When we evaluate the strategic plans of a corporation, there are generally two key points to observe.
Products are designed in the past to meet future needs. They are not put into production immediately because there is no demand for them. Here are some examples for review.
Take the concept car for the new Maybach vehicle.
Mercedes-Benz could produce this version of the Maybach, even today, as its retail price justifies the customization of the special parts needed to assemble it. Why do corporations then, if they know what their future products look like, fail to release their iterations sooner?
Wouldn’t this provide future-proof products to the marketplace?
This is a prime example of consumers holding back innovation. The future products do not reach the market because the consumers are not ready to purchase them.
No corporation is going to purposely shelve a product that they know will sell for years to come.
Every industry faces the setbacks of innovation that are driven by the consumer. The most recent versions of the iPhone, the 8 and the X (or 10), are another example of the Pyramid Innovation Theory.
Imagine what iPhone sales would be if Apple decided to release the iPhone X on its own without the iPhone 8 as a backup. The sales figures of the iPhone 8 show us that most people would not buy the iPhone X. It is for that reason Apple decided to release the first iterative improvement in the iPhone 8, as they have done in the past, including the “S” models.
Those who would be accepting of the innovation and its cost would naturally gravitate to the iPhone X. Those who would not would gravitate toward the iPhone 8.
There are even visual changes to the iPhone, between the 8 and the X, which influence consumer demand.
Apple has two specific reasons for releasing the iPhone 8 and the iPhone X almost simultaneously.
Even our apparel is affected by the Pyramid Innovation Theory. Let’s take a look at one of the latest shoe designs from Adidas.
As you can see, these shoes are laceless and strapless. That makes them easier to wear, maintain, or put on in the morning. A futuristic design is included to include curves and ergonomics. High-quality materials are combined with simplistic colors like grey, black, or white.
Pricing for the Ultraboost line of shoes from Adidas begins at the high $200 price point. That allows consumer habits to be updated toward an intellectually protected model without disrupting all their past consumers in the process who might not be ready for the laceless future.
Before Adidas got to the laceless and strapless athletic shoes, there were subtle design changes introduced into previous designs. Take the Racer design.
Notice how the laces appear in the lower tier of the shoe? And how the laces appear to be more of an ornament than a necessity for the shoe to perform properly?
In all of the above examples, we can see that our future will involve powerful processors, curvy designs, and fewer unused spaces. The future may seem more complicated, but in reality, it will actually be driven by a desire of consumers for greater simplicity. This introduction of innovation meant for higher tiers of society allows corporations to advance consumer trends toward their future products without being disruptive to the entire marketplace.
We’re seeing this drive for simplicity and added productivity everywhere. Voicebots are replacing typing. Universal translators are replacing human translators. Autonomous vehicles may even replace driving instructors one day.
Everything becomes simpler, which means the design of future products must follow this trend as well.
Digging Deeper into the Pyramid Innovation Theory
Needs make humans solve problems on their own. Corporations can then innovate off those ideas through business-based research and development.
Once corporations get involved, however, they must be able to protect their branding and IP because of the levels of capital investment that are involved. That means they are almost forced to create products that more people at higher levels of the pyramid would use and pay more for. Even startups with access to proper funding levels can get involved with the Pyramid Innovation Theory today.
Let’s take this idea and use it to examine what Apple is doing right now with the iPhone.
The consumer innovators are those who are at the top of the pyramid. Those who are not ready for the future don’t want to be ignored, but they don’t want to be innovators either. That is why there is a gap between the two consumer groups.
One embraces future products in a leap. The other embraces future products with baby steps.
By creating products which appeal to both consumer groups, Apple can optimize their profits as an innovator. In time, that can justify the capital intensity required for introducing future products to the market in coming years.
Not every corporation follows the rules of the Pyramid Innovation Theory. Instead of working up the pyramid, some corporations start at the top and work their way down.
Elon Musk and Tesla are an excellent example of this variation.
Tesla launched with a future-like product at the top of the Pyramid with their Roadster. Instead of expanding their influence at the top of the pyramid, they moved downward to embrace more consumers.
The lower levels of the pyramid come with less profitability. They do have more sociability, however, and the social nature of humans helps to drive future innovation. Elon Musk cannot change the laws of humanity or alter the concepts of capitalism. If he tried, he’d likely end up like Nikola Tesla, who found himself living in a hotel and talking with pigeons in his final days.
Sociability does not directly translate to profitability. Musk may be headed toward social change. Adidas is not. They are taking an approach that is similar to Apple's Iphone with their laceless shoes.
In today’s market, we have an interesting dynamic. Startups often describe the future marketplace quite accurately and dream of being a disruptive force. Then they criticize corporations for not providing innovation.
It is a short-term vs. long-term argument. Corporations are slowly pushing consumers toward the future without compromising their profitability. Startups want to shove consumers into the future and are willing to gamble their own futures to do it.
Both approaches can be successful. Both approaches may also fail.
By understanding the Pyramid Innovation Theory, startups can identify niche consumer segments that are not interesting to corporations in this process for their own strategic reasons. Instead of being disruptive like this, which comes with a high risk of failure, they can focus on incremental innovations that their market can accept.
In doing so, each will bring us one step closer toward the future.