By Matt Patton

1. Innovation: Proactive v. Reactive
Matt Patton
Director, New Product Incubation
Advertising.com

2. Innovation
• Defined by its compliment
– A Developed Product or Service that is:
• NOT status quo
• Outside the comfort zone or the current company thought and convention

3. Innovation Defined Cont’d
• I do not like academic black-letter definitions of innovation
• Innovation is an art form
– Like art, it can come from any person within any organization
– Is a cultural characteristic of a business
– Value is always in the eye of the beholder
• Debatable as to both impact and characterization

4. Innovation as an Art Form
• Quick Exercise:
– Is facebook an innovative product?
• My take:
– Yes!
– The “may” in “I may never hear from him/her again” is now much less
likely.
• Culturally disruptive

5. The Innovation Dichotomy
• Proactive v. Reactive Innovation
• Proactive:
– Extensive R&D, engineering, and marketing fueled by forward thinking
creates a new or more effective offering
• Reactive:
– Where a discrete problem or opportunity results in a company-wide
solution and new offering or business method

6. Proactive Innovation
• Goal: disruption
– When we want product to shape demand
– Build for consumers something they have yet to realize they want
• Characteristics
– For the startup:
• Pros: less process resistance, part of an initial growth strategy, high reward
potential
• Cons: expensive, high risk, limited tangible resources
– For the large company:
• Pros: more resources, hedged risk, selective cost structure
• Cons: cumbersome planning and dev process, impatience for incremental success

7. Proactive Innovation Cont’d
• Example: Advent of the CPA business model (Ad.com ca.
2001)
– Idea: offer risk-free performance based advertising for clients
• Ad.com would only be paid if Internet users “converted” on ads
– High Risk: Ad.com would be paying for publishers’ ad space with no
guarantee of revenue from the advertisers
• Tenuous demand for this pricing model (CPC was still most popular)
– High Cost: required a large upgrade to tech and operational systems
– High Reward: now a 9-figure revenue stream for Ad.com and a multi-
billion dollar business industry wide.

8. Reactive Innovation
• Goal: Fill a market void
– Solve a problem or capitalize on a new opportunity
• Characteristics
– For the start-up
• Pros: less risk, incremental opportunity
• Cons: resource constraints (time), challenge to scale
– For the large company
• Pros: even less risk, easier access to resources
• Cons: challenge to scale, challenge to stream-line

9. Reactive Innovation Cont’d
• Example: AdLearn Open Platform (AOP) (2012)
– Idea: start competing with other Demand Side Platforms (DSP’s) while
leveraging our existing capabilities
– Moderate Risk: if failed, would be PR concerns but core business still
would be intact
• Potential opportunity cost to existing core business
– Staffing Challenge: had to pull resources off other projects
– Tech Challenge: since product would be client-facing and highly
publicized, we needed reliability at scale
– High Reward: one of the fastest growing parts of business
• Scaling efforts fostered more expansive use of Big Data Architecture and
tools, which are now scaling other parts of the business
• Reporting interfaces for AOP are currently being used for better reporting and
analytics company wide

10. Conclusion
• Innovation as a characteristic of culture
– While established R&D, Engineering and Marketing teams continue to
proactively on the next disruptive thing
• Essential to have a new ideas lab outside of the core development processes
– “start-ups” within the company
• Must be open to any member of the business
• Must be able to test, analyze, and prototype
• Must be taken seriously
– These groups can engage in both types of innovation and lead to faster
company growth

11. Thank you.
mpatton@advertising.com