{"id":16775,"date":"2020-11-02T11:27:00","date_gmt":"2020-11-02T15:27:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=16775"},"modified":"2020-11-07T13:57:42","modified_gmt":"2020-11-07T17:57:42","slug":"principles-of-innovation","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/","title":{"rendered":"The 6 Principles of Innovation in Action"},"content":{"rendered":"\n<p>What are the principles of innovation? What do the principles of innovation look like in practice?<\/p>\n\n\n\n<p>The 6 principles of innovation are used to navigate new and disruptive technologies. A thorough understanding of how these work in practice can help you confront disruptions.<\/p>\n\n\n\n<p>Read on for an application of the 6 principles of innovation using automobile technology as a case study.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\">Applying the Principles of Innovation<\/h2>\n\n\n\n<p>Now that you understand the principles of innovation and disruptive technologies, as well as how to successfully adopt them, what does the process look like in a real situation?&nbsp;<\/p>\n\n\n\n<p>We\u2019ll go through the 6 principles of innovation applied to how a car-making company could apply these concepts when confronting the disruptive technology of electric vehicles.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 1: Is the Technology Disruptive?&nbsp;<\/strong><\/h3>\n\n\n\n<p>First, the manager needs to <strong>determine whether electric cars are truly disruptive to the automotive industry, by predicting the trajectory of market demands compared to the trajectory of electric cars\u2019 performance improvements.<\/strong>&nbsp;<\/p>\n\n\n\n<p>Here\u2019s a look at car buyers\u2019 demands, and how electric vehicles stack up:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Buyers want a cruising range (distance between refuelings) of 125 to 150 miles. Electric cars offer 50 to 80 miles.&nbsp;<\/li><li>Buyers want 0 to 60 miles-per-hour acceleration in under 10 seconds. Electric cars can do it in almost 20 seconds.&nbsp;<\/li><li>Buyers want a large number of options among makes and models. Electric cars only offer a small variety.&nbsp;<\/li><\/ul>\n\n\n\n<p>Although electric cars can\u2019t deliver on customers\u2019 demands <em>now<\/em>, the manager must look at whether car buyers\u2019 demands will continue to exceed electric cars\u2019 performance.&nbsp;<\/p>\n\n\n\n<p>Based on traffic laws, demographics, and other factors, car buyers\u2019 demands will most likely stay about the same over time. But <strong>electric cars\u2019 performance is likely to improve enough to eventually meet buyers\u2019 demands.<\/strong> This means that electric cars are almost certainly disruptive, triggering the first of the principles of innovation.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 2: Potential Markets Are Essential to the Principles of Innovation<\/strong><\/h3>\n\n\n\n<p>Having confirmed that she\u2019s dealing with a disruptive technology, the manager can use that information as she searches for a market for electric cars.&nbsp;<\/p>\n\n\n\n<p>Most likely, it\u2019ll take a few attempts to hit on <a href=\"https:\/\/www.shortform.com\/blog\/target-the-right-market\/\">the right market<\/a>, but the manager can use three principles we\u2019ve discussed to guide her search:&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\"><li>By definition, <strong>disruptive technologies don\u2019t appeal to the mainstream market<\/strong> initially, so the manager needs to find a potential emerging market where electric cars could gain traction. She should look for potential customers who are attracted to the low cruising range and low acceleration that make electric cars unappealing to mainstream customers.&nbsp;<\/li><li>Because she doesn\u2019t yet know who her buyers will be, <strong>market research and customer surveys will inevitably be inaccurate.<\/strong> She must expect a trial-and-error process, through which both the company and the customers will figure out the best use for electric cars.&nbsp;<\/li><li>Since disruptive technologies come with so many unknowns, <strong>the business plan must be centered around learning, not executing.<\/strong> The manager must identify what information she\u2019s missing, which information is most important to find out, and in what order.&nbsp;<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 3: Create a Product Development Strategy&nbsp;<\/strong><\/h3>\n\n\n\n<p>How can the manager create a viable strategy for an unknown market?&nbsp;<\/p>\n\n\n\n<p>First, she can understand how <a href=\"https:\/\/www.shortform.com\/blog\/oversupply-innovators-dilemma\/\">performance oversupply<\/a> triggers products to shift into the next phase of their product life cycles\u2014and that this process typically creates an opening for simpler, more convenient, and more affordable disruptive technologies to take over the low end of the market. In the car industry, <strong>customers\u2019 demand for higher speeds and longer cruising ranges will give way to prioritizing reliability and convenience.<\/strong> This gives the manager a sense of what attributes she can emphasize.&nbsp;<\/p>\n\n\n\n<p>Second, she can ensure that the electric cars are designed in a way that they can be easily and cheaply modified to fit a new market. Knowing that the first market she targets will probably be wrong, the manager must conserve resources for second and third iterations.&nbsp;<\/p>\n\n\n\n<p>Third, the manager needs to develop a product that is affordable. <strong>Since electric cars\u2019 functionality will be far behind gas-powered cars, electric cars must make up for it in price<\/strong>, as well as simplicity and convenience.