BA 850
Sustainability-Driven Innovation


Gray Space Innovation


Incremental Innovation and Refinement

Gray space innovations are those where there may be some incumbent product or service, but it may be an unestablished or immature market. This is where meaningful improvements to the offering or a small handful of differentiators can be enough for an organization to enter the competitive fray and explore.

Gray Space Innovation

Defining Characteristics:

These innovations are defined by the fact that they many times represent incremental innovation. This may be manifested by the organization developing a new set of attributes, a new delivery method, new cost structure, or other innovations. We will explore these in more detail when we cover the ten types of innovation in a few lessons, but the key for gray space innovation is remembering that they are built on incremental innovation.

One misconception, perhaps driven by the interpretation of white space innovation as the "true" innovation, is that gray space innovation is not really "innovation." What is ironic about this is that many of the most famous innovations in any realm, were not white space innovation, but in fact, gray space innovation. Some examples? From Henry Ford's assembly line (actually Samuel Colt's) to Apple's computer mouse (actually Xerox), these innovations may be refined and popularized by one organization, but have their roots in the white space innovations of others. Much of technology, including smartphones, tend to exhibit gray space innovation. A new system or way of operation here, a new sensor there, a revised interface.


  • "Fast follower" or incremental approach to innovation allows accelerated cycle times
  • Typically lower development cost than white space innovation
  • Reduced need/cost to market an already semi-established concept
  • Ability to position offering against an incumbent
  • Allows a sort of "a la carte" combination of innovations in one offering
  • Builds on existing market successes and preferences
  • Reduces the number of unknowns in creating the offering around pricing, features, etc


  • Intellectual property protections may not offer total coverage
  • Requires some level of differentiation or education of the market (like most products)
  • Not as wide of a technology or competence moat to discourage competitors
  • Potential to be derivative and confusing for customers
  • May enter a market already dominated by the originator or another incumbent
  • Requires some speed in development, lest your offering becomes obsolete before hitting the market

Best Utilized By:

Many organizations. This is perhaps the most common and versatile space for innovation, as it allows any organization to leverage its specific strengths while evolving a concept. An organization with an especially strong brand can elect to leverage this fact by popularizing its take on an offering, while an organization with especially efficient organization may elect to come into the market as the low-cost player by leveraging its strengths.

Examples of Gray Space Innovation

Apple's Vision for the Xerox GUI and Mouse

Sometimes, gray space innovation comes down to seeing potential in the offerings of others that even they can't. A pure example of what this can look like is Steve Jobs' visit to Xerox PARC. Xerox saw the GUI and mouse, at best, as an overpriced curiosity, Jobs saw it as a potential revolution in computing. (The most important segment begins at 6:26)

Transcript of How Steve Job Got the Ideas of GUI from XEROX

PRESENTER: It all began in 1971 in Palo Alto, just south of San Francisco, when Xerox, the copier company, set up the Palo Alto Research Center, or PARC. Xerox management had a sinking feeling that if people started reading computer screens instead of paper, Xerox was in trouble unless they could dominate the paperless office of the future. You Could take computer technology into the office and make the office a much better place to work, more productive, more enjoyable-- a lot more enjoyable, more interesting, more rewarding, and so we set to work on it.

PRESENTER: Bob Taylor ran PARC's computer science lab, and one of the first things he did was to buy bean bags for his researchers to sit on and brainstorm.

BOB TAYLOR: These are a couple of the original beanbag chairs. The role of beanbag chairs in computer science is ease of use.

PRESENTER: OK. It was said that of the top 100 computer researchers in the world, 58 worked at PARC-- strange, as the staff never exceeded 50. But Taylor gave these nerd geniuses unlimited resources and protected them from commercial pressures.

PRESENTER: It's very comfortable.

BOB TAYLOR: Now let's see you get out of it.

PRESENTER: I feel my neural capacity already increasing.

BOB TAYLOR: There you go.


JOHN WARNOCK: The atmosphere at PARC was electric. There was total intellectual freedom. There was no conventional wisdom. Almost every idea was up for challenge and got challenged regularly.

