Disruptive Innovation to create a market where you are the standard to follow

Disruptive innovation is actually a low-risk strategy !

"We can't solve problems by using the same kind
of thinking we used when we created them."
Albert Einstein

In a high-risk environment, a disruptive innovation is actually a cautious strategy.

Factors of uncertainty are complex and it is difficult to foresee their development. However successfully carrying out a disruptive innovation is possible, even despite this lack of visibility. Here’s how you innovate while minimizing risks.

Change your perspective on the issue at hand

• Break through the straitjacket:
  Your thinking habits are a stranglehold for innovation. They stop you from imagining other possibilities. We have a tendency to presume that this or that is impossible, especially when we have been experts in a particular domain for several years.


• Widen the range of possibilities :
  You have to think outside the box, beyond your usual way of thinking. This means that you have to question commonplace convictions and beliefs and ask yourself “why not?”. This makes the realm of possibilities bigger. It helps you go beyond the paradigm that stipulates a strict relationship between actions and results.


• Rethink the fundamentals:
  Our usual way of thinking is a dead end. Business models focusing too intensely on incremental innovation often lead to absurd results. For instance in the deodorant sector everybody wants to do better than everybody else, which means making the deodorant’s effects last longer. In the end a deodorant that lasted 72 hours was released ! Who needs a deodorant that lasts 72 hours ? The only way to avoid such absurdities is to engage in the disruptive innovation procedure. This consists in questioning our most fundamental beliefs, as well as the facts that we take for granted.

You don’t need to be a creative genius to successfully carry out a disruptive innovation.

It is often a wise idea to hire an external consultant that is unaffected by the usual way of thinking in your sector.

Designing new products with a small budget

• The trial-and-error principle:
  He who succeeds in his first attempt learns nothing because he cannot know why he succeeded. However he who proceeds through trial and error comes to understand what doesn’t work, and why it doesn’t work. He then comes up with new ideas and carries out new trials. This is a fundamental principle. Trials that do not work are not failures! They are stepping stones.


• Make use of a pretotype :
  The pretotype phase is the step that precedes the prototype phase: it is a simulation that sets the conceptualized objects in motion. By quickening the process it gives you the means to know whether you are on the right track or whether you are heading for a dead end. Those who design web projects use this technique. When the results are good, they know that they can keep searching.


• Draw on existing technologies :
  This allows you to reduce risks. Disruptive innovations do not need huge budgets since existing technologies can perfectly well be reused in the process. Disruptive innovations are mainly business model innovations, not necessarily technological ones. They therefore allow for caution.
  See the following article:
  Disruptive innovation, redirect existing technologies


• Listen to the heavy users of your product :
  They are better at detecting faults and failures than lighter users are. This product improvement process eventually leads to the creation of a new product that responds to needs that were previously unfulfilled. You have then therefore created a new market in which you have a competitive advantage (an advantage for the consumer that your competitors either do not provide or provide less well) that is sustainable.
  See the Salomon case study:
  Salomon's example: 7 pieces of advice for disruptive innovation

These pieces of advice are taken from the conference held on the 6th of April by Olivier Soudieux and Benoît Sarazin. Olivier Soudieux is a trainer and a speaker at conferences. He provides the world of business with his expertise on demanding environments. Benoît Sarazin is a consultant and a specialist in disruptive innovations.

Disruptive innovations: 2 fundamentals that you must bear in mind (4/4)

The Salomon case study brings to light 2 fundamental characteristics of disruptive innovation: The risk factor is tiny and it’s all about passion…

Disruptive innovation, a very low-risk strategy

• Incremental innovations are much more expensive and high-risk than disruptive innovations.
  Improving a product that is already very good is a complicated process. R&D budgets become huge. And yet faults in the quality of a product can always happen. Product recall is very costly the world over. Or you may make the mistake of removing a feature that consumers found essential. Your whole product range is then dead and you have to start again from scratch.


• Investments are small in disruptive innovations
  We saw previously that technological investments are small. Similarly, the budget needed to fund community management is much smaller than that required to fund a typical media campaign. In fact, a disruptive innovation only means changing business models.


