Innovations, Cannibalization & Strategies

Innovation is the ability to see change as an opportunity, not as a threat.

-Steve Jobs.

Job's statement has been a motivation for he ocean of businesses who dared to leave the sight of their coast. However, the ship of innovation often sails into mouths of the cannibalistic sharks.

Every organization knows it's BCG matrix for each product well and at every point of given time, strives to focus largely on innovation. Cash cows build the bottom line but dwelling simply on them puts the brand equity in danger. Incase of star, of course every org. wishes for its stars to align in the direction of growing the star quadrant but the rate of achieving it is comparatively low as compared to other quadrants.

So what threatens innovation? Apart from the risk of failure of high investment and losing the emotional connect with star performing products, there lies a risk that arises when the innovation succeeds. The risk of cannibalization. (What is cannibalization? The reduction of the sales of a company's own products as a consequence of its introduction of another similar product is known as cannibalization). Metaphorically speaking, do parents want to opt for a second child while the first one is doing well? the answer to that is completely a matter of opinion.

So suppose you do innovate and bring in a second child, does it cannibalize the growth or attention of the first child? That depends on the difference between both. Unless the second one is born, the hypotheses of permutation and combination of results can keep swinging.

Let us consider the

First Case: Elder daughter, younger son

A very few parameters are common to judge both in the long run. The group of friends differs. The personalities are different. The focus on both is very unique and so are the expectations. As the comparison, group of peers, style and perception of people around towards both is fairly unique to each, the competition between both is comparatively low as compared to other cases. In case of a school competition, both compete in completely different categories.

Second Case: Two brothers

Competitive, each to its own. Although there can be a direct comparison between two, due to age gap and personality difference (assumed here), both may have different peer groups and social circles. Hence, could prove to be a healthy competition between the elder and the younger. In case of a school competition, although both compete in the men's category, both compete with students of their own ages only. Hence, both carry a chance to win.

Third Case: TWINS!!

Incase of twins, a direct comparison is always expected. In other cases, where both hold an equal chance to win, the twins who study in the same class are compelled to compete with each other and only one can win. The competition proves as a direct threat for each other. This often results in the net loss of the family.

Coming out of the metaphor, the siblings signify the products; competition signifies the market share and peers signify the target audience.

Here are 4 types of innovations with the rate of cannibalization risk with them.

Examples:

Disruptive: Ola S1 Pro introducing dash maps, sound system, GPS, smartphone connectivity, remote unlocking with phone in 2W segment and disrupted the entire market.

Incremental: Samsung introducing the affordable M series and slightly cannibalizing its S series.

Architectural: Britannia's positioning of Cheese in Bhutan to integrate it as a part of their national dish (Ema Datshi)

Sustainable: Maggi's Atta Noodles cannibalizing sales of the original Maggi.

Apart from cannibalization, innovation plays a crucial role in re-correcting the market positioning. Here's an excellent example of the same.

Innovation & Price Points

While discussing strategy related things with Saurabh Bajaj - Practical Marketer , the topic of pricing and innovation sparked up. Premium products are often compelled to skim prices or launch products at a lower price to stay market relevant. Refusing to do so often results in a ruthless loss of market share. One of the excellent examples he offered was that of the famous 'GoodDay' cookies competing with the 'Parle-G' biscuits which crunched a major chunk of market share back in the day. GoodDay was known for having cashews in it. Considering the price points, it was almost impossible to compete basis just the USP of cashews. The solution? Smaller pieces of cashews sprinkled on the cookie to maintain the premium touch of the product making the price sub-premium. Britannia was able to achieve the desired price points making it an affordable premium biscuit.

Scaling down from a premium product to compete with a non premium product takes a gigantic toll on the brand equity. 'Premium' needs to stimulate the aspirations. The moment aspiration turns affordable for majority, the brand equity takes a punch. As far as the product qualifies the blindfold test (you know it's a Nike's Shoe simply by putting it on. That's a product qualifying a blindfold test), the brand equity is fairly shielded to the risk despite scaling down the price points.

Do drop down your opinions, experiences of the same if you have any in the comments!