Thursday, September 9, 2010

What Type of Innovator Are You?

Most of us interested in innovation are familiar with Everett Rogers' idea of the diffusion of innovations, in which ideas are not instantly adopted, but instead there are differing rates of adoption of an idea by different participants in a market or industry.

But: have you asked - which type of adopter is your organization when it comes to innovations in your industry?

The Diffusion of Innovations Model

In Rogers' diffusion of innovations model there are 5 distinct groupings when it comes to adopting innovations, and a new innovation is adopted by each group at distinctly different stages.

image from http://en.wikipedia.org/wiki/Diffusion_of_innovations

There are the innovators, the trailblazers out on the cutting edge, who find and implement new technologies at their inception and adapt and use these ideas in their raw, seminal form to stay ahead of the curve. There are the early adoptors, who recognise and adopt the new technology or innovations ahead of the mainstream, and adopt it early to gain a competitive advantage. There are the early majority, who recognise that a shift is happening in their industry, and adopt the change at around the same time as others do or slightly before. There are the late majority, who recognise that a shift has occurred in their industry, and make the changes required to adopt the new technology and stay in the mainstream. And then there are the laggards,  a group who are slow to recognise and adopt the new technology and its implications.

In the graph above, the yellow line shows cumulative adoption of the new technology, while the blue curve shows the break down of each group of industry participants over time.

Implications For Industry

Innovators

Clearly, the innovators as a group have a tremendous opportunity to seize the advantage over their competition in the market and

  • create points of differentiation from competition, 
  • create disruptive innovation that works to their advantage, 
  • create new revenue sources, and 
  • introduce new cost efficiencies. 

However, these advantages comes with their own set of challenges. In the early stages, an innovation may be quite raw. There may be a lack of support and explanation around the innovation, and there may be considerable work to do in order to develop and mature the innovation into a viable commercial offering. Innovators need to be prepared to work at the cutting edge (or, indeed, the 'bleeding edge').

Innovators need a distinct mindset, including an ability to sense trends and developments and assess which ones will be important to their industry, and rapid and effective decision making processes when it comes to responding to and adopting new innovations. Innovators display a willingness to continue to develop a concept or technology from a raw germinal form into a viable mature commercial offering, service, or business process. Innovators understand that they are managing a portfolio of innovations, some of which will pay off strongly and others which may ultimately not result in a strong business outcome or indeed may on occasions constitute a temporary setback. Innovators are comfortable exploring and evaluating risk and uncertainty, and making sensible investments in light of the best information available in order to gain the potential benefits.

Early adopters

Early adopters have an advantage over innovators in that they are now working with proven, mature innovations. There is less risk in adopting the innovation, and less work to do to develop the innovation into a viable commercial offering or useful business improvement.

There are still significant opportunities to gain a competitive advantage over the majority of the industry (up to 97.5% of the industry, in Roger's model), and to gain many of the benefits listed above for the innovators. Early adopters will however have less chance to shape their industry, or to carve out 'blue oceans' of new opportunity where they dominate a market or industry.

Early majority

The early majority are moving with the mainstream, or slightly ahead of it. The early majority therefore are likely to either maintain their current competitive positioning in a market, or to slightly improve in relation to the majority of the industry. They miss the opportunity to reap the significant benefits available to the innovators and early adopters.

As organizations in the early majority tend to have longer and more cautious decision making processes regarding their decision to invest in new innovations, they tend to ultimately make safe, sensible and responsible decisions when investing in new technology.

Late majority

Organizations in the late majority are, by definition, behind the mainstream in their adoption of new innovations. This puts them at a distinct disadvantage when responding to changes in a market, and in their attempts to create differentiation from their competition.

The late majority are often skeptical of new innovations, are attached to existing advantages in the current industry structure (such as monopoly advantages or other vested interests or relationships) or are generally slow to adopt a new innovation until it has been proven and adopted by others. An organization seeking to adopt, for example, 'best practices' may for example be constantly moving towards standards and approaches that innovators, early adopters and the early majority previously adopted, and have since moved on from.