LARRY TESLER: The management said, go create the new world. We don't understand it. Here are people who have a lot of ideas and tremendous talent-- young, energetic.

ADELE GOLDBERG: People came there specifically to work on five-year programs where their dreams.

PRESENTER: This is a computer room in the basement of the Xerox Palo Alto Research Center. About 25 years ago, they built the Max time-sharing system in here, and now it's loaded with all sorts of other computers. And there's one that we're really interested in here. Let's see. Here it is. Let me turn on the lights.

OK. Here we have it. This is a Xerox Alto computer built around 1973. Some people would argue that this is the first personal computer. It really isn't, because for one thing, it was never for sale, and the parts alone cost about $10,000. But it has all the elements of a modern personal computer, and without it, we wouldn't have the Macintosh, we wouldn't have Windows, we wouldn't have most of the things we value in computing today. And ironically, none of those things has the Xerox name on it.


SPEAKER 1: What's the mail this morning?

PRESENTER: This promotional film made in the mid 70s to flaunt Xerox PARC research shows just how revolutionary the Alto was. It was friendly and intuitive.

SPEAKER 2: This is an experimental office system. It's in use now--

PRESENTER: It had the first GUI using a mouse to point to information on the screen. It was linked to other PCs by a system called Ethernet, the first computer network. And what you saw on the screen was precisely what you got on your laser printer. It was way ahead of its time.

LARRY TESLER: Everybody wanted to make a real difference. We really thought we were changing the world and that at the end of this project or this set of projects, personal computing would burst on the scene exactly the way we had envisioned it, and take everybody by total surprise.

PRESENTER: But the brilliant researchers at PARC could never persuade Xerox management that their vision was accurate. Head office in New York ignored the revolutionary technologies they owned 3,000 miles away. They just didn't get it.

JOHN WARNOCK: And none of the main body of the company was prepared to accept the answers, so there was a tremendous mismatch between the management and what the researchers were doing, in that these guys had never fantasized about what the future of the office was going to be. And when it was presented to them, the had no mechanisms for turning those ideas into real-life products. And that was really the frustrating part of it, because you were talking to people who didn't understand the vision. Yet the vision was getting created every day within the Palo Alto Research Center, and there was no one to receive that vision.

PRESENTER: But a few miles down the road from Palo Alto was a man ready to share the vision. The most dangerous man in Silicon Valley sits in an office in this building. People love him and hate him, often at the same time. For 10 years, by sheer force of will, he made the personal computer industry follow his direction. With this guy, we're not talking about someone driven by the profit motive in a desire for an opulent retirement at the age of 40. No, we're talking holy war. We're talking rivers of blood and fields of dead martyrs to the cause of greater computing. We're talking about a guy who sees the personal computer as his tool for changing the world. We're talking about Steve Jobs.

STEVE JOBS: Hi. I'm Steve Jobs. When I wasn't sure what the word charisma meant I met Steve Jobs and I know

BOB METCALFE: Steve Jobs is on my eternal heroes list. There 's nothing he can ever do to get off it.

LARRY TESLER: He wanted you to be great, and he wanted you to create something that was great. And he was going to make you do that.

BOB METCALFE: He's also obnoxious, and this comes from his high standards. He has extremely high standards, and he has no patience with people who don't either share those standards or perform to them.

STEVE JOBS: And I'm also one of these people that I don't really care about being right. I just care about success.

PRESENTER: Steve Jobs had co-founded Apple Computer in 1976. The first popular personal computer, the Apple II, was a hit and made Steve Jobs one of the biggest names in a brand-new industry. At the height of Apple's early success in December 1979, Jobs, then all of 24, had a privileged invitation to visit Xerox PARC.

STEVE JOBS: And they showed me, really, three things, but I was so blinded by the first one that I didn't even really see the other two. One of the things they showed me object-oriented programming. They showed me that. But I didn't even see that. The other one they showed me was really a networked computer system. That over 100 Alto computers, all networked, using email, et cetera, et cetera. I didn't even see that.

I was so blinded by the first thing they showed me, which was the graphical user interface. I thought it was the best thing I had ever seen in my life. Now, remember, it was very flawed. What we saw was incomplete. They'd done a bunch of things wrong.


