Hi! Managers: Old markets, new innovations

We don't lack choices these days. From cosmetics to cars, computers to condos, it's the "if you want it, we've got it" age. In most markets today, supply exceeds demand. There aren't shortages of consumer goods, electronics, automobiles, condos, airlines or mobile phones.

As a seller in this market, it's increasingly difficult to differentiate yourself, particularly in mature market segments. While technological innovation will continue to drive new industries such as green energy and new product categories such as tablet devices, for many of us it's just more of the same mundane world, without technological innovation to spring us forward. But it's not so bleak a picture if you're open to new arenas for business-model innovation.

Take my company. We're in a very old industry called marketing and in a very established segment called design. OK, it's web pages and not print, but it's still design, copy and production, same as the old days. When you want a new website you go to a web and graphic design company and for a fixed price you get your new site.

That's exactly what we do. We offer the same as the hundreds of thousands of designers, developers and agencies around the world, but with one important difference. We deliver it as a subscription. For what in the US is sold on a project basis for US$5,000 (Bt152,000), US$10,000 or more, we deliver for a low monthly subscription, without setup or term commitment. It's month by month, pay as you go, cancel any time.

I'm very proud of our level of quality, but the truth is we haven't innovated on actual web design or development. We've innovated on the delivery and payment model for our industry. We've traded short-term project revenue for annuity-based lifetime-customer value-based revenue. It was a risk, but it has worked.

This is business-model innovation.

Now let's take the case of the circus segment of the entertainment industry. Look back to almost 40 years ago when market leader, Ringling Bros. and Barnum & Bailey Circus was in decline. New forms of entertainment, changing demographics and animal-rights issues created the tide against which Ringling Bros. was swimming.

Born about this time, created by two street performers in Montreal, Canada, was a reinvention of the circus: Cirque du Soleil. By redefining the segment, charging premium prices, creating a format with theatrical style and the absence of performing animals, the idea mushroomed. Today, Cirque employs more than 4,000 people, produces shows in more than 240 cities and is generating revenue that's approaching US$1 billion per year. More than 90 million people have experienced a Cirque show. All this came from a very tired sector, from two boot-strapped innovators who realised the opportunity from real product and business-model innovation. This is real product innovation, not "new and improved".

If you're with an incumbent market leader, the chances of your company coming up with market-changing innovation, I'm afraid to say, are remote. It's not about you - it's about the dynamics of organisations. From Clayton Christensen's seminal book The Innovator's Dilemma to the more recent Creative Destruction by Richard Foster, it has been well documented that market leaders rarely develop game-changing innovation or business-model revolution. These things generally happen to them, not by them.

Thomas Friedman wrote in his column: "I can't help but reflect on what, in my view, is the most important rule of business in today's integrated and digitised global market, where knowledge and innovation tools are so widely distributed. It's this: whatever can be done, will be done. The only question is, will it be done by you or to you. Just don't think it won't be done."

What to do? As we say in Thailand, "up to you". Defend your turf to your dying breath (newspapers come to mind), be a change agent in your company and find a corner where no-one is looking and innovate - or strike out on your own. "Up to you".

Derek Brown is managing director of Pronto Marketing, and former marketing director of Microsoft (Thailand). Follow his article in Hi! Managers column every second Monday of the month.