Red Ocean and Incremental Innovation
Every day, we come across captivating stories of unicorns disrupting industries with radical innovation. SpaceX revolutionised space exploration, while Uber transformed the transportation landscape, and our very own UPI is transforming financial inclusion on a global scale. It’s tempting to believe that success hinges on disruptive innovation and that anything less than revolutionary is unworthy of our pursuit.
However, beneath this fascinating narrative lies a more nuanced truth — many successful innovations aren’t groundbreaking but rather build upon existing technology or concepts, offering incremental improvements. Let’s explore this further through the Red Ocean approach.
Red oceans are all the industries in existence today — the known market space, where industry boundaries are defined, and companies try to outperform their rivals to grab a greater share of the existing market. Cutthroat competition turns the ocean bloody red. Hence, the term ‘red’ oceans.
Red Ocean Innovation
The business landscape is saturated with “red oceans,” crowded market spaces bursting with competitors. These waters may be bloody, but they’re far from bleak. Despite what popular beliefs may lead us to believe, there are many successful businesses that find opportunities for innovation in these overcrowded spaces.
For example, Apple didn’t invent smartphones; they made them more user-friendly, elegant, and desirable. Google was not the first search engine, but it perfected the search experience through its minimalistic design and superior search algorithm.
There’s a common misconception that mature markets lack opportunity. However, this thinking ignores the vast number of existing customers in these markets who can help validate and refine your ideas. Established players often become complacent and fail to anticipate their customer’s needs, which opens the door for innovative upstarts.
Incremental Innovation, the right way
The idea of incremental innovation may lack the charm of radical disruption. However, this approach can be just as rewarding. Zoom is an excellent example of a company that capitalised on incremental innovation to achieve success in a crowded market.
When Zoom was founded in 2011, the video conferencing market was already well-established with players like Skype, Google Hangouts, Cisco Webex, and many more. However, Zoom identified specific pain points in the existing solutions and focused on addressing them.
Zoom’s primary innovation was building an easy-to-use video conferencing platform, which was not much different than what was being offered by other platforms. Zoom prioritised and simplified the process of joining meetings by allowing users to join with a single click, eliminating the need for complicated setup procedures or downloads.
To find the right kind of incremental innovation, focus on understanding customer pain points and exploring how your product can better meet their needs. By adopting an evolutionary, rather than revolutionary, approach to innovation, you may discover untapped opportunities that evade those blinded by the pursuit of radical disruption.
Differentiation and Defensibility
While radical innovation can give your product a unique edge, it doesn’t guarantee market success. Differentiation is critical but so is defensibility. Building upon existing technology or concepts allows you to benefit from familiar user behaviour and focus on creating sustainable competitive advantages.
Netflix demonstrates this strategy. Netflix didn’t invent the concept of movie rentals or even streaming services. However, they transformed the industry by focusing on a few key factors — convenience, personalisation, and content production.
When Netflix entered the market, movie rentals were already a well-established industry with players like Blockbuster dominating the space. Recognising the potential of the internet and digital technology, Netflix introduced a DVD-by-mail service, which eliminated the need for physical stores and late fees. This incremental innovation offered customers a more convenient way to rent movies.
As internet speeds improved and streaming technology evolved, Netflix was quick to capitalise on the opportunity. They introduced their streaming service, which offered customers instant access to movies and TV shows without leaving their homes. By continually improving the user experience and launching nifty features, Netflix further differentiated itself from competitors.
To sustain its competitive advantage and create a defensible position, Netflix made a bold move into producing original content. This paid rich dividends for them with a series of hit productions, and it made its peers take note. We now see that producing original content is a definitive strategy (prerequisite) for streaming platforms.
In conclusion, while radical innovation makes for compelling stories, it’s essential to see beyond the hype. There’s value in exploring established industries, embracing incremental innovation, focusing on differentiation and defensibility. Radical innovation is the next stop.
What do you think about this? Would love to hear your thoughts.
Until next time!
~ Sajid
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Sajid is a Strategy Consultant (Business & Innovation strategy) who works at the intersection of human behaviour, business design and innovation strategy. He blogs at Strategy Square with Sajid and tweets @sajidkhetani.
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