Small ideas often lead to big changes.
In 1839, Goodyear accidentally dropped some rubber mixed with sulfur onto a hot stove. Instead of melting, it charred like leather, and both the surface and the entire piece of rubber transformed. This was the birth of vulcanization, a process he patented in 1844. This seemingly small innovation had a monumental effect on the footwear industry.
This kind of incremental innovation, focusing on the refinement of existing products, is championed by David Robertson and Kent Lineback in "The Power of Little Ideas." They argue that these little ideas, or complementary innovations, surround and enhance a company's key products or services, offering additional value to customers and creating a competitive edge in the market. This approach can be seen as a low-risk alternative to betting the farm on disruptive, market-shaking innovations which, while potentially transformative, can also fail spectacularly.
One vivid example besides Goodyear's vulcanization is the addition of camera technology to mobile phones. Initially, mobile phones served the sole purpose of voice communication. However, the incremental addition of a camera, and subsequently improved camera features, has fundamentally changed the way we use our phones, making them indispensable tools for capturing and sharing moments. Another one in similar lines is the incorporation of internet connectivity has turned mobile phones into portable gateways to the World Wide Web, enabling users to access information, social media, and a plethora of applications at any time and place.
Innovation that operates 'around the box' may not drastically alter the core product, but it significantly improves the user experience, enriches interactions, or branches the brand into fresh, sometimes unanticipated areas. By focusing on incremental complementary innovations that streamline the decision-making process or augment the usability of a product, companies can substantially boost the product's allure and overall value proposition. This approach to innovation goes beyond the pursuit of disruptive, headline-grabbing technologies. It involves a consistent drive to enhance existing offerings to satisfy current customers and exceed their evolving needs.
Behavioural economics elucidates why these incremental but strategic enhancements can be so potent. They cater to an innate preference for familiarity while also providing novel value, thereby triggering a consumer's sense of gain without the risk of loss.
This theory can explain the success of brands like Amazon with its Prime service. What began as a loyalty program offering expedited shipping has evolved into a vast suite of benefits including streaming video, exclusive deals, and more. This 'around the box' expansion retains the core value proposition—convenient and fast shipping—but layers additional services that tap into various dimensions of consumers’ lives. Behavioural economics suggests that such tiered enhancements, while comforting in their familiarity, also promise new layers of utility, thus encouraging consumers to integrate Amazon's offerings further into their daily routines.
Again, our favourite example of Lego comes up here. They didn't just create a brick but did a lot of complementary innovations to boost their sales like Star Wars, and the Harry Potter series, and even produced movies that boosted their sales.
The financial world is not immune to the power of little ideas either. With innovations like contactless payment systems, mobile banking apps, and digital wallets, the way we manage our finances has been transformed.
By leveraging complementary innovations and understanding consumer psychology, companies can enhance their product's value proposition and establish a stronger connection with customers. This deeper bond ultimately fosters increased loyalty, repeat purchases, and a sustained competitive advantage in the marketplace. However, this shift takes companies into uncharted territory. Often, offering a compelling suite of complementary innovations around the core makes it externally appealing but internally complex. Managing this requires an entirely new set of rules, processes, structures, metrics, and more. It involves navigating challenges in external innovation within existing internal structures that often lead to failure. More research is required into the challenges and opportunities of integrating complementary innovations into existing business models
What obstacles have companies faced? How have they sidestepped potential pitfalls? Ultimately, what has enabled the most successful ones to embrace this approach to innovation and where can the next incremental innovations come from?
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