Adjacent Innovation 101: Leveraging Existing Resources to Create New Opportunities

7 min read

In today’s rapidly changing business environment, opportunity identification is key to achieving business goals and developing a successful business strategy. One way businesses can identify new opportunities is through Adjacent Innovation, a strategy that involves developing new products, services, or markets that are closely related “Adjacent” to existing offerings.

This approach allows businesses to leverage existing resources and expertise to create new opportunities and grow revenue.

What is Adjacent Innovation?

Adjacent Innovation is a strategy used by businesses to develop new products, services, or markets that are closely related or “adjacent” to their existing offerings, capabilities, or customer base.

This strategy involves leveraging existing resources and expertise to create new opportunities and expand into new markets, rather than starting from scratch with entirely new and unrelated products or services. Adjacent Innovation can help businesses to stay competitive, grow revenue, and achieve sustainable long-term growth.

The Adjacent Innovation strategy is frequently utilized by disruptive brands to discover unaddressed gaps or neglected markets in their industry. At Digital Leadership, we provide Innovation Consulting services to help businesses implement the Adjacent Innovation strategy, as it involves making incremental improvements to existing products, services, processes, technologies, and business models to fill the identified gaps or serve the overlooked markets.

The Intersection of Adjacent Innovation, Business Model Innovation, and the Three Horizons of Growth

In this section, we will explore the relationship between these three concepts and their role in promoting innovation within organizations. Specifically, we will examine how Adjacent Innovation, Business Model Innovation, and the three Horizons model work together to help organizations identify new opportunities, develop innovative products and services, and stay ahead of the competition. By understanding the interplay between these three concepts, organizations can gain a deeper understanding of the innovation process and develop more effective strategies for driving growth and success.

So What is The Relationship Between Adjacent Innovation, Business Model Innovation, and the Three Horizons of Growth?

First let’s define the 3 concepts,

1. Adjacent Innovation

Adjacent Innovation involves developing new products, services, or markets that are closely related or “adjacent” to a company’s existing offerings, capabilities, or customer base. This can help companies to leverage their existing resources and expertise to create new opportunities and expand their business.

2. Business Model Innovation

Business Model Innovation, on the other hand, involves fundamentally rethinking and redesigning the way a business creates, delivers, and captures value. This can involve developing new business models or adapting existing ones to meet changing market demands and achieve sustainable growth.

3. The Three Horizons of Growth Model

The Three Horizons of Growth Model is a framework that helps businesses to balance short-term and long-term growth objectives. It involves identifying and pursuing opportunities across three distinct horizons:

Three Horizons of Growth
The UNITE Horizons of Growth
Designed By: Digital Leadership AG
  1. Horizon 1 (Improve): Improving a business (model) means making incremental changes in order to execute your current systems and processes more effectively. This is well understood since this is what most people work on every day.
  2. Horizon 2 (Transform): Transforming an existing business (model) is focused on evolving your existing business in new directions. You seek to change at least one part of your Business Model in a more significant way, i.e., a step-change.
  3. Horizon 3 (Innovate): Innovating a new Business Model is focused on radical innovation. You venture beyond and explore unknown possibilities through an innovation of the Business Model itself.

The Relation Between The 3 Concepts

The intersection of Adjacent Innovation, Business Model Innovation, and the Three Horizons of Growth can be a powerful tool for companies looking to achieve sustainable growth and stay competitive. By focusing on Adjacent Innovation and Business Model Innovation, companies can identify new markets, create new products and services, and capture value in new ways that enable them to achieve long-term growth and success across all three horizons.

For example, a company that develops a new product that is closely related to its existing offerings (Adjacent Innovation) may also need to develop a new business model to capture value from this product (Business Model Innovation). This new product and business model may represent a Horizon 2 opportunity that can help the company achieve long-term growth objectives.

Terms Related to Adjacent Innovation in Business

(1) Adjacent Market

A market that is closely related to a company’s existing markets, but may involve new customer segments, distribution channels or product features. Adjacent innovation involves identifying and developing new products or services that serve these adjacent markets. By focusing on adjacent markets, companies can leverage their existing capabilities and resources to enter new markets and drive growth.

(2) Product Extension

The practice of adding new features or functionality to an existing product to extend its lifecycle or appeal to new customer segments. Adjacent innovation can involve product extensions to serve adjacent markets or customer needs. By extending the product, companies can cater to the evolving needs of their customers and tap into adjacent markets to generate new revenue streams.

(3) Line Extension

The practice of adding new product lines or variations to an existing product category to address new customer needs or preferences. Adjacent innovation can involve line extensions to serve adjacent markets or customer needs. By introducing new product lines or variations, companies can cater to the specific needs of adjacent markets and expand their customer base.

(4) Incremental Innovation

The process of making small, incremental improvements to existing products or processes. Adjacent innovation can involve incremental improvements to serve adjacent markets or customer needs. By continuously improving their products or processes, companies can enhance their competitiveness and better serve the needs of adjacent markets.

(5) Rapid Prototyping

A process of quickly building and testing prototypes to validate new product or service concepts. Rapid prototyping is often used in adjacent innovation to quickly test and refine new ideas for adjacent markets. By using rapid prototyping, companies can quickly identify the most promising ideas and develop products that meet the specific needs of adjacent markets.

(6) Disruptive Innovation

A process whereby a new product or service creates a new market or disrupts an existing market. Adjacent innovation can involve disruptive innovation when a company introduces a new product or service that creates a new market adjacent to its existing markets. By introducing disruptive innovations, companies can expand their market reach and establish themselves as leaders in emerging markets.

Conclusion

In conclusion, adjacent innovation plays a crucial role in driving business growth by helping companies expand their market reach and develop new revenue streams. By leveraging their existing capabilities and resources, companies can identify and enter adjacent markets to tap into new customer segments and meet evolving customer needs. Additionally, adjacent innovation can be closely related to other business concepts such as business model innovation and the three horizons of growth model, which can further enhance a company’s innovation strategy.

At Digital Leadership, we understand the importance of innovation in driving business success, and we are committed to helping our clients develop and implement effective innovation strategies. Our team of experts can work with you to identify adjacent markets and develop new products or services that meet the needs of these markets.

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