Innovation as a Competitive Strategy

It is now almost 30 years since Harvard's Michael Porter published Competitive Strategy in 1980 and gave us the five-forces model, and 15 years since Peter Drucker penned Innovation and Entrepreneurship.  Yet in the field of innovation and technology, the last few years have seen major new contributions to strategic business thinking, such as Geoffrey Moore's ideas on the evolution of the basis of competition in a product category from functionality to reliability to convenience and finally to price.  These four stages are remembered by most as 1) pioneers or bleeding edge, 2) early adopters, 3) early majority, and 4) late majority in Moore's 1995 classic Crossing the Chasm.  Clay Christensen's  1997 book The Innovators Dilemma produces the gloomy thesis that good managers using good management practices will miss the market revolutions caused by what he terms "disruptive" technologies - precisely because these good managers listen to their customers too well.

All of this is key for firms in the technology industry, where technical innovation is routinely used as a source of sustainable competitive advantage.  And now, with the Internet and e-commerce, technology firms will find that they need to drastically innovate in their business practices as well.  This distinction is vital: for most technology firms (i.e. other than those firms inventing Internet or e-commerce infrastructure), the Internet and e-commerce will bring business innovation first, then technical innovation.

Porter and Drucker both suggested that the largest shifts in conditions in the business-economic environment of a firm (shifts creating opportunities for innovation and providing sources of competitive advantage) would be from background factors such as demographics, changes in perception, and new knowledge.  This of course remains true.   But in the technological sphere, and in the era of the internet, where competitive battles are won and lost every day, trends with much shorter half-lives must be factored into the analysis.  This is where the works of Moore and now Christensen become so important.

Chesapeake Analytics helps clients identify and cross the chasms in buyer preference, and identify the disruptive events occurring in market sectors.   Our broad industry view helps executives understand the larger shifts and their effects in the technology sector.