But we didn't know that at the time. And still, though, they had-- the germ of the idea was there, and they'd done it very well. And within 10 minutes, it was obvious to me that all computers would work like this someday.


PRESENTER: It was a turning point. Jobs decided this was the way forward for Apple.

ADELE GOLDBERG: He came back, and-- I almost said "asked," but the truth is demanded, that his entire programming team get a demo of the Smaltalk system. And the then head of the science center asked me to give the demo, because Steve specifically asked for me to give the demo. And I said, no way. I had a big argument with the Xerox executives, telling them that they were about to give away the kitchen sink. And I said I would only do it if I were ordered to do it, because then, of course, it would be their responsibility. And that's what they did.

SPEAKER 3: The mouse is a pointing device that moves a cursor around the display screen.

PRESENTER: Adele and her colleagues showed the Apple programmers an Alto machine running a graphical user interface.

SPEAKER 3: A selected window displays above other windows, much like placing a piece of paper on top of a stack on a desk.

PRESENTER: The visitors from Apple saw a computer that was designed to be easy-to-use, a machine that anybody could operate and find friendly, even the French.

SPEAKER 3: Choose one.

BILL ATKINSON: I think mostly what we got in that hour-and-a-half was inspiration, and basically, just sort of a bolstering of our convictions that a more graphical way to do things would make this business computer more accessible.

LARRY TESLER: After an hour looking at demos, they understood our technology and what it meant more than any Xerox executive understood it after years of showing it to them.

STEVE JOBS: Basically, they were copier heads that just had no clue about a computer, what it could do. And so they just grabbed defeat from the greatest victory in the computer industry. Xerox could have owned the entire computer industry today. It could have been a company 10 times its size. It could have been IBM. It could have been the IBM of the '90s. It could have been the Microsoft of the 90s.

Nest Thermostat

While there had been thermostats, touchscreen thermostats, even smart thermostats before it, Nest brought the most intelligent features and best design into one product. Central to the Nest concept is its ability to learn from the habits of those in the home, as well as the ability to leverage "the internet of things" to become even more efficient and seamless (for example, relying on the motion sensors in Nest smoke alarms to know when the home is occupied or not, or looking at the weather forecast and adjusting behavior).

While the Nest modus operandi for gray space innovation is to take very boring, "dumb" things and make them smart and sustainable, we can only imagine the developments now that Nest Labs is owned by Google. Please watch the following 2:12 video.

Transcript of How Nest Learning Thermostat Learns

OK. Most people don't really think about their thermostat. But here's an eye-opening fact. The thermostat on your wall controls half your energy bill. A lot of that energy is wasted, usually when the heat or AC stays on after you've left the house. Programmable thermostats were supposed to help, but there's a hitch. They're incredibly complicated. According to one study, 90% of people don't program them properly, and they all lost the EPA's Energy Star rating in 2009. But what if a thermostat could program itself around your life, not the other way around? The Nest Learning Thermostat does.

Nest learns when you change the temperature, so treat it like a normal thermostat. Turn it up when you're cold and down when you're hot. Nest will remember your temperature adjustments and use an array of sensors, sophisticated algorithms, and the processing power of a computer to help it learn. We call it Nest Sense. After a few days, you'll be adjusting Nest less. Within a week, it will put all it has learned into a schedule for your home. Nest will begin noticing when you're gone and will turn on Auto-Away to avoid heating or cooling an empty house.

To make the biggest impact on your energy bill, teach Nest good energy saving habits in the first week. Remember to turn the temperature down at night and when you leave the house. You can control Nest from anywhere using your laptop, smartphone, or tablet. Soon you won't have to remember. Nest will do it for you. And as Nest learns from you, you can learn from Nest.

The Nest Leaf will guide you to more energy savings. Changing the temperature just one degree can reduce your energy use by up to 5%. Check your Energy History to see how much you saved. You'll see if your temperature changes, the weather, or Auto-Away saved you the most. So maybe it's time to think about your thermostat.

