In a recent opinion column Clayton M. Christensen, author of The Innovators Dilemma, identifies three types of innovation that drive capital markets.
Empowering innovations: These transform complicated and costly products available to a few into simpler, cheaper products available to the many. The Ford Model T, IBM’s personal computer, online trading at Schwab and cloud computing are examples.
Sustaining innovations: These replace old products with new, better models. The Toyota Prius hybrid is an example. When a customer buys a Prius they are buying it instead of a Camry, not in addition to.
Efficiency innovations: These reduce the cost of making and distributing existing products and services. Examples are mini-mills in steel and Geico in online insurance. These innovations allow organizations to do the same amount of work with fewer employees or resources.
Mr. Christensen’s hypothesis is that all three innovation types are needed for a robust, fully functioning economy. He goes on to offer ways to restore the ratio in the economy of the three innovation types which he feels are out of balance. For more details see the article A Capitalist’s Dilemma, Whoever Wins on Tuesday, published November 3, 2012, in the New York Times.
These innovation categories also provide a useful framework for evaluating the demand drivers for enterprise technology products and services. Most enterprise technology vendors claim they provide all three categories of innovation and in truth they do; no innovation falls discretely into any of above categories: The Model T empowered the average consumer and improved the efficiency of manufacturing processes.
That said, understanding the type of internal innovation need driving prospects can help guide sales and marketing strategies. Understanding what a prospect is comparing your solution against helps you better position your product and service. Are they looking for CRM or mobile capabilities they have never had before (empowering innovation)? Are they looking for an easier or more comprehensive means of protecting their data (sustaining innovation)? Are they simply looking to reduce the costs of their data center through cloud computing (efficiency innovation)?
These categories matter in terms of making your product or service relevant to prospects. If prospects are simply looking for greater efficiency but your sales and marketing efforts flog a “paradigm shift” your message is likely to fall flat. Conversely if prospects are looking to change the way they do business, empowering messages will resonate more than sustaining messages about features and functionality.
In reality your market is more nuanced than can be fully expressed with these three categories. However, they provide a useful framework for stepping back and assessing at a high level how well your sales and marketing efforts align with the perspectives of your market place.