Have you ever heard "bring me the Next Big Thing!" but had proposal after proposal rejected? There's talk about moving in bold new directions, but your backlog is full of tiny tweaks from the same three power users. Still, you’re the market leader and your renewal rates are sky-high, so is that necessarily a bad thing? What is innovation, really? The answer – it’s up to you. Alignment on what innovation means to your leadership is the key to a successful product and go-to-market strategy.
Aligning With Leadership on What a Big Idea Looks Like
As I suggested in my post 5 Steps to Innovate on Purpose, you need to get aligned on what "innovation" means to leadership. Too often, teams and leaders skip this critical step, and everyone ends up spending a lot of effort on innovation proposals your organization will never pursue.
To enable this alignment, I've created the Market Opportunity Spectrum. It provides four phases of innovation opportunity and is a valuable guide to gain clarity on the type of innovation your leadership is looking for.
Each phase of the Spectrum illustrates an increasingly more radical and forward-looking type of innovation – always reflected as the assumption that these are market-driven opportunities – as follows:
The goal of Reactive Innovation is to continuously fulfill user’s requests to improve existing solutions. Of the four phases, this one could be arguably said to not be innovation, because it’s characterized by fulfilling requests instead of doing proactive opportunity identification. In this phase, users tell you what they want - maybe even draw a picture. Organizations serving very mature markets, where there are no new customers to get, or where renewals are critical need to focus at least some effort here, but even when renewals are paramount, some innovation beyond order-taking is a good idea. I would recommend all organizations fund some efforts at the next level – Responsive Innovation.
Responsive Innovation allows you to find current-market opportunities to expand functionality of existing products that can enable you to increase buyer satisfaction (and, ideally, renewals), steal market share from your competitor or even bring in new customers from the markets you currently reach. It helps you know when it’s time to modernize your product to upgrade security, interoperability and scalability. Responsive Innovation goes beyond what users ask for to proactively innovating to satisfy buyer needs, upcoming changes in regulatory requirements or to stay ahead of competitors.
Inventive Innovation is about building better solutions for known market problems or selling existing solutions in new ways, to expand into new markets or workflows. Inventive Innovation may be non-product oriented, in the form of a new pricing model, such as offering monthly subscriptions on formerly contract-only products; or new delivery model (grocery delivery, anyone?). Building from a product to a workflow or persona ecosystem is another facet to Inventive Innovation. These opportunities are harder to identify in the market, because they require investigation of an overall industry, workflow and the changes that open such opportunities. It also requires listening for non-product frustrations, such as dissatisfaction with the current distribution, pricing or selling systems. That said, you can often repurpose all or pieces of mature products in new ways to pursue these opportunities. Inventive Innovation is riskier than the prior two types but the rewards can be substantial.
Disruptive Innovation is what most of us think of when we hear “The Next Big Thing.” Miracle products that come seemingly out of nowhere to solve problems we didn’t even know we had. That’s not how it happens, but the goal of Disruptive Innovation is indeed to articulate and solve market problems that were previously unarticulated, unsolved or nonexistent. These opportunities can emerge as a result of invention or improvement of enabling technology, a cultural re-prioritization of needs, a shift in values or the emergence of a new market entirely.
Align on the Phase That Fits
With the possible exception of over-focus on Reactive Innovation, there is no “right” phase for any product, market or company. What is critical is that you and your leadership align on what phase you’re supposed to be looking for.
Create this alignment through a conversation with your leader that walks an existing product, market or persona through the phases of the Market Opportunity Spectrum. What phase seems aligned to our organizational vision and strategy for this product/market/persona? How far is too far? Talking through order-of-magnitude examples can guide you to a common understanding.
For example: let’s say your organization offers time-and-billing software to help law firms track the time each lawyer spends on various client matters, so they can charge those clients appropriately. What type of innovation opportunity does leadership want you looking for?
Improve your existing software to populate the billing code wherever needed = Reactive Innovation
Add the ability to report hours worked by practice area = Responsive Innovation
Offer your software on a month-to-month subscription with a freemium version for solo law practitioners = Inventive Innovation
Leverage the data flowing through the software to model legal billing trends; create an app for corporate clients of legal services, to help them forecast and negotiate their legal fees in a way not available today = Disruptive Innovation
Talking through such order-of-magnitude examples can guide you to a common understanding of the type of innovation opportunity you should look for. Budgets, resources, timelines and risk all escalate the farther down the spectrum you go, as does the opportunity for reward, competitive dominance and market disruption. Not everyone can or should be looking for Disruptive Innovation, but if you are, everyone must be clear on what that entails.
With scarce resources, fixed budgets and never enough time to do everything, getting straight on what leadership wants the business to accomplish is the first step toward successful innovation.
About the Author
Diane Pierson is the Founder and Principal Market Strategist at Innovate on Purpose, a consultancy helping organizations achieve market-driven success through planning, executing and communicating effective product innovation. Diane is also a visiting instructor at Pragmatic Institute. Contact Diane at firstname.lastname@example.org.