Diversification: How do I develop search fields in new industries?
Diversification is a very demanding type of innovation in which new products are developed for new markets. In this article, we show you how we proceed to find sustainable fields of application in new industries.
Type of innovation with the highest degree of innovation
While with a classic product and process innovation or with a market innovation existing competences and technologies are used in new markets, with a diversification beside technology, marketing or service also the products and the business model must be adapted to the requirements of the new industry. Accordingly, this is also referred to as New Business Development. A well-known example of a very successful diversification is the introduction of the iTunes Music Store by Apple.
How to find search fields in new industries
Search fields define the framework for the search for innovation ideas in order to be able to plan innovations purposefully. Diversification is about strategically dealing with search fields that lie outside the current core business area.
If you want to deal specifically with the development of new markets in new industries, you have to go a further way than with the development of search fields for a product or process innovation. Because you are entering unknown territory with a new industry and cannot fall back on the experience of your traditional industry. The individual steps of the process are explained below in a brief overview:
1. Survey of the company's core competencies
Developing new competencies for new markets is an expensive business due to the high development costs. A cheaper and safer option is to find new ways of exploiting existing core competencies. New fields of application can also be found in markets that one would not consider at first glance. In this first phase, the project team is therefore concerned with gaining an exact picture of its own core competencies.
2. Finding industries for these core competencies
In the second phase, markets or industries are sought that are interesting with regard to the core competencies of the company. We compare the list of competences with the LEAD Transfer database. This internal competence database was developed by LEAD Innovation using the scientific method "Technological Competence Leveraging". The database helps to find industries and fields of application in which very concrete competences are required. It is based on the Global Industry Classification Standard (GICS) and contains extensive information such as:
- Products with their most relevant properties
- Customer benefits that companies should generate or generate
- Technical Processes
- Sales and logistics processes
After comparison with the database, the project team receives a list of 30 to 40 potential new fields of application in which the company's competencies are relevant. In a further process step, we reduce this list together with the project team and compare it with the Strategic Fit.
3. Evaluate the future potential of the industry
The research of the selected branches/application fields forms the basis for the derivation of relevant search fields and the development of the innovation strategy. However, before concrete search fields can be derived, the following questions must be clarified:
- Which trends are relevant in the new industry?
- Will the competencies of the company be in demand there in the future?
If the project team has found several industries in which the competencies of the company are relevant, then it should additionally be checked in which an engagement also pays off economically. In this process phase, it is therefore a matter of intensive examination of the new industry in order to evaluate whether a commitment is actually worthwhile. If you skip this step, you run the risk of investing in a new market that may look quite different tomorrow.
4. Derivation of concrete search fields
In order to specify search fields for the selected industries, qualitative interviews are conducted with users. This step is absolutely necessary if you want to enter a new industry with new products/services. In contrast to innovations in its own industry, the company does not yet have any experience with customers. It must be ensured that the company's competencies can cover not only current but also future needs. Therefore, already in this very early phase one begins to collect customer needs intensively, since one has considerably less know-how in the new industry than in one's own industry.
5. New Business Development
The results of this selection process are concrete search fields in which ideas for innovations in a completely new industry are searched on the basis of the company's core competencies. To find concrete ideas for new products or services, separate innovation workshops have to be held.
Conclusion: Search fields in new industries
In order to identify promising search fields in new industries, the project team first looks at what the company can really do well. Then, with the help of the LEAD Transfer database, one or more sectors are determined in which meaningful investments could be made. Whether or not this is the case is checked and evaluated on the basis of trends, etc. Concrete search fields are only derived once it has been ensured that the selected industry also offers perspectives for the company in the future.
Born in Graz, Austria. After positions as project manager & head of innovation of the project management at LEAD Innovation, Daniel Zapfl has been responsible for the success of the innovation projects of our innovation partners since January 2018.