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How to Innovate in a Flat Market

Robert G. Cooper

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The Challenge

Most companies have ambitious growth goals. The trouble is there are only so many sources of market growth. Markets in many countries and industries are flat and increasingly commoditized; achieving growth in market share is expensive; and acquisitions often do not work. For most companies, product development means line extensions, improvements and product modifications and only serves to maintain market share. Markets aren’t growing, so firms increasingly compete for a piece of a shrinking pie by introducing one insignificant new product after another. The launch of a truly differentiated new product in mature markets is rare these days.

The Solution

The answer is true innovation – breakthrough products, services and solutions – that create growth engines for the future. This means larger-scope and more systems-oriented solutions and service packages. Examples such as Apple’s iPod, are often cited. (Note that Apple did not invent the MP3 player; nor was this opportunity in a Blue Ocean; in fact there were 43 competitors when Apple launched!) What Apple did succeed in was in identifying an attractive strategic arena (MP3s) where it could leverage it strengths to its advantage and then to develop a solution that solved users’ problems. The result - an easy-to-use, easy-to-download MP3 system, which also happened to be “cool”.

There are dozens of other similar examples of true innovation where companies created “big concepts” and bold innovations, typically an integrated system or total solution package for the customer, and won:

P&G’s Olay skin-care business
Once almost given up on by P&G, the business was rejuvenated based on the “one big concept” - preventing the signs of aging on women’s faces. The company searched for and found the needed technology (outside of P&G) and relaunched the business with multiple new products: Regenerist, Definity, Professional, and others. Olay now does over $2 billion in sales annually.

Barnes & Noble, U.S. bookseller
Barnes & Noble, the huge U.S book retailer, operates hundreds of bookstores across America. Facing new on-line competition, the company has boldly launched a reading system called Nook. One can download books from B&N’s huge library and do so wirelessly (anywhere in the U.S. and Canada, on the fly, direct to the tablet, and with no need for a computer).

Sanifair in Germany
The company developed a systems solution to a problem we all face when travelling on the highway – finding a clean and well-equipped restroom. The company developed and operates a chain of public toilets that are clean, open and modern, especially at service centers along highways. They charge per use, but the user gets a voucher for the shop in the service center, thus up-selling the rest-room user to spend more in the service center.

Green Mountain Coffee Roasters
The company began humbly as a small café in rural Vermont in 1981, and soon was doing its own coffee roasting and selling to local hotels and restaurants. Management saw a unique consumer need and developed an inexpensive and convenient single-serving coffee-maker for households. Green Mountain created the K-Cup and Keurig system and signed up well-known coffee makers (Tully’s in Seattle, Newman’s Own, Timothy’s in Canada, and others). The business model was similar to Gillette’s razor-and-blade model, namely sell the machine cheaply and make money on the K-cups. The company has been enormously successful, achieving 2009 sales of $800 million, and has been able to win against corporate giants like Kraft and Nestle.

There is a pattern here: this is the type of innovation that we need, and this is what will generate the growth desired by so many firms.

larger and more systems-oriented solutions and product-service packages.

Five Innovation Vectors

Our benchmarking studies of hundreds of firms reveals that five vectors must be in place to undertake this type of innovation to yield bolder and imaginative projects that create integrated, larger and more systems-oriented solutions and product-service packages (Figure 1).

  1. Develop a bold innovation strategy that focuses your business on the right strategic arenas that promise real growth.
    Most businesses focus their efforts in the wrong areas – on flat markets, mature technologies and tired product categories. Break out of this box towards more promising strategic arenas with extreme opportunities.

  2. Foster a climate and culture that promotes bolder innovation.
    Leadership is vital to success. But if senior management does not have the appetite for these big concepts, then all your initiatives and systems will fail. Senior management plays a vital role here in promoting an innovative climate in your business.

  3. Create ‘big ideas’ for integrated product-service solutions.
    We have identified the ‘top ten methods’ for generating breakthrough new product ideas. Use them! Order a copy of Generating Breakthrough New Product Ideas today!

  4. Drive these ‘big concepts’ to market quickly via a Stage-Gate® process designed for major service-and-product innovations.
    Just because these projects are imaginative and bold is no reason to throw discipline out the window. In fact, quite the reverse is true. Adopt and use an efficient and effective Discovery-to-Launch process that drives these large and bold projects to market.

  5. Build a solid business case and pick the winners.
    Most innovation teams we see don’t get the facts and build weak business cases; the result is that many worthwhile innovations don’t get the support they need to be commercialized. It’s essential to do the front-end homework, and so build a compelling business case. Then make the right investment decisions – evaluating ‘big concepts’ for development when little information is available. Note that financial models don’t work well when it comes to evaluating major innovations, because the data are often wrong. But other methods can be used to make these tough Go/Kill decisions.

So if you are looking to create game-changing new products for your company, then consider how you fare on the five innovation vectors. Each vector strongly impacts success and if you truly desire this type of innovation then all five need to be effectively deployed within your organization. Now might be a good time to critically assess whether your company is ready for the challenge.

About Stage-Gate International

Stage-Gate International’s highly knowledgeable and experienced team of advisors have guided hundreds of organizations to successfully implement a best-practice Stage-Gate Idea-to-Launch process in as little as 4-8 weeks. We accelerate time-to-benefit with an extremely attractive return on investment by:

  • Crafting a balanced Idea-to-Launch Process Solution of expertise, advice, facilitation and best practices that fits your company’s situation, sense of urgency, and budget.
  • Collaborating with you so that your Idea-to-Launch process is implemented rapidly and your organization is equipped to ‘own’ and manage the process as quickly as possible.
  • Leveraging our market-leading accelerators, Benchmarker™ and SG Navigator™, to not only deliver all of the foundational elements straightaway, and ‘clear the path’ for rapid achievement of a  best-practice Idea-to-Launch process.

Dr. Robert G. Cooper

Robert G. Cooper is one of the most influential innovation thought-leaders in the business world today. He pioneered many groundbreaking discoveries in product innovation, including the Stage-Gate® Idea-to-Launch Process, now implemented by almost 80% of North American companies. Having spent 40 years studying the practices and pitfalls of 3000+ new product projects in thousands of companies, he has assembled the world's most comprehensive research in the field of product innovation management. His presentations and practical consulting advice have been widely applauded by corporate and business event audiences throughout the world, making him one of the most sought-after speakers.

A prolific author, Dr. Cooper has published 100+ academic articles and thirteen books, including the best-selling 'Winning at New Products', now in its 4th edition. He is the recipient of numerous prestigious awards including the Crawford Fellow from the Product Development and Management Association (PDMA) and the Maurice Holland Award from the Industrial Research Institute (IRI). He is also Professor Emeritus of Marketing and Technology Management at the DeGroote School of Business at McMaster University, and Distinguished Fellow at the Institute for the Study of Business Markets (ISBM) at Penn State University.