November 9, 2012
This is the third blog of a three-part series discussing business consultant Geoffrey Moore’s book, “Dealing with Darwin.” (Check out Part 1 and Part 2) The book explores the topic of innovation, as Moore attempts to better define and characterize innovation by creating specific zones and categories. My first post, Using Innovation (and Outsourcing) to Gain Product Leadership examines the first zone, Product Leadership, and the subsequent post, Where Innovations and Outsourcing Intersect, I previewed the Operation Excellence Zone. The third zone I will explore is the Customer Intimacy Zone, and it applies to mature markets.
The first innovation within this zone, Line Extension, is the most relevant from an IT perspective. Many of the ideas in this category are easily applied to software development and outsourcing. Line-Extension is defined as an innovation in which an existing product is modified for a new niche. Moore cites examples of this innovation, such as the creation of People magazine, a spin-off from Time magazine, to target a new readership, as well as the development of the Lexus brand, by Toyota, to gain share of the luxury car market.
We have seen Facebook employ this type of innovation when they added Instagram and Skype to gain more users on their site. In this case, Facebook is not necessarily an instance of a new product or service being innovative, but they are using someone else’s innovation to extend their existing product. In doing so, Facebook is able to reach new users and maintain relevancy with their existing users.
Outsourcing can be very effective for creating Line Extension Innovation. Companies can employ vendors to modify their existing software and to extend product lines into new niche markets. American businesses longing to expand and to sell their products to a new customer base, such as China, may use Chinese software developers to effectively create or modify their existing web applications to specifically target the Asian market.
Adding enhancements to keep software products new and fresh is a classic goal of any software company, but the capability to do so is often limited by the number of programmers available. When Facebook partnered with Skype, there were technical changes required, and some of that work was outsourced to facilitate the integration of the two web applications. Outsourcing is an effective way to get an instant team to quickly augment your existing software with additional features. This venture becomes increasingly more innovative, if the team you hire subscribes to a creative work environment and will collaborate with you to develop something unique and specific to your business needs.
Other categories in the Customer Intimacy Zone are less relevant to the software development world, so I will only touch on them briefly. They include: Enhancement Innovation, which is described as the ability to earn more from an existing market. For example, the development of Barbie accessories or the Boeing 747 series. Marketing Innovation happens when the product stays constant, but marketing engages more customers. Moore used the Apple iPod and McKinsey Consulting as examples of this kind of innovation. Finally, Experimental Innovation is defined as valuable interactions with the customers, similar to the experience customers receive at Disneyland or with Progressive Insurance.
I hope this three-part series has encouraged you to brainstorm and develop your own innovative ideas and has challenged you to ask yourself: if you have an idea for a product or service, what category of innovation does it fit into? And will that category lend itself well to software outsourcing?