This was initially posted on LinkedIn December 16, 2013.
Innovation comes in many forms. Many times innovation is thought of as technological improvement or as invention. We can all cite examples of inventions which turned into industries which re-defined civilization. The steam engine comes to mind but there were many others before and after. Inventing something is certainly a way to create value but it’s not as common or as reliable a method as it might seem. Creating Intellectual Property is one thing, finding a defensible market and business model is quite another.
More often companies innovate in terms of processes or the “algorithms” which are used to deploy existing resources. Wal*Mart was immensely innovative in the way it organized itself and laid out a low-cost business model. More recently Amazon has innovated in distribution and fulfillment based on the ability to dispense with showrooms for products and sell directly online. There is little in terms of technology which Amazon “invented”. Rather, it deployed off-the-shelf technology in a novel way.
But what I want to address is a more mundane sort of innovation: marketing innovation, specifically pricing. Few would consider a price model to be an innovation but in fact it’s a core lynchpin to many breakthrough innovations. It was pricing which permitted Henry Ford to build an industrial empire. He could have built cars for those who could afford them as cars were defined in 1907 but he chose to build a car around a price point which was around the median of the population. A car “so low in price that no man making a good salary will be unable to own one.” His business logic began with a price and the product and process followed.