• Disruptive innovations are very low-risk :
  You are launching a product in an area where customers did not have a solution to their problems in the first place. You will be seen as a pioneering business who innovated in an attempt to provide a solution that was unavailable elsewhere. Your brand image will not suffer even if this solution does not find its own market. The risk is therefore minimal.

At the heart of disruptive innovations: passion!

• Salomon’s corporate culture is cultivating passion !
  Salomon’s employees are all passionate about mountain sports. Here is how Patrick Pons de Vier, manager of the company’s Footwear business unit, describes his team:
  “Challenges give us motivation; we are passionate about serving athletes, about our jobs. We custom-make shoes for our athletes, and though our competitors provide the same service for cheaper, our athletes stick with Salomon. We are passionate about helping them improve their performance. Salomon’s values are: integrity, innovation, and a taste for challenge. Being attentive to our customers comes naturally to us since we have passion and are motivated by the idea of improving our products. We start from unsatisfied needs and we innovate from there. We like dreams that are a bit crazy. Salomon’s employees were motivated by the challenge that switching from making skiing equipment to hiking equipment represented. When we were bought out by Adidas, the integration was difficult. We were then bought out by Amer, a financial holding. Financially speaking it was David versus Goliath. However in terms of culture, our corporate culture is so strong, so firmly established and so vibrant that it is very stable. Salomon’s employees have an astonishing ability for recovering and bouncing back, despite going through 3 layouts. We want to help this sport grow; it’s a bit like wanting to change the world.”


• Passion is essential in disruptive innovations
  Only passion can enable you to change your way of thinking, in order to find or invent new concepts. It is crucial in disruptive innovation. You realize that you can do things that previously seemed impossible. For instance, did Salomon imagine that its profit margins would be multiplied by 2.5 within 5 years? That is the key to disruptive innovation.

Creating and preserving your competitive advantage in the face of much stronger competition (3/4)

Salomon was able to preserve its competitive advantage in the face of much stronger competition thanks to a disruptive innovation. Here Benoît Sarazin (FarWind Consulting) explains how Salomon kept a step ahead of the competition by using the Web 2.0 – and especially its community management features…

Preserving a competitive advantage in the face of much stronger competition

The competition will always end up becoming conscious of what you are doing, even when you target a niche market. They have the means to wipe you out in no time. The solution? Communities of enthusiasts. Salomon was faced with giants such as Adidas and Asics that were taking an interest in this new market: They began to sponsor races and were signing ridiculously big contracts with athletes.

Community Management : a strategic choice

Powerful competitors have huge budgets. It is pointless to try to beat them on that front. That is why Benoît Sarazin recommended community management for Salomon, at a time when it was not yet mainstream. Salomon at first teamed up with 3 community managers and now has 13 of them in 14 countries.

Values shared by the community: passion

Community managers do not have primarily financial motivations. They are all passionate about running in nature and are referred to by the community. They are passionate and enthusiastic at the idea of being a core part of an adventure of their own making. They are recognized on a national level for their athletic achievements. They want the sport to grow, they want to spread it to more and more people and increase the number of aficionados. One of their favorite topics to comment on is the achievements of Killian Jornett, a champion whose performances are incredible. Being relatively young he is largely ignored by the mass media, but his exploits in the Kilimanjaro are followed by thousands of fans.

Community Management : cheaper and more efficient

This system is very efficient because connoisseurs give advice on what equipment is the best. When a highly regarded athlete recommends Salomon shoes, it creates a snowball effect. The amateurs then spread these recommendations to their peers and they too become brand ambassadors. This is a cheap and powerful tool for Salomon: a community management contract is much cheaper than a standard media campaign. It basically consists in word of mouth, multiplied and magnified by the World Wide Web.

Being close to your customers is a major asset in making your competitive advantage sustainable.

• Be accessible and attentive to passionate consumers
  The average amateur can join Killian in one of his races. Being able to run 10km with an idol is a powerful feeling for an enthusiastic amateur. Community Managers are accessible and attentive to nature running enthusiasts. They spread information on specialist websites and on social networks. They answer questions and ask some themselves too. The community reacts immediately and exchange views widely. Pictures on Facebook are uploaded very soon after an information is spread. And finally the torch is passed onto specialized stores.


