Key take-aways from this article:
Measuring innovation KPIs begins long before your disruptive product or service is launched.
If you take a technology-first approach – be ready for fast-paced iteration.
If you take a customer-first approach – listen first.
There’s no single recipe for success; the art lies in mixing different ingredients to make your innovative idea come alive. Keep reading to find out what those ingredients are…
Disruptive innovation 101
Sounds like some everyday buzzword in our industry, but “disruptive innovation” is a term coined by Harvard Professor Clayton M. Christensen in 1997 in his book The Innovator’s Dilemma (pro tip: it’s a must-read for all innovators out there). That’s about 25 years ago – and in that quarter century, we’ve experienced the rise and rise of disruptive innovations like Netflix, Uber, Spotify and more. Mr. Christensen’s term has become a guiding principle for organisations from all industries, around the globe.
A disruptive innovation refers to a service or product started by nimble, resource-limited entities that find ways to challenge big players. These disruptors focus on overlooked needs and pain points and deliver something that fulfils unmet desires. While existing businesses continue to prioritise their main profit channels, these agile newcomers gradually ascend to a broader market. As their solutions gain traction, the masses gravitate toward them. And that’s when disruption has occurred.
According to Mr. Christensen, there are two main types of disruptive innovation:
Low-end disruptors enter the bottom of an existing market and present a new business model that moves them upmarket. They typically target the most price-sensitive segment of a market with offerings that, while perhaps not as feature-rich as those of established competitors, are good enough for many consumers. Examples would be Skype, Netflix’s DVD-by-mail service and cloud computing.
New-market disruptors bring something new to the table and attract customers who have never used or purchased the service or product. They create new markets and value networks, typically by finding new groups of customers or serving the needs of existing ones in entirely new ways. Examples here are GoPro, Duolingo and Etsy.
Enough theory… let’s see how it can be done.
No recipe for disruptive; but know the ingredients
Making an innovation disruptive is an ambitious goal. One that requires well-thought-out strategy and approach. Creating a list of ways you can set up yourself and your team for success makes it seem like it’s easy to accomplish. It’s an interesting contradiction actually: there’s not a recipe you can follow to create a disruptive innovation, but in the end anyone that did create something that shook things up was using the same basic ingredients.
How much of these ingredients you use, what order you mix them in or what you leave out is what makes your recipe and journey unique, but these are spices to consider:
Market research analysis: Be sure to set a clear focus! A common trap in the early stages is trying to solve too many problems for too many people. It’s better to keep your target group very narrow at the beginning and aim to be the best solution in this domain. Once you achieve that, you can still add more features and reach more customers.
Generate ideas: Bring together a diverse team with varying skillsets and customer touchpoints and set up brainstorming sessions or innovation workshops to generate ideas for new products and services.
Test prototypes: Gain a practical evaluation of your potentially disruptive concepts using prototypes or smoke tests. Gather feedback, refine the innovation, repeat, repeat, repeat.
Stay agile: Continuously assess the market, customers and feedback, and make strategy adjustments to stay ahead of the curve. As you continue, be ready to adapt further to scale when your innovation gains momentum. Have a robust plan in place to scale when your innovation gains momentum.
Make ethical considerations: Use the lens of “responsibility” to be sure you’re thinking about your innovation’s impact on people and the planet.
Measure impact: Set tracking metrics to validate learnings and analyse market share growth, revenue and customer loyality.
Business eco-systems: Explore opportunities of linking up with partners in completely different industries to see if you can create a new business model together.
Remember that the process of creating a disruptive innovation – and maintaining its impact – is on-going. It’s an evolutionary process. Remain open to feedback and be willing to pivot.
What comes first: technology or customers?
Good question! Even at Creaholic we have different opinions. The common denominator: react and pivot quickly.
Hot take 1: Technology first
While championing the customer's voice is a well-established mantra in innovation circles, there's a strong argument for the times when technology itself is the catalyst for unearthing new customer desires and opportunities. Often, transformative technology begins its journey not as an answer to a call, but as a call itself to the unknown possibilities.
The case of Generative AI is a good example of this - it didn't emerge to meet an existing demand but was born from a curiosity about the capabilities of cutting-edge algorithms. This vanguard approach to innovation requires not just the courage to venture into the unknown but also the agility to navigate it.
However, to make this approach work, your team needs to be quick on their feet, building rapid prototypes, testing the technology, especially seeing how people react to and use it, assess how it’s used in real-world scenarios, and make changes over and over again. This fast-paced tweaking makes sure the technology really meets a need and doesn't just float around without purpose.
