Three Steps to Improve Innovation Success Rate
Product flops are painful…and too common. New product success rates range from 10% to 50% depending on the market segment. The question of how you measure success is a topic for later. Suffice it to say that business success amounts to a correspondence between prediction and reality.
Dissipation of human effort and corporate finances results from the failure of products in the marketplace. As a development team, we set out to build a superior product. We are creative and keen to design features we believe are likely to deliver customer benefits. However, profits are hit-or-miss.
Innovation efficiency needs to be improved. Widget makers focus on manufacturing productivity, farmers on crop yield. Likewise, innovation-driven companies need a focus on improving their batting average with product development. Development cost, time to market, and the evolution of revenue and profitability over time have to be predictable. To succeed at innovation, companies must ensure that the ideas they choose to implement will actually end up creating value in practice.
What are the critical factors for innovation success ? Giving this problem further attention, could help move the needle in a meaningful way for an innovation economy. For sure, there are critical factors at each step in the process including design, engineering and marketing. Good practices have been developed to design and engineer products that are manufacturable and manufacture products that are reliable. However, the front-end of the innovation process still seems to be a main source of inconsistent results.
The initial steps often set the course for a project. Going directly from idea to development is the practice to be avoided. There needs to an explicit pre-development stage before making a decision to invest in development. What rings true to me from the thinking that exists out there and from my own experience can be condensed in three essential pre-development activities.
1) Be thorough in understanding real user needs. Break down user activity into stages so that you can look at ways to improve efficiency in each stage. Speak with users in their work environment. Grasping the user’s yardstick of value is key. Matching product features to areas of strongest unmet needs gives greatest value creation. Our tendency is to shape a product around our own initial presumptions of user needs. Get good information first, then develop ideas.
2) Take the time to create a detailed functional description of the product. This allows you to think through the different aspects of a product before investing any development dollars. Discuss this with customers as a validation and use the functional specification as a basis for building technical specifications. Build software wireframes and 3D renderings for hardware if possible. This helps reduce project delays and frustration caused by feature creep.
3) Build over time a trustworthy system for value estimation of a product concept. Forecasting may be inexact but is necessary for investment decisions. Calibrate your financial model against appropriate benchmarks like the history of a similar product in your company. NPV calculation and the Bass Diffusion model are two useful things to have in your toolkit.
To summarize, the maxim of proper prior planning comes to mind as germane to this situation. That’s it for now. I hope to develop these three points in more detail and post some usable tools, spreadsheets and a collection of reference articles to help put this into practice. Here are links to 3 articles that I found useful.
Turn Customer Input into Innovation (PDF) : The ideas here are proven and make a solid case for taking a detailed approach.
Bass Diffusion Model (Wikipedia): Reputed to be the most popular model in the field of marketing. Lots of paper on this topic if you search Google Scholar.
Success Factors in Product Innovation (PDF) : Another great article to tap into the wisdom of an experienced practitioner and researcher.
