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Q&A: Defining disruptive innovation – Part 2

Article-Q&A: Defining disruptive innovation – Part 2

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Exploring innovation at scale, the role of intellectual property (IP) protection and innovating business models.

It's not enough to have creative license when looking to disrupt the market—one must also have the means. Additionally, companies investing the time in resources in innovative products should seek IP protection, which creates another layer of costs. A company then needs to evaluate if the overall investment is of value relative to competitors. It's improtant to note that the metrices to measure the outcome of R&D and innovation should be framed in a long-term picture rather than short-term. In Part 1 of this Q&A series, we differentiated innovation from invention, and outlined the need for dedicated financial and human resources. In Part 2, Vitafoods Insights speaks to Julia Wiebe, director of research and development at Nektium, about getting ahead, challenges around scale and the importance of not neglecting business model innovation. 

How often are nutrition companies considered ahead of consumer trends? 

People who study the market, social and demographic changes and mega trends and look at developments in other industries or countries, are often able to extrapolate these trends to our market. For example, if we want to predict the consequences of an ageing population, and find out what opportunities we have regarding product innovation, it is wise to look at the nutraceutical innovations emerging in Japan.

It takes time and money to develop evidence-based new products, so spotting a trend early on, when it hasn’t been described in market reports and industry media buys a company time. Once the trend becomes obvious, these companies are then first to market or at least early followers. The e-gaming trend is a good example. As Nektium, we noted this area gaining traction last year, when we observed that beside the core industries like computer/game developer companies, secondary industries were becoming associated as sponsors. The COVID-19 lockdown restrictions accelerated this trend, and today nobody would question that gaming is a huge opportunity for many sectors—the supplement industry being one of which to starting to make inroads. Those able to forecast the success of this trend and develop a product will now reap the rewards of being established players until others catch up.

How can smaller innovators be supported with scaling? 

Usually it’s small companies with a start-up mentality and interesting technologies that are flexible enough to innovate, but often don’t have the financial muscle or business experience to scale. SMEs usually turn to investors to support them, which then turns to diluted shareholding; over and above capital, they need business expertise, regulatory support, patent funding and access to markets. The ideal win-win situation for a start-up may be partnering with an established company that retains the innovative capacity of the start-up while supporting it to achieve scale.

What is the process of protecting intellectual property and how do brands protect innovation through patents?

Innovation is expensive and time consuming, but the success of the company depends on it—therefore protecting it is essential and can be achieved through patents, as well as strong branding. The best is a combination of both: a patent gives a company a legal position to defend its product, and a strong brand supported by clinical studies differentiates the product from copycats. In the nutraceutical B2B business where products are often single ingredients that are difficult to protect by patents, strong brand equity is crucial.

How can companies refine their internal structure to optimise innovation?

Firstly, we need to define the different types of innovation: we can innovate a product to make it better, we can innovate the process to increase our margin, we can innovate by launching a new solution, we can innovate management, and we can also innovate whole business models.

To avoid disruption by competitors, at some stage or another companies need to re-evaluate their strategy and innovate their business model. Well-managed companies in particular have difficulties in changing legacy models, especially when customers and their existing needs are still providing good business. However, once other players start attracting customers and they choose to switch to the cheaper disruptive innovation, it's too late for change. This is what Clayton Christensen called the 'innovators dilemma.' Big, well-managed companies like Nokia and Kodak ended up in this trap, but others successfully survived as ambidextrous companies, exploiting the present and exploring the future—like IBM for example—but how did they manage to succeed? To manage the change, these companies typically set up a new company with a different business model, with its own structure and culture, separating the new, exploratory unit from the established business—but they maintain close links through senior management. These examples show that incremental gains from existing business can be aligned with a forward-looking search for radical or disruptive innovations.