Geoffrey A. Moore has an important article in the July-August 2004 issue of the Harvard Business Review. Articulating and systematising what we probably already understand at some level, Mr. Moore proposes a taxonomy of innovation and reminds us how different types of innovation are relevant at different stages of the market lifecycle from disruptive innovation in the early markets through to structural innovation near the end of life of the market for a particular product or service offering. The article also provides a useful summary of the type of leader best associated with each type of innovation.
Darwin represents the market evolutionary pressures to continually innovate to create differentiation. The demon is the demon of inertia: the success of the mature market with its focus on incremental innovation of processes and marketing often creates an inertia that is difficult to overcome when the company must change to ride either another stage in the market lifecycle for its existing or begin the journey on a completely new lifecycle with new products or services.
It’s important to recognize that differentiation-creating innovation and productivity-creating deconstruction must be conducted in tandem. If you try the former without the latter, the inertia demon defeats you. If you try the latter without the former, you do nothing to overcome the forces of commoditization; you are simply able to endure them for longer. By running the two efforts in parallel, and migrating resources from legacy processes to innovation wherever possible, you not only improve your returns in the marketplace, you renew and rejuvenate the company. Neither Darwin’s forces nor the Demon’s will defeat you.
The taxonomy of innovation includes:
- Disruptive Innovation
- creating new markets
- Application Innovation
- re-purposing existing technologies in new markets
- Product Innovation
- developing existing products in existing markets to the next level of functionality
- Process Innovation
- improving the processes for delivery of established products in established markets
- Experiential Innovation
- creating new customer experiences from trivial modifications to existing products
- Marketing Innovation
- improving the customer facing processes
- Business Model Innovation
- reframing the product’s value proposition or the company’s position in the value chain
- Structural Innovation
- restructuring industry relations
A very useful summary article: be sure to read it.