Disruptive Innovation

March 15th, 2012

When I went to New Zealand last year to speak at their Roaster’s Symposium the topic I chose to speak about was innovation.  This was not because I consider myself an expert on the subject, not by a long stretch!  It seemed like New Zealand has reached an interesting place where a country of 4 million people can sustain 130 roasting companies, and so some could consider it saturated.  Along side this it seemed that certain trends of the global industry hadn’t taken root as much, and it seems a place where the opportunity for innovation is huge.

In reading up more on the subject I became interested in two different descriptions of innovation:  incremental and disruptive.  Incremental is something that we’re certainly much more familiar with in the coffee industry.  Things are slowly improved through rounds of feedback.  Sometimes this can happen relatively quickly – raw coffee being a potential example.  Cupping providing a feedback loop to improve an annual process quite effectively.  Other times it can happen incredibly slowly:  Coffee grinders…. need I say more?

Disruptive innovation is much more interesting, but there seem to be fewer people in coffee playing this particular game.  Disruptive innovation can be described as a technology that creates a new market, a market which comes to make existing technologies obsolete.  DSLRs are a pretty good example of a disruptive technology.  What is notable about these sort of technologies is that initially the market ignores them because they appear inferior in certain aspects.  When DSLRs hit the pros were sure they would continue to shoot on film – digital couldn’t compete with the look and feel of film.

I’m not sure this counts as disruptive innovation but I couldn’t help but be intrigued by Starbuck’s announcement about creating a joint venture with the Chinese Ai Ni Group in Yunnan province for processing coffee and dry milling.  Oddly, this went largely unnoticed which made me doubt its importance.  Interesting that this is a venture part focusing on export, as well as doubtless being part of Starbuck’s supply chain in a new, potentially explosive market.  China feels like a big unknown to me – I have no idea how quickly consumption could tick up there, and how that could impact the delicate demand/supply balance we have going on right now.  Is their increased vertical integration going to give them a noticeable advantage in this market, and potentially other markets too?

It is more depressing to think that a more obvious disruptive innovation is the whole single serve thing.  It is easy to point out the flaws – it doesn’t taste amazing, it is expensive.  It is proving that this stuff doesn’t really matter to the market.  Maybe we’re going to continue to ignore it, while it may slowly make what we do increasingly obsolete.  No one is going to argue that vinyl doesn’t sound better, but it doesn’t do much to change the fact that this matter less and less to people, and technology is catching up all the time.

Depressing right?  If anything it ought to be inspiring us to do something about it, to move speciality coffee out of the place where people compare amazing coffee to single serve, preground pods.  I have no idea how we do this, but it is certainly worth thinking about… 1

  1. After an interesting conversation (sadly shorter than I would have liked) with Stain Horne in Oslo last week – I am proud to have made it to the end of a post on innovation without talking about Apple.  I am also aware that that last sentence invalidates this footnote.  ↩︎

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