If you are considering launching a new product or service, you are going to be tempted by two separate approaches. A first will consist in implementing a disruptive innovation strategy, to change the rules of the game by creating a completely new product, which is unlike any other. Or you’ll use an incremental innovation strategy to improve an existing product or service. Here are some food for thought to help you define your strategy…
What is your objective ?
A first element to take into account in your thinking is the goal you want to achieve with the launch of this product. If your goal is to obtain an undisputed leading position in a new market, then it is in your interest to favor a breakthrough innovation that will allow you to “create” your market, and therefore define “your” rules of the game and consolidate your position before potential competitors arrive. If, on the other hand, you want to increase your market share, or enter a new market without necessarily wanting to be a leader right away, much like the entry of Free into the mobile phone market, then you can take an incremental approach which will allow you to offer an offer that stands out from those of your competitors but without revolutionizing the market or existing uses.
Your Innovation Strategy
If you are looking to launch a breakthrough innovation, your strategy will be to identify a need that is unaddressed or very little addressed. This means that using your product will probably involve new uses, or changes in the behavior of your customers. This is what is happening, for example, with Sigfox in BtoB, this young French company was the first to launch a low-speed network dedicated to connected objects and offers a communication solution that requires players in the energy sectors , transport or telecoms to rethink their service offerings. Succeeding in bringing such an innovation to the market automatically puts you in a position of strength since as a newcomer, you are, at least at the start, the only master on board. However, this strategy is far from being THE panacea, for several reasons:
- First, you’re going to have to agree to making expensive investments. Already in terms of communication, not only to publicize your product, but also to explain with pedagogy to your prospects what is your product and what value it will bring them. It’s not the easiest part because until now your prospects have been doing very well without even being aware that a product like yours could exist. Since the majority of people are rather resistant to change and prefer to keep their habits, convincing them to adopt your product and change their uses will not necessarily be easy. Your communication strategy should be particularly effective.
- Then, if it is a technological product, you will also have to rely on R&D expenses (equipment, skills, patents) to ensure you stay at the forefront.
- Acquiring a leading position in a new market also implies that you will have to grow rapidly, and therefore invest massively from the launch of your product. If you already have a successful business with substantial working capital or if you are supported by powerful investors, this will not be a problem. Otherwise, you will need to find sufficient sources of funding to support the growth of your business.
- Finally, the sales cycles of a breakthrough innovation can be very long, at least longer than for conventional products. It is a risk factor for your cash flow, a vital element if you are a VSE or an SME.
These points illustrate that while disruptive innovation can be a decisive asset in launching a new product, it also represents a fairly risky strategy.
On the other hand, if you start with an incremental innovation strategy, you will seek to differentiate yourself on an existing market by offering a better offer: cheaper, better quality, simpler … with the objective of taking market shares to players already present. In this case, no need to propose a major innovation, you will rather identify improvement points on existing products in your target market and choose those that will allow you to attract the customers you target. In the aviation sector, it is the strategy used by Ryan Air which has implemented simpler processes which have enabled it to offer a more accessible offer known as “low cost”. The advantage of this approach is that it is a priori less risky since:
- Your concept has already been validated by your competitors, you are only improving it for a defined target.
- You need less communication efforts to do since you don’t need to explain to your prospects the principle of your product.
- You need less funds, because no long and expensive R&D period.
- Your time to market is shorter, so you are less likely to arrive too late or to miss an evolution in your target market.
On the other hand in the long term, it is a less profitable approach than the rupture strategy. Since you arrive after the others, you will have great difficulty in obtaining a place of leader and if you arrive there, it will be at the end of long years. However, empirical studies by BCG have shown that in a mature market, it is often the leading company that has the best profitability. In addition to the economies of scale that the leader can obtain, he benefits from increased negotiating power over his suppliers and, more generally, from a better cost structure. In addition, your competitors will not fail to react to your entry into the market, which can lead to a general drop in prices and therefore, ultimately, to low profitability of your activity.
What levers to innovate?
Once you have determined your innovation strategy, you can think about the levers that you will use to deploy your innovation. Here are the 3 main levers that are generally used to launch an innovative product or service.
This is the first lever that comes to mind, the one that will make it possible to release a product that is technically more efficient than those of competitors or to design a very innovative product to meet new needs. Examples of technological innovations include the smart card, which has revolutionized the IT security sector, or the electric car which will transform our modes of travel in the city. This type of innovation requires specialized technical skills as well as significant R&D and technological watch efforts.
You don’t think about it as much, but process innovations can give a company a decisive competitive advantage. The possibilities to innovate in terms of process are very wide since they cover the entire value chain: purchasing, production, marketing, sales, R&D, after-sales service. This is what Dell has achieved by implementing sales, logistics and support processes that allow their customers to be able to customize their orders and get them delivered quickly at the lowest cost. Dell has positioned itself as the market leader in business PCs. In general, it is often through innovation in their production and distribution processes that companies manage to improve their cost structures and design “low cost” offers.
The way an offer is structured can be a considerable asset for a product. For consumer products, it is the “brand” effect (and everything that goes with it: story telling, communication, slogan, etc.) that can help you find your customers. This is what Guillaume Gibault did very well when he launched Le brief Français. He marketed a very classic product but built all around it, a name, a story and a slogan, while riding the wave of “made in England”, which allowed him to successfully enter a market already very competitive. And for products with a strong technological component, the packaging is even more important since it can also simplify the understanding of the product. One of the best examples of this is the Free Box, which has been a real innovation in terms of packaging: 3 main functions (internet, telephone and TV) combined in a single product with simple and competitive pricing.
Rather pioneer or competitor?
As you can see, in practice, the incremental innovation strategy is the most widespread because it is more accessible and is part of the “natural” evolution of a market. In fact, the more profitable a market is, the more it will attract new competitors who will seek to differentiate themselves from the players already present to also get a piece of the pie.
Using a disruptive approach is more difficult because it requires “creating” a new market, which induces risk-taking of considerable efforts. However, this observation can be qualified by the rise of digital technologies (Internet, mobile applications), which make it possible to have almost zero marginal costs and facilitate risk-taking. Indeed, producing 10,000 additional licenses for the software you market will not cost you much, which is not the case if it is to produce 10,000 additional pieces of furniture. We often tend to look for THE great revolutionary product idea, but it’s not necessarily the best approach. Sometimes it is enough to change the distribution strategy or the packaging of an existing product to find a new market. In fact, it all depends on your goal, the risks you are willing to take, and the innovation strategy that best fits your business.
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