The new innovation paradigm

The launch of our book is only two weeks away! To support the book and spread the ideas, we have a number of events planned in the United States and Europe in where you can find out more about the Demand Revolution and meet some of the authors.

• MIT Sloan Management Review Webinar (October 3rd,, 11 am EDT): Nicolai Broby Eckert and Caroline Kastbjerg will join Sloan Management Review? features editor Kaushik Viswanath for a session entitled “Tapping Into the Hidden Consumer Demand for Sustainability”. You can sign up for the webinar here.
• SK Breakfast Club Copenhagen (October 10th): Nicolai and Caroline will speak on sustainability as a strategic opportunity. You can find out more information and register for the event here.
• Professional Pricing Society conference in Las Vegas (October 24th): Our colleague Shikha Jain will deliver a keynote address on the Demand Revolution at the annual fall conference of the Professional Pricing Society. You can also meet Nicolai at the SK booth at the conference. Find out the details here.

Nicolai will also be attending the Sustainable Brands Conference in San Diego, CA from October 14-17 and the VERGE 24 Climate Tech Conference in San Jose, CA from October 29-31. Please reach out to him via LinkedIn if you would like to meet up at either of those conferences.

Perhaps the most important difference between sustainability and previous megatrends is that it will be driven by the demand side, not the supply side. As a result, companies will not only need to change how they go to market, but also take a fundamentally different approach to innovation.

The new innovation paradigm

Most transformative megatrends – such as electrification, automobiles, and digitalization – evolved in somewhat similar ways. They originated on the supply side thanks to technological breakthroughs and then followed roughly the same innovation paradigm: first movers, many fast failures, and then a series of successful followers that eventually brought solutions to the mass market.

As we described in the newsletter edition "Are You Dead Yet?", the progress created by the first and second movers sweeps away entire industries with a wave of creative destruction. In our lifetimes, the transition from physical to digital goods, and from analog to digital services, have transformed the way we will live in all phases of our lives.

Sustainability will be a different megatrend

The transformative megatrend of sustainability will unfold much differently and much faster than previous megatrends. One fundamental difference is that the impulses and the forces behind the megatrend are coming primarily from the demand side, not the supply side. Consumers across all eight archetypes want affordable, less wasteful solutions at scale.

That is, of course, not possible without significant changes on the supply side. But the presence of pent-up demand accelerates everything. Companies can achieve lucrative scale faster, consumers remain loyal longer, and the far-reaching destructive changes to existing ways of doing business take hold much faster. This combination not only leaves companies much less time to adapt. Perhaps most importantly, it breaks the chain of first movers and successful followers. The odds are that only first movers win – and win big.

In short, following the traditional innovation paradigm will no longer work. The companies that capture that pent-up demand for sustainable solutions will follow a new innovation paradigm that enables them to develop more affordable, less wasteful solutions at scale.

The foundations of this new paradigm are a deep customer focus, a relentless commitment to affordability, and radical changes to business models and supporting ecosystems. Simply swapping out an old technology with a new “greener” one is not sufficient.

• Deep customer focus: ?The idea that a company should focus intensively on its customers is not revolutionary. With respect to sustainability, however, companies have tended to view consumers simplistically and superficially, a problem we refer to as the green mirage. They also risk misinterpreting ingrained habits as desires and preferences. Do consumers really want to carry heavy bottles of beverages home or get their car serviced every 5,000 miles? Companies that show consumers a better sustainable experience – one that meets their nuanced needs and overcomes their biggest barriers – will unlock the pent-up demand.
• Relentless commitment to affordability: This is not synonymous only with lower unit costs, although those are usually advantageous. It means applying commercial creativity – such as the use of alternative monetization models – to make sustainable solutions easier to acquire, easier to pay for, and more affordable both currently and over time. Home energy is one example. Providing consumers the ability to generate, store, and share their own electrical power is not only a question of technology, but also a question of finding the right monetization money to make these initiatives attractive for all parties.
• Radical changes to the business models and supporting ecosystems. These help companies create and maintain the volumes and scale that help bring down the cost of a sustainable solution. Tesla exemplifies not only how this idea works, but also how it relates to the other two pillars of the new innovation paradigm. Having no dealer network gives Tesla a cost advantage that makes its cars more accessible and affordable and also helps fund more innovation. Having cars that require less frequent service improves the customer experience. Having a network of charging stations eases consumer concern about range and reliability. These combined initiatives help them maintain stronger loyalty.

We realize this is a daunting challenge for incumbents. But if they place their faith and their money in the traditional innovation paradigm, they risk getting caught in an irreversible downward spiral. They will move too slowly to offer the eight consumer archetypes the affordable, less wasteful products they demand. When that happens, they end up simultaneously underserving the growing demand for sustainable solutions and “over-serving” the declining demand for legacy solutions. In other words, they don’t have enough “green” solutions that people want and they still need to support too many legacy products that fewer people want.

The new innovation paradigm helps companies find the right combination and balance of commercial creativity and creative destruction. Instead of facing the downward spiral, they unlock the pent-up demand that leads to large first-mover advantages and a positive spiral.

Please click here to pre-order your copy of The Demand Revolution: How Consumers Are Redefining Sustainability and Transforming the Future of Business. The book is scheduled for publication by MIT Press on October 8.