So you have been managing your business poorly over the last 4 years, allowing your has-been products to lose market share while you lament the “underhand” tactics of your competitor. What is worse, while your competitor gains ground on you, you still revel in the “good old days” when things used to be easier - your products used to fly off the shelf even before they had had enough time to cool down - and you now blame your sales people for not performing. Instead of recognizing that you have reached the end of the product life, and that you need to inject new products and attack new markets, you simply sit there are blame everyone for not pulling their weight. Ultimately, you fail to see that it is you who are causing the problem, not anyone else; it is you who have not kept up with the market, who have not brought in new products.
Then suddenly the light dawns on you. You realize that you need new products because no one is buying your stuff anymore. You suddenly perk up with new vigor, targeting everything that walks, hoping to find a quick fix. Suddenly you talk innovation and you hope that it brings you your next stream of income TODAY! But innovation is not like this. In fact, innovation will not help you because all the fundamentals of innovation are missing. So in this article, we talk about what you need to make innovation work for you.
1. A clearly defined market
If I have said it once, I would have said it a thousand times that you would need to have a clearly defined market. If you are currently serving in that market, that would be good because you have insight into what they need, and their pain points. But that might not be of significant value to you when you find that you are over-exposed in the market. If you have already covered the market, and you don’t have a new market to extend your reach, it might not be of any use to you. Hence, you need the next thing…
2. A unique product
What pain are you relieving? In an earlier article, I spoke about offering either a pain-reliever or vitamin C type product. In essence, a pain reliever will always be wanted more than vitamin C type products, especially when the pain is present. When you offer a product, make sure that you identify the pain that you are trying to overcome. Don’t just use innovation to beat the competition or to stay alive, it must be done to relieve a pain – and with a unique product that is still absent in the market, or where incumbent products doing a bad job at it.
You need time to figure out what works and what doesn’t. Even if the value is apparent to you, it might not be to your market. Hence, there is no way but to test out your hypotheses. There are 4 key tests that need to be done: customer value (meaning, will people buy it, and at what price – the more valuable, the higher the price), execution (meaning, do you know how to produce the solution), scalability (meaning, can you make and deliver a sizeable number of them so as to be viable in the market), and defensibility (meaning, can you protect your market so that your efforts will not go to waste through me-too products). Each of these major tests has a couple of hypotheses that need to be tested in the market, and these take time. Don’t jump the gun by asking for production schedules, sales forecasts and revenue expectations before you are totally clear about the answers to these tests.
Related: 4 Tests for your startup
4. A good team to put it together
It is extremely important to bring in the right people onto the project as early as possible. This is especially so if you don’t have them in your company right now. When you source for people, you must look for those who are comfortable with ambiguity, who are not afraid to fail, and who will pick themselves up, dust themselves off, and start right over. In that sense, too, you as the business owner must allow hypotheses to fail. It is in failure that we learn how to grow. In other words, you, and the members of this team, need to have a growth mindset.
Finally, the last thing you will need on your side is timing. While this is difficult to quantify, and even all the customer discussions, focus groups, and product innovations cannot predict the right time to market, this has still been identified as the biggest contributor for innovation success. The reason why Uber is so successful now is because incumbent taxi companies have grown lazy and don’t provide consistently good service. They are never around when you need them! The reason why AirBNB is so successful now is because post global financial crisis, many people are sitting on spare capacity at home, which they can open up to visitors, thereby earning for themselves some spare cash. This also comes in the wake of cheaper airfares, and higher hotel rates. A perfect storm to create the success of AirBNB. So timing is important, and sometimes, this is just a matter of luck; other times, it is pure engineering that takes a lot of patience.
Getting it right
As you can see, innovation is a process, and not a panacea. Even if you need innovation to deliver, you cannot hurry it along. When timing is wrong, when you don’t know your customers’ pain points, when you don’t know how to assuage them, your innovation will take a much longer time to deliver. What we know from systems thinking is that most people under-estimate time and effort by a factor of three. Hence, if we think we need 6 months to get our innovation out to market, we most likely need 18 months. So this tells us that we need to be serious about innovation, and that it has to be an organic capability that is on-going. It cannot be initiated to address declining revenues, because by that time, it would be too late. It needs to go out when the current business is on a growth path, on a high. Then, by the time your current business starts to wane, this new one can pick up the slack. Getting the timing right is more art than science, but one thing is certain, innovation is not a short-term solution, and once you start down that road, there is no stopping.