The Third Way to Innovate

There is a big flaw in innovation thinking today – a false dichotomy. Conventional wisdom says that to survive, companies must move beyond incremental, sustaining innovation and invest in some form of radical innovation. “Disrupt yourself or be disrupted!” is the relentless message company leaders hear. Don’t be fooled. David Robertson in his book, The Power of Little Ideas shows there is a Third Way that is neither sustaining nor disruptive, but is, in its essence, complementary. This low-risk, high-reward strategy is one that all managers and executives must understand and practice in order to achieve competitive advantage in today’s dynamic economy.

The Third Way, isn’t a new concept altogether. Some companies have used the concept in their own way to maneuver their businesses into profit. However, no one has explicitly defined and described this form of innovation as a replicable process. To understand the concept in a concrete way, one should know its three distinctive traits.

First, and most obvious, the Third Way consists of multiple, diverse innovations around a central product or service that make the product more appealing and competitive. We refer to the product at the center of every Third Way project as the key or core product. It is always a key or important product; making a marginal product the focus of so much effort would make no sense. But the product does not always have to be a company’s core product, as its sports drink was for Gatorade and used cars were for CarMax. For Novo Nordisk, its HGH drug was certainly important, but its insulin product was, at least for the period covered in our story, the company’s core product. “Always key and often core” is the way to understand any product that is the focus of the Third Way.

By diverse complementary innovations, we mean that they should fall into a wide range of business categories, such as pricing, marketing, operations, sourcing, and partnerships. Likewise, the innovations should appear in a host of different forms, such as auxiliary products, support services, and social media activities.

Second, what makes this approach work is that all the complementary innovations operate together as a system or family to satisfy a compelling promise to the customer. Gatorade promised peak performance for serious athletes through a complete nutrition and hydration solution. Norditropin promised to make HGH therapy as trouble- and pain-free as possible for all involved. And CarMax promised buyers a hassle- and worry-free experience when they were locating and buying the car they needed.

Third, and perhaps the least obvious in the stories, the family of complementary innovations must be closely and centrally managed. It’s not an ecosystem of interrelated but autonomous companies and products that compete, collaborate, or otherwise co-evolve according to their own needs and priorities. Instead, each complementary innovation is created or selected and then closely managed, usually by the owner of the key product. Indeed, the careful selection and proactive management of this system is crucial to the success of the Third Way.

This is an excerpt from David C. Robertson and Kent Lineback’s The Power of Little Ideas. Get Your Copy here.

Credit: Abhishek Singh

 

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