Innovation’s Mantra – Sell New Product To New Customers

by Mike Shipulski

Innovation’s Mantra – Sell New Product To New CustomersThere are three types of innovation: innovation that creates jobs, innovation that’s job neutral, and innovation that reduces jobs.

Innovation that reduces jobs is by far the most common. This innovation improves the efficiency of things that already exist – the mantra: do the same, but with less. No increase in sales, just fewer people employed.

Innovation that’s job neutral is less common. This innovation improves what you sell today so the customer will buy the new one instead of the old one. It’s a trade – instead of buying the old one they buy the new one. No increase in sales, same number of people employed.

Innovation that creates jobs is uncommon. This innovation radically changes what you sell today and moves it from expensive and complicated to affordable and accessible. Sell more, employ more.

Clay Christensen calls it Disruptive Innovation; Vijay Govindarajan calls it Reverse Innovation; and I call it Less-With-Far-Less.

The idea is the product that is sold to a relatively small customer base (due to its cost) is transformed into something new with far broader applicability (due to its hyper-low cost). Clay says to “look down” to see the new technologies that do less but have a super low cost structure which reduces the barrier to entry. And because more people can afford it, more people buy it. And these aren’t the folks that buy your existing products. They’re new customers.

Vijay says growth over the next decades will come from the developing world who today cannot afford the developed world’s product. But, when the price comes down (down by a factor of 10 then down by a factor of 100), you sell many more. And these folks, too, are new customers.

I say the design and marketing communities must get over their unnatural fascination with “more” thinking. To sell to new customers the best strategy is increase the number of people who can afford your product. And the best way to do that is to radically reduce the cost signature at the expense of features and function. If you can give ground a bit on the thing that makes your product successful, there is huge opportunity to reduce cost – think 80% less cost and 20% less function. Again, you sell new product to new customers.

Here’s a thought experiment to help put you in the right mental context: Create a plan to form a new business unit that cannot sell to your existing customers, must sell a product that does less (20%) and costs far less (80%), and must sell it in the developing world. Now, create a list of small projects to test new technologies with radically lower cost structures, likely from other industries. The constraint on the projects – you must be able to squeeze them into your existing workload and get them done with your existing budget and people. It doesn’t matter how long the projects take, but the investment must be below the radar.

The funny thing is, if you actually run a couple small projects (or even just one) to identify those new technologies, for short money you’ve started your journey to selling new products to new customers.

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Mike ShipulskiMike Shipulski brings together people, culture, and tools to change engineering behavior.  He writes daily on Twitter as @MikeShipulski and weekly on his blog Shipulski On Design.

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