• Geographical proximity
  Stay local – act on a regional or even national level, but not a global one. Salomon organizes races on a local, regional, or national scale, with the involvement local specialized stores.

The contractual obligations of community managers

Community managers have certain duties to fulfill : updating information on a regular basis, attending certain sporting events, participating in in-store events and training sessions, being assistants at certain events, etc… They help Salomon’s teams at Annecy respond to quality issues.

4 rules to follow to succeed in community management

• Be transparent: refrain from stonewalling. When there is a problem, admit it.
• Make it tangible, not abstract: this is not a dream
• Share a common passion: common to employees, amateurs (consumers), community managers…
• Keep it local: it is a fallacy to think that communities are global. Communities can only be local. The marketing must be local, in the field, done in partnership with the community.

Is community Management possible everywhere?

Yes, even where there is no community of enthusiasts. It is the key to knowing the opinions of the web-goers of the community that you are targeting. This in turn gives you the opportunity to understand their needs and to be attentive to their frustrations, desires and wishes. For this to happen you must first engage in a conversation with the community.

Community Management is an essential tool in creating disruptive innovations and in preserving your competitive advantage over your competitors, even when they are much stronger than yourself.

7 pieces of advice for creating a competitive advantage through disruptive innovation (2/4)

Salomon succeeded in becoming the leading business in its market by creating a disruptive innovation. Read on for an explanation given by Benoît Sarazin (Farwind Consulting) of how Salomon multiplied its sales figures by 2.5 in only 5 years!

The first step in disruptive innovation : identifying a new market

• How Salomon identified unfulfilled latent needs :
  For a number of years Salomon had been equipping athletes of a little-known sport, “adventure racing”. It is an extreme sport that is very demanding on shoes. For instance adventure racers take part in “Raid Gauloises”. Salomon’s teams were looking to improve these athletes’ performance and so designed shoes that were more stable, solid and protective, as well as lighter and faster. However the “adventure racing” market was too small and, with Benoît Sarazin’s counsel, they looked for a larger market.


• Identifying a starting niche :
  The « trail running » market was small compared to the « running » market, but Benoît Sarazin saw potential for growth there. He noted that trail runners aspire to run in the wild, far from asphalt. However, since there was no specialized footwear for this, mountain runners were using running shoes. Therein lied an unfulfilled latent need since running shoes are not well adapted to mountain running: runners slip, they hurt their ankles etc…


• Anticipating fundamental market changes :
  By drawing an analogy with Mountain Bikes, whose market has become much bigger than the Road Bike market in the last 20 years, it is perfectly reasonable to think that the trail running market will become much bigger than the city jogging market. Is the human body made to run on asphalt? In the long term Sunday joggers (who make up the biggest part of the market) will stop modeling marathon runners and will “get off the road”, as it was done with bicycles 20 years ago.

7 pieces of advice for creating a competitive advantage through disruptive innovation

1. Starting small and thinking big :
   You predict that a given market, while small, will become much bigger. That means having a vision of the future. But you must start small, with a starting niche…


2. A single competitive advantage is enough at first :
   Provide a simple but very competitive offer in your starting niche. When you launch a product in a niche, what you bring to the customer is based on a single benefit : Salomon’s “trail running” shoes were more stable on treacherous terrain. Nothing more. And yet Salomon sold 3 million pairs of its first “trail running” shoes in 5 years…At first, compared to the competition, the iPhone was merely simple to use. It did not even have a 3G connection, a fact that some competitors did not hesitate to make sarcastic comments about. They did not laugh for long…


3. Provide an offer that is based on existing technologies :
   These trail running shoes use only traditional materials and techniques that are used in other domains, such as cross-country skiing and hiking clothes. Creating was involved, but strictly speaking no revolutionary technologies were used.


4. The disruptive innovation allows you to make significant profit margins
   The advantages provided by Salomon’s shoes to its customers are such that Salomon can sell at a price higher than that of the competition. And since significant investments in R&D weren’t necessary in creating the shoes, the innovation brings about some great profit margins. Typical of disruptive innovations!


