Beyond The 4Ps Of Innovation

By Anand Tamboli

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If you were offered a carbonated drink in a glass, what are the chances that you could easily identify whether it was Coca Cola or Pepsi? Would you even care? Well, hold on to that thought as we talk about several types of innovations first.

People have been talking about the 4Ps of innovation for quite some time. While these lenses have served well in the past, they are becoming outdated now. With the level of chaos that is going on around the world, I would say they are ripe for an update. But before we discuss the update, let us recap what those 4Ps are.

Product or service

The first P in the list of 4Ps is your product or service; the thing that you offer to your customers. So, when someone says innovate your product or service, they want you to create and introduce a new product or service to your customers. Sometimes, it does not have to be a completely new thing as an improved version of previous products or services qualifies. The caveat is, of course, there must be some enhancement in quality or overall performance. There must be some material change.

This type of innovation is mostly driven by technological advancements, outdated product designs, changes in customer requirements, competition, etc. What is peculiar about this type of innovation is that it is clearly visible to customers. Mostly because they are the direct receivers of it.

Process

The second P in 4Ps is the process. It is all about how you create and deliver your product or service. This may include changes in the equipment and technology used in making the product. In addition, there might be an improvement in tools, techniques, and solutions used to help in making and delivering the product or service. It also includes processes you use to maintain your goods, accounting methods, customer service, etc.

This change may not always be visible to customers, and they may not even realise it sometimes. But from a business’s point of view, process innovation often leads to bottom-line impact.

Position

Third P is about product positioning in the market. It is about who do you offer your product or service to. It is about the story you tell about your product or brand. This helps create a unique position in customers’ minds and the market.

Most of the time, positioning-related innovation is geography or demography-specific. Customers do not easily recognise this innovation as it may not happen directly. However, if the existing customers are part of the same geography or demographics where you reposition your product or service, they can easily recognise it. The outcomes usually affect the business’s top-line, expanding the market, and hence the sales base.

Paradigm

The last one in 4Ps is paradigm innovation. It is quite complicated compared to the other three. And that is because this innovation is about the business’s mental model, that is, how your business thinks about why you do what you do and for whom. You can also call it a high-level business model.

It is the hardest to handle because it expresses your understanding, which you want your customers to appreciate. Nonetheless, many companies use it during their brand revival efforts.

Now back to my main argument regarding the significant update to this 4P based thinking. A lot has changed in the last few years, especially in the last two years. And as the change percolates through various aspects of society, it will affect businesses and how they approach innovation in their business.

We often insist on data to make informed decisions. But this is a data abundance economy. Everyone has enough data to prove their point.

It is not about right or wrong data. Every data has some perspective. This puts every business in a strange fix. It compels us to look beyond data, which can be more powerful and useful.

How can it be done? Let me show you an example to prove my point.

At the beginning of this article, I asked you to think about carbonated drinks and your choice. People were clearly divided between Coca Cola and Pepsi until the last few years. They still are. Both brands have tried their hands at all the 4Ps of innovation successfully. But now, if you combine their 4Ps with available data and look at the bigger picture through a different lens, it will change your perspective significantly.

Allow me to share some data. And this data is coming from a Harvard study. It is called impact weighted accounts initiatives (IWAI). Using sample data and findings from that study, here is how these two brands stack up.

Coca Cola’s net revenue during 2018 was approximately $31.8 billion. But to generate this revenue, its total environmental impact cost was about $3.7 billion. We are talking about many things, such as plastic waste produced, drinkable water consumed, drinkable water wasted, etc. And that means, if they were to pay for all the environmental costs, according to Harvard, their real profits would be about -11.6%, a loss!

What about Pepsi? Pepsi’s net revenue during 2018 was about $64.7 billion, about twice as much. Pepsi’s environmental impact cost was about $1.8 billion to generate this revenue. And it means, if Pepsi were to pay for all the environmental costs, their profits would be down to about -3%, also a loss. And remember, we are talking about a like to like comparison here.

The bottom line is, Coca Cola is four times ‘dirtier’ than Pepsi. Does that change your preferences? What do you think about it now? Do you see a point favouring one over the other?

I do not see why I would choose one over the other. For me, both do not fit my personal brand promise. Both are not aligned with what I am about as a person. And it is not just about these two brands of carbonated drinks, but also about all the others. They all affect the ecosystem similarly, some more, some less.

So, the product, process, paradigm, or positioning innovations are not helpful. This is the new world. The 4Ps of innovation have served well in the past. But now, they alone are not enough. We need to update our perspective and think beyond the 4Ps of innovation.

What do you think?


Anand Tamboli is a serial entrepreneur, speaker, award-winning author, and an emerging-technology thought leader

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