P-Type vs. S-Type Loonshots
Distinguish product innovations from strategy innovations to avoid blind spots
Bahcall identifies two fundamentally different categories of loonshots (radical innovations that everyone dismisses). P-type loonshots are new products or technologies that no one thinks will work -- like the first radar, the first statin drug, or the first computer-animated film. S-type loonshots are new strategies or business models that no one thinks will achieve their goal -- like yield management in airlines, hub-and-spoke routing, or Google's AdWords auction system.
The distinction matters because most leaders, teams, and companies have a natural bias toward one type. P-type innovators are drawn to flashy new technologies and products. S-type innovators are drawn to clever operational improvements and business model tweaks. Deaths from P-type loonshots tend to be quick and dramatic: a new technology appears, champions emerge, and the old guard crumbles. Deaths from S-type loonshots tend to be gradual and masked by market complexity, making them far more dangerous because they are harder to spot.
The framework teaches you to systematically scan for both types and to ensure your loonshot nursery is seeding innovations on your blind side, not just the type you are naturally comfortable with. This is especially critical during periods of sudden change (regulatory shifts, new competitors, technology disruptions), when S-type innovations often determine survival.
- With P-type loonshots, people say 'there is no way that could ever work,' and then it does; with S-type loonshots, people say 'there is no way that could ever make money,' and then it does.
- Deaths from P-type loonshots are quick and dramatic; deaths from S-type loonshots are gradual and masked by complexity, making them far more dangerous.
- Most leaders have a natural blind side -- they gravitate to one type and systematically neglect the other.
- The most powerful competitive positions combine P-type and S-type innovations: Google started with a P-type search algorithm but dominated through S-type advertising innovations.
- Identify your natural innovation biasExamine your organization's track record and leadership tendencies. Do you primarily invest in new products and technologies (P-type bias) or in business model and operational improvements (S-type bias)? Look at where your R&D budget goes, what gets celebrated in all-hands meetings, and what your leaders spend their time on.Pro tipAsk your team: when was the last time we celebrated a non-technological innovation -- a new pricing model, a new distribution strategy, a change in how we serve customers? If no one can recall, you likely have a P-type bias.
- Conduct a blind-side scanSystematically look for emerging threats and opportunities in the type of innovation your organization typically neglects. If you are a P-type organization, scan for competitors experimenting with new business models, pricing structures, distribution channels, or customer engagement strategies. If S-type, scan for emerging technologies that could disrupt your product category.Pro tipStudy industries adjacent to yours that have recently been disrupted. Was the disruption P-type or S-type? The answer reveals what type of threat is most likely to come for you next.WarningS-type loonshots are particularly hard to spot because they often look trivial at first -- a small pricing change, a minor operational tweak, a slightly different way of serving customers.
- Seed your loonshot nursery with both typesEnsure your innovation pipeline includes deliberate experiments in both P-type and S-type directions. Allocate resources, talent, and leadership attention to the neglected type. Create specific roles or teams responsible for exploring your blind side.Pro tipConsider hiring or promoting leaders who have the opposite innovation bias from the dominant culture. If your CEO is a P-type visionary, ensure the innovation council includes strong S-type thinkers.
- Prepare for sudden environmental changesBuild organizational resilience by maintaining active S-type and P-type innovation programs before a disruption hits. When regulatory changes, new competitors, or technology shifts suddenly change the rules, organizations with both types of loonshots in their pipeline survive; those with only one type are blindsided.Pro tipRun scenario-planning exercises that specifically model both P-type disruptions (a new technology makes your product obsolete) and S-type disruptions (a new business model undercuts your pricing or distribution).WarningThe most dangerous moment is when your current franchise is performing well. Success breeds complacency about blind spots.
Pan Am's Juan Trippe was a P-type genius who built the world's largest airline through spectacular product innovations: flying boats, transpacific routes, jet airliners, the Boeing 747. American Airlines' Bob Crandall was an S-type genius who developed yield management (dynamic pricing), frequent flier programs, and hub-and-spoke routing. When deregulation hit in 1978, Pan Am's P-type advantages evaporated while American's S-type innovations proved critical for survival.
IBM correctly anticipated the P-type loonshot of personal computers and quickly dominated the market. But it outsourced its operating system to a tiny 32-person company called Microsoft and its microprocessor to Intel. IBM missed the S-type shift: individual buyers cared more about exchanging files with friends (which required compatible software) than the brand logo on their box.
Google started with a P-type loonshot -- a new algorithm (PageRank) for ranking internet search results. But it was the eighteenth search engine. What made Google dominant were several S-type loonshots: the AdWords auction system for advertisers, the self-service advertising model, and the strategy of giving away the search product to monetize through ads.
Bahcall developed this distinction by studying the airline industry as a natural experiment. Before 1978, US airlines were heavily regulated, making the industry essentially a controlled environment. Pan Am's Juan Trippe was a master P-type innovator who built the world's largest airline through a series of spectacular product loonshots: flying boats, the China Clipper, jet airliners, and the Boeing 747. Meanwhile, American Airlines' Bob Crandall was a master S-type innovator who developed yield management, frequent flier programs, and hub-and-spoke routing.
When deregulation suddenly changed the rules in 1978, the S-type innovations proved decisive. Of 170 airlines that went bankrupt or disappeared over the next three decades, Pan Am was among the casualties. American Airlines was the only major carrier that survived without bankruptcy. The same pattern -- S-type blind spots killing P-type champions -- appeared repeatedly across industries: IBM missing the software standard, Nokia missing the smartphone platform shift, Polaroid missing digital imaging.