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The article is a practitioner-oriented conceptual article. It develops a managerial framework for choosing innovation types based on a market’s life-cycle stage. It does not report a formal empirical study, statistical analysis, sample, or hypothesis test.
Research question
Which type of innovation should established enterprises pursue as their markets evolve?
More specifically, the article asks how managers can choose between different innovation types when competitive pressure, commoditization, outsourcing, and offshore transfer reduce the returns from existing commercial processes.
Hypotheses
Not specified.
This is a conceptual article rather than an empirical hypothesis-testing study.
Method
The article develops a managerial framework for aligning innovation strategy with the market development life cycle.
Moore argues that innovation is not one activity. It includes multiple types, each with different strategic value depending on where the product category sits in its life cycle.
The framework combines three main elements:
- a typology of innovation types;
- a market development life-cycle logic;
- a resource-reallocation argument for overcoming organizational inertia.
The article uses examples from firms and products such as Motorola, Pokémon, Tandem, OnStar, Intel, Toyota, Titleist, HP, Palm, Dell, Charles Schwab, Wal-Mart, FedEx, Amazon, eBay, Gillette, IBM, Apple, Fidelity, Citigroup, Zara, CEMEX, and Southwest Airlines. These examples are illustrative rather than part of a formal case-study design.
The article also includes two important managerial visuals. The “Aligning Innovation with the Life Cycle” figure maps innovation types onto stages of market development. The “Choosing the Right Leader” table links each innovation type to an appropriate executive sponsor and team leader.
Results / key findings
The article’s central argument is that firms face Darwinian pressure to innovate as commercial processes commoditize. In developed economies, processes that once created differentiation are increasingly outsourced, transferred offshore, automated, or standardized. Companies therefore need new forms of innovation to maintain differentiation, margins, revenue growth, and access to capital.
The first major finding is that innovation takes several distinct forms.
Disruptive innovation creates new market categories, often rooted in technological discontinuities or rapid social adoption patterns. It is associated with major new sources of wealth but also high uncertainty.
Application innovation takes existing technologies into new markets or uses. Moore gives examples such as Tandem applying fault-tolerant computers to banking through ATMs and OnStar applying GPS technology to automobile roadside assistance.
Product innovation improves established offerings in established markets. Examples include new Intel processors, new Toyota cars, Titleist Pro V1 golf balls, HP inkjet printers, and Palm handhelds.
Process innovation makes existing processes more effective or efficient. Examples include Dell’s PC supply chain and order-fulfillment systems, Charles Schwab’s shift to online trading, and Wal-Mart’s vendor-managed inventory processes.
Experiential innovation improves the customer’s experience of established products or processes. It can include small but meaningful delighters, satisfiers, or reassurers, such as package tracking from FedEx.
Marketing innovation improves customer-facing communication or transaction processes. The article uses examples such as web-based viral marketing for The Lord of the Rings, Amazon’s e-commerce mechanisms, and eBay’s online auctions.
Business model innovation reframes the value proposition, the firm’s role in the value chain, or both. Examples include Gillette’s razor-and-blades logic, IBM’s move toward on-demand computing, and Apple’s expansion into consumer retailing.
Structural innovation changes industry relationships, value-chain positions, or market structures. Examples include financial services firms using deregulation to restructure markets, as well as companies such as Zara, CEMEX, and Southwest Airlines using structural differences to compete.
The second major finding is that innovation types should be matched to the market development life cycle.
Moore describes the market development life cycle as moving through the early market, the chasm, the bowling alley, the tornado, early Main Street, mature Main Street, declining Main Street, and finally the fault line or end of life. The early stages are associated with technology adoption, new category formation, and rapid revenue growth. Later stages are associated with commoditization, consolidation, slower growth, and eventually disruption or obsolescence.
The article argues that disruptive, application, and product innovation dominate the technology adoption phase. These innovation types help create and scale new categories. Until the tornado phase has passed, Moore argues that no other innovation focus is rewarded as strongly.
Once the market reaches Main Street, however, disruptive, application, and product innovation lose leverage. The market no longer provides enough revenue or margin gains to justify heavy investment in those types of innovation. At this stage, process innovation, experiential innovation, and marketing innovation often produce better returns because they improve efficiency, customer experience, and customer access in established markets.
When the market moves into decline, process, experiential, and marketing innovation also lose power. At that point, business model innovation and structural innovation become more relevant. These can help firms reframe value creation, shift their position in the value chain, or participate in a restructured industry.
The third major finding is that mature firms often struggle to change innovation focus because success creates inertia. A company that became successful through product innovation may continue investing in product innovation even after the market has moved to Main Street, where process, experiential, or marketing innovation would create better returns.
Moore calls this the inertia demon. The more successful and mature an enterprise becomes, the stronger its tendency to return to familiar routines, legacy processes, and established organizational structures.
The fourth major finding is that managers should not simply add new innovation activities on top of old structures. Moore argues that this is the most common mistake. Managers often hope that successful new initiatives will naturally draw resources away from legacy activities, but he argues that this rarely works. Legacy structures usually keep consuming resources unless managers deliberately extract resources from them.
The article recommends deconstructing old processes and organizations while introducing new innovation types. This means that differentiation-creating innovation and productivity-creating deconstruction must run in parallel.
Moore outlines a sequence for deconstructing legacy processes.
First, managers should centralize the process. A process embedded across many units is hard to change. Centralization makes it more visible and easier to manage.
Second, managers should standardize the process. Standardization reduces variation and prepares the process for simplification.
Third, managers should simplify the process. Simplification removes unnecessary complexity, duplication, and discretionary variation.
Fourth, managers should automate or outsource the process. Once a process has been centralized, standardized, and simplified, it can often be embedded in systems or transferred to an external provider for whom that process is a source of revenue rather than a drag on margins.
