Contemporary businesses needs a culture of innovation that drives product development. The days of incremental change and product line extensions are gone, as the diminishing return or new market debuts and consumer attention spans wane. Let’s take a look at how lessons from software innovation invade multiple vertical marketplaces for new product adoption and market sustainability. Author Bill Buxton in his book, “Sketching User Experiences: Getting the Design Right and the Right Design,” cites the trend for software manufacturers to develop new products sometimes known as “n+1” – one with enhanced functionality that appeals to the marketplace. Unfortunately, though the incremental costs of these subsequent releases diminishes profitability. We have seen this many times over with Microsoft products, Quickbooks accounting software and many others. Buxton states that the reasons why the profit drops are four-fold: the products increase in complexity, the installed base grows and disruptive changes are not tolerated, the low handing fruit has been picked with both features and customers and lastly, as the product has grown, the product has gone through “feature bloat” to a point of diminished return.
The aforementioned circumstances occur at a time when the marketplace is shrinking and the attention span of consumers is drifting to another trendy software. Thus, there is always a compelling need to develop and market new products. The lesson in these circumstances – create a culture of ongoing research and development to seek out new innovation with a vengeance for innovation. Research and development groups may at times get bogged down in the n+1, n+2, or n+3 mentality. This is devastating to the organization. While interim product innovation provides a temporary life in sales and market movement, the erosion of innovation and long term sustainability of the company may be falling apart.
Savvy venture capitalists remain wise students of this phenomenon and they actively search for and invest in software companies that have more than a “one trick pony.” A one trick pony may be a good idea for the inventor who may be able to ultimately monetize the invention through a strategic sale, but a company with a culture of innovation that pervades the executive suite, the research and development group, marketing and all branches of the company provide the right investment --- the place for smart VC money.
While Buxton’s book cites numerous software and technology innovations, including an in-depth case study of Apple and the successive iPod debuts, these innovation cycles apply to nearly everything, most notably many consumer products that we touch every day. Smart business executives, designers, researchers, marketers and professional communicators seek that culture of innovation that goes beyond n+1 to true, “box breaking” innovation because it maintains top line growth and bottom line profitability.
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