In this blog, I have so far discussed rogue innovations that were initiated by either peripheral players or non players. Vanguard was an example of peripheral player introducing a rogue innovation. Sony’s digital camera was an example of a non player introducing a value destroying or rogue innovation. However, not all value destruction needs to take place via competitive activity. Sometimes, value destruction can take place due to consumer shifts alone.
Earlier, I was reading about a shift in the pattern of usage by US teens. The report shows that teens are increasingly using text messages instead of phone calls. While 75% of 12-17 year olds in the US have a cell phone, more of them are using texting to replace phone calls. Unlimited texting packages from carriers imply that more of these subscribers will not lead to stronger bottom-line for the carriers. A more salient impact of this shift may be a permanent change in cell phone usage habits for this generation. Usually, such shifts in habits and demographics does not change rapidly. However, this report shows that teens texting daily has increased from 38% in February 2008 to 54% in September 2009.
This rapid rise in use of texting is significant when compared to how long it took common consumer products to diffuse in their markets. Furthermore, consumer habits often take a very long time to change as any marketing professional will tell you. Product or usage diffusion is often a matter of decades rather than months. However, with the internet on the one hand and network externality effects (i.e. value of a product increases exponentially with the number of other users of the same product) on the other hand, texting seems to be defying what we normally expect diffusion timelines to be.
The carriers are in a similar situation as firms that face a rogue innovation often are. Although there is no producer innovation here, the value destruction is more triggered by usage innovation in a customer segment. This highlights the importance of understanding major and minor trends in your target industry. Although strong and rapid trends such as these will ensure that you do not miss them, the speed of change will also make it harder for you to react. This points to the fact that perhaps you need some new capabilities to deal with such rapid trends.
One capability that will become increasingly more important will be the ability to quickly resurrect value in the fact of profit destroying forces. A natural place to start learning about these capabilities is the firms that tamed rogue innovations.
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