Hot take 2: Customers first
At first glance, it makes sense to come up with something ground-breaking that changes the way we do things – because if it’s so revolutionary, customers will be naturally drawn to it. Right?
Though new technology can open the floodgates to opportunities and applications, there is another way: use-cases and customer needs should come first. This way, the technology or solution you create is aligned with an existing problem that requires a relevant and innovation solution. When you come up with this solution, your customers will be waiting for it; creating a technology you think people need or want may result in the opposite.
Let’s take Generative AI as an example. The disruptive technology is prevalent and everyone is searching for use-cases where Generative AI’s full potential can be applied. Turns out that’s not so easy. Instead, customer pain points worth easing should be explored, and then the right technology should be applied – Generative AI might not even be the right solution.
Identifying use-cases for disruptive innovation
This early step in the innovation process requires a combo of constant vigilance, an in-depth understanding of the market and a willingness to experiment and take risks. If your company is already well established, continue doing what you do best! At the same time, investigate opportunities and spot areas where your product or service overlooks potential customers. You can use a bottom-up or top-down approach to do this.
In a bottom-up approach, you use the brainpower and perspectives of employees in all departments with various degrees of customer interactions. They are coached and encouraged to explore, test and pitch business ideas that could spark something disruptive. This could look like an intrapreneurship programme, similar to what Raiffeisen established (which led to three launched business ideas).
With a top-down style, a smaller, specialised team (usually strategists or innovation departments) works intensively on this assignment and is dedicated solely to the task of entrepreneurship and incubating potential business ideas.
Strategic forecasting can be analytical, but the Future Thinking workshops we arrange are more immersive. Future Thinking workshops can help you and your team take a different approach in identifying opportunities. When engaging in Future Thinking, you consider development outside of your industry while monitoring broader social and economic trends. We empower participants to get out of their everyday roles and reimagine what is on the horizon to create something for consumers – or a new need – in a more tangible timeline of five to 10 years down the road.
How innovation should be measured
KPIs to measure innovation should be put to use way before your innovation is on the market. In fact, the KPIs that will be the most impactful are those that focus on your innovation process – starting with how you and your team come up with ideas and how those ideas become a reality. Customer acquisition, retention, sales, media coverage – these traditional KPIs are important, but not enough. They give you insight into how your new innovation eventually will perform, but not on what can be used or changed within your organisation on the way there.
Keep in mind: for KPIs to be effective, they need to be part of your organisation’s innovation system or framework. A good first step is to think about what questions your KPIs should answer. You might want to know:
Will this idea lead to market success?
Are we driving innovation efficiently and effectively?
Are our investments in innovation paying off?
Are our investments aligned with our strategic goals?
The innovation KPIs you choose to focus on should fit together while also measure performance on different levels such as the business as a whole, the innovation funnel and the project itself. Within each of these levels, you can focus on employees, customers and finance.
KPIs to measure innovation
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Avoiding failure
In the success of a disruptive innovation, a little luck can go a long way. And honestly, it may be a required ingredient. Fortune favours the diligent and hard-working! In the absence of luck, you can also find success by spotting and avoiding several major pitfalls.
Resistance to change within your organisation or lack of support from leadership to take risks.
Poor timing or a mismatch between the innovation and actual market demand.
Failure to pivot and sticking to the original strategy without being open to feedback or adapting to market changes.
Legal hurdles or regulatory constraints that stifle the progress of your innovation.
Faster competition that launches the innovation or a similar version before your team does. Proper IP research or a solid IP strategy could be helpful here.
Inability to scale when growing beyond the original market or industry. Scaling requires addressing new challenges in manufacturing, distribution and customer support.
Maintaining positive company culture. Having great company culture when you’re starting with a small team is easy. Evolving the culture and keeping it positive requires careful attention when the team size grows into the tens or hundreds.
Let’s get disruptive
Don’t forget the WHY: you’re doing all of this to future-proof your business. Disruptive innovation is a key lever for growth and sharpening your organisation’s competitive edge. But it’s not just about a unique idea – it’s about transformation and introducing something that forces the evolution of the status quo. And… it’s about knowing how far perseverance will take you and when it might be time to move on. The push for disruptive innovation is crucial for survival, and it’s also a cut-throat arena where there is much to be gained by remaining open and resilient. Having a plan and being open to changing that plan is both the burden and the adventure of today’s innovation leader.
Creaholic can help you at every stage of your disruptive innovation journey:
Trendspotting and Future Thinking
Building an innovation strategy
Developing new products, designing new services and creating new technologies
Innovation training for creative thinking and ideation
Enhancing company culture
We’re curious to hear how Creaholic can support you in your disruptive adventures.
