existing products, or developing applications that are not geared towards customer needs.

Advantages of rapid take off for innovation?
1) Captures brand loyalty and establishes reputation.
2) Sets dominant standard in the industry.
3) Achieve sales and experience (or word of mouth) effects.
4) Capture sales and profits before competitors do.

Prof Robertson suggested a five-pronged strategy to ensure rapid take off in innovation:

1) Pursue Early Mover Advantages Early movers tend to enjoy a bigger market share. However, this does not mean you must be the first to embrace state-of-the-art technologies. Remember that Apple Newton was ahead of its time and didn't capture the same market share that a later player like Palm did.

2) Engage in Alliances No man is an island and similarly, no company can afford to go it alone. The trick is to either develop or embrace industry standards and create an entire system of complementary products. A good example is through licensing of technology.

3) Preannounce to Customers Microsoft does this very well, and uses it as a strategy to "freeze" its customers purchases of potential competitive products. Eg the announcement for Longhorn.

4) Understand the Flow of Influence in the Market This means to identify who the key movers and shakers of the market are, and work with value chain partners which have disproportionate influence over other accounts.

5) Manage the Market Penetration Process In the market penetration process, there are 4 steps, namely:

Awareness --> Interest --> Trial --> Adoption

To see where the gaps are, it is key to identify where the problems arise, be it in awareness, interest, trial or adoption. In other words, is it because awareness is low? Interest is lacking? Customers unwilling to try? Or they are not keen to be repeat buyers?

The final takeaway that I got was that innovation is in anticipating the future while driving the market. Most innovations will fail if there isn't a suitable fit between technology and application. Innovation can happen in minor or major ways.