Where innovation ideas come from: Other industries

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A key source of innovation is drawing from developments in other industries. Implementing business practices that originate from a different setting is a common approach to innovation – allowing companies to either compete on different dimensions to what is common in the industry or offer unique reasons for customers to use your firm over competitors.

Things that can be borrowed from other industries

When considering innovation from other industries it is easy to fall into the trap of thinking that product features and technological innovation are the key things that you can draw from other settings. While this is one possible source of innovation, it is not the only one – in fact, it is important to recognize that the practices of other activities that the firm performs can be drawn from adjacent industries. Indeed, changes to the pricing model, ways of selling and advertising the product can all be used as a basis for innovating in your industry.

Product features and technical innovations

Possibly the most obvious source of innovation that can be borrowed from adjacent industries is product features and technological innovations. It is possible to see the technology being used in a different setting and determine that similar or identical offerings can be incorporated into your product or service. The idea of autonomous driving for example didn’t originate within the pizza market, but Dominos for example is drawing from innovations in the automotive industry when trialing autonomous delivery bots.

The key thing is when consideration technological advances it to examine other settings, and consider how developments originating in a different setting may transform your business area (or one that you are considering entering) – potentially allowing you to better serve a segment of customers or reduce the cost of operations.

Pricing models

Another source of innovation is permutations on pricing models that you can draw from other settings. Subscription models are one example – it is uncommon to think of food and drink to be sold via a subscription model (more common with software) – but that is exactly what Panera Bread is attempting with a subscription coffee service, allowing you unlimited coffees for a monthly fee. In their case, the relatively low subscription fee ensures that customers are repeatedly visiting the store, increasing loyalty and providing opportunities to upsell users with additional snacks.

Sales channels and advertising methods

Another innovation that can be borrowed from other settings is new sales channels. At one point in time, selling via the internet was a new, novel approach. Similarly, selling via social media at one time was a very unique way of getting your goods out. By opening up new ways of gaining customers, these approaches have enabled new firms to flourish, allowing small firms to distribute goods to new audiences. It is important to key an eye on new sales channels – which may either open up new markets or allow you to establish yourself as a leader in a particular niche channel before other companies enter.

Operations and manufacturing innovations

A final innovation that can be drawn from other industries is operation practices of how to organize the firm and manufacture the products. If we think of McDonald’s, their fundamental success derives from bringing in manufacturing ideas more associated with mass manufacturing. The standardization of menu items, assembly line production, and automation to speed the production of the burgers were all ideas borrowed from manufacturing companies.

Benefits of drawing from other industries

Already tested – resolved many difficulties

Drawing from other industries allows many of the initial difficulties with developing technology or pioneering a new sales approach to be resolved in a different setting. At the early stages of innovation, there are likely to be few other businesses that support this approach – with time though it becomes more widely adopted, initial missteps and growing pains are resolved. By drawing from an industry that already has implemented a similar approach, you can use their experiences to help you avoid making similar mistakes in your implementation.

Customers are increasingly used to the innovation

Another benefit of looking for innovation in adjacent industries that customers are already used to the idea. If we take subscription services as an example, when Harries and Dollar Shave Club launched their razor blade subscription services, customers were increasingly familiar with the idea of subscription services. While 10 or 20 years prior few services were a recurring flat-rate payment (largely limited to telephone, internet, and television), there is growing acceptance of subscriptions as a convenient way of purchasing goods – the number of subscriptions that customers have is now substantially more. In turn, the hard work of convincing users to adopt a different way of purchasing has largely been overcome, and Harries and Dollar Shave Club are able to enter with much greater customer acceptance.

Reduced cost compared to internal innovations

Drawing from other settings also allows companies to access innovations and a reduced amount compared to if it had been developed internally. While early-stage R&D is often very costly, risky with long lead times before it can be deployed, with borrowed innovations, the development costs, risks, and implementation times may be greatly reduced.

Risks associated with borrowing from other industries

May not translate to your setting

Something to be cautious about when transferring ideas from other settings with whether they will translate into your industry. Your environment may have its own unique characteristics, and what worked in a different environment may not be directly applicable in a different area. Before simply imitating a different setting, consider what is unique about your or there area, and whether there are specific reasons to expect that it would transfer over or not. 

Others are also watching

Another danger of imitating another setting is that other companies may also be watching developments – also able to see this as an attractive innovation to copy. There has been a fad of companies positioning themselves as the “Uber” of their particular area – allowing users to share their products with others or easily provide services for others. A risk of this is that while this may initially seem a novel idea with limited competition, if there is a sudden rise of other firms entering the space (including incumbents changing their offerings), then there may a sudden increase in competition.  

Final thoughts

Other industries can be an important source of new ideas and business models. Companies have a tendency to focus on their competitors – to benchmark practices and adopt practices that they are implementing. While it can be important to adopt improvements that other firms are implementing in order to keep pace, there is a danger that solely focusing on implementing practices that competitors are doing does not lead to any unique advantage for your firm. Examining development external to your industry, however, does provide the possibility of identifying changes that are new to your industry – potentially allowing you to establish yourself in that area before competitors can imitate.

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