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Mind the Innovation Gap
November 20, 2007
The restaurant business has a certain cyclical quality to it. There are periods of growth, and periods of consolidation. Where these periods intersect is the point where innovation is in full bloom. Innovation is rampant in these “between times” because the market has become static and dull. Stability is not necessarily a good thing in a dynamic business such as restaurants.
 Chris Muller |
When the industry is in the early stage of a growth period, as it was from 2002 to 2004, it seems that every new idea or creative concept can find investors and be brought to market. Towards the end of this part of the cycle, from early 2005 to mid-2007, even boldface imitators will look for a way to ride on the tails of others’ successes. Every restaurant concept seems to be a loose copy of something already existing. Even menu items start to look the same from concept to concept. Eventually, innovation slows almost to a stop.
When the industry is consolidating, as it is currently, innovation in the market comes through highly regarded mergers and acquisitions. New concepts are in short supply, but the “art of the deal” is what makes headlines. Big fish capture the fastest little fish (Darden swallows Rare Hospitality), even a medium fish can catch a big fish if it is moving too slowly (IHOP opens wide for Applebee’s). But as everyone decides that it is either catch or be caught, innovation eventually leads to desperation, even to panic, and many bad deals will be made. This part of the cycle should be in full swing over the next twelve months.
That’s when the coming Innovation Gap will open up. The last restaurant growth cycle was helped by the tragic event of Sept. 11, 2001, which acted as a catalyst for consumers seeking new ways to find comfort nearby their homes and businesses. Innovation in the form of fast-casual concepts burst on the scene, and even mature casual/theme players got a welcome second wind.
Now imagine that the combination of a period of economic recession driven by a skyrocketing oil price and the continuing call for a “green revolution” will be the catalysts for the next wave. Today, somewhere on the edges of a consolidating restaurant market, innovative ideas are being formed by people asking, “What if we...?”
It’s better to be that person than the one who a few years from now will look around and say, “Why didn’t we think of that?”
Posted by Chris Muller on November 20, 2007 | Comments (0)