What is behind the trend?

• In advanced economies, a significant proportion of GDP growth will come from a broad range of incremental improvements to existing offerings

• Particularly important will be “soft innovations,” distinct from big breakthroughs or “hard innovations.” Soft innovations are improvements that may be generated from market or customer insights and process or business-model inventions. They have not been part of the traditional definitions of the center of innovation but will become more central.

• The result of soft innovations will be to increase total consumption, including the greater consumption of nonphysical (intangible) value, in contrast to just efficiency innovations that only drive down costs and price points.

What does it mean for business?

• For businesses, increased commitments to invest in soft innovations are not just competitive imperatives, but creative ones—making spacious new markets out of crowded old ones.

• Marketing, customer research, process improvements and business model inventions will continue to be critical to creating incremental economic value above and beyond “stealing share.”

• Services, especially in the consumer space, may be poised to expand rapidly and diversify, mirroring (and in response to) the explosion of diversity in product SKUs.

Many consumption categories in advanced economies appear relatively “low-tech” and not “innovation-centric” by conventional definition

But innovation occurs in more than just “tech”; marketing and process intensive “soft innovations” touch on the biggest segments of consumer spending

The “same but nicer” innovation theme divides into a set of three archetypes that push GDP upwards

Coffee is an example of how a “low-tech” product can be “improved” to create more economic value