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 4: A Technology Strategy<\/strong> Is One of the Principles of Innovation<\/h3>\n\n\n\n<p>The technology strategy may consist of reconfiguring existing components and proven technologies. However, the manager needs to avoid hinging her product on any major technological advancements.&nbsp;<\/p>\n\n\n\n<p>Many established carmakers insist that electric cars won\u2019t be viable until there are significant improvements to their batteries. However, <strong>the batteries are only an obstacle in the context of mainstream customers\u2019 demands. <\/strong>The established companies are making the mistake of trying to fit the disruptive product to the existing market.&nbsp;<\/p>\n\n\n\n<p>In order to be successful, this manager must find customers for whom the battery\u2019s limitation is a nonissue.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 5: Develop a Distribution Strategy<\/strong><\/h3>\n\n\n\n<p>Distribution is another key component of the principles of innovation. When it comes to selling <a href=\"https:\/\/www.shortform.com\/blog\/disruptive-products\/\">disruptive products<\/a>, distributors\u2014in this case, car dealers\u2014typically face the same constraints as established companies. Distributors\u2019 business models are developed around existing products and profit margins, and diverting from those models threatens their businesses.&nbsp;<\/p>\n\n\n\n<p>Most car dealerships are likely to be reluctant to sell cars that bring lower profits and that don\u2019t appeal to mainstream customers. <strong>Just as the manager needs to find a new market for her electric vehicles, she needs to find a new network of distributors to sell to that market.&nbsp;<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 6: Determine Organizational Structure<\/strong><\/h3>\n\n\n\n<p>With a general plan on how to move forward, the manager now needs to decide how to structure the team that will execute this project.&nbsp;<\/p>\n\n\n\n<p>Considering that electric cars are a disruptive product, and all that entails\u2014including a different cost structure and processes than the main company has for its gas-powered vehicles\u2014<strong>the best options are to either spin-out an independent division or company, or to acquire a small company.<\/strong> As we\u2019ve talked about, this separate entity needs to be small enough that small profit margins can support its overhead costs and small enough to get excited about orders and achievements that would be disappointing in the main company.&nbsp;<\/p>\n\n\n\n<p>The parent company should support this entity with resources, and the independent organization should never have to compete for resources against the company\u2019s gas-powered vehicles. However, <strong>the organization heading up the electric cars project should have a budget that\u2019s still tight enough to push the team to turn a profit quickly.<\/strong>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What are the principles of innovation? What do the principles of innovation look like in practice? The 6 principles of innovation are used to navigate new and disruptive technologies. A thorough understanding of how these work in practice can help you confront disruptions. Read on for an application of the 6 principles of innovation using automobile technology as a case study.<\/p>\n","protected":false},"author":6,"featured_media":16921,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[45,79],"tags":[141],"class_list":["post-16775","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-entrepreneurship","tag-the-innovators-dilemma","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The 6 Principles of Innovation in Action - Shortform Books<\/title>\n<meta name=\"description\" content=\"Do you know what the principles of innovation look like in action? See how they work, using the electric vehicles as the innovation.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The 6 Principles of Innovation in Action\" \/>\n<meta property=\"og:description\" content=\"Do you know what the principles of innovation look like in action? See how they work, using the electric vehicles as the innovation.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/\" \/>\n<meta property=\"og:site_name\" content=\"Shortform Books\" \/>\n<meta property=\"article:published_time\" content=\"2020-11-02T15:27:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-11-07T17:57:42+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/s3.amazonaws.com\/wordpress.shortform.com\/blog\/wp-content\/uploads\/2020\/10\/system-goals-thinking-in-systems-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"1707\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Rina Shah\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rina Shah\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/\"},\"author\":{\"name\":\"Rina Shah\",\"@id\":\"https:\/\/www.shortform.com\/blog\/#\/schema\/person\/d07435826f13a8f422d5d333dceac287\"},\"headline\":\"The 6 Principles of Innovation in Action\",\"datePublished\":\"2020-11-02T15:27:00+00:00\",\"dateModified\":\"2020-11-07T17:57:42+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/\"},\"wordCount\":1090,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2020\/10\/system-goals-thinking-in-systems-scaled.jpg\",\"keywords\":[\"The Innovator's Dilemma\"],\"articleSection\":[\"Business\",\"Entrepreneurship\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/\",\"url\":\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/\",\"name\":\"The 6 Principles of Innovation in Action - Shortform Books\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/principles-of-innovation\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2020\/10\/system-goals-thinking-in-systems-scaled.jpg\",\"datePublished\":\"2020-11-02T15:27:00+00:00\",\"dateModified\":\"2020-11-07T17:57:42+00:00\",\"description\":\"Do you know what the principles of innovation look like in action? 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