In his 1996 work “Mastering the Dynamics of Innovation” MIT professor James Utterback defined three phases of innovation in the marketplace for any product and service. Utterback called these three phases the Fluid, Transitional and Specific phases:
- When launching new products and services to the market we are in the Fluid phase, an era of radical product innovation when there is an explosion of different designs of products and services coming from different competitors. Over time during the Fluid phase there will be a consolidation of designs around a Dominant design that will be adopted by all or most players in the market (i.e. do you remember the times when VCR was launched and the war between competing VHS, Betamax and 2000 formats?).
- Once a dominant design is defined we are mostly out of the product innovation phase and start a phase of mostly process innovation when all players try to optimize their processes improving the quality and reducing the cost of their products and services. This is called the Transactional phase.
- Finally in the last phase called the Specific phase there is a reduction of the number of players in the market (those that can not compete anymore will move to other products) and innovation is focused on incremental changes trying to squeeze the last euro of profit out of the product.
Then, what happens after the last phase? That we start all over again, Innovation is a continuous exercise, otherwise our companies would be stuck with exhausted products and services that will eventually die. We have to think of innovation as a series of Utterback cycles where we will jump using innovation and creativity from the end of one cycle to the beginning of a new one with the next product or service.
As an example think of the music industry moving from the vynil LP to the CD and then to portable devices and to streaming and cloud storage. Sometimes the cycles will be shorter sometimes longer, but remember that it will always happen. Sticking to your old products and services for too long is a recipe for failure.