Integration vs. Innovation

Innovation is the well known recipe for a success. Innovation in Product Development makes a company’s product (or service) stand out above competition. But it is not always true that the companies that makes the most innovative products are the most successful ones. So there got to be something that beats innovation. If we look carefully, success in most of the industries is dependent on mass production and distribution. Creating a breakthrough innovative product is just one piece of the puzzle. The product needs to take into account the different ways the customer is going to use it, the accessories and support system for it, the partner network and so on. It is important that the product attains mainstream adoption. Without all this, any level of innovation is of no use. Therefore, the one thing that I think challenges innovation is Integration.

By integration I mean creating an ecosystem for the product. Success of a product depends greatly on the packaging of the product. How well the product meets the complete requirement of the customer? How much percent of the market actually uses this product? How many products in the market use this product as their base? Answers to these and many other questions define the success of the product. The product, along with its ecosystem, should be the market leader and should meet all the requirements of the customers.

Let’s look into videocassette recorders (VCRs) format war to see how integration out beats innovation. Producers of Beta format for VCRs were the first to develop VCR commercially in 1975. Beta got substantial technological head start due to the innovative product they brought to the market. The producer of rival Video Home System (VHS) format were the follower to Beta in the market. But there was one difference between the operations of the two companies. Beta kept the exclusive rights for production and distribution of its format of VCR. They were reluctant to share the technology or form alliances with other producers in the market. On the other hand,VHS formed strategic alliances with other producers, producers of prerecorded tapes and distributors to manufacture and market their VCR format. This integration strategy gave VHS an early lead in the sales of its VCRs giving it a dominant position in the market. By the end of 1980’s, Beta was no longer in production making the VHS format the de-facto standard for VCRs. The VHS format VCRs were neither technologically advanced nor cheaper as compared to Beta format VCRs. But they were able to beat competitions in the global VCR market due to the creation of the ecosystem around its product.

There are numerous other examples that shows the importance of integration. Windows operating system can be another prime example in the category. The number of applications that run on Windows exceeds the numbers on any other commercial operating system. This acts like a base for the success of Windows. More than ninety percent of the computers in the World run Windows. Microsoft has a networks of thousands of partners who make applications for Windows enabling the ecosystem. So any company with innovation alone cannot take on Windows operating system. They will have to do the complete integration and create an ecosystem to make their offering attractive and usable by the customers.

It is important to note that integration in no way is a substitute for innovation. Innovation in product development is still required for the success of the product. But as we just saw, integration is something that can challenge innovation. So the new recipe for guaranteed success of a product – Integrated Innovation. Let’s keep on innovating and evolving the product, let’s keep beating the expectations of the customers, let’s keep challenging the competition, but at the same time, make sure that the ecosystem is moving along with the product. The bigger and denser the ecosystem, more is the integrated innovation and higher are the chances of success.