Innovating on the Fringe
Partner management. Consortium creation. Joint venturing. Cross industry experiential design. Strategic collaboration. Welcome to the functions that will allow your firm to compete in the connected economy. Together these aforementioned functions, along with a handful of other emerging differentiators, make up a broad new category in corporations that we refer to as “Fringe Management.”
Competing in Siloes
For centuries, businesses competed in siloed environments, broadly known as industries. The overlap from one of these industries to the next was limited. Inter-industry touches typically occurred either early or very late in any industrial value chain. Early value-chain crossover was tied to common commodities and materials used to produce products or enable services. The overlap late in the value chain has typically fallen on the shoulders of the product user. It was up to the user, most often referred to as a customer by product companies, to determine how to use separate products in concert with each other to get the most positive experience.
For product companies especially, this later overlap has been outside the scope of their core business. These companies design, engineer, manufacture, distribute, and at times service the product for which they create. They have become refined and seasoned corporate machines, excellent at churning out “their product.” They have competed in this space and know how to edge out competition with better, faster, cheaper improvements (often packaged through methodologies like Six Sigma, Lean, etc.) They have done everything right, until now.
Blurring Industry Lines
The world is connecting. It is no longer necessary to build the case that products are rapidly being connected to the Internet. It is even generally understood that new services are being built from the data being generated from or available to these “connected products.” The focus must shift from this “Internet of Things” discussion to that of “Connected Experiences.”
Consumers are rapidly departing from a view of products in the industry-segmented lens of yesterday. Expectations are rapidly shifting to an ecosystem-driven view where products are expected to work together to maximize a value for the user. In the past this recognition of value-driven user experience was the responsibility of the users themselves. Static products would be integrated by the person(s) experiencing them.
This user-centric integration model is tired and old. As products connect, integration must be engineered from the beginning to ensure complex sets of data are available, creating experiences throughout the life of a product. The new product company value chain must interlink at every step to remain relevant. Consumers won’t judge only how well your product works; instead they will be judging how well it will work in their “ecosystem.”
Integration Becomes the Holy Grail
As products connect, and features are developed that consume information from outside the body of the core product, integration becomes the Holy Grail. Integration must be architected into the design of the product. It must be future-proofed to consider experiences driven from data that doesn’t yet exist. Smart integration becomes the user experience differentiator.
There is a natural evolution for integration that spans from a single product integrating with itself (all elements work in concert with one another) to cross industry integration of all products. The complexity for the latter is significant and this may very well be a utopia that is never reached. This utopia is what many consumers will expect as other ecosystems in their life continue to integrate.
The figure above demonstrates the believed projection of how integration will evolve from a product engineering discussion to a corporate strategy and industry-shaping discussion. It is a nice visual for demonstrating this idea of innovation on the fringe.
Although it is safe to say this progression will not be realized immediately, companies with strong brand equity will soon find it necessary to begin respecting early tags of this transition. They will need to:
- Ensure their products work well with one another in use, not just in marketing (Inter Brand Product Integration). Simple examples of this could be automotive manufacturers that market and sell two different products to the same family. When a husband, let’s say Bob, gets out of his sedan, and into his wife’s SUV, why does he need to adjust seats, temp, radio presets, etc.? Why do these two products sold by the same company to the same family not yet have the same contextual awareness Bob’s office computer does? When he logs into the machine in his office or into the same accounts from his tablet all his preferences are already shared. His emails are up to date; his browser favorites match, and even his Internet radio stations are the same on each.
- In fact, why don’t all the touch-points across this brand work this way (Intra Brand Touch Point Integration)? Regardless if it is in the product, touching the call center, or dealing with an online financing program, why aren’t all these touch points integrated?
- That got Bob thinking, why don’t similar products from different manufacturers work this same way (Intra Industry Integration)? When Bob travels for work, he often finds himself renting different brands of vehicles. They all have four wheels, power seats, radio stations, mirrors, and basic engine performance calibrations. Why don’t his basic preferences follow him to make his rental car, “his car?” Furthermore, why doesn’t the way he drives follow him to tell all his brands more about him and how their products can maximize value for drivers like Bob?
- If some products are contextually aware, then a user will begin to expect more and more products in their life to have the same awareness (Inter Industry Integration). Why should the same information need to be entered more than once when a product should be able to just access the original source? Some information will certainly remain proprietary, but others will need to be shared to meet the emerging connected consumer’s expectations.
This progression of different integrations will not happen overnight, but it will occur as our connected society demands it. How firms organize around this new necessity will vary. Some will try to control integration by investing in proprietary systems that play this “middleware” role. Through exposing only some data, limited intra and inter industry collaboration could occur. Other firms will look to join clearinghouse integration services that ensure integration between certain industrial partners.
Integration Will Enable Innovation
Regardless of your firm’s choices of the right model for enabling integration, one thing is sure: The opportunity to innovate will flow from this disruptive space. With all this new data about the product and the user, everything that is considered “a given” in an industry is no longer sacred. Financial and pricing models will change. With so much of the user experience associated with a product now blurring with other products/services, companies will find themselves scrambling to manage this new space. The earlier stated “fringe management” functions will be these strategic groups that help to conceptualize, design, and quickly test different mash-ups between products, brands, or industries. As companies get better at this, they may consider their true differentiation is not the product, but rather their expertise in managing these user experiences. Asking “what is my real business” will trigger strategy conversations.
No matter how drastic, this shift from the core may prove difficult for many companies. Students of corporate strategy will explain structures that enable success in support of one strategy can become one of the greatest impediments to success when a market shifts, forcing implementation of a new strategy. Case studies written 10 years from now will most likely feature companies that have succeeded or failed because of how early they recognized that “connected” is more than a product feature. Those that recognize it is a systemic market change blurring industry lines will drive structural alignment programs.
The world is connecting and with it the expectations of how experiences integrate across a user’s entire life is being redefined.
Gregg Garrett leads a team that advises clients on how to harness innovation in the connected economy as CEO and president of CGS Advisors. He can be reached at firstname.lastname@example.org