Technology Innovation is about ferreting our value from the market through satisfying customers out of technology ideas. Is not a great technology idea good enough to help customers get the job done better and generate profit? Unfortunately, that is not sufficient. Despite increasing the Flow of Ideas and risk capital to roll them out, why are more than 80 percent of innovative ideas failing to extract profitable revenue from the market? It’s worth noting that Google’s idea graveyard is already crowded with 293 dead ideas (as of November 2023). Does it mean that great ideas and risk capital to roll them out are not good enough? For ferreting out value from the ideas, we need a winning technology innovation strategy that gives us a game plan to win the race.
Technology innovation strategy refers to synchronized and timely responses for delivering and capturing value, by outperforming alternatives and competition, in helping customers get their jobs done better by leveraging technology, ecosystem, and externality possibilities.
Of course, we need empathy to understand customers’ pain points and innovative ideas for helping customers to get jobs done better. But that is not sufficient to create innovation success stories. In addition to addressing customers’ pain points, ideas must succeed to generate profitable revenue. It happens to be that in the competitive market, an innovator is not a solo player. There has been a race between competing innovations. Hence, willingness to pay for innovation not only depends on how innovation helps customers. It also depends on competing products. Furthermore, customers’ preferences, underlying technologies, and externalities keep changing. Hence, we need a strategy to win the unfolding race.
Technology innovation strategy for turning a humble beginning into a great success
The strategy should spell out how to penetrate, grow market share, and increase profit. It should indicate how to blend different innovative ideas like incremental or disruptive into a well-orchestrated move. The innovation strategy should determine whether innovators get into head-on competition with incumbents or start gaining momentum by progressing from the periphery. It should tell us how a humble beginning could grow as a Breakthrough performance. The innovation strategy must focus on attaining price-setting capability out of the flow of ideas, creating a blue ocean. Furthermore, to win the race, it should blend product and process innovations into a strategy to improve quality and reduce cost.
Importance, purpose and benefits of technology innovation strategy
- Importance–the technology innovation strategy is important because technology competence, ideas, complementary assets, brand value, and seed capital are not good enough to profit from innovation. Worth noting that Polaroid, Nokia, Sun Microsystems, Yahoo, Hewlett-Packard, Google, and countless others have found innovation a frustrating pursuit. Despite massive management time and money investments in developing R&D capacity, patent portfolio, and high-caliber teams, technological innovations frequently fail. Besides, once highly successful innovations face a hard time sustaining their performance.
- Purpose–the purpose of technology innovation strategy is to set a game plan for nurturing the humble beginning of innovation for helping customers get their jobs done better out of emerging technology possibilities into highly profitable and sustaining growing business.
- Benefits–technology innovation strategy offers several benefits such as
- leveraging the reoccurring patterns to avoid stupid
- offering a clear path and rational approach to team members and partners
- filtering out ideas and selecting the most promising candidate
- ensuring synchronized and timely response
- creating flywheel effect through a flow of systematic ideas
- preparing and responding accordingly before facing the crisis and unjust deviation
- having a reference framework for monitoring, evaluation, learning, and changing the course
Focus areas:
Although technology plays a vital role, that is not enough for technology innovation strategy to ferreting out value from the market. Here are a few focus areas for successful technology innovation strategy:
- Consumer preferences–serving latent consumer preferences in performing their jobs better is the primary purpose of innovation. Hence, the focus should be on empathy and Passion for Perfection to feel latent desires that are not often explicitly expressed by consumers.
- Technology possibilities and life cycle–technology inventions and their dynamic life cycles offer the possibilities of ideation for helping customers perform their jobs better.
- Ecosystem and partners–the implementation of ideas needs contributions from the ecosystem and partners.
- Evolution runway for scaling and sustaining innovation–the success of innovation hinges on evolution. Hence, the length of the evolution runway is crucial for increasing diffusion and sustaining innovation in the market in the midst of competition responses.
- The business model for delivering and extracting value–the success of innovation does not only depend on delivering value to customers. Often, the business model is important for extracting value.
- Internal capacity, culture, and organizational structure–the evolution of innovation and timely response in association with partners demand suitable internal capacity, culture and organizational structure.