5. Make distribution simple :
   The target is running equipment stores, who hold the largest share of the market. But Salomon does not have a presence there. The right strategy is therefore to start with distribution networks in which Salomon has a presence – namely stores specialized in hiking. The idea is to reinforce its presence there (especially by progressively broadening their product range) and to then target stores specialized in running equipment.


6. Progessively develop and adapt your product range in order to keep your competitive advantage :
   3 years later Salomon launches a mixed shoe that is perfectly adapted to both walking AND running. Finally, in 2011, Salomon launches “all-terrain” shoes, good for both trail running and running on asphalt.


7. Keep on improving, steer clear from a 2nd disruption, so your competitive advantage becomes long-lasting :
   Do not rest on your laurels, do not wait for your competitors to imitate your product! Going from one disruptive innovation to another without exploiting them properly is like creating a new market for the benefit of your competitors. Therefore once the disruptive innovation is on its way you must keep your status as pioneer and innovate progressively. That way once a competitor is ready to launch an product imitating your own you are already one step ahead. In this way your competition makes you look good… By belatedly imitating your product they endorse your innovation, and you become the standard to follow in your market.

Disruptive innovation : The Salomon case study (1/4)

How did Salomon succeed in becoming the leading business in its market, even in the face of competition much more firmly entrenched than itself? The conference held on the 7^th of December “Communities of enthousiasts, a new lever for success in innovation” provided answers to this question. Here is an account of the conference for those who could not attend (in 4 articles).

Defining disruptive innovations…

Up until January 2007, Apple was an information technology business, not a telecommunications one. All business strategy theories claim that attempting to infiltrate a mature market is a bad idea. There was therefore no reason for Apple to invest in the saturated telecommunications market. Apple had no particular know-how in this sector and yet it was able to revolutionize the telecommunications market by launching the Iphone. It is now unquestionably the benchmark in that market. Now that is a disruptive innovation!

Disruptive innovations are within reach of small businesses!

The good news is, carrying out a disruptive innovation doesn’t mean that your name has to be Steve Jobs. After all Salomon did it! 5 years ago its Footwear department was at its worst. Its sales figures have since been multiplied by 2.5! Here’s how…

The 4-part account of the 7th of December conference :

1. “What are disruptive innovations?”
2. “7 pieces of advice for creating a competitive advantage through disruptive innovation”, click here
3. “Creating and preserving your competitive advantage in the face of much stronger competition”, click here
4. Disruptive innovations: the fundamentals that you must bear in mind”

Introducing the speakers :

Benoît Sarazin : Consultant, specialist in disruptive innovations, founder of FarWind Consulting. As Marketing Manager for HP Benoît cut his teeth in the High Tech sector where markets are constantly being transformed. His role consisted in creating new markets. He is an expert in anticipating forthcoming markets. He helps businesses create markets where they are the standard to follow. He has been a consultant for Salomon for 4 years.

Patrick Pons de Vier : Manager of Salomon’s Footwear Business Unit. Salomon’s sales figures exceed 220 million euros, 90% of which are made through export.

The FarWind Club conferences :

The FarWind Club conferences are a cycle of bimonthly conferences on topics at the forefront of disruptive innovation. Within this framework Benoit Sarazin (FarWind Consulting) and Patrick Pons de Vier (Salomon) talked about their experience of disruptive innovations on the 7^th of December 2010. A conference on “Deciphering weak signals to create a disruptive innovation” was held on the 3^rd of February 2011 with Philippe Cahen, a specialist in imagining future business scenarios.

A conference on “How to innovate in an uncertain world” will be held on the 6^th of April 2011 with a specialist of the extreme, Olivier Soudieux. To sign up for the next conference, click here.

 

Disruptive innovation : redirect existing technologies…

Steven Johnson’s book « Where good ideas come from » details the factors that promote innovation ideas. Of all the interesting concepts that were introduced in this book, “exaptation” was the one that struck me the most. It is the process by which you redirect a technology from its initial function to a new function. It concurs with one of my recommended principles of successful disruptive innovation.

What exactly is exaptation?

Both in biology and business, exaptation happens when a given characteristic or ability is redirected from its original function. For instance, feathers first appeared on dinosaurs in order to keep them warm. The Archaeopteryx then used these feathers for flying. Crucially this particular behavior had not originally been provided for by nature.

