Innovate with a Leapfrog Vision
Leapfrog Innovation
Many of us have experienced failure after putting forth a tremendous amount of effort. Maybe you have experienced this yourself by working hard to release an inferior product. How do you respond to this situation? Do you try to fix your inferior product? Give up? Some companies fail to recognize the difference between “trying really hard” and establishing visionary goals. Consequently, management can get caught up in a game of catch up while blaming externalities for struggling sales.
One way to address a catch up scenario is to invest in leapfrog innovation. Leapfrog innovation can generally be understood as a method to preempt competition by developing and releasing a future-generation product partway through the competitor’s innovation cycle. The competitor may not have a means to immediately respond and could lose market share as a result. Some might even consider leapfrogging as an offensive business tactic to shape the market in your favor, and it could additionally be used to enter a market.
Example of Leapfrog Innovation
Consider a smartphone manufacturer that releases a device with a decent camera, pretty good screen, and a fast wireless connection. You may expect this product to sell well if the market conditions are ripe for it. If, around the same time, a competitor releases a smartphone with a slightly better camera, brighter screen, and an even faster connection for around the same price, the first manufacturer’s sales may get crushed.
Since the smartphone industry is fairly well established, we can generally anticipate what the next generation of smartphones will be capable of. The first manufacturing company can use this knowledge to their advantage by preempting their competition with a generation-after-next product midway through the next-generation cycle. In other words, they invest early to be halfway done with their next release before their competitor begins development. Figure 1 provides a visual of this concept.
Creating a Leapfrog Vision
You may wonder if leapfrogging could be permanently incorporated into an innovation strategy. I would argue that it could, but it really depends on what kind of business you are in. High-tech companies are capable of releasing products with the best technology available, so why not do it all the time? It is difficult to execute in practice for several reasons: 1) The rate of research and development is often slower than the rate that consumers get bored, 2) the latest and best technology will likely neither reduce costs nor increase margins, and 3) leapfrogging is not necessarily cost effective for extended implementation.
Companies are incentivized to produce sustaining innovations that keep customers hooked, not solve all problems all at once. Next-generation products and their features can consequently be easily forecasted. Leapfrog innovations can be great for catch up situations, but they are neither sustainable nor necessary to permanently incorporate into your strategy (game theory, anyone?).
Your leapfrog vision may be relatively easy to establish for sustaining innovations. If you have performed your business intelligence due diligence, you should have a good idea about trends in your competitor’s product development. Imagine yourself as your competitor and how they might produce a sustaining innovation for the competing product. Then repeat that process once more. The resulting product concept becomes the target you want to beat. These steps are generally outlined in Figure 2.
The underlying assumption with this approach is that your product can undergo chained rounds of sustaining innovation. Disruptive innovation is more difficult to apply and generally involves an alternative paradigm for solving a poorly solved problem. The vision creation process would not change, but step 4 from Figure 2 would involve technology scouting and possibly existing or new research and development activities.
Executing the Leapfrog Vision
Even well-established companies and products are subjected to customer demand risks. Among reasons why new products fail, the most common reason is poor customer alignment [1]. This risk increases as the amount of time between product releases increases because the customers’ needs continue to diverge from the latest data point. Furthermore, new product releases have the highest risk of misalignment. Like the introduction of a new product, your customer discovery process must be woven into your leapfrog innovation practice.
In addition to periodic customer discovery, you can mitigate the risk of playing catch up by investing in research and development that focuses on different time horizons. First, the bulk of your investment should focus on innovating upon the existing generation of your product (< 3 years). Second, invest in new technologies or features that have a favorable likelihood to provide a strong competitive advantage against competitors (3-7 years). Lastly, consider the product concepts that may be 10 years away from practical implementation but have the potential to provide a significant advantage for your business. Such concepts could lead to significant cost reduction, highly desirable product features, or even alternative business models.
A widely accepted rule of thumb is to invest 70% of your innovation capital into the first time horizon, 20% into the second time horizon, and 10% into the third horizon (i.e., the 70:20:10 rule) [2]. This allocation allows you to keep most of your budget dedicated to the core product, but provides additional leverage for adapting to changing markets. While rules of thumb can be helpful, you do not need to strictly adhere to them in order to find success. Instead, adapt them, including the concepts in this article, to your company’s specific needs and situation.
References
[1] Kotashev, K. (2022, March 26). Startup mistakes: First-hand lessons from 80+ failed startups. Retrieved July 25, 2022, from https://www.failory.com/blog/startup-mistakes.
[2] Nagji, B., & Tuff, G. (2021, February 24). Managing your innovation portfolio. Harvard Business Review. Retrieved August 4, 2022, from https://hbr.org/2012/05/managing-your-innovation-portfolio.