How to Outwit Your Competition

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Decades of experience have taught me that making thoughtful improvements to existing products is a consistently profitable way to innovate. An effective way to come up with ideas is to start by surveying the market in a familiar industry and asking: What's missing?

Maybe a potential demographic has been completely overlooked by industry leaders. Maybe there's been a lack of innovation for years. You don't have to reinvent the wheel to create a winning innovation.

The question to ask is: How can the products already out on the market be made better? Here are three ways to help you out-design your competition:

1. Examine the dominant brands.
Years ago, I wondered why the shape of the guitar pick had remained unchanged for decades. There were so few designs, even colors, to choose from. I began examining the market and it became clear to me the dominant brands were selling picks that only appealed to serious rock musicians. Where were the picks for garage bands? Where were the picks for fans? As a result, I started a business that sold novelty picks with designs ranging from Mickey Mouse to vampires to a line with polka dots and leopard print marketed to adolescent girls. We also targeted different stores from our competitors, including 7-Eleven and WalMart -- not the typical retail environment for guitar picks, which were primarily being sold at specialty music shops.

Choose a specific market that intrigues you. Determine what the benefit of each competing product is and get a sense of each producer by visiting their website. Who are they marketing their products to? What message is their brand trying to convey? What promises do they make to their customers? Are there any obvious holes? Has a potential demographic been ignored? Knowing what is already out there helps identify what isn't. Use your creativity to envision alternative, superior solutions to the problem their products attempt to solve.

2. Take a good look at packaging.
Don't underestimate the power of delivery. Packaging is an incredibly important extension of your brand, as it forms a consumer's initial impression.

Take my guitar pick business. At the time, packaging had not been made to entice customers. Most stores sold picks in tackle-boxes that you had to rummage through to find what you wanted. Picks were viewed as tools, not as accessories or collectable items. The competitors had successfully been selling picks this way for thirty years. I decided it would be best to package our picks individually and create counter displays to show off the designs -- a markedly different approach from the competition.

3. What aren't customers getting?
It sounds so obvious, but many entrepreneurs don't take the initiative to find out what consumers want and like. Visit retail stores in person to observe how people interact with the products. What are consumers saying about the products they buy and use? Read product reviews on Amazon and message boards to learn what's working and what isn't.

My interactions with consumers confirmed that there was an untapped market for unique, fun picks. We created a survey and asked store managers to have customers fill it out. We explicitly asked them to tell us which designs they liked best and would buy. We used what they told us to create designs that sold. There was no mystery.

Innovations can come from anywhere. But when you choose to capitalize on existing demand by out-designing the competition, you up your chances of success.

Stephen Key

Stephen Key is an inventor, author, speaker and co-founder of InventRight, LLC., a Glenbrook, Nev.-based company that educates entrepreneurs in how to bring ideas to market.

You're Going To Need More Than New Packaging To Call It Innovation

The definition of what constitutes an "innovative" idea has gotten pretty loose lately. It's time to challenge your team to come up with truly revolutionary ideas that create a distinct competitive advantage.

Stand in front of a grocery store’s cereal aisle and you may be confronted with more than 130 different boxes of flakes, Os, pops, or puffed forms of grain slathered with varying amounts of sugar. Move to the detergents and you will see a wall of powders, liquids, bleaches, softeners, stain removers, and more, stretching on for 20 feet. Move to oral care and you may encounter 42 different variants of Crest toothpaste alone. Then just try to pick out a toothbrush. Sheesh.

Yet if you were to go into virtually any of the world’s largest firms that make the items sold in that grocery store today, you would find that most of what they are cooking up are yet more such product variants and line extensions. “Surely, we will sell more if we make one in mango flavor, no? What if we make the potato chips with pink Hawaiian sea salt?" Changes like these are easy in big firms--they don’t require factories to be retooled--so they’re common.

There’s only one problem: As an innovation strategy, it’s nearly useless.

Why Product Performance Isn’t Enough

There’s nothing wrong with product performance innovation per se. In fact, depending on industry or context, such innovation may be necessary to cut through the noise of existing offerings. When a PC first gets designed with special chips for managing graphics, or includes a nice little biometric feature that starts it up securely with just your fingerprint, users value these advances. But if that’s all you use, this steady progression of new functions and features is insufficient for continued success and differentiation. Today, nearly every category is hyper-contested. Also, suppliers can only succeed if they can sell their little specialty ingredient or functional doohickey to all the market players in an ecosystem, not just one. That means any unique effect is swiftly eroded.

Remember that a firm’s overall performance inexorably erodes through the phenomenon known as the cost of complexity. Pickup truck wars illustrate this trend. For several decades, the key to marketing a pickup truck has been to assert that yours is more macho than everyone else’s. Toughness and torque are keys, with horsepower and towing power detailed in a basso profundo voiceover. To dramatize just how tough these trucks are, we see ads showing them being thrown off cliffs, driven through fiery tunnels, and molested by robots in underground bunkers. It’s certainly a relief to know that these fine vehicles will survive such ordeals, but thankfully such situations seldom arise in real life. When all the trucks are mighty macho, innovation that helps the truck driver or owner do something else is what matters.

Today, almost any design can be knocked off in record time, whether you work in textiles or technology. Launch any new gadget and an engineering deconstruction will quickly appear online showing the components used, with clear speculations about the suppliers and costs of each one. Twenty thousand products were introduced at the 2013 International Consumer Electronics Show, including dozens of new ultrabooks, OLED TVs, next-generation smartphones, and 3-D printers. There is always room for thoughtful designs in the world, but who’d like to make a bet on how many of these will be successful in the marketplace? It’s safe to say that a large percentage of them will enjoy only a short and troubled life.

Apple represents the apotheosis of gadget lust. Still, with reliable regularity, it adds to its arsenal of beautifully designed technology objects, causing the technorati to swoon on cue. Yet Apple’s products are just the tip of an innovation spear that has been carefully designed from start to finish. Even before he became CEO, Tim Cook had won praise for the way in which he drove efficiencies through every part of Apple’s supply chain. For example, many analysts believe the company has a substantial cost advantage on flash memory due to its supply chain management. The platform of iTunes and the App store has allowed it to generate enormous value from an ecosystem of developers and record labels keen to connect with Apple’s audience. That makes any of the devices that connect to that ecosystem much more valuable and appealing. 25 billion songs had been downloaded by February 2013, an indication of a lucrative business model by anyone’s standards.

So, while Apple designs beautiful products, the point is that there is much more to its success than “mere” product performance or industrial design.

It’s not that product performance is unimportant. Rather, challenge your team to add other types of innovation to achieve a bigger and more sustainable competitive advantage.

Text adapted from Ten Types of Innovation: The Discipline of Building Breakthroughs (April 2013; Wiley) by Larry Keeley, Ryan Pikkel, Brian Quinn, and Helen Walters. For more details, see www.doblin.com/tentypes 

--Larry Keeley is cofounder of Doblin, an innovation strategy firm, now a unit of Deloitte Consulting LLP. He teaches innovation effectiveness at both Chicago’s Institute of Design and the Kellogg Graduate School of Management. Ryan Pikkel is a design strategist at Doblin. Brian Quinn leads client relationships and programs at Doblin. Helen Walters is the Ideas Editor at TED.