The idea of incremental improvements normally causes experts to cringe. The pace of innovation is incredibly high in today’s age and the intense competition for market share gain is increasing by the day. Innovators, leaders and experts most often focus on creating breakthrough innovations to create new markets and categories for new technologies and product lines – which also help them in establishing a significant lead over others. While this is true, the importance of incremental innovation must not be underestimated either. Its market impact can be immense, even though it might not always be clear or be calculated at launch.
Breakthrough innovations tend to change our life for good, and in many cases, leapfrog us into a whole new world of possibilities with new benchmarks and rules. The invention of the steam-engine set a new benchmark for productivity and brought the industrial revolution; the invention of the airplane set a new benchmark for our travel reach and time; and the invention of the internet changed the way we do everything in our daily lives today. Numerous such breakthrough innovations have improved our living conditions significantly. However, the initial versions of all of them were often basic platforms which provided a framework for further innovations and improvements. It then enabled their widespread use and subsequent monetization. These incremental innovations or improvements often hold the key to mass adoption.
One of the most successful and recent example of incremental innovation is the iPhone. While smartphones existed before Apple entered the market, it was mostly the incremental innovations of large touchscreen, the app store, ease of use and the overall experience, etc. which enabled the iPhone to be the first in making smartphones mainstream. It created a whole new ecosystem which made the iPhone a preferred medium for accessing the internet and our mails, finding directions, playing games, conducting online transactions and generally becoming a central part of our daily lives. This year, for the first time, more than a billion smart phones will be shipped. As per IDC, smartphone shipments have doubled in two years. It is incremental innovation which has brought a fundamental change in our behavior and created a market that will be worth $1.6 Trillion by 2018.
A disproportionate percentage of incremental innovations are happening in industries such as hi-tech, telecom, automotive, aerospace, medical, industrial, etc. There are clearly huge opportunities in all industries, markets and regions to drive blue ocean strategies for incremental innovations. Much around us has hardly changed, staying pretty much the same for several decades. One company trying to change this within the ambit of our homes is Nest. It currently has 2 products in the market: a thermostat and a fire and smoke alarm. Neither of these product categories has changed over the decades and though in use every day, the way we use them is still very archaic. Nest is changing that with sensors and intelligent algorithms which enable these devices to understand user preferences, interact in a more human manner and talk to similar devices to ensure an incident is reported in a more informative manner. While fundamentally doing the same thing, the enhanced and connected user experience is tremendous. At $100+ for the fire and smoke alarm and $249 for the thermostat, Nest has created a new market place which has traditionally been based on cost and undifferentiated products. Incremental innovation is making strides all around us.
In a report published by Bain on Trillion-Dollar Growth Trends to 2020, $5 Trillion of incremental GDP expected during this decade will be on account of ‘Everything the same, but nicer’. The power of incremental innovation is huge as they have the ability to expand the market and also upgrade products and services into premium categories.
Many times, the right discontinuity manifests small inconveniences which become the catalyst for incremental innovation. They drive the need for change. Creativity and pervasive technologies are the key ingredients which must be leveraged to fuel these gaps. One can look around and find examples across industries, markets and regions for incremental innovation: Uber for hailing a ride on a tap through mobile apps, Square for enabling individuals or small commercial set-ups to accept credit/debit card payments through their iOS or Andriod-based devices, Flipkart for their ability to collect cash on delivery, etc. All are great illustrations which provide huge benefits on account of incremental innovation.
The power of incremental innovation may just be the next big thing this decade…