6 steps: How market innovation works
If you are confronted with growth limits in your industry or face ruinous competition, you should look for alternatives to your previous field of activity. Your products, services or technologies could also be useful in industries where you have not been active before. Read in this blog post how you can win new customers, partners and sales markets with a market innovation without having to invent something new.
When you think of the term innovation, you usually associate it with a new product. However, there are many other forms of innovation. Market innovation is one of them. You try to transfer the technologies you already use to new fields of application.
However, the term market innovation has no geographical dimension. He does not mean resolutely opening up new regional markets. Rather, with a market innovation you are trying to use your existing know-how to penetrate industries in which you have not been active before. The measures for this are very different from those you use to expand into new regions.
In six steps to go - or no-go.
Essentially, there are six steps you can take to implement a market innovation:
1) What can your company really do?
At the beginning, it is important to get a precise picture of your own portfolio and technologies. It is helpful to abstract the function, benefits and properties of your products. With this abstraction to the fundamental functions of your products, you will automatically leave the silo in which your company operates. You should also seek external help with this step. This is because external experts may discover completely new fields of application for your products, your technologies and your know-how. This is because external partners are not so strongly focused on previously used applications as you and your employees are.
2) Which industries need your skills?
The list of your competences and the basic functions of your products can now be compared with the LEAD Transfer database. LEAD Innovation has developed this internal competence database using the scientific method "Technological Competence Leveraging". The database helps to find branches in which very specific competences are needed. It is based on the Global Industry Classification Standard (GICS) and contains information such as technical processes, products with their most relevant properties, customer benefits that companies should generate or generate, as well as sales and logistics processes. This comparison shows you which industries basically use and demand the competences that your company possesses.
3) Which commitments can pay off?
If you have found different industries in which your competencies are relevant, you should check which one of them is economically profitable. This step does not only include a market analysis in terms of size, competitors, entry barriers and customers. A large-scale telephone search within the relevant industries shows whether the competencies could cover not only current but also future needs.
4) What role could your company play in a new industry?
As soon as you have discovered sectors in which an engagement pays off economically, you should consider a concrete entry scenario. What happens if you enter this market with your products or technologies? How would your potential competitors, who use products with similar basic functions but different technology, react? Which companies could you work with? What place would your company occupy in the value chain? Which trends are relevant for you and your technology in the respective industry? In this phase, you also consider who to contact to discuss all these issues. Or which partners you would like to venture into the market together with.
5) What are the specific opportunities and risks?
Now you will have concrete discussions with industry representatives, early adopters and potential partners and discuss your plans together. These discussions give rise to opportunities and risks for possible market entry. You will find out whether the problems that your technology solves in the specific industry are actually relevant. These discussions will also help you decide whether you want to enter the market alone or with a partner.
6) Go or No-Go decision
In the end, you analyze all the information from the previous steps and make the decision to venture a commitment or not. Although the process has shown that several industries may need your technologies, it is advisable to focus on the most lucrative ones. Even if you have clarified many questions beforehand, entering a new market is still associated with a certain degree of uncertainty. Entering multiple markets that are still unknown to your company could therefore tie up too many resources.
External service providers help with the process
However, you should be accompanied on your way to a new market by an external service provider such as LEAD Innovation. LEAD Innovation ensures that the process runs smoothly and has a database to help you compare your competencies with other industries. LEAD Innovation also provides you with a network of experts. And also contacts the relevant contact persons in this interesting new industry. This effort should not be underestimated: in order to optimally prepare a market innovation, it is usually necessary to make more than 100 contacts. This is an effort that you and your employees, who are involved in day-to-day business, find it very difficult to manage on their own.
The four typical advantages of a market innovation
The advantages that your company derives from a market innovation are very individual. Generally speaking, you benefit fourfold from this:
1) New growth opportunities
If one of your technologies is completely new to another industry, you have a decisive competitive advantage over the established players. This results in high growth opportunities for your company.
2) Broader risk diversification
If your company is only active in one area, then economic survival depends very much on the development of this sector. If you are active in several sectors of the economy, you minimize your entrepreneurial risk. Because even if an industry is weakening, you can still count on others to grow or even boom. If you have a foothold in several industries, you can also balance seasonal fluctuations and make optimum use of your company's capacity.
3) New partners
In new industries you will meet new potential partners. This often results in opportunities to use your technology together with others in other fields of application. A successful market innovation can therefore also be the first step towards further innovation projects.
4) Low cost
A product innovation is usually associated with high costs because you have to develop something new. However, you don't have to invent anything for a market innovation. At best, some adaptations of your technology are necessary. This advantage always depends on the project. Generally speaking, however, market innovations are associated with lower costs than product innovations.
Market innovations prove their worth
There are already some companies that have supported LEAD Innovation in a successful market innovation. Getzner Textil is one of them. Their core competence is a special weaving technique, with which particularly thick and functional fabrics can be produced. Getzner no longer uses this competence for the production of fashion fabrics for shirts alone. In the meantime, the production of technical fabrics and corporate fashion has also become part of the company's divisions. Through a market innovation, LEDvance has found new fields of application for its spray coater, which was previously only used in the lighting sector. And the German manufacturer of medical aids, medi, has been operating successfully on the sportswear market under the CEP brand for several years. The latter project was not only a market innovation, but also a business model innovation.
Conclusion: 6 steps: How market innovation works
Innovation doesn't just mean developing a new product or technology and being successful. With a market innovation you can shine with your existing skills in front of a completely new audience. This not only opens up new growth opportunities for your business. You will also come into contact with new partners who can help you with further innovation projects of any kind.
Born in Lower Austria. At LEAD Innovation she works as Head of Innovation and focuses on agile innovation management via SCRUM.