In the search to constantly innovate and try to “disrupt” the market we often lose focus on the basics, where lots of value may still be untapped or providing a product/service/journey that we think will be beneficial because it has a bit of technology, AI or analytics behind it. Using technology to lead these ambitions is often the fallacy that proves to be the undoing. Disruptive Innovation stems from the entrepreneurial domain that references innovation that breaks down the barriers of complexity and prices, making it accessible to the broader market. We often loosely use innovation to refer to anything “new” that is attempted, such as enhancing a product or process. In the book “The Innovators Dilemma”, we are presented with two types of innovation that companies deal with. Sustainable innovation allows companies to incrementally improve operations to remain competitive and drive business as usual. In contrast, Disruptive innovation uncovers new categories of customers by harnessing technology.
While both types may be good for the prospects of a company, the difference between the two is important. The reason for this, is that each scenario requires a unique strategic approach, and this is essential in realizing the associated benefits. It is also important in determining how we react to competitors in our market. For example, disruption takes time which can often cause competitors to go unnoticed until their innovations are revealed to the market. Consider the depiction of the theory of disruptive innovation, in figure one. Research suggests that companies generally focus on sustaining innovations in a few well-established value areas (1), This creates a gap of unfulfilled needs (2), that develops over time for a subset of customers (that can also evolve into widespread needs). This creates the opportunity for competitors to disrupt (3), generally with business models that are agile enough to take the opportunity while incumbents may not be able to shift fast enough to counter. The result (4) is the disruption.
Figure 1: Theory of Disruptive Innovation (Source: MIT Sloan Management Review)
While this theory doesn’t capture the realities of sustaining innovation completely, it highlights the omnipresent threat of developing products or services devoid of customer needs and expectations, in the pursuit of technological advancement or improvement.
The Customer Experience (CX) that you intend on driving, develops from customer needs – it is a pivotal element in both types of innovation. This provides a steer that will allow you to target unmet customer needs and sustain innovation without overlooking key existing customer needs. Starting with your CX in mind, allows you to avoid costly technology decisions that may add little value in the future. Data has a pivotal role to play in this process, in order to understand your CX – you need to be able to measure it in a way that makes sense. While legacy measures such as Customer Satisfaction Scores (CSAT) and Net Promoter Scores (NPS) are able to tell a small part of your CX, the important parts (what your customer doesn’t tell you) largely goes unnoticed until it becomes an issue. This is critical, as customers are no longer comparing CX within industries but across. For example, the ease of signing up for a streaming service is being compared to that of signing up to a bank account. The miss match in the unfilled expectation opens the door for competitors. Using the understanding from designing your CX journeys, you are able to pinpoint what is important to measure to ensure each handover is successful without actually asking your customer. Companies that have accomplished this have outperformed in their respective markets and have higher success rates launching new products, as they are geared toward customer needs and not just chasing an innovation milestone.
About the Author
Dr. Durrel Ramrathan
Senior Analytics & AI Leader
MultiChoice