S-Type vs P-Type Loonshots
Distinguish between product loonshots that nobody thinks will work and strategy loonshots that nobody thinks will make money
Bahcall identifies two fundamentally different types of loonshots that organizations must nurture. P-type loonshots are new products or technologies that everyone dismisses as impossible or impractical. S-type loonshots are new strategies or business models that everyone dismisses as unable to make money. The distinction matters because most organizations have a blind spot for one type. Companies focused on technology watch for P-type threats but are blindsided by S-type disruptions. Deaths from P-type loonshots tend to be quick and dramatic (streaming video displaces rentals). Deaths from S-type loonshots tend to be gradual and harder to detect (Walmart took three decades to dominate retail). Both Facebook and Google succeeded not through P-type innovation but through S-type loonshots: small changes in strategy that nobody thought would amount to much.
- P-type loonshots are new products or technologies that no one thinks will work; S-type loonshots are new strategies or business models that no one thinks will achieve their goal
- Deaths from P-type loonshots tend to be quick and dramatic; deaths from S-type loonshots tend to be gradual and masked by market complexity
- S-type loonshots are harder to spot because they are masked by the complex behaviors of buyers, sellers, and markets
- Most organizations have a blind spot for one type and must actively watch for the type they are least comfortable with
- The biggest competitive threats often come from the type of loonshot the organization is not watching for
- Classify Your Innovation PortfolioAudit your current innovation pipeline and classify each project as P-type (new product or technology) or S-type (new strategy or business model). Most organizations will find their portfolio heavily weighted toward one type. Identify which type dominates and which is underrepresented.Pro tipS-type loonshots are easy to overlook because they do not look like traditional innovation. They are often small changes in how you sell, distribute, price, or organize rather than what you sell.
- Scan for Your Blind SideIf your organization is technology-focused, actively scan for strategic threats: competitors with inferior products but superior business models. If your organization is strategy-focused, scan for technological disruptions that could make your strategy irrelevant. Assign specific people to watch for the type your organization naturally ignores.Pro tipAsk yourself: which competitors are doing something that everyone in our industry thinks is stupid or unprofitable? That is where S-type loonshots hide.WarningDo not dismiss competitors who lack technological superiority. Walmart had no technology advantage over variety stores; it won through strategic innovation over three decades.
- Nurture Both Types in Your Loonshot NurseryEnsure your loonshot nursery is seeding and protecting both P-type and S-type projects. Create space for strategy experiments alongside product experiments. Evaluate S-type loonshots with different criteria than P-type ones, since strategic innovations may take longer to show results and their signals are weaker.WarningThe most dangerous blind spot is the one you do not know you have. Regularly challenge your team to identify which type of loonshot could disrupt your business from a direction you are not watching.
Facebook did not invent social networks and Google did not invent search. Early investors passed on both because everyone knew there was no money to be made in those markets. Both succeeded because of small changes in strategy that no one thought would amount to much.
Walmart did not invent selling things cheaply. It won through a series of strategic innovations in distribution, purchasing, and store placement that no individual competitor could identify as threatening. The disruption was gradual and masked by market complexity.
Bahcall developed the P-type/S-type distinction by analyzing why certain companies were blindsided by competitors who did not appear to have superior technology. Facebook did not invent social networks. Google did not invent search. Walmart did not invent discount retail. Each succeeded through strategic innovations that incumbents dismissed. By mapping these cases against product-innovation disruptions, Bahcall identified two distinct categories of loonshots, each with different signatures, timelines, and organizational blind spots.