- Externalities, standards, and policies–innovation evolution and diffusion depend on externalities like infrastructure, compatibility set by standards, and policy support and regulation.
- Alternatives and competition–innovations face barriers not only from the competition of offering similar products. Conventional alternatives also influence the adoption and willingness to pay for innovations.
Key takeaways:
- Technology competence, great ideas, risk capital, and high caliber team are not good enough to profit from technology innovations.
- Invariably, all technology innovations begin the journey at a loss. Reaching profit and sustaining it are key challenges.
- Technological innovation possibilities are fraught with pervasive uncertainties. They also risk getting caught in a Chasm. Managing uncertainty is a key challenge of technology innovation strategy.
- Global ecosystem formation through partnership is a key challenge to harness technology innovation possibilities.
- A technology innovation strategy is essential for ensuring a synchronized and timely response to turn technology possibilities into a profitable business and sustain it.
Research questions of technology innovation strategy:
- Technology–detecting scalable potential and managing technology uncertainty are two important questions in formulating a technology innovation strategy.
- Consumer preferences--knowing latent consumer preferences is a significant challenge.
- Deciding about a Reinvention wave- figuring out the suitable technology core and timing for pursuing a reinvention wave- poses significant questions in the formulation of a technology innovation strategy.
- Ecosystem formation- selecting suitable partners and managing the relationship to play a complementary role- is a significant challenge.
- Predicting competition responses--how to predict likely competitors’ response and prepare to respond in releasing successive versions.
Examples of successful technology innovation strategies:
The following examples state significant attributes of successful technology innovation strategies:
- Apple–the blending of consumer preferences and refinement of user interface technology possibilities underpins Apple’s technology innovation success. The development of the global ecosystem and the release of successive better versions have also been playing a meaningful role.
- Sony–a long journey of refinement of embryonic technology possibilities for unleashing Creative Destruction waves in consumer electronics and camera created technology innovation success.
- Amazon’s eBook–reinvention of paper books and its distribution underpins Amazon’s technology innovation success.
- TSMC–sustained improvement of the microchip production process for fueling smartphone waves led to outperforming competition and creating blue ocean in high-end microchip making.
- Microsoft and Intel- the continued advancement of graphical user interface-based computationally complex software for personal computers led to the scale effect for the success of technology innovation for Microsoft and Intel.
- Facebook and Google–-network Externality Effect and business model innovation underpin the technology innovation success of Facebook and Google.
Key practice areas for implementing the technology innovation strategy
Getting jobs done better–focus on consumer preferences
The journey of winning strategy begins in delivering an innovative product that customers find attractive to recruit to get their jobs done. Studies find that customers consider between 50 and 150 metrics in assessing the suitability of a product to execute any job. Hence, innovation strategy should focus on empathetically observing customers busy performing their jobs. Identification of the nature of jobs, job executers, competing products that customers are using, pain points, and technology feasibility to support idea generation to address unmet needs should be the beginning of forming an innovation strategy.
Leveraging technology and ecosystem partners to create scale, scope, and positive externalities
Technology innovation strategy for making quality-cost trade-offs irreverent:
The conventional strategy focuses on whether to compete on quality or cost front. Whether we focus on quality or cost is always a strategy debate. However, there are opportunities to pursue ideas that improve the quality and reduce the cost simultaneously. For example, the Microsoft Office suite is an excellent product. Although its development cost is very high, the per-unit cost is meager. Hence, by charging a minimal price, a tiny fraction of the development cost, Microsoft succeeds in generating significant profitable revenue.
On the other hand, customized software application developers have been failing to succeed by delivering poorer quality software at a higher price. Similarly, Airbus succeeded in making the cabin of A380 quieter while reducing fuel consumption. To make quality-cost trade-off irreverent, both Microsoft and Airbus had to make upfront R&D investments in strategic areas. For example, Airbus’ R&D led to the development of carbon fiber in reducing the plane’s weight, making engine size smaller, turning the cabin less noisy, and lowering fuel consumption.
