From Pain Points to Demand Creation
When you ask a company about innovation, they talk about how their product manager asks customers what they want and how their R&D delivers new features or new products. Lots of companies are following the pain points to solution approach and engage in evolutionary innovation. Although evolutionary innovation is the best way to grow revenue from an existing customer base in the short run, there are several disadvantages that most underestimate.
Evolution means assuming the status quo will never change
Evolving products based on customer feedback assumes that the current solution is the best possible solution for the customer and only some features are missing. Showing status-quo-breaking innovations, a.k.a. disruptive innovation, to customers will often yield a negative response.
Whoever went to the postal service to try to sell email servers as the next generation letter [letter 2.0], will have had a very negative reply. The postal service would not understand why they would want to offer free-of-charge instant delivery to their customers because it canabilizes their existing business. Instead if you would offer a sorting machine that can sort double the amount of letters in half the time for half the cost, you are a lot closer to a sale.
Whoever read “the innovator’s dilemma“, will understand that disruptive innovation is often rejected by the current customers because it either canabilizes their business or is not resolving their specific pain points.
World-leading companies focus at most 90% on evolution and at least 10% on disruptive innovation. Some like Amazon and Apple seem to invert the equation.
Companies that do not focus on disruptive innovation will sooner then later run into problems. Disruptive innovations are becoming more common place and occur more frequently. Whole industries are being transformed as we speak. Existing players can disappear in a few years:
- Books versus Kindle and eBooks
- CD, DVD and Blu-ray versus P2P, mp3 and DIVX
- Harddisks versus memory cards
- Data center per company versus Cloud IaaS
- PC with Windows versus Tablet with Android
- Physical PBX versus Cloud-based PBX
- Roaming versus VoIP
- Nokia feature phone versus iPhone and Android
- Circuit networks with pay per minute versus flat fee data traffic
- Physical routers, firewalls, loadbalancers versus virtual networks and Openflow
- High priced spectrum licensed versus white spaces
Towards a world of demand creation
Companies that want to innovate disruptively should focus on demand creation. Demand creation is about understanding customers hassles. Customers hassles are different from their pain points in the sense that customers do not always understand their own hassles, and even less tell you.
People never told Nokia that their phones were such a hassle to navigate the internet and to install applications on. Customers will not tell you that you need to build a touchscreen phone and app store to solve the hassles.
Disruptive innovators find those activities that customers waste a lot of time with, think are ackward, cost a lot but deliver few value, etc. by questioning, observating, networking and experimenting.
Disruptive innovators at the same time focus on developing technology capabilities in innovations that have a potential to change industries, e.g. VoIP, cloud computing, big data, collective intelligence, etc.
Disruptive innovators work together with early adopters to map out their hassles into hassle maps. To understand if solutions for these hassles are like painkillers [big market] or just vitamines [no or small market]. They propose the simplest solutions possible. Those that do not require a user manual. First on paper and only when everything is validated [technical solution, business model, distribution, purchasing stakeholders, marketing] do they build a real prototype. Ideally customers can personalize the new solution towards their individual needs. Listening to customers is key. Being able to add features frequently and validating in a statistical manner which one contribute to the bottom line, allows innovators to rapidly go from an early beta to a ground-breaking product.
Disruptive innovations do not need to cost millions to launch. Good books on the matter are: Nail it then scale it, Demand: creating what people love before they know they want it, the lean startup, etc.