Innovating in a market is about bringing a new value proposition to it. Successful innovation is about bringing a profitable value proposition. This is why all innovations are far from being market successes, as they have to win customer preference (over the current product or solution) and generate margins.
Product and service innovations in high-tech B2B/B2G
Any innovation must be convincing to customers, profitable and as difficult as possible for competitors to copy.
This explains the interest of the high-tech B2B/B2G sector in services in general and in innovative services in particular:
- They build customer loyalty
- They are based either on human know-how or on investments, particularly in IT, which make them long and/or costly to imitate,
- They therefore create interesting barriers to entry.
In B2B/B2G markets, market innovation is at the heart of the competitive game. Three basic rules “frame” high-tech B2B/B2G innovation:
- Not every technical innovation is a market innovation (see the article “distinguishing between technical and market innovations”)
- The market value of a technical innovation is measured in terms of a change in the “value for money” from the customers’ point of view and not in terms of adding a function or improving the performance level of a function
- Not every market innovation is a technical innovation. High-tech B2B/B2G innovation is of course very often technical but not only: it can also come from new services, a new identity or image, a new transaction model proposed to customers.
How to innovate in a high-tech B2B/B2G market?
So what are the different ways to innovate in a high-tech B2B/B2G market?
These are all ways of bringing a new value proposition to the market and to customers, i.e. one that is likely to change customers’ preference or willingness to pay. Remember that customers decide on the basis of a comparison between suppliers, products and possible solutions of the “value for money”, i.e. a comparison between the value proposed and the price asked. All elements likely to modify this “value for money” are therefore possible sources of market innovation.
The three main sources of ‘value for money’ traditionally cited, across all sectors, are the product, services in the broad sense and image. The technological world, which often values it too little, is sometimes surprised to see image cited as a source of value. However, this is also the case in technology, even if we are often less aware of it than for consumer products. Everyone knows that removing the label from a Hermès scarf makes it lose a good part of its value and consequently its price, but this seems curiously less clear-cut for the company name or the brand associated with a technological product.
Let us mention that, logically, price is also obviously a way to change the “value for money” and could therefore also be considered as a source of innovation. In this case, lowering the price is the least interesting innovation action since it is the only one:
- It degrades margins
- It is the action most easily imitated by competitors
In the technological world, we prefer to remember as sources of innovation
- The product
- The services
- The revenue model or transaction model, which is clearer than “diluting” it among the services because it is different in nature
- The image.
We will not list here the countless purely product innovations. We will simply mention that product innovation, which we have recalled is not automatically a market innovation, can be associated with:
- The ability to do something that was not previously possible
- An addition of new functions
- Improved performance
- Reduced operating costs
- Easier to use, maintain or reprocess
- Reduced environmental footprint
- etc.
Some examples of market innovations beyond products
Innovations through services
Here are some examples of Service Innovation:
- Remote management and optimisation of the maintenance of a fleet of machines (e.g. turbines or rotating machines) based on data collected from a large number of machines in service
- Generally speaking, all services aimed at relieving customers of some of their operations and carrying them out for them
Innovations through identity or image
Some examples of Innovation through Identity or Image
- The replacement of the initial name of a product, often technical, by a more memorable and customer-friendly commercial name
- Repositioning a product as “top of the range” (often associated with added functionality or better performance)
Innovations by “transaction model” or “revenue model”
Some examples of Innovation through the “transaction model” or the “revenue model”
- The transition from selling software as an annual subscription including automatic updates to selling successive versions for unlimited use
- Generally speaking, all SAAS (software as a service) sold in the form of a subscription
- Pricing of a product according to its performance as seen by the customer (savings on the cost of use and maintenance, availability, etc.)
- The transition from selling a product to paying per hour of use (invoicing per hour of flight, for example)
