Platform-Services Innovation Map and Cash Cow Business Models

Increasingly, the following three strategic moves at the fundamental innovation level in business organizations are being recognized as game changers:

1. It is not just products, it is also the process.
2. It is no more only about products, it is also about platforms.
3. It is not only about products and platforms, it is also about services.

So lets understand product innovations, process innovations, (technology) platform innovations, and service innovations.

In the following tech strategy framework, what is posited on the left is the emergence of a dominant product design sometime around the intersection of the product and process innovation curves. This is intuitive, since a company initially focuses on building a core product out to market, and there is usually a lot of innovation around the product, until a dominant design emerges. Around that time, the rate of innovation at the business process level usually is on the rise, and this is depicted by the graph on the left, where the two blue hills of the product and process innovation charts intersect:

Similarly, what you see on the right hand side above are two curves depicting the rates of innovation at the technology platform level and at the services level respectively, as functions of time. The point in time where they intersect is also the time around which business focus has to shift from creating the world's best platform to servicing the customers who are using the platform. At this point in time, the rate of services innovation is still increasing even as the rate of platform innovation is on the decline.

What this platform-services innovation map depicts is a practical truth: before a business starts making boatloads of cash, it has to innovate its platform to a sufficient commercially optimized level, and also has to start working on its services as well. In a nutshell, cash-cow businesses now a days are not only about products or platforms, they are also about services.

Listen to the podcast to learn more about ongoing platform battlegrounds ranging from social networking (Facebook / MySpace) to smart mobile handhelds (Google Android / Apple iPhone), and how the cash-cow business model evolves at the cusp of platform and service innovation...

Technology Push vs. Market Pull

This framework builds on the Architectural Innovation framework (reproduced in the diagram below on the top left hand side). The framework TECHNOLOGY PUSH vs. MARKET PULL shows how having an agile product strategy in terms of courting a continuously changing product architecture can be a recipe for survival in the competitive marketplace for high-tech products, services, solutions, and platforms:

What is depicted above is a fact about human lethargy / inertia, as seen in many older, comfortable, bureaucratic, myopic high-tech firms. Frequently, the "technologists" in such organizations draw comfort from a stable product architecture and have a tunnel vision that innovation can happen only at the product "components" level. Consequently, they keep pushing their R&D and associated business / product development activities along the blue arrow as depicted above. Relying on this kind of technology push can be dangerous to the business; competitors / new entrants can upset the status quo by flooding the market with products / solutions which have newer product architectures. Sometimes, these moves by new entrants can take the form of technology invasions, as we have shown in a prior podcast.

Try this Business Mantra: Pull, don't just Push. If you can push your technology, or your products along the direction of market pull, as depicted by the red arrows above, then no one will be able to disrupt you! This is agile product strategy, this is true product innovation. Also, how can you look beyond product innovation into process innovations? In other words, how can you use the above framework to make your business processes leaner? Listen to the podcast to learn more...

Architectural Innovation as a Core Comeptency Destroyer

What is presented below is a pioneering framework, first articulated by Henderson and Clark in a research paper on "Architectural Innovation." The framework posits that where as firms love to introduce innovations along the blue arrow (from incremental to granular), for their core competencies are built along well set "product architectures," they frequently ignore the architectural dimension of replacing older architectures with newer ones, as represented by the red arrow below:

The above framework suggests that incremental innovations and even a progressive innovation from incremental to granular along the blue arrow reinforces the core competencies, where as jumping across the comfort zone and going for "architectural innovation" along the red arrow above can destroy a firm's core competencies! Why? For "engineers" and "designers" do recognize when a new design at the component level hits the market. Whenever that happens, they consider that to be a "radical innovation," because they try to come up with better, cheaper, newer, faster, sleeker, smaller components themselves. Frequently, R&D departments within established firms focus on this, i.e., the blue arrow. Since a radical innovation incorporates that, i.e., newer components, a firm does not fail to notice this when it happens, or as it keeps happening; i.e., as better / cheaper / faster / sleeker / smaller / newer components incorporated within a similar product hit the market. However, if a firm is focused only on new components, new designs, overturning core design concepts, it can miss if an "architectural innovation" hits the market. Moreover, as per our framework above, a truly radical innovation is one which has not only newly designed components, but which also incorporates a new product architecture.

In other words, an architectural innovation is more subtle; no new component designs have been introduced; or the core design concepts underlying the components which go into making a product have not been overturned! This can be dangerous to an incumbent, if introduced by a new competitor, because it is a new product innovation. It is "outside the box" of thinking for an established firm, which is set in its ways in terms of building core competencies along the old, stable, established, product architecture. Hence, an architectural innovation being cooked outside your firm can be dangerous to your existing business, if business leaders in your firm are not aware that innovation can happen along this dimension, i.e., along the red arrow in the above framework. To learn more, please listen to the accompanying podcast. This framework is built on top of two older tech strategy frameworks: Dominant Designs, and S-Curves. Listen to the podcast to learn more...

Disruptive Innovations and Technology Invasions

The tech strategy model below depicts a disruptive technology which begins its trajectory of technology invasion at point D. We have placed two baseline frameworks, with which you all must be familiar, if you have used our Open Strategy Portal before: S-Curves and the Ansoff Matrix. In particular, we have placed points A, C, and D from the model with the corresponding points on the familiar S-Curves framework:

When the invasive technology has a gap in terms of performance output from the technology and what is demanded by the existing market (at time T1), the businesses selling the existing technology see no threat from the invasion. But what if the invasive technology is able to become a successful business by courting lead users and creating a new niche market, and make it to point B, where it is able to meet the existing market demand (at time T2)? Typically, it starts taking market share from the older stagnating / mature technology because of its better price / performance metrics... To learn more about this technology strategy model, associated concepts like lead users, and its applications to current technologies / products (iPad, Google Buzz), listen to the associated podcast...

Dominant Designs and Technology Cycles

If you have listened to our podcast on S-Curves, you are already familiar with terms like Technology ferment, take-off, and mature / stagnate. However, before a technology is productized / servitized and takes off in the market-place, there is fierce competition, and eventually a dominant design emerges, as depicted in the following technology cycle.

So, what is a "dominant design?" What might intrigue you, and what the holy grail of product marketing truly is, is this concept called "Dominant Design." Why can your business model be shaky, if you package a product / service around a technology which does not have "dominant design" writtern all over it? Are there exceptions to this rule? Listen to this POCAST to find out more. Relax and enjoy; it is only 32 minutes long!

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