Why Context is Critical in Competitive Intelligence Analysis of Innovation

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Why context is critical in competitive intelligence analysis of innovation

A novelty product can be tomorrow’s disruptor, especially if ignored in its context. You will have heard the story about the demise of Kodak. This article asks why context is critical in competitive intelligence analysis of innovation.

The story goes that Kodak was crazy for ignoring digital photography. Yeah, we know; it’s in every business textbook. And it’s still one of the favourite examples of business failure since they went belly up. 

A lesser-known accompanying fact is this. Did you know that in 1975, Kodak invented the digital camera? Crazy eh? A foolish decision not to take it to market. It really screwed the company up, and in 2012 Kodak declared bankruptcy. It was all over. Or so it seemed. Eastman Kodak emerged from the ashes and is now focused on B2B chemicals and imaging. Their original core market – was chemicals for photographs. 

They went back to what they thought they did best

In 2020 they received a $765 million US government loan to set up a pharmaceutical division. They were going to manufacture ingredients for generic drugs. Nothing runs smoothly, and the loan was delayed to investigate potential insider trading. But that’s a different story. In 1975 they may have invented the digital camera, but they decided not to market it. And for them at the time, it was an excellent sensible business decision. Hindsight may say otherwise, but it was a reasonable choice at the time.

Well, Kodak was not a technology firm. It was (and is) a chemical firm. Kodak did not have product production lines or technical expertise to build cameras. They had a cautious and steady approach (slow) to R&D and production. It would have been out of date by the time they had a camera in production. Tech needs rapid R&D and production. Otherwise, marketing and production are entirely wasted. 

Also, they could not let go of their incumbent product – their film. Yes, they had LCD screens but used the “Advanced Photo System” format film. Also, data storage was not great, even for standards at that time. The image was saved on a cassette, and the Advanced Photo System format only allowed a single photo to be saved. So the LCD was for the user to decide if they would save the image. They could not see another use for it. 

The article is not about Kodak

But this article is not about Kodak. It’s about context. Context is critical when looking at innovation potential or the vulnerability of incumbents. All differ depending on time, which markets they operate in and across incumbents. A technology that destroys a market leader’s advantage in a market might only give them a glancing blow in another. 

Innovation could also enhance the technology roadmap for companies and the industry sector. But most importantly, it increases customer expectations. To maintain or increase any competitive advantage, the new tech will make them have to advance quicker than the entire market. And, of course, many incumbents can’t or won’t in many cases. You operate in unique environments, and your customers live and buy stuff in their own way. And new products and entrants into your market are usually due to major local and global trends. You’ll find out too late if you are not looking for them. 

Changing business world

The global business environment has changed and is changing. The rising price performance of digital tech more towards liberalisation of resources policies means:

  • Movement from stocks to flows supply chains
  • Increasing consumer power
  • Increasing competitive pressures
  • Improvements in the underlying technologies
  • The barrier to entry that was once prohibitively is dropping. Making it easier for small new entrants to service a fragmenting consumer demand.
  • The accelerating impact of new technology

Disruption to incumbent businesses used to take 20 to 30 years, and it can take a couple of years or even a few months after launching tech, a merger or an investment into a new unicorn. There are a number of market conditions that affect the competitive dynamics in a market. Current market conditions determine the type of threats that can emerge and how all stakeholders, including customers, perceive them. And also how the industry incumbents respond.

The conditions making a market appealing to incumbents make it susceptible to disruption. A market with high switching costs may become complacent about its customers’ needs. And be unable to notice and respond quickly to new customer demands. Leaving the door open for new businesses and their technology and way of doing things. All the new entrant has to do is reestablish the customer connection. And deliver value to negate the switching costs associated with entering that market. And find something customers want and market it differently.

Why context is critical in competitive intelligence analysis of innovation

In conclusion, you might have heard this story before. The companies that are not disrupted by new technology or entrants are the ones that die. And the worst are the ones that ignore the new entrants.

No one should be under any illusion that new entrants can’t make money. Often, it’s just not for the same business model incumbents use. And this is where context comes into play, and knowing the markets and the competition allows you to see where disruption is possible. 

Knowing the competition and trends allows you to see where new innovations may have potential. When you know the product, you can see where new entrants may have an advantage and disrupt the market.

But most importantly, you need to be able to spot the new entrants and adapt your business model quickly. In a fast-moving competitive landscape, you need to be able to spot new entrants and disrupt their business plans and establish them as a new leaders.

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