3 types of Innovation strategies to ponder about during the current macro economic downturn cycle by using the lens offered by the late Professor Clayton Christensen.
1) Disruptive Innovation
- new product/service that initially aims for low-end market and gradually improves its feature and quality offering to move up the value chain and finally replaces the incumbent.
- able to capture new market share OR even create new markets from nonconsumption
- able to create more values
- high risk investment that would not necessary achieve the expected Return of Investment
2) Sustaining Innovation
- improved/upgraded version of the existing product/service offering
- able to maintain or slightly expand the existing market share with better feature and quality offering
- normally only able to create the profit growth from the price difference between the original product and the upgraded product
- potentially overshoot the needs of the existing customers (of what they actually want) and thereby withhold their spending
- customers who have bought the upgraded product/service will no longer possess/buy the the existing product (older product version before getting upgrade), i.e., consumer who bought Toyota Camry will no longer buy another Toyota Altis; your PC that has upgraded to Windows 11 is no longer required to have Windows 10 license
- companies normally discontinue the offering of existing product line to force the existing customer base to subscribe to the upgraded product/service (however companies risk pushing customers to their competitors who offer cheaper product/service with "bare minimum features")
- low to medium risk investment
- better prospect to achieve the projected Return of Investment
3) Efficiency Innovation
- doing more with less
- no market share growth
- no creation of new value
- squeeze the value out of the existing resources, cost and revenue by improving efficiency gain besides tightening internal spending
- low risk investment (the impacted star employees who are overworked might be leaving for companies that offer Disruptive Innovation and Sustaining Innovation opportunities)
- stagnant growth on the balance sheet due to no market share growth and no new market creation
- the capital that was saved from Efficiency Innovation can be invested into Sustaining Innovation or Disruptive Innovation as mid to long term investment
- when the capital released from Efficiency Innovation is being kept on recycling into another Efficiency Innovation cycle, the company might eventually lose its ability to retain talent and launch new products or services that would wow the market and media
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