Innovative strategies originate not only from one’s own company or industry, but also from the deep market. Examples of this are everywhere, surrounding us so thoroughly that we seem not to notice them at all, instead preferring the conventional wisdom that benchmarking and industry appointed gurus drive innovation.
Managers prefer this conventional wisdom because it makes life easier. Relying on an industry guru deflects responsibility in the case of failure. And benchmarking provides an excuse to protect bonuses most often tied to short term economic gains—gains that investments in product development, R&D, and new market development jeopardize.
By nature, benchmarking is retrospective rather than prospective—it prepares managers to emulate yesterday’s industry leader rather than to become tomorrow’s leader. Industry gurus and management consultancies earn their profits from managing networks of people and hoarding information—granting or denying access based on some esoteric pay to play calculation—rather than risking their own reputations through the real, hard work of innovation.
The notion that innovation springs from everywhere, often from outside one’s narrowly defined market is not new. Peter Drucker has famously described changes in demographics, technology, and culture as sources driving innovation. And W. Chan Kim’s and Renee Morbogne’s Blue Ocean Strategy focuses on innovation through redefining market space rather than competing in predefined, red oceans where competitors destroy profits by competing with similar business models.
A few of the countless examples of innovation springing from unlikely sources include the invention of the internet, an adaption from software used by the DOD, the use of oil—previously used predominantly for heating—to create plastics, and mortgage backed securities which can be traced back to Japanese rice farmers in the 1600’s (and perhaps much further).
What is new, is the development of a strategy framework that codifies a larger context within which the hard testing and tempering of ideas and probing of success factors and failure points can be applied and managed.
Sources of innovation exist in the deep market as well as within a given industry or organization. The deep market includes a sum of all industries, raw materials, people, capital, and ideas. Next Friday we’ll go into greater detail with regards each of these key dimensions.
Until then, you’ve earned your weekend, enjoy it.