2013-04-17: Reactive vs. Proactive Innovation


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By Matt Patton

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2013-04-17: Reactive vs. Proactive Innovation

  1. 1. Innovation: Proactive v. ReactiveMatt PattonDirector, New Product IncubationAdvertising.com
  2. 2. Innovation• Defined by its compliment– A Developed Product or Service that is:• NOT status quo• Outside the comfort zone or the current company thought and convention
  3. 3. Innovation Defined Cont’d• I do not like academic black-letter definitions of innovation• Innovation is an art form– Like art, it can come from any person within any organization– Is a cultural characteristic of a business– Value is always in the eye of the beholder• Debatable as to both impact and characterization
  4. 4. Innovation as an Art Form• Quick Exercise:– Is facebook an innovative product?• My take:– Yes!– The “may” in “I may never hear from him/her again” is now much lesslikely.• Culturally disruptive
  5. 5. The Innovation Dichotomy• Proactive v. Reactive Innovation• Proactive:– Extensive R&D, engineering, and marketing fueled by forward thinkingcreates a new or more effective offering• Reactive:– Where a discrete problem or opportunity results in a company-widesolution and new offering or business method
  6. 6. Proactive Innovation• Goal: disruption– When we want product to shape demand– Build for consumers something they have yet to realize they want• Characteristics– For the startup:• Pros: less process resistance, part of an initial growth strategy, high rewardpotential• Cons: expensive, high risk, limited tangible resources– For the large company:• Pros: more resources, hedged risk, selective cost structure• Cons: cumbersome planning and dev process, impatience for incremental success
  7. 7. Proactive Innovation Cont’d• Example: Advent of the CPA business model (Ad.com ca.2001)– Idea: offer risk-free performance based advertising for clients• Ad.com would only be paid if Internet users “converted” on ads– High Risk: Ad.com would be paying for publishers’ ad space with noguarantee of revenue from the advertisers• Tenuous demand for this pricing model (CPC was still most popular)– High Cost: required a large upgrade to tech and operational systems– High Reward: now a 9-figure revenue stream for Ad.com and a multi-billion dollar business industry wide.
  8. 8. Reactive Innovation• Goal: Fill a market void– Solve a problem or capitalize on a new opportunity• Characteristics– For the start-up• Pros: less risk, incremental opportunity• Cons: resource constraints (time), challenge to scale– For the large company• Pros: even less risk, easier access to resources• Cons: challenge to scale, challenge to stream-line
  9. 9. Reactive Innovation Cont’d• Example: AdLearn Open Platform (AOP) (2012)– Idea: start competing with other Demand Side Platforms (DSP’s) whileleveraging our existing capabilities– Moderate Risk: if failed, would be PR concerns but core business stillwould be intact• Potential opportunity cost to existing core business– Staffing Challenge: had to pull resources off other projects– Tech Challenge: since product would be client-facing and highlypublicized, we needed reliability at scale– High Reward: one of the fastest growing parts of business• Scaling efforts fostered more expansive use of Big Data Architecture andtools, which are now scaling other parts of the business• Reporting interfaces for AOP are currently being used for better reporting andanalytics company wide
  10. 10. Conclusion• Innovation as a characteristic of culture– While established R&D, Engineering and Marketing teams continue toproactively on the next disruptive thing• Essential to have a new ideas lab outside of the core development processes– “start-ups” within the company• Must be open to any member of the business• Must be able to test, analyze, and prototype• Must be taken seriously– These groups can engage in both types of innovation and lead to fastercompany growth
  11. 11. Thank you.mpatton@advertising.com