Four Steps for Successful Marketplace Innovation
Organizations establish best practices during the early growth phase of their lifecycles in order to meet market needs and achieve maximum growth. When markets eventually shift -- usually due to competitive activity -- rates of return will decline.
Most organizations never successfully compete in the shifted marketplace. Instead, revenue growth flattens or declines until the organization fails. Companies can't shift with the marketplace because they're fixated on their established ways of doing business. Thus, the very products and processes that brought them success become obstacles when the marketplace changes.
GM, Polaroid, Montgomery Ward and Digital Equipment Corporation are all examples of companies that have tried and failed to adjust to changing markets.
A select group of organizations have demonstrated the ability to overcome this pattern by following a four step approach.
1. They reject historical reviews as well as core markets and capabilities analysis, instead implementing extensive scenario planning about the future. The more unbounded the scenario planning the more effective it appears to be.
2. They obsess about competitors. They cast a wide net, evaluating all possible competitors, even those considered fringe. They pay more attention to competitive analysis than customer feedback.
3. They are not afraid of implementing internal disruptions to the status quo that attack existing habits. They practice disruptions and utilize them regularly to identify business weaknesses as well as surface new opportunities.
4. They implement multiple projects in which management is given permission to operate outside the usual ways of doing business and dedicate resources to developing new successes.
If any of the steps are overlooked, organizations do not maintain or regain growth -- it's essential that all four steps be followed. These steps also work at transitioning functional groups, work teams, business units and even individual leaders. GE, Apple and IBM are good examples of companies that have been able to shift with or even ahead of shifting marketplaces by following all four of these steps.
Apple, for example, has only about 2 percent market share in mobile phones. On the one hand, this could appear nearly immaterial. But if we look at usage, we see a very different story.
iPhone application growth, which is becoming logarithmic, demonstrates a change in the marketplace. People are clearly using these devices for more than making calls. Apple isn't trying to defend and extend a market position. Instead, Apple is creating a market disruption by changing how mobile devices are used. Offering lots of applications increase demand for the iPhone (and iTouch) as not just phones, but as replacements for laptops and other Internet devices. This pulls people toward Apple's devices, which will generate strong future growth.
By constantly bringing out new uses, Apple disrupts the market for phones, computers and Internet access devices -- positioning its own products to be big winners as demand continues growing, and keeping Apple growing fast.
Today, we are in the middle of a dramatic shift in markets as globalization of resources changes competition. Those companies that have been most successful in the previous market conditions will have the toughest time dealing with the changes necessary to earn above-average returns in the post-recessionary marketplace.
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