The advantages of exaptation:

Exaptations give you the means to find new growth drivers and to create a sustainable competitive advantage because:

• You reduce access costs to innovation through the use of existing technologies,
• You open up new, unforeseen fields of opportunity by redirecting these technologies towards new applications and uses.

Some examples of exaptation:

• Salomon’s Trail Running shoes were designed using technologies that Salomon had used for other sports. They are now the standard in Trail Running. 
• The GPS was originally designed to guide submarine-launched missiles towards their land destination. Later, when this technology became available for use in the private sector, it was redirected towards several new uses, such as helping motorists find their way.
• Digital Sensors were invented in order to catch starlight in electronic telescopes. They were then used to invent digital cameras.
• Text messages (SMS) were originally intended for maintenance technicians working for telecom operators. They were then made available as a service for the general public.   

Disruptive innovations are within reach of small businesses

Exaptations are both a simple and powerful concept. It isn’t absolutely necessary to make massive financial investments to successfully innovate.  Exaptations make disruptive innovations accessible, although only if they are part of a well-designed innovation strategy:

• Be attentive to the market and especially to untapped latent needs
• Anticipate market evolutions (with the help of weak signals)
• Think outside the box of prevailing ideas in your sector.

Here is the question that you must ask yourself: Do the technologies at your disposal enable you to prosper on a different market?

Read about another exaptation example:
You can order Steven Johnson’s book “Where good ideas come from” on Amazon.

Disruptive innovation : the takeoff of Facebook explained…

The founder of Facebook, Mark Zuckerberg, used one of the key principles of disruptive innovations: thinking big and starting small.

He thereby gained a sustainable competitive advantage that skyrocketed Facebook to much higher success levels than those enjoyed by the social networks that existed before it. That is what struck me when I saw “The Social Network”, the movie which tells the story of Facebook’s creation.

Think big by targeting a high potential market

When Mark Zuckerberg launched the first version of Facebook, he was satisfying an essential need of internet users: showing themselves online and sharing aspects of their lives with friends. He was aiming a huge market. He does not know its size and does not quite know what Facebook will look like in a few years. He only knows that it’s going to be big.

That is the advice that I give to my clients who are undertaking a disruptive innovation: think big. Target a universal and widespread need. Provide a considerable advantage in a market that has a big potential.

Start small with a niche that will act as a stepping stone

Although Facebook’s potential seemed huge, at first Mark’s objective was very limited in scope. Facebook’s first edition was a closed social network for the benefit of Harvard University students. Its functionalities were limited and Mark took a few weeks to program it alone. He then extended it to other American, and then worldwide, universities. Now it hosts approximately 500 million users.

Follow Mark’s example. When you create a new market, start small. In this way you will cut investments. You will immediately get feedback from customers in your niche and you will adapt your offer to their demand, making it high quality. It will then increasingly win over new customers.

Aiming high and starting small seems paradoxical. And yet it is a key to disruptive innovations. It is the means to winning over increasing numbers of loyal customers. It is the key to building a sustainable competitive advantage that will make competition powerless.

How to find a good innovation idea ?

I am often asked this question. Everyone’s got ideas.
The real question is “How are ideas transformed into commercial successes ?” or

"How do you ensure that an innovation gives you a sustainable competitive advantage ?”

Analysing creative processes is not enough.

In his book “Where good ideas come from”, Steve Johnson gives us some useful but limited insights:

• Ideas take a long time to mature.
  Tim Berners-Lee took 10 years to create the World Wide Web.


• Several minds create them.
  Apple imported and used most of the ideas to create the iPod.


• The good news is that the Internet has sped up our ability to communicate and create good ideas together.
  Take communities that develop freeware programs. Their products are more innovative and of better quality than those developped more traditionally.

Steve Johnson’s demonstration is ingenious but incomplete. An innovative idea is only good if it is followed up by commercial success. Therein lies a real challenge.

Setting up a real innovation strategy is the only way to “find a good innovation idea”.

These are the advices that I give to my clients:

1. Focus on innovations which provide solutions to latent (unsatisfied) needs. Before the iPhone existed the possibility of downloading thousands of applications on a mobile device was a latent need: having never done it before, we had no idea of its potential uses.