Growing market through creating scale effect:
Growing market demands increasing diffusion of the innovation through different customer groups. Unlike innovator-type customers, others are highly pragmatic in assessing the value and cost. Furthermore, different customer groups have variations in Jobs to be done. For example, not every customer would like to use mobile handsets to schedule meetings or capture 3D pictures. Hence, innovation strategy should focus on customer segment-specific variations, whether through addition, removal, or advancement of features. It may lead to developing a family of products around the same core assets to avail the scope advantage.
Innovation strategy should also focus on attaining a high scale advantage in pursuing those ideas that create high perceived value and require a minimal marginal cost for replication. Oftentimes, though, those ideas demand high R&D costs. The change of the role of hardware with software also creates such an effect. Furthermore, for leveraging continued technology progression, the innovation strategy should focus on redesigning products at regular intervals so that innovation diffuses as a series of progressive waves.
Sustaining technology innovation strategy through flywheel effect:
Irrespective of the greatness, every innovation faces the reality of competition. It does not matter how well an innovation helps the customers execute their jobs; the willingness to pay keeps drifting downward as time passes. It happens due to competition responses in the forms of replication, imitation, innovation, and substitution. Even the magical iPhone could not avoid this reality. Hence, for sustaining, innovation strategy should fend off this reality by developing the capacity for releasing successive better versions at regular intervals. This is a solid strategic response for dealing with eroding willingness to pay and expanding the customer base. Without it, the iPhone’s success could have been history, as sales of the iPhone 1 came down to nearly zero within one year. To realize successive better versions, innovators should create a flow of ideas through in-house R&D, the acquisition of capabilities from the outside, and the supply chains.
Timing and leveraging externalities:
Timing highly matters in turning out innovative ideas into a profitable business. For example, some of the .com ideas that got bust in the late 90s have become innovation successes lately (2022). The underlying cause has been the timing. Due to the lack of resonance between innovative ideas, customer preferences, infrastructure, technology maturity, and standards, many great ideas falter. As Bill Gross identifies, although ideas, funding, teams, and business models matter, timing is the most important factor. Furthermore, innovation strategy should create and leverage positive externalities.
Reinvention for pursuing Disruptive innovation strategy:
All the innovative products are around a certain technology core. For example, all the microwave ovens have a common technology core. Similarly, all automobiles used to have the same gasoline technology core; now, an electric vehicle technology core has emerged. At the maturity of a given technology core, an opportunity to reinvent it arises out of an emerging one. Subsequently, the reinvention of the technology core opens up innovating new products and reinnovating existing ones. These dynamics open up the strategic possibility of forming new waves of creative destruction and pursuing disruptive innovation. For sure, pursuing a disruptive innovation strategy is quite different than incremental and sustaining ones.
Creating technology barriers and speeding up the progress of refinement
One of the common strategic options for creating barriers to imitators is to develop a patent portfolio. However, due to a long legal process and high cost, such an option does not work well in rapidly advancing technology innovations. As the evolution offers the opportunity of releasing successive better versions, eroding the market value of previous ones, speed of evolution could be an effective strategy for keeping followers in a disadvantageous position. Hence, an effective technology innovation strategy could to focus on the speed of evolution for consistently offering higher quality at less cost than followers can offer for attaining a price-setting capability.
Technology innovation strategy for creating an imperfect market: blue ocean
In the innovation race, not all companies make the same rate of profit. For example, although both LG and Samsung make innovative smartphones, unlike Samsung, LG incurs a loss. The equilibrium between supply and demand does not set the price that all innovators take. Instead, the innovation race leads to the price-setting capability by the smart performers to make a profit while compelling others to incur a loss. Hence, the competition in ferreting out value from the market creates an imperfect market, forming a competitor-free blue ocean. In an extreme situation, the winner takes all. Therefore, all the elements of an innovation strategy should form a synergy for creating price-setting capability. Of course, it would take place through cumulative effects.
The innovation strategy is at the core of systematically ferreting out value from the market out of ideas. Innovators should focus on creating Economies of Scale, scope, and externality effects for attaining the capability of offering the highest quality at a given price that nobody can match. It does not matter how great an idea is; innovation strategy is a must. In its absence, even followers take the lead from the inventors. Hence, a well-designed innovation strategy attaining a price-setting capability is an essential requirement.
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