2013-04-17: Reactive vs. Proactive Innovation
- 1. Innovation: Proactive v. Reactive Matt Patton Director, New Product Incubation Advertising.com
- 2. Innovation • Defined by its compliment – A Developed Product or Service that is: • NOT status quo • Outside the comfort zone or the current company thought and convention
- 3. Innovation Defined Cont’d • I do not like academic black-letter definitions of innovation • Innovation is an art form – Like art, it can come from any person within any organization – Is a cultural characteristic of a business – Value is always in the eye of the beholder • Debatable as to both impact and characterization
- 4. Innovation as an Art Form • Quick Exercise: – Is facebook an innovative product? • My take: – Yes! – The “may” in “I may never hear from him/her again” is now much less likely. • Culturally disruptive
- 5. The Innovation Dichotomy • Proactive v. Reactive Innovation • Proactive: – Extensive R&D, engineering, and marketing fueled by forward thinking creates a new or more effective offering • Reactive: – Where a discrete problem or opportunity results in a company-wide solution and new offering or business method
- 6. Proactive Innovation • Goal: disruption – When we want product to shape demand – Build for consumers something they have yet to realize they want • Characteristics – For the startup: • Pros: less process resistance, part of an initial growth strategy, high reward potential • Cons: expensive, high risk, limited tangible resources – For the large company: • Pros: more resources, hedged risk, selective cost structure • Cons: cumbersome planning and dev process, impatience for incremental success
- 7. Proactive Innovation Cont’d • Example: Advent of the CPA business model (Ad.com ca. 2001) – Idea: offer risk-free performance based advertising for clients • Ad.com would only be paid if Internet users “converted” on ads – High Risk: Ad.com would be paying for publishers’ ad space with no guarantee of revenue from the advertisers • Tenuous demand for this pricing model (CPC was still most popular) – High Cost: required a large upgrade to tech and operational systems – High Reward: now a 9-figure revenue stream for Ad.com and a multi- billion dollar business industry wide.
- 8. Reactive Innovation • Goal: Fill a market void – Solve a problem or capitalize on a new opportunity • Characteristics – For the start-up • Pros: less risk, incremental opportunity • Cons: resource constraints (time), challenge to scale – For the large company • Pros: even less risk, easier access to resources • Cons: challenge to scale, challenge to stream-line
- 9. Reactive Innovation Cont’d • Example: AdLearn Open Platform (AOP) (2012) – Idea: start competing with other Demand Side Platforms (DSP’s) while leveraging our existing capabilities – Moderate Risk: if failed, would be PR concerns but core business still would be intact • Potential opportunity cost to existing core business – Staffing Challenge: had to pull resources off other projects – Tech Challenge: since product would be client-facing and highly publicized, we needed reliability at scale – High Reward: one of the fastest growing parts of business • Scaling efforts fostered more expansive use of Big Data Architecture and tools, which are now scaling other parts of the business • Reporting interfaces for AOP are currently being used for better reporting and analytics company wide
- 10. Conclusion • Innovation as a characteristic of culture – While established R&D, Engineering and Marketing teams continue to proactively on the next disruptive thing • Essential to have a new ideas lab outside of the core development processes – “start-ups” within the company • Must be open to any member of the business • Must be able to test, analyze, and prototype • Must be taken seriously – These groups can engage in both types of innovation and lead to faster company growth