incremental innovation

Last weekend, I met the founder of a new business that provides an online trading platform for investors.  A new business taking on well established  companies like TD Ameritrade, Charles Schwab and Scottrade?  I felt my inner critic come out – what’s the hook?  Do we really need another trading site?  Isn’t one basically interchangeable with the other, aside from the transaction fee?   Then I learned that his company had partnered up with a game development company to create a more intuitive, fun and useful interface and that his goal was to get young people more interested in investing.  My interest was piqued – a cross of gaming and investing with the noble goal of getting youngsters financially savvy!  I created an account and played around on kapitall.com, and I have to admit, it was much more user-friendly and visually pleasing that any other platform I have seen.

The question is:  Is improved user experience enough?  More broadly speaking, can a business be built on an incremental innovation over an existing (and widely accepted) product?  Well, the jury is still out on kapitall, but despite our tendency to be dazzled by “revolutionary” and “proprietary” products and to pooh-pooh ideas that are “not unique,” research shows that many successful businesses sell products and services that are similar in function (if not completely interchangeable) with those of other businesses.  Amar Bhide’s work on Inc. 500 companies (companies deemed by Inc. magazine as promising, high-growth companies) showed that 58 percent of the founders said that there were identical or close substitutes in the market for their products and services and 36 percent said that there were slight and moderate differences between their products and their competitors’.  Only 6 percent claimed that they had a unique product or service.   

So, what differentiates these founders from all of the struggling business owners out there who also sell ordinary products?  It turns out that there IS a secret to these high-growth entrepreneurs’ success – exceptional execution.  The takeaway:  You don’t need to have a unique idea to build a successful business, but you have to carry out the idea very, very well.

Mina

(For those interested, here is the full citation for Bhide’s work:  Bhide, Amar.  2000.  The Origin and Evolution of New Businesses.  New York:   Oxford University Press.)