Innovation is the engine of economic growth. Companies that create new products, services, and business model can create profitable growth and substantial consumer welfare. Yet, sometimes there can be too much innovation.
Consider a recent article in The Wall Street Journal describing how automakers are creating new ways for drivers to start their cars. Instead of manual keys, more than 50 2008 models feature push-button starters. Drivers of push-button cars still have to carry a small device that emits a wireless signal that authenticates the driver.
Not to be a Luddite about it, but what exactly was wrong with using a physical key to start a car? The process is familiar, it is easy to transfer a key to another driver, and the process takes about 10 seconds.
Saving 10 seconds is wonderful in today’s hectic world, but there’s a catch. In exchange for saving those 10 seconds, drivers have to make sure they don’t walk away with the activation device in their pocket when they valet-park their car. More importantly, they have to hope that their new key doesn’t run out of batteries or malfunction. While some activation systems include manual keys, using those keys involves following a complicated set of instructions, with helpful owner’s manual advice like “call your dealer.”
There is something about human nature that restlessly seeks to improve things. But instead of asking “Can we?” innovate to improve what exists and create what doesn’t, companies need to ask “Should we?”
There comes a point in the evolution of any product or service where incremental improvements no longer matter to a given group of customers. The term for this in the disruptive literature is “overshooting.”
Customers will almost always accept improved products or services, but when overshooting sets in, they won’t pay for improvements that used to be valuable to them.
Think about your landline phone service. What would you say if your local phone company offered you a package with even clearer call quality and higher reliability? While you are likely to take that product, you are unlikely to pay price premiums, because you wouldn’t even notice the performance improvements.
Overshooting happens in just about every industry. It tends to start in the least demanding tiers of the market and creep up to more demanding tiers. Overshooting creates conditions that encourage the formation of disruptive attackers who change the game through simplicity or low prices.
Understanding opportunities for innovation requires taking a market-first perspective. Zero in on points of frustration and innovate away.
Taking a company-first perspective can lead to the equivalent of the 37th button on your remote control. The engineer who dreamed up that button probably believes fiercely in that button’s importance. But the customer doesn’t know how to use it, doesn’t care to learn how to use it, and ends up frustrated by the remote control’s complexity.
Sometimes there can be too much innovation.
I’d love to hear other examples of innovation missteps that occurred because companies asked “Can we?” instead of “Should we?” Where have you experienced too much innovation?
