Great Leaps Forward: how market research must find the methods and tools to identify disruptive innovations
By Philip Cartwright, Research International, Paris
Disruptive innovations radically change product and industry boundaries. Philip Cartwright argues that market research must find the methods and tools to identify the disruptions, and proposes a methodology to do so.
Traditional market research focuses on exploring the past in order to understand the current business environment, and perhaps gaining insight into possible future consumer behaviors. It is heavily weighted toward the application of tools or processes to historical information. In this context, these tools and processes of market research lend themselves to understanding the current state of the market and incremental possibilities for tomorrow, provided tomorrow is not too far out-of-sample. As such, market research is adept at discovering the needs and expectations of clients in existing markets in order to fuel incremental innovation.
In the case of disruptions, however, the corresponding market is yet to be created: potential customers are difficult to identify, and when they can be identified, their feedback is of limited use because they are not familiar with the new concepts brought about by the disruption. They cannot express needs, except in very general terms, because they don't know what is possible. For instance, nobody asked for the internet in the seventies, or for the MP3 format in the late nineties. At the same time, existing customers are likely to dismiss radical innovations. This leads the firm to conclude that there is no market, and the risk of false negative is high.
In a radically different context, market research must adopt a radically different approach. Going beyond what is expressed by customers, which is usually misleading in disruptive markets, market research should work on needs, rather than demands, and cross these needs with what the technology makes possible. The challenge is to go from descriptive work, analyzing client demands, to prescriptive work. This means getting actively involved in the creation of new concepts and radical innovations.Towards a methodical approach: market research and disruptions
A good example of a "disruptive" market research initiative to avoid the false negative syndrome is given by Nokia's approach to discovering deep trends in the mobile phones business in the early nineties. Worried that traditional market research techniques would only discover yesterday's trends, Nokia decided to make a trip to Florida Beach on the West coast of the US. Led by a team of consultants, the top Nokia executives spent a few days meeting and speaking with teenagers on the beaches. The culture shock between staid and technically-savvy Finnish business people and hip youngsters must have been profound, but Nokia gained a truly unique understanding of their key target group's values, behaviors and expectations. The fact that Nokia was able to become the uber-cool brand in the late nineties owes probably a lot to this unusual step. With this in mind, the method we propose for identification and evaluation of potential disruptive innovations follows.Proposed method
The method starts by the identification of key user needs, and the description of the environment along three axes.
Identify key user needs
The first step is the determination and the analysis of end-user's fundamental needs. This is critical, particularly in the area of technology-based innovation where firms must recognize the demand-pull side as opposed to only the supply-push side of the R&D and marketing equations. An example of fundamental need is the need to be able to access personal data anytime, anywhere. As indicated by the success of the iPod, it's a growing need that is currently addressed by the various concerned industries, be they hardware manufacturers (PDAs, mobile phones, MP3 players), software developers or mobile operators.
The environment of practically any industrial sector can be described by about 20 fundamental needs. The objective is not to be exhaustive, but rather to make sure not to miss the one that corresponds to a fundamental shift in the firm's environment. For each fundamental need identified, additional work is done along three axes, which are: corresponding products, related disruptions and related technologies.
Invent corresponding products, identify disruptions and key related technologies
First, invent corresponding products: conduct creative work to imagine products and services that could be associated with the need. In our example, one could imagine a mobile phone with a storage system that is synchronized in real-time with a corporate server, maintaining duplicates of files when no connection is available. Then, identify the disruptions likely to contribute to the emergence of the need. In our example, it could be the increased mobility of executives, the availability of high-speed connection everywhere, the falling cost of data staorage, etc. Finally, identify the related technologies that can be used to create products: storage systems, synchronization, high speed connection, miniaturization of computers, etc. After the completion of this work, a series of disruptions has been explicitly identified, among which the most significant are selected. Expertise, but also some distance from the analyst, are crucial in this step.
Translate into R&D projects
From here, a more classic process can be applied ranging from scenario planning to the identification of ideas to improve products, covering the whole R&D spectrum. This process usually lasts from several weeks to several months in complex industries. This method allows the MR team to avoid the radical / incremental dichotomy as all the basic ideas derive from the needs and disruptions identified at the beginning of the process. Not all ideas will result in a radical R&D project, but the likelihood that critical disruptions will be identified and dealt with in the process is high. When the process is completed, the definition of the target R&D project portfolio can be completed by a quantatitive weighting of each project, in order to balance the portfolio with respect to priorities. This process becomes an irreplaceable tool allowing the firm to avoid both the "active inertia" syndrome, whereby the firm is trapped into purely incremental innovation, and the "silver bullet" syndrome.
Experiment, partner and learn
Because disruptions are about emerging markets, market research has to learn not only about customers' needs, but also about emerging structures of the market itself. The impossibility to discover customers' expectation directly by asking them calls for an active and investigative approach that requires more interaction with the parties involved in creating the potential market than is the case of traditional market research.
Once the R&D portfolio has been defined and the development effort is underway, market research can invest in the next phase, which consists on playing an active role in two parallel but intertwined efforts: a market learning effort, and a product development effort. Given the high uncertainty about clients products and usage at this stage, this "last mile" to the market can only be travelled in a highly interactive process where design, test and learning steps are conducted in short cycles. This can only be achieved by experimentation and it requires close interaction between the R&D team and the target users that have been identified as the beach-head to larger segments.
Given the amount of learning at stake, and the fact that this learning often will be about domains that are totally new to the firm, a solution will often be to develop partnerships with other firms that have the required knowledge. This "Experiment, Partner and Learn" phase is crucial, and it is our belief that market research must play the leading role, as it is really about driving the learning of the firm into its new territory. For that, market research must become engaged in the disruptive innovation business: from passive readers of clearly established markets to proactive participants in learning about disruptive markets.
The full version of this article originally appeared in volume 12 of WPP's Atticus Journal