Friday, March 12, 2004

Push, Pull and Clash

In determining an appropriate innovation profile for an organization, the first place to get information is in the market. In our view, the market is composed of three elements – customers, competition and technology. Customers provide the “pull” in the market, technology provides the “push” and competition provides the “clash”. All three of these elements need to be taken into consideration to determine an appropriate innovation profile for the organization.

If it is an existing market, there are already existing customers, and if your organization is already in the market, then you have existing customers. We find it useful to consider three types of customers – existing, known potential and unknown potential. In almost all cases, your organization has to meet the needs of its existing customers. In general, those needs are incremental in nature, although sometimes existing customers will identify needs for distinctive innovations. (See previous blog entry for discussion of the types of innovation). Known potential customers are those that are buying your competitors’ products or services. They generally will not be persuaded to change unless you offer something distinctly different (a distinctive innovations). Unknown potential customers are those who are not presently customers in the market, but could be. They might be swayed to purchase something in the market if a breakthrough innovation, or possibly a distinctive innovation, becomes available.

Technology within the market usually provides the “push”. It can be used to satisfy existing needs of customers, create new needs, expand the market or create a new market. We like to consider three types of technology within the market – embodied, supportive and enabling. Embodied technology is integrated into the product. Supportive technology is used to assist in the development, manufacturing, sales and distribution of the product. Enabling technologies are those that expand the capability of existing embodied and supportive technologies. Quite often, the embodied technologies result in product innovations, supportive result in process innovations and enabling result in procedure innovations. This is not a hard and fast rule, but only a tendency.

Competition provides the “clash” in the market. Again, we find it useful to consider three different types of competition – direct, indirect and structural. Direct competitors are providing the same function you do in the same way. Indirect competitors are providing the same function in a different way. And, structural competition is trying to do away with the need for the function you provide. Consider automobiles. There are many different companies providing a plethora of different types of automobiles. These are direct competitors. However, the function being provided, among other things, is transporting people. Airlines, buses, trains and ships also provide that same function but in a different manner. They are indirect competitors. The Internet and videoconferencing sometimes does away with the need for people to travel. They are structural competitors. Structural competitors usually provide breakthrough innovation within the context of the existing market. Indirect competitors are either distinctive of breakthrough innovators, again within the context of the market. And, direct competitors are usually incremental or distinctive innovators.

An organization that has the appropriate innovation profile has probably integrated all of these elements to synthesize a correct market innovation profile. This innovation profile will represent the potential for innovation within the market. To determine the innovation profile appropriate for the organization, the organization must consider its own capability and capacity for innovation.

Furthermore, this market innovation profile is temporal. It will change with time. But, that’s another story.

Paul Schumann

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