2. Start by targeting a niche. Apple started out by selling the iPhone to its loyal customers before it tackled the mass market of mobile phone users.


3. Give your first customers the means to “preach” to a larger public. The iPhone’s touch screen was such a breakthrough that the iPhone’s first users were proud to show it off to their friends.

With an innovation strategy, you will find commercially successful innovation ideas. Take a pragmatic tried and tested method on board!

 

Sustainable competitive advantages in the agricultural sector are within reach!

Does agricultural sector have a future in a highly competitve market ?

Yes, as long as you create a disruptive innovation that gives you a sustainable competitive advantage.

That was the “Vergers de Gally” company’s successful bet…

The rush towards Organic: a competitive advantage that will not last forever…

Each month a growing number of farmers try their luck at growing organic foods, a market whose growth rate exceeds 10%. But what will they do when the market matures and its growth rate drops? To avoid this pitfall, some create innovating concepts:

• Picking foods on a farm: a limited business model…
  It's IKEA-style agriculture: the customer picks his own fruits and vegetables just like he assembles his own furniture. The product is free from high labour costs. The producer sells at a competitive price whilst keeping his margins. But the model is restricted to local clienteles. Furthermore if neighboring farms adopt the same model, the proffered competitive advantage disapears.


• Organic baskets...
  Customers order an assorted basket whose content is chosen by the store in advance. The prices are cheap and the food is garanteed to be fresh. However this concept is limited by a number of issues arising from customers (e.g. the impossibility of choosing the basket’s content).

The success of the Vergers de Gally: a truly sustainable competitive advantage…

“Les Vergers de Gally” are farmers who deliver organic fruits to companies directly. The company makes baskets of organic fruits available to employees and renews them every 2 or 3 days. It donates a small portion of its sales to a cancer research institution.
It succeeded in carrying out a disruptive innovation. It shifted from a producer market to a services market. Its competitive advantage is truly sustainable because:

• It has an upmarket strategic position. The company gives its customers an unprecedented advantage (good health in the workplace). It gives companies the means to express their commitment to sustainable development in an unheard of fashion.
•  It started in a niche market where it had no competitors.
• Its market has the potential to be huge (encompassing all employees of all companies).
• When eventually it faces competition, it will keep its competitive advantage through constant innovation in order to respond to the emerging needs of its clientele.

If you want to gain a sustainable competitive advantage, ask yourself the following questions:

• Have you created a new market through a disruptive innovation?
• Have you created a unique value that nobody has thought of offering yet?
• Have you anticipated the course that your market will take in the future?
• Have you set up a strategy of constant innovation in order to keep your competitve advantage?

Through this disruptive innovation, an ordinary farmer has succeeded in creating a new market. He is the leader of a niche that will develop and become a massive business. He has all of the necessary assets to maintain a sustainable competitive advantage.

The secret to Amazon’s success in disruptive innovations

Throughout the last 4 years Amazon has reoriented itself towards a domain of activity which is very far from its original purview: it shifted from trading in e-commerce to cloud computing and is now the leader in this emerging market. What were the keys to its success?

With AWS (Amazon Web Services), the company offers computing power on demand to companies. AWS is the perfect solution for companies who need computing power and who do not want to invest in data centers. Voyages-SNCF.com (French train company) uses it to test new programs before they are released on its own website. Turbo Tax runs its tax declaration program, whose use is largely confined to a few intense days per year, on AWS. Facebook uses it to host thousands of online gamers.

2 simple ideas for success :

• Seizing an opportunity created by a technological disruption.
  Amazon understood the potential of cloud computing when four years ago nobody could predict whether the disruption would be a transient fashion or a major phenomenon.


• Betting on its internal potential.
  Thanks to its ability to process great volumes of transactions for the purpose of e-commerce, Amazon organised itself to make its composition available to other companies.

Questions that you must ask yourself :

This perfect example of a disruptive innovation strategy begs the following questions:

• Is there a technological disruption in your sector that paves the way for new innovations?
• Do you have abilities that may be of interest to clients outside of your usual market because of their level of excellency ?
• Are you ready to use these assets to create a new market?

The answer to these questions may be the beginning of a new period of growth for your company.