The fifth major finding is that each innovation type requires different leadership. The “Choosing the Right Leader” table links innovation types to executive sponsors and team leaders. Disruptive, application, and product innovation should be sponsored by general managers, but the best team leaders differ: entrepreneurs for disruptive innovation, marketing managers for application innovation, and engineering managers for product innovation. Process innovation should be sponsored by the VP for operations and led by an operations manager. Experiential and marketing innovation should be sponsored by the VP for marketing, with customer service or marketing managers leading. Business model and structural innovation should be sponsored by the CEO and led by a general manager.
Overall, the article argues that innovation strategy must change as markets mature. Firms renew themselves when they shift innovation focus at the right time and deliberately migrate resources away from legacy processes toward the innovation types that fit the next stage of competition.
Practical implications
For managers, the article’s main implication is that innovation should be diagnosed before it is funded.
A company should not ask only whether it is “innovative.” It should ask which kind of innovation fits the market category’s current life-cycle stage. Pursuing disruptive innovation in a mature Main Street market may waste resources if customers are no longer willing to pay for major new performance improvements. Pursuing process or experiential innovation too early may also be premature if the category still needs application or product innovation to scale.
The article is especially useful for established enterprises because it explains why innovation portfolios often drift. The innovation capability that made a company successful in one phase may become less useful in the next. Product innovation skill may be powerful during category formation but insufficient when the market needs process efficiency, customer experience improvements, or new business models.
Managers should therefore treat innovation as a portfolio that changes over time. The relevant question is not only “How much are we spending on innovation?” but “Are we spending on the innovation type that the market currently rewards?”
The resource-allocation lesson is also direct. New innovation efforts will usually fail if legacy processes continue to absorb the same resources. Managers need to extract resources from old activities, not simply add more budget to new ones. This is politically difficult, but Moore argues that it is necessary to defeat inertia.
The deconstruction sequence is a practical tool. Managers can ask whether a legacy process can be centralized, standardized, simplified, and then automated or outsourced. This turns legacy work from a permanent organizational burden into a source of freed-up resources.
The leadership table is another useful implication. Different innovation types need different sponsors and leaders. An entrepreneur may be valuable for disruptive innovation but may not be the right person to lead process innovation. Similarly, a marketing leader may be appropriate for experiential or marketing innovation but not necessarily for product engineering.
For practitioners, useful diagnostic questions include:
- Where is the product category in its life cycle?
- Which innovation type is most rewarded at this stage?
- Is the company still investing in an innovation type that worked in an earlier phase?
- Which legacy processes are absorbing resources that should move to new innovation?
- Can legacy processes be centralized, standardized, simplified, automated, or outsourced?
- Does the innovation effort have the right executive sponsor?
- Is the team leader suited to the type of innovation being pursued?
- Is the organization trying to add innovation without removing old cost and complexity?
Theoretical implications
The article contributes to innovation management by connecting innovation types to market life-cycle logic.
Rather than treating innovation as a single construct, Moore presents innovation as a set of distinct strategic activities. This helps explain why firms may appear innovative in one sense while still failing strategically. They may be innovating in a way that no longer fits the life-cycle stage of their market.
The article also contributes to organizational inertia thinking. Inertia is not just resistance to change. It is the result of successful routines, structures, and processes that continue to attract resources after their strategic usefulness has declined.
The article also links innovation strategy to resource allocation. New innovation requires not only creativity, but also resource migration. The argument is close to strategic renewal: firms must renew themselves by moving people, capital, attention, and leadership away from legacy activities toward activities that fit the next stage of competition.
The article also complements diffusion and technology adoption perspectives. Moore’s market development life-cycle logic reflects the idea that markets evolve through adoption phases, and that the managerial challenge changes as the customer base shifts from early adopters to mainstream customers and eventually to saturated or declining demand.
For corporate entrepreneurship, the article is useful because it shows why established firms struggle to support new growth. They may understand the need for innovation but remain trapped by legacy processes and the opportunity costs of current success.
Limitations
The article is conceptual and practitioner-oriented. It does not report a formal empirical test, sample, statistical analysis, or systematic case-study method.
The company examples are illustrative. They help explain the framework but should not be treated as comprehensive evidence.
The article assumes that managers can identify the life-cycle stage of a market with reasonable accuracy. In practice, this may be difficult because different customer segments, geographies, and technologies can be at different stages at the same time.
The innovation typology is useful but not exhaustive. Some innovation efforts may combine several types at once, making classification difficult.
The article focuses on market life-cycle fit and organizational inertia, but it pays less attention to external factors such as regulation, ecosystem dynamics, platform competition, capital markets, organizational politics, and employee resistance.
The article was published in 2004. Its examples reflect the business and technology context of that period. The core logic remains useful, but digital platforms, artificial intelligence, software ecosystems, and sustainability transitions may require updated applications.
Future research
Future research could test whether firms that align innovation type with market life-cycle stage outperform firms that pursue innovation less selectively.
Researchers could examine how managers identify market life-cycle stages in practice, especially when markets are fragmented across customer groups, technologies, or geographies.
Future studies could investigate how firms successfully reallocate resources away from legacy processes without damaging morale, operational reliability, or customer relationships.
Another useful research direction would be to study whether different leadership profiles actually improve performance for different innovation types.
Researchers could compare the effectiveness of centralizing, standardizing, simplifying, automating, and outsourcing legacy processes across industries.
Future research could also apply Moore’s framework to contemporary contexts such as artificial intelligence, electric vehicles, cloud computing, platform markets, healthcare technology, renewable energy, and software-defined manufacturing.
Finally, future studies could explore how innovation portfolios should shift when firms face multiple life cycles at once, such as a mature core business alongside emerging digital or sustainability-related growth opportunities.