Organizations in the late majority are potentially at a disadvantage relative to their competition during times of innovation and change, and are open to significant risks from disruptive innovations in their industry.

Laggards

Laggards are, by definition, behind at least 84% of their industry when it comes to change. Laggards are potentially at a significant disadvantage when it comes to times of innovation or change.

Laggards and the late majority may lag behind the rest of the industry in adopting change for a number of reasons, including:

  • failure to monitor the market and recognise that change is occurring
  • vested interests such as a leading market position or monopoly advantages making change seem unattractive
  • commitment to outdated thinking patterns that lead to decisions that are not optimal in the current environment
  • decision making processes that are flawed and slow to adopt innovations until change is absolutely and manifestly necessary
Which Diffusion of Innovation Category Does Your Organization Fit In?

While it is likely to vary with different types of innovations, in general which diffusion of innovations group does your organization fit into?

And which of the diffusion of innovation groups do you think your organization should be in?

Innovators

The greatest benefits clearly accrue to innovators, the first 2.5% of the market to adopt a new innovation. But to be an innovator requires a distinct mindset and a set of capabilities including

  • the ability to monitor trends - not just within the industry but also outside it - and identify new opportunities
  • the willingness to invest at an early stage in trialling new, unproven innovations and developing them into mature commercial offerings or business processes
  • a mindset that is comfortable with assessing risk and uncertainty and investing accordingly in a portfolio of investments
  • a disposition towards accepting that change is inevitable and that organizational thinking, the business that you are in and the products and services that you offer over time will always evolve
  • a decision making process that allows your organization to make rapid and sensible choices in relation to new opportunities and investments
If your organization is not currently an innovator in your industry with regards to the diffusion of new innovations, it may be worth developing the capabilities and mindset to be the innovator and gain the advantages that accrue from this positioning.

Early adopters

Early adopters can gain many of the advantages of innovators, without some of the extra risks and work involved in recognising raw innovations and developing them in to a form that can be taken to market.

And if early adopters can identify innovations from other industries and are the first to bring these innovations to their own industry, early adopters still maintain significant potential for creating disruptive innovation in their industry and recreating their industry in such a way as they maintain and defend a dominant position.

Early majority

If your organization is typically in the early majority, you are likely maintaining - and possibly improving -  your position relative to the majority of competitors in the market, but you are at significant risk from disruptive innovation from innovators and early adopters.

Your organization's trend-monitoring and decision making processes are likely to be nimble enough to let you adapt in sufficient time to changes in your industry, but you may not gain real advantages from that change, it may only maintain the status quo or indeed you may slip back in the market positioning as innovators and organizations in the early majority take up greater market share.

If you are in the early majority it may be worth investing the extra effort to shift in to the early adopter category and gain the benefits of improved positioning following times of innovation and change.

Late majority and laggards

If your organization is in the late majority or laggard category, it may be useful to analyse exactly why your organization is in this category.

It may be that your greatest task is to update your capability for momitoring trends and developments and maintaining a useful foresight capacity in your industry.

It may be that it might be useful to review your decision making processes and develop more proactive and rapid processes to make good decisions and investments during times of industry change.

It may be that deeply engrained cultural values or patterns of thinking are holding your organization back from growth.

Or it may be that current advantages you enjoy in the market place make it difficult to contemplate change, or certain types of change. If this is the case, then your organization may be at significant risk during times of disruptive innovation or other significant industry change, and it may be wirth analysing this context and developing contingency plans for facing innovation and change in your industry.

The Takeaway:

Change will happen. Innovations will be developed that significantly transform your industry.

You can respond as an innovator, an early adopter, as part of the early majority, as part of the late majority or as a laggard.

Unless there are structural reasons - such as monopoly positioning - that are retarding your ability to change, your organization should aim to be an innovator or early adopter, in order to gain the significant benefits that accrue from rapidly and effectively to innovations and changes in your industry.

If your organization is a late adopter or laggard in response to innovation and change, you will benefit from understanding exactly why your organization is in this category - and acting accordingly.

Which diffusion of innovations group is your organization currently in - and which group should it be in?

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