Tuesday, April 01, 2008

Innovating by scaling up

I thought the following snippet maybe obvious to many but it highlighted to me the breadth of what we mean by innovation. Although this discusses scaling to mass markets, it is more than appropriate to scaling in niche markets as well. My experience at DuPont suggests that companies can drive growth by scaling good ideas vs. just inventing them; many in fact felt this was the true greatness of DuPont…..

Costas Markides and Paul Geroski once more write about colonizers and consolidators in Strategy + Business (Issue 35). They now recommend large corporations to stick with what they do best in: operating at large scale. So instead of treating discovery as the only holy grail in I. (as many consultants are advising them apparently), they argue scaling up is actually as innovative as discovery. More importantly, it is also creating a tremendous amount of value. Moreover, the authors also explain the skills a company needs to excel in turning niche markets into mass markets. They are:

1. Focus on the price/performance trade-off :don't focus on creating a technically superior product but compete on a reasonable quality at an attractive price to mass (any size customer segment) consumers
2. Get a bandwagon rolling: alliance strategies, merge with a major rival or use marketing to create the illusion that a design has already become dominant
3. Reduce consumer risk in adopting the new product (universal to any market size)
4. Build a strong mass distribution channel (you want to build a strong distribution regardless of the scale)
5. Create complementary products (or support complementary products from other parties).

1 comment:

Bob Cooper said...

A great response from Rob Wolcott from the Kellogg School:


This is great! Finally, we are seeing a focus on the Transition and Scaling Challenge just as we’ve been saying for a few years in the KIN. In fact, our subject last year in June was “The Transition and Scaling Challenge.” The year prior, Mike Lippitz and I did a cursory literature review and found very little management literature focused on this critical topic. In late 2006, Mike and I presented at the Product Development Management Association (PDMA) Conference and challenged the researchers in the room to focus more attention to this critical stage in the innovation cycle. Markides and Geroski’s work suggests the field is finally coming around to the importance of this challenge.

I also recall the first time we met, Bob, you mentioned that the scaling phase of innovation requires a different kind of skill set, metrics and requirements. This is also reflected in Horizon 2 of the Horizons of Growth framework used by your team at DuPont and many other companies including IBM and McKinsey. Just this past week during our KIN event at Cisco in San Jose, Guido Jouret, Cisco’s CTO for Emerging Technologies, presented their innovation management model which explicitly calls out the differences between the early stages and scaling stages of innovation.

As corporations become better at generating and developing concepts for market, the innovation bottlenecks naturally move from the ‘front-end’ to the scaling phases post launch. I highly recommend Markides and Geroski’s work on this subject. Thanks for pointing it out to the community.

Best to All,

Robert C. Wolcott