When the term “innovation” is used, it is often mixed up with “invention.” While an invention is typically linked to research and development, the term “innovation” is about marketing and sales. It goes back to Joseph Schumpeter in the 1930s. He distinguished innovation from invention: The core of an innovation is the commercial use of an invention. Hence, adding the “commercial” to innovation may sound like a tautology. However, it underlines that it is about new ways of bringing existing products and services to the market.
GPS navigation technology was invented in the 1970s. The use of this technology in civil cars started in the late 1990s. This basic military invention became an innovation for civil cars decades later. Therefore, many innovations are products or even “waste products” of existing products and they go back to fundamental inventions which influenced every business sector. True inventions are rare.
Is it paradox? Though companies are striving hard for inventing something new, customers complain that their needs were not taken seriously. On the one hand companies invent, innovate and launch products that nobody needs and on the other hand, customers do have unmet needs.
The crux of innovation is about fulfilling customer needs, whether customers know their need or whether they are created. Commercial innovation is an approach that does not wait decades for a new invention. It is about identifying existing customer needs and existing willingness to pay. In areas, where existing products, services or concepts do not fully fit to these needs. It is the opposite of bringing new products to new markets. It is a market-oriented and fast approach of materializing growth potential in existing markets.
Understanding Commercial Innovation
The term “commercial innovation” is not broadly used. Misinterpretations are widespread. One of the most common misinterpretations is putting commercial innovation to the corner of “fake innovation.” In fact, some companies were suspected to just change a name and launch an old product as a new one. The change of “Raider” to “Twix” was such a farce. The same product got a new name and marketing strategists anticipated the critical customer feedback and created an ironic story about the innovation fake.
Indeed, marketing science has a name for such procedures: product re-launch. This is only condemnable when such re-launch suggests a new groundwork or basic innovation. In fact, sometimes pharmaceutical companies get suspect of such behavior and this is sometimes linked to commercial innovation.
Although such re-launch is a common way of re-accelerating product life cycles, this is not a commercial innovation. A commercial innovation is a real new way of bringing products to the market. A commercial innovation may be accompanied with a re-launch. But re-launch or fake innovation is not the core of a commercial innovation. Even, if Google hits may insinuate this.
Implementing Commercial Innovation
When dealing with ideas about commercial innovation, the following recommendations exist:
If a commercial innovation initiative is planned, keep the idea secret as commercial innovation is about peeling the onion from the marketability to the core of the product benefits. This will bother the whole organization.
Chose a distinct and separate team working on these ideas and let it report to a level above the current market organization. Existing managers may smell the disruptiveness of the new ideas and try to work against them
Be sure that you engage positive thinking and creative strategists with this task. Peeling this onion is about finding hundreds of hurdles why it will not work. Self-motivation is key when finding out how difficult it is.
Use a “4F” approach of being inspired by other commercial innovations, even in other industries. Whilst the analysis of family and friends is crucial for the implementation, the analysis of fellows and foreigners gives new ideas and will fuel the innovativeness.
Shift R&D budget to this commercial innovation initiative. If you see this initiative just as a low-budget task for some intern, you’ll hardly get results that really justify to be communicated as an “Innovation.”
If you do not start with this initiative, some competitor, channel partner or a new entrant may turn the logic of your business model with an existing product or service.
Imagine you still own a Video Rental Shop and though people are still watching movies at home, you will lose 80 percent of your customers. Unless you change.
Michael Scholl is Managing Director at Homburg & Partner, a marketing consultancy based in Germany. You can reach him by emailing Mr. Eduard Mesares, Head of Communications, at Eduard.Mesares@Homburg-partner.com.