Catch and Release: Good for Fishing, Bad for IP

As markets mature, customers give preference to types of innovation that leverage experience and know-how.  In the consumer sector, for example, marketing innovation and experiential innovation come to the fore—the sort of thing that separates Apple, Startbuck’s and Nike from their would-be competitors.  In industrial markets, meanwhile, process innovation and business model innovation get privileged treatment—areas where operations like Cisco Services, G.E. Medical, and Caterpillar’s remanufactured engine group have all shined. 

None of these forms of innovation directly touch the offers that these companies make and ship—they are all relatively similar to those that their competitors field.  Instead what differentiates them is their ability to mine a broad base of experience to discover insights and best practices, capture them as intellectual property, and then exploit them either by distinguishing their own operations or by licensing them to partners or customers.  Done well, this type of innovation is extremely lucrative as it entails no cost of goods.

Most companies with established positions in mature markets have the wherewithal to pursue one or more of these types of innovation, but tragically very few actually capitalize on the opportunity.  Instead of harvesting their insights and institutionalizing them, they take a “catch and release” approach to IP.  They do not take the time or exert the discipline to capture and scale their best practices.  Instead they reinvent and rediscover these insights over and over, or worse, lose them entirely.  In short, anecdotally they know much; programmatically they leverage little. 

There is no excuse for this behavior, particularly in a mature sector where differentiation is increasingly hard to come by.  The productivity gains alone would pay for the work involved, and the follow-on upside more than warrants the opportunity cost entailed.  Depending on your organization and its management team, this might be a failure of intellect, imagination, or will: take your pick—all three lead to commoditization and decay.  Alternatively, get you team off its duff and get cracking on a ready-made opportunity to improve your market position.

Comments

[Sanjay Dalal]

But isn't this leading to "sustaining innovation?" If you are only focused on your own customers, insights gained thereof, and innovating to meet their needs, eventually this leads to sustenance or incremental gains.

Marketing, experiential, process and business model innovations tend to lead to evolutionary gains, not revolutionary results - or do they?

Did Cisco for instance focus too much on their core customers, and lost the disruptive innovation that a Juniper created?

Markets mature. Markets evolve. However, there is always room for differentiation. For example, in a matured market such as automobiles, the new hybrid cars are differentiating and creating disruption. In a mature market such as Airlines, JetBlue created disruption.

Companies must have dual strategy: sustaining innovation on the one hand that combines the elements of marketing, experiential, process and business models that generates incremental revenues and profits; on the other, tangible mechanisms to create disruption.

Great innovators do both; e.g. Toyota's Innovation Factory:http://creativityandinnovation.blogspot.com/2006/10/toyotas-innovation-factory.html and Apple's Innovation Mastery:
http://creativityandinnovation.blogspot.com/2006/10/ipod-apples-best-innovation.html