Tesla Powerwall

This is an example of a fairly straightforward concept, packaged elegantly, sold brilliantly, and benefiting from tremendous efficiencies of scale. Battery backups for homes, and even home-built power cells to capture solar energy, have been around for years, but, like Nest, Tesla is making it interesting and feasible for the common homeowner. If you wonder about Tesla's ability to make battery backup interesting, consider that they booked $800 million of preorders in the first week, on track to surpass the iPhone for one of the most successful new product launches in recent history. Please watch the following 4:00 video.

Transcript of Tesla's Powerwall Home Battery: The Stuff Worth Knowing

BRENT ROSE (TECH WRITER): Hey guys I'm Brent Rose tech writer and gentle assassin. Elon Musk just announced Tesla's first home battery product. He thinks it's going to change the way the world consumes and stores energy. Let's break this down so you can sound smart at your weekend barbecue.

First off, let's talk about the product itself. Tesla's powerwall is basically a big lithium-ion battery. It's about four feet tall three feet wide and 7 inches deep. It looks kind of like the Monolith the monkeys worshipped in 2001 a Space Odyssey. Now Tesla isn't the first company to offer home batteries, but they're selling it for about a third the price of the competitors and they say it'll last a lot longer. It comes in two different flavors. There's a 10 kilowatt hour version for 3,500 bucks which is basically used as backup power in case you have an outage or there's the seven kilowatt hour version for 3000. This one is meant for daily cycling that means powering up and depleting that power every single day running your house off of it basically. The unit sleek enough that can be mounted to the wall inside your garage or even an exterior wall on your house. They can be lined up side by side by side to match the power requirements of your home. It also comes in several different colors in case you wanted to match that pretty model s you got inside your garage.

Tesla is also going to be selling an infinitely scalable hundred kilowatt hour power pack. That's just for utility companies and commercial purposes so let's leave that aside for today. so why is this a big deal? Well solar energy can obviously only be generated when the sun is out in the middle of the day. however peak energy consumption happens at night when there's no potential for solar energy. So all that energy we generate during the day essentially goes to waste. What this system does it gives us a way to store that energy and then be used later when we turn the lights on, run the dishwasher, and watch TV. If you have enough solar panels the system has the potential to take you completely off the grid. Now you don't have to have solar panels to use the power wall because you can use the grid to charge it up too. One theoretical benefit could be charging it up during off-peak hours when electricity is cheapest and then running your home off of it during the peak evening hours when electricity prices go up. That said given the current price of the batteries we just don't see the cost-benefit here.

The place where it would make sense is if you lived in a blackout prone region the ability to charge up when you did have power and then run your home off the batteries when the grid goes down could be a real lifesaver. But what if you use these things plus solar to get completely off the grid? How much money could you save? Well the average U.S. household uses about 30 kilowatt hours per day or just over ten thousand nine hundred kilowatt hours per year. So let's say you get for of Tesla's seven kilowatt-hour batteries at three thousand apiece that's twelve thousand dollars for the batteries alone. Now the average cost of electricity in the U.S. is roughly thirteen cents per kilowatt hour so you would need to use roughly 90 2300 kilowatt hours before you broke even on the cost of the batteries and the average rate of consumption that's eight and a half years before this thing pays for itself. And that doesn't account for the cost of installation, of maintenance, of the price of an inverter, which would be thousands, or for the gradual decreasing efficiency of a lithium-ion battery over the course of its lifetime. Again these are just averages but currently this is not something that's going to save most Americans any money that's not even factoring in the cost of solar panels. That said if you live in a place where energy is more expensive you would break even sooner. For example, in Hawaii the cost per kilowatt hour is a whopping 37 sets at that rate it would only take about three years to recoup the cost of the battery which is approaching reasonable.

Ultimately, if you're just trying to save money than this isn't the way to go yet, but if you've got the cash to spend and you live in a sunny area and the concept of being able to live independently of the power grid has a lot of appeal. So what do you think? Is this really the beginning of an energy revolution or is this just Tesla trying to sell more batteries to justify the existence of its gigafactory? Let us know what you think in the comments and don't forget to subscribe to Wired. Thanks for watching.

Five word summary - Refinement and evolution of innovation