Industry constantly trumpets the value of innovation. Consider the path that microchips followed in the years between the introduction of the personal PC to the miniaturized music players that clip onto collars of millions of tech aficionados worldwide.
But studies show that between 50 percent and 90 percent of new products fail to reach their potential of meeting company expectations and fall ignominiously into the category of an “also-ran” product. But does innovation always need to happen within the space of a brilliantly conceived, heretofore unseen product that captures the fancy of millions?
According to Venkatesh Shankar, Coleman Chair in marketing at Texas A&M University’s Mays Business School, developers cannot expect to hit a home run with every product or service they create. “Look to add incremental value to existing lines, generating in the process a mixture of products and services that provide even higher benefit to end-users,” he says.
Smart Business spoke with Shankar about the nature of innovation in today’s competitive marketplace and how businesses can help achieve a higher rate of success with their new product introductions.
How differently can we view the concept of innovation today?
Only rarely does a company develop a good or service that creates an entirely new market or so reshapes a market that it experiences unforeseen profits for a considerable length of time. Innovation is not just coming up with a new gadget, which is the way people typically think about the concept. Innovation also can occur in business models, existing processes and overall marketing strategy. Many times, adding a few bells and whistles that are incremental in nature to the mixture of existing product lines will generate significant benefits to the bottom line.
What is really needed in most organizations is a culture of innovation that gives the kind of autonomy that allows people to become ‘intrapreneurial’; that is, a system of incentives that motivates employees to build upon the strengths of what already exists. Some of these innovations can be hybrid an innovation that combines product and service lines to create new applications.
Essentially, the concept involves the exploitation of an idea for a performance by both good and service that is perceived by customers to offer new benefits that results in monetary gains for the innovator from both the good and the service.
Where have we seen examples of hybrid innovation?
In the business-to-business sector, we see many cases in which goods marry with service offerings to create an even stronger brand. Consider Xerox, which first built copiers and printers but then added supplies, maintenance contracts, and configuration and user support. Or 3M, which has institutionalized a culture of innovation. Today, it has more than 60,000 SKUs, the result of building upon an existing slate of products. And there’s Google, which asks its work force to come up with a Googlette; a new business idea one day in the week.
In all cases, the firms have set in place an incentive system to motivate employees to contribute to the overall growth of the organization. A significant amount of revenue can be generated from a hybrid innovation; but the trick is to be clear on which of these hybrid solutions will work.
What does it take to implement such a concept?
Firstly, your staff needs to be customer-focused and approach its work with a mindset we call ‘adaptive innovation.’ Firms must closely scrutinize their customers to discover what drives their business success. In doing so, you have to be able to find your customers’ ‘pain points.’ That is, discover problem areas that exist within a client’s organization and seek solutions to those problems. Many businesses have been born to address pain points, and often such efforts have succeeded to a far greater level than attempts to create an entirely new product.
The notion requires you to align your marketing strategy to focus on customer needs and tie the innovation strategy around it. Which new products ought to be developed to satisfy market needs, how to test them, and how to quickly get new developments out into the market. This could mean encouraging your R&D team to focus solely on pain points and getting your sales and marketing team more attuned to the weaknesses in their customers’ operations. Such a mindset allows you, the product or service provider, to get out of the problem of having to develop too many products, many of which could fail. Instead, the method asks you to focus on products or solutions that can fill an immediate need.
VENKATESH SHANKAR is the professor of marketing & Coleman Chair in marketing at the Mays Business School at Texas A&M University. Reach him at email@example.com or (979) 845-3246.