Innovate for the 1 percent, solve for the 100 percent
Put a human on the moon. It sounds like a simple ask nearly a half-century later. At the time, such an ambitious goal had never been set. In 1958, NASA was founded with that very goal in mind. And its competitors? The Soviet space program was already halfway there.
We all know how the story ends. Neil Armstrong. One small step, one giant leap. In the process of solving for its goal, NASA created countless products that have found their way into our everyday lives. And we rarely take notice. Everything from baby foods to handheld vacuums, solar panels to space blankets.
If you’re looking to innovate your product, the book has been written many times. Literally. Clay Christensen’s The Innovator’s Dilemma is the gold standard. Set up an internal labs division, maybe even acquire a few other companies. Both road-tested and proven ways to innovate product.
But I think there’s a better way.
Two sides to innovating today
When innovating your product, there’s always the temptation to go after larger customers. And why not? It means more revenue and greater adoption. So you start building more and more features for fewer and fewer customers.
Before long, a wave of new technology and products come in that are good enough for a broad base of users. You find yourself vulnerable, and you’re left with two options:
Acquire what you’re missing. Most of the innovation we see today is the result of acquisitions. And while they might seem cut and dry, there’s an art to acquiring a company.
Back in 2006, Disney purchased Pixar. It was the stuff of (animated) dreams. Pixar’s contract was nearing its end and Disney’s own animation studio was fledgling. Acquiring Pixar meant Disney could freely work with the most gifted minds in storytelling. The merger brought blockbusters back to Disney with films like Frozen and Tangled.
So let’s break down an acquisition:
- Rather than gobbling up competitors in a last ditch attempt to stave off disruption, a product-driven company should really look to solve for the customer first.
- Find a complement to your existing product that adds value for the customer.
- Then, fold and integrate it into your existing products.
Launch a lab. The worst way to innovate your distribution model, Christensen believes, is to do it within your current distribution model. He’s unequivocal about it.
He suggests companies start an internal labs team to do things differently. Then, like acquisitions, fold those innovations back into the larger company. It’s a MOAT play that effectively wards off other companies trying to scale your walls. You could call it a startup within a startup.
Most companies forge ahead with their product and never look back on the space they’ve traveled. What ends up happening is these companies are the ones building larger, more sophisticated hard drives when, suddenly, someone else builds a more nimble, cheaper flash drive. An internal lab is supposed to solve for that.
Here’s the thing about labs and acquisitions
The real risk companies run with acquisitions is that a lot of them don’t work out. Well, that and they’re expensive. The risk of running an internal labs team is that your core product team loses focus.
Years ago, I heard someone say, “It’s not my job to innovate.” And it was a major holy sh*t moment in my career.
As a product leader, you need to make sure your core team maintains a mentality where it’s everyone’s job to innovate. It’s no one’s job to just hold the tiller.
Build for the 1 percent to solve for the 100 percent
Putting a man on the moon gave NASA an ambitious goal. It tasked them with embracing sophisticated customers and building products specifically for them.
The key to product innovation, however, is not to leave your innovations in the high-priced tier. Instead, you should actively work to make those innovations broadly applicable by pulling them all the way down to your free products. Do not assume they will trickle down on their own.
Take the semiconductor industry, for example. The spark of innovation ignites with a 286 chip one year and it’s used in the $5,000 computer. The next year, a 386 chip hits the market and that’s the one sold and used in the $5,000 computer. The 286 chip? Well, that now gets sold in the $2,000 personal computer. And the next year, a 486 chip comes out and everything shifts once again. What starts to happen is every year the higher-end becomes more powerful, and there’s this runoff into the lower-end of the market.
More than just a way to innovate your product, it’s a corporate strategy. As other companies try to get into the market, they’ll never secure the foothold they need in the low end of the market. The sophisticated runoff from your high-end innovation becomes your competitive advantage.
The motion works both ways, too. Find a way for amazing new free things to grow into being paid, and find a way for amazing high-end paid things to be free. This way your core team can innovate without your having to open a labs team or acquire a new company.
The one piece of advice I can give to companies looking to innovate their product? Shoot for the moon. Imagine what you’ll create in the process.
Christopher O’Donnell is VP of Product at HubSpot, where he drives product management, design, and user experience. Previously, he was Director of Product at Performable before it was acquired by HubSpot. He has also been a startup founder, advisor, and product/UX leader.