Editor's note: Ralph Blessing is executive vice president of GfK Custom Research North America, New York. He can be reached at ralph.blessing@gfk.com. This article appeared in the March 12, 2012, edition of Quirk's e-newsletter.

Pebbles, rocks, boulders, Horizon 1, 2 and 3 or Blue Ocean - there is a range of terminology used to describe and differentiate the size and scope of innovation efforts. While many companies claim they want to be innovation leaders and develop disruptive innovation along with more incremental endeavors, most firms struggle to develop really big new ideas.

Predicting market disruption requires a systematic and holistic understanding of not just your consumer or customer but also deep insights around macro trend implications, emerging technologies and what new ideas are being seeded with consumers in (what may appear to be unrelated) categories with similar need-states.

A review of innovation patterns and dynamics over the past 35 years across 350 categories has taught us some important lessons in predicting market disruptions.

1. Innovation tends to evolve in waves.

2. These waves of innovation are linked to both consumer needs within the category and what new ideas are being seeded around the consumer from outside the category.

3. By studying waves of innovation (i.e., how current products or services are satisfying these needs; how analog categories or countries have evolved; and linking this to emerging technologies), a predictive model of what will come next can be developed.

4. When a category goes through a major disruption - one that goes beyond just adding another benefit or product feature to the mix - the preceding waves set the stage and provide the clues about what was coming.

So what are these waves of innovation that evolve a category? And how can understanding them help companies develop big ideas?

Wave 1 births a category. Usually there is one primary core need that the leading brands compete over. For example, when modern toothpaste emerged, everyone promised some version of cavity protection. At this stage, some brands may compete over other benefit areas, like whitening, but they are often niche.

Wave 2 innovation tends to focus on improvements on the core need. Again using oral care as an example, the category developed as advanced claims and technology promised better cavity protection. Similarly, in sun care in the 1990s we saw an SPF war - ending up with SPFs over 100. Coppertone saw that consumers were generally satisfied that all the lotions provided good protection but they were sticky, hard to apply and inconvenient. At the same time, new spray technology allowed for a light, any-angle portable spray resulting in Coppertone Sport - an application disruption that raised margins, unit prices and now accounts for well over 20 percent of category dollars.

Wave 3 innovation is a fusion of core need-states. If after earlier waves the consumer is satisfied that the available products or services are meeting a primary need, they are ready to move on to something better. In food, if the core need of taste is met, consumers will want taste + health or taste + convenience. In personal care, it might be beauty + wellness. In automotive it might be comfort + style. 

Wave 4 innovation then tacks on additional secondary benefits. Many leading brands now have a huge variety of SKUs to meet specific niches - look at Tide or Crest. When categories are in Wave 4 of their evolution, they are often ripe for Wave 5.

Wave 5 is when a new idea, technology or way of framing the need causes a major disruption. Often, this stage challenges a core paradigm that the category has been operating under or segments the market in a radical new way. Wave 5 can reshape the very definition of the category, often spawning new segments or markets that represent a fusion of one category with another. This type of innovation can change consumer behavior, draw in new customers and significantly increase current-user purchases. For example, not too long ago consumers had many choices of whitening toothpastes (that didn't really do much) or dentist services (that cost a lot). At the same time, they were being exposed to patch technology (i.e., nicotine patches, estrogen patches, breath strips, liquid bandages, etc.). The market was primed for an affordable, highly-effective, at-home whitening process with a new - but not unfamiliar - application process: Crest Whitestrips.

Game-changing results

Leading companies cannot thrive if they only produce Wave 1-4 innovations. Looking for Wave 5 opportunities is critical for game-changing results. Even when Wave 5 ideas aren't generated right away, these more future-oriented and disruptive efforts have tremendous spin-off benefits as they also produce incremental ideas; help identify potential acquisitions, alliances or new competitors; and put companies in a better responsive competitive position.