"Innovate or die," declared management philosopher Peter Drucker. But innovation is easier said than done. Established players like Procter & Gamble have departments full of people devoted to continuously launching "new-and-improved" products, while investor-funded newcomers like Airbnb can afford to burn through billions of dollars annually in the quest to disrupt their markets. How are you supposed to beat fierce, deep-pocketed competitors like them at the innovation game?
David Robertson, a Wharton professor who studies and teaches innovation and product development, thinks there is another way to innovate that is different from the incremental innovation of a P&G and the big-bang disruption of an Airbnb. In his new book, The Power of Little Ideas: A Low-Risk, High-Reward Approach to Innovation (with Kent Lineback, Harvard Business Review Press, May 2017), he describes this 'Third Way' as complementary innovation and explains how you can use it to gain a competitive advantage for your company.
"The Third Way consists of multiple, diverse innovations around a central product or service that make the product more appealing and competitive," says Robertson. "What makes this approach work is that all the complementary innovations operate together as a system or family to satisfy a compelling promise to the customer. [Thus,] the family of complementary innovations must be closely and centrally managed."
The Power of Little Ideas features the stories of several companies that have successfully followed the Third Way, including LEGO, Gatorade, Disney, and most surprisingly, Apple. Apple is a company that is usually and, according to Robertson, mistakenly associated with disruptive innovation. But starting in 1997, when Steve Jobs returned to Apple for his second, staggeringly successful, stint as CEO, the Wharton prof says Jobs followed a process driven by four decisions.
Decision 1: What is your key product?
When Jobs returned to Apple, he eliminated 70 percent of its hardware and software products. Then, he positioned the Mac computer as the company's core product--the "digital hub" around which all of the company's innovation efforts would revolve.
Decision 2: What is your business promise?
Jobs promised customers that Apple and the Mac would enable them to easily and effectively manage every aspect of their digital lives.
Decision 3: How will you innovate around your key product?
The new products and services that Apple launched after declaring the Mac its key product all helped fulfill its business promise. iPod and iTunes initially worked only with a Mac. Software--including iMovie, iPhoto, and GarageBand--brought a broad range of digital capabilities to Mac owners. Apple Stores made owning a Mac easier.
Decision 4: How will you deliver the complementary innovations?
Apple, says Robertson, made acquisitions, developed partnerships, and hired internal talent to execute its digital hub strategy.
The family of centrally-managed products and services that Apple launched around the Mac are still driving the company's success as we approach the sixth anniversary of Jobs's death. Some of the complementary innovations that supported this strategy have become massively successful in their own right--in 2016, the Apple App Store generated $28 billion in sales, for instance. That fact, in and of itself, is good reason to see if you can capture the power of complementary innovation in your company.