Technical Innovation doesn’t inherently create markets

This post is also the subject of a “leadership minute” video at

The March 2015 Harvard Business Review article “Red Ocean Traps” discussed a number of management mistakes that inhibit strategies that create new markets. Trap three is: “Confusing Technology Innovation with Market-Creating Strategies”, where the authors point out that market creation is not inevitably about technical innovation. They claim that the reason market-creating products win is because they are simple to use, fun and productive. The customers of these products no longer notice the technology, but notice the ‘cool’ new features they get. This was the case with Uber, and Quicken — all technical but not the reason they created new markets. It was not the case with the Segway – technically marvelous but not supported by other transportation systems. It is value innovation, not technical innovation that creates new markets. Organizations missing this point may develop products that are too complex or different.

I have experienced this first hand. Unfortunately the article doesn’t mention how to avoid the trap, or how to get out of the trap once you’re in it.

The European Business Review did a study ( which included a measurement index that revealed that the top 200 companies in the Forbes 500 are losing, on average, 10.2% of their profits due to value-destructive complexity. That’s an aggregate $237B annually.  The article gives a six point “simplicity revolution”, which is practical if the business you are trying to simplify has acknowledged its own complexity. Once you get there, it’s a relatively straightforward change management engagement driven from the top.

The larger challenge in my opinion is when a startup’s leadership doesn’t see that their initial focus is too complex. How do you get the leader to understand? The problem described in “The Innovator’s Dilemma” is that if you focus too much on what customers think they want, you’ll miss the pivots necessary as the environment changes. The converse of that, however, is not true. You cannot ignore the customers’ desires. If you don’t know your customer, and you don’t have a plan to find and engage him, you will almost certainly lose. So although I didn’t find a reference for this, I think the ‘lowly’ Business Plan, with target customers, is an essential tool.

If your CEO doesn’t have one, keep pushing until you get one. You need a defensible business plan with a go-to-market strategy that makes a compelling argument for how your identified customers will discover and want to adopt your cool new idea.

If you have that, you can reduce complexity by asking how it supports the strategy.

Or, you can just noodle around in technical complexity and hope that someday, magic will happen and a market will develop.

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