Content originally published on Bitmatica
Innovation and invention are often used interchangeably. Attend any startup conference and the two concepts are indisputably intertwined as speakers repeatedly affirm them to be complementary.
Innovation is defined as a new idea, device, or method, which lends itself to the speakers’ notion of invention as innovation. However in practice innovation can be more aptly described as the application of better solutions that meet new requirements, unarticulated needs, or existing market needs.
Uber and Lyft were not inventions, but they were innovative in how they added software to the outdated and time consuming process of calling a taxi. By applying a self-service solution they met the Millennial market’s needs for a faster and more technological experience.
“If invention is a pebble tossed in the pond, innovation is the rippling effect that pebble causes. Someone has to toss the pebble. That’s the inventor. Someone has to recognize the ripple will eventually become a wave” Tom Gratsy, current startup co-founder and former Development Executive at DreamWorks, smartly notes.
Granted, the terms are not mutually exclusive. An idea can be both inventive and innovative, the first cell phones being a good example. Nonetheless, examples often show that it is far easier to find success through innovation, rather than invention.
Invention can easily fall victim to a common first-mover disadvantage: being first to market frequently means not only mapping where a road should lead but also clearing the land, paving the way, and marketing its existence. Meanwhile an innovator can come along to “fill the potholes” and build off of the foundation laid by the inventor.
“Being early is the same as being wrong” is a common Venture Capitalist warning about the difficulties of true invention. If the market is not yet ready for an invention, Innovators can re-apply those concepts a few years later when the benefits align closer with the needs of the public. Such was the case with SixDegrees.com and Facebook.
SixDegrees.com was the first social networking site, launching in 1997 and closing in 2001. When SixDegrees launched in 1997, only 21.6% of Americans were online. The addressable market was small and the general public wasn’t ready to share their lives online. Because a two-sided market requires a substantial market density for success, the traction SixDegrees.com needed was at least three years away.
By the time Facebook launched to the public in 2006, 68.9% of Americans were using the Internet, and were already familiar with other social networking predecessors — MySpace and Friendster. Facebook built on the brands that its competition had created while improving their user experience to become the most valuable social network in the world.
The importance of timing and product-market fit has become a platitude, yet the coming of age of a new generation has altered the market’s landscape. New companies are winning the titles of ‘Innovators’ by revising old inventions targeted at Millennial lifestyles.
In the coming weeks we will explore how companies like Casper, Dollar Shave Club, and Hulu have built innovative companies without inventing using a fixed set of Millennial-focused tactics to build with formulaic success.
Traditional industries and commonplace inventions have become ideal opportunities for innovation. Updating outdated products to be more inline with the behavior of 18-to-34-year-olds has proven successful for companies from Uber to Warby Parker, Instacart, and Venmo.
These companies and nearly every product that has found modern success have taken an outdated or arduous process and brought it online or to mobile. A recent study found that 47% of millennials access a business via mobile at least once a day, furthermore finding that 36% made a decision about where to spend their money or even switched companies based on what they were able to accomplish on mobile.
Young adults have grown up using modern technology, making antiquated processes that involve inefficient in-person time wasteful for a generation which works longer hours than their predecessors. 26% of Millennials work two or more jobs, meaning time represents money more than ever.
Similarly, saving money itself also ranks among their top priorities. Millennials are saving a larger percentage of their paycheck than any other age group. Seasoned by the financial crisis, this generation is seeking out deals. Even just the slightest edge over a competitor’s price has led to the rise of companies like Groupon and LivingSocial.
57% of Millennials compare online prices to those in stores before making purchases and 33% say that low prices will make them loyal to a brand.
Origin stories about being “fed up with the industry’s unfair prices” run rampant–and for good reason. They connect to Gen Y’s yearning to get the best deal on the best product with the best experience. They’ve led to huge successes for the online mattress industry as we will discuss.
This new generation of buyers can be enticed by these lowered barriers to entry. While in-person appointments and tasks may not have seemed unreasonable in previous years, they have become prohibitive for a period where time and money are each budgeted tightly. Therefore tomorrow’s innovation can be yesterday’s invention, and the next billion dollar company may just streamline the process of getting a loan or buying a car without changing any of the core steps involved in today’s process.
78% of young adults would rather spend money on an experience than a thing. That data correlates nicely with the research showing that spending on experiences and events has increased by 70% since 1987.
That doesn’t mean people aren’t still buying ‘things’, but it does mean that they are being selective. Products now need to create an aura around them that extend to a larger meaning in people’s lives.
Meanwhile, an experience starts with a company’s design, and leads from the seamless flow of an application to the consistent use of stylized branding and messaging. Good design tells the story of who a company and their users are, and the experience one has from using their products.
“Every startup looking to re-imagine broken industries, whether it’s housing or health care, has one thing in common: well-designed experiences.” Michele Serro writes “And every established giant within that same system tends to be plagued by the reverse.”
Simple, a web and mobile banking application, took on the legacy banking industry in 2009. Since then they grew exceedingly quickly to over 100,000 customers by focusing on two areas the “too big to fail” industry had long neglected — technology and human-centered design.
“These [startups] are essentially product design teams that are focused on iterating fast to find product-market fit.” writes Hemant Teneja for Harvard Business Review.
Traditional industries have been weighed down by legacy processes and websites for years. Although many large corporations have recently made efforts to reinvent and innovate, the invitation has already been sent to countless startups whose teams are focused on building experiences tailored to the new demands of our economy that meet the same fundamental need.
Limiting customer’s choice may sound unintuitive, yet with the correct delivery it can save companies money while increasing revenue. By having only a few or even just a single model of product, companies can save on production while fine-tuning their product.
“The presence of choice might be appealing as a theory,” states Sheena Iyengar, a Professor of Business at Columbia University. “But in reality, people might find more and more choice to actually be debilitating.”
Professor Iyengar famously ran a study involving two booths selling jam. The booth with fewer choices attracted slightly less visitors but sold to 30% of those who tried the jam whereas the booth with too many choices was only able to secure 3% of their market despite attracting slightly more visitors.
Apple has been a long time champion of simplicity. Up until recently they have maintained a single model of each of their products, a method which has earned them a considerable user base, particularly among Millennials. 44% of Americans aged 18 – 34 use an iPhone and 63% are Apple users or own an Apple product.
“The necessity of making trade-offs alters how we feel about the decisions we face; more important, it affects the level of satisfaction we experience from the decisions we ultimately make” notes Barry Schwartz, author of The Paradox of Choice.
The presence of too many options raises doubts in buyers’ minds, making it easier picture appealing attributes in the rejected options. Gen Y may have coined the term “FOMO” (fear of missing out), yet the feeling is as prominent today as it was in the 1980s.
“As the number of options increases, the costs, in time and effort, of gathering the information needed to make a good choice also increase,” Schwartz continues. “The level of certainty people have about their choice decreases. And the anticipation that they will regret their choice increases.”
Given the savings-oriented and overworked nature of young adults, the increased time needed to evaluate an excess of options becomes undesirable. Similarly, the feeling of doubt surrounding whether they got the best product for the best price can be easily triggered for a generation already sensitive to value.
For many startups, innovation has become taking the overwhelming options of the competition, distilling them into one mass-market product, and supporting its release with substantial, focused, and concise marketing. For cash-conscious and agile teams, the focus should be doing one thing, and doing it well.
Today’s innovation has found a home for itself in the act of refining and remarketing existing ideas for the near quarter of our population who have recently gained purchasing power. In the coming weeks we will explore how Casper, Dollar Shave Club, and Hulu have all applied these lessons successfully.
To never miss our tips for startups subscribe to our newsletter.