In his book Change by Design, Tim Brown lays out his Ways to Grow Matrix, which maps innovation along a vertical axis representing existing to new offerings and a horizontal axis representing existing to new users. This is a simple and brilliant way for companies to gauge the balance of their innovation efforts by plotting their many innovation initiatives on this axis.
The issue many companies face today with innovation is their tendency to overcommit to a single quadrant by either being too optimistic and wanting all innovation to be revolutionary or being too cautious and staying in their comfort zones. Both typically lead to failure and a perception that the company must get back to the core business and shed its innovation efforts. The key to a successful innovation strategy is to diversify investments across all four quadrants of the innovation matrix.
The vast majority of innovation falls into the existing offering, existing user’s quadrant. This type of innovation is necessary for most companies and can sometimes drive significant gains. More often than not, though, this type of innovation falls flat, like the example of Pumpkin Spice Oreos that publications love to ridicule. Don’t get me wrong, flavor innovation is fine, but it can’t be the be all end all. It is certainly wise to innovate against your company’s core competencies without straying too far from your main expertise, but that can only be expected to deliver so much in incremental growth.
Extending existing offerings is an effective way to solve unmet needs of current customers. Typically this type of innovation either reinvigorates current offerings so that customers stay loyal to a brand or creates complementary offerings that drive incremental purchasing with something customers were not buying before. Either way, it focuses on the customer base you already have and creates new value for those customers.
The age-old saying that it is easier to grow with existing customers than gain new customers is true in B2B and B2C markets, so this type of innovation should be a key focus. Apple is a brilliant example of a company innovating in this quadrant. When people talk about Apple creating products consumers didn’t even know they needed, most of the time those consumers are already Apple customers. Innovating for that customer base was as important as trying to steal Windows customers during Apple’s explosive growth years.
Evolutionary innovation in the adapt quadrant involves adapting your company’s product or service to satisfy a wider population. Tesla is a great example of this. Tesla had overwhelming success when the company introduced its Model S car. To extend the company’s reach, Tesla then designed the Model 3 to be an affordable option for the mainstream market. This opened up a product for a population that previously could only dream of owning a Tesla.
Uber and Lyft are also great examples of evolutionary innovators with their Pool and Line features. By pairing passengers with one another, both companies offered a more cost-efficient solution to their existing service, bringing a swarm of new users to the platforms.
Revolutionary innovation is by far the most challenging and risky because it creates entirely new markets. Companies have to balance the high probability of failure with the enormous potential gain. A risk-averse culture will not allow for revolutionary innovation while an overly optimistic culture may rely too heavily on it. Spotify and Amazon are great examples of revolutionary innovation with music streaming and voice recognition. Music streaming changed the entire music industry and made the historical methods of selling to fans almost completely obsolete. Amazon, in contrast, created Echo products and opened up a category that never even existed before.
Balance across all four quadrants is paramount to successful innovation. People scratch their heads at why Google, Amazon and Facebook are so strong at innovation, while companies like Proctor & Gamble fall behind. The answer lies in the balance of innovation efforts and the risk-taking mentality of senior leadership. Like personal investing, diversification is key, and carefully defining each innovation initiatives quadrant and purpose should be a top priority.