In a recent conversation with a food executive, we discussed an aspect of disruption theory that I have only really heard about in the context of technology. In the consumer food industry, large players make products for the masses, as economic intuition would suggest. If it takes the same input costs to produce a product that millions will enjoy as it does one that thousands will enjoy, make the one with broader appeal. Therefore new ideas go through a stringent R&D and testing process that is designed to weed out products that the average consumer would dislike ('testing to the average'). The very logic that food companies use to inform and filter product innovation creates space for smaller players and entrepreneurs to play. And this is what lets the seed of disruption grow. Entrepreneurs who find a niche market for their unique food idea can be successful and do not have to worry about large companies stealing their share. If it so happens that the niche trait of the entrepreneur’s market starts gaining mass appeal, voila, ‘disruption,’ unless large players respond quickly enough either by launching their own products or through strategic acquisitions.
None of this is new, but even through food we can see that big players do not ‘miss’ new trends because they are clueless or conduct poor research. Rather, it’s a product of fundamental economics. In a resource constrained world, it is not rational for them to create products that appeal only to a subset of the market. One way to address the natural shortcoming that falls out from this logic is to integrate data, market analysis, and monitoring into the product innovation process. Continue to test to the averages, but as soon as your data team identifies a rapidly growing niche characteristic, act fast.