Platt Perspective on Business and Technology

Rethinking innovation in an age of online social media 1: What drives it? A supply and demand story

Posted in macroeconomics, social networking and business by Timothy Platt on July 12, 2016

I have written fairly extensively about innovation and innovators in this blog, and about bringing innovation into businesses, and to the marketplace. And I have written about the innovation diffusion process here too, and about the pace of acceptance of New among potential consumers and users. I turn here in this brief thought piece of a posting to at least take note of one more dimension to this overall puzzle:

• What drives the innovation process and the cycle of initial development, production, marketing and sales of New?

I have repeatedly referred to innovative businesses, and to innovation as a source of competitive excellence in them – for how it enables more effectively meeting consumer needs and demands and the pressures of the marketplace. And I have just as repeatedly written of market pressures and the demands of the marketplace itself.

• To adapt two terms from economic reasoning, is the drive to innovate more supply-side driven and a process that derives its primary impetus inside competing businesses, where consumers and their purchasing decisions define success from how they select among what happens to be offered to them?
• Or is innovation primarily demand-side driven with consumer feedback providing what amounts to compelling pressures for competing businesses to meet their evolving needs and demands?

I focus here on marketable products and services that are brought to marketplaces external to the business. But in principle everything that I would offer here would apply to business process innovation too. There, the “end-user market” that innovative developers cater to is internal to the organization, but it is likely to be as separate and distinct from the group of employees who actually develop, refine and produce those offerings, as any external market is from the in-house product developers in a business who provide their more externally facing product offerings. (For simplicity in this, I will switch to using “product” as a general term that would include both products and services, and packaged combinations thereof.)

• I would argue that the nature of innovation and the innovation process have fundamentally changed, and certainly since the development of the internet and online sales, and particularly since the advent of Web 2.0 and the interactive internet and the proliferation of social media with its online reviews and consumer commentary.
• More traditionally and certainly pre-internet, product innovation was more supply-side driven with consumers having to essentially passively choose among whatever products and options that manufacturers chose to offer. And outside pressures to innovate, such as they were, came primarily if not exclusively from competing businesses as all of the businesses fighting for shares of specific markets, compared what they offered to that of their business peers, with all of them seeking to offer better. But they defined what “better” meant and certainly at the product selection, design, development and manufacturing steps.
• The interactive online in general, and online social media and reviews in particular have changed everything there. And the flood of direct consumer feedback on what self-selected market participants like and do not like, want and need and don’t, has forced businesses to be much more actively responsive to consumer needs, and proactively so as they seek to anticipate what their market and its customers will want next. Simply looking to what the competition is doing and treating purchasing consumers as if more passive participants in their product line determination can no longer work.

I offer this brief note as the first installment to a new brief series. And I will build from it in a next series installment where I expand upon the points just made here. As part of that I will consider the issues of pace: the speed of innovation on the supply side, and of demand for it, and the issues of innovation diffusion and the shift from exclusivity to commonality as new and innovative and even disruptively innovative becomes mainstreamed and commonplace. Meanwhile, you can find this and related postings at Macroeconomics and Business and its Page 2 continuation. And you can also find this and related material at Social Networking and Business and its continuation page too.

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