Tuesday, June 14, 2016

Making innovation less difficult and less expensive

I've made a simple drawing to illustrate what many of you already know.  Too many people in the innovation arena are apt to talk about ideas, which are relatively easy to get, but fail to consider the effort involved to move from an idea stage to an innovation stage.  I've often compared this to the amount of force it takes to get a rocket into orbit.  You can have thousands of rockets, of all sizes, launching all the time.  But until and unless one of them has the requisite amount of thrust necessary to get it into orbit, they will all crash.  There's no half way.  There's no "almost" in orbital science.  You either got into orbit or you crashed and burned.  The same is true with innovation.

You see there's a trap that's set by many innovators.  They like to talk about ideas because ideas are easy.  They are really easy to generate, and once generated we can count them, and everyone likes quantitative results.  We can count how many ideas our program generated, and celebrate this vast cornucopia of ideas.  In this horn of plenty there may even be some good ideas, worth investigating, prototyping and even launching.  If statistics holds, a small handful may break even and a few will generate outsized returns.  But you'll rarely know until you launch.  And that one really good idea that becomes the next Google or Facebook or iPhone or whatever will cause an awful lot of amnesia about the 50 or 100 ideas that failed to launch or barely got into orbit.

You see, ideas are easy, and they are cheap.  In a corporate setting, however, innovations are often difficult and expensive.  If corporations want more innovation, they should stop worrying about ideas, and start worrying about how to make it easier to move more ideas to market.  That is, they need to worry about how to make converting ideas into innovations less difficult, less expensive, or both.  Or just become really good at predicting what other startups will be successful and purchase the startup.


Why is it difficult to move an idea from a nascent concept to a fully fledged product or service ready to be offered to customers in a corporation?  Well, there are a host of reasons and culprits:
  1. Existing products and services.  Most companies don't want to impact near term revenue streams, so they protect existing products and services from disruption.  This means good ideas are launched, if at all, in other markets or become extensions to existing products.
  2. Resource bandwidth.  Each year a plan is developed for spending on products and services.  If a good new idea emerges, and it wasn't budgeted, executive have to rob Peter to pay Pauline, postpone the idea for a while or find new budgets.  None of these are easy to do.
  3. Different skills.  Bringing a new product to market exercises the entire business process, and isn't something that's done all that often in many companies.  It requires different skills than sustaining and extending an existing product.
  4. Risk.  New products create risk, and most organizations are about risk management at best, and risk avoidance at worst.  There are more types of risk, and more considerations about risk, than anyone has time to read about.  Let's just say this is "big".
Notice that all of these difficulties are wounds that companies inflict on themselves.  No other firm or competitor is forcing them to be bad at managing new ideas or their internal skillsets.  This is an internal, institutional challenge and until they are met or overcome, it will be difficult to bring new ideas to market, regardless of their value or number.


New innovations aren't just difficult to move through the product development process, they are also expensive to create.  It's much less expensive to create incremental changes to existing products or services than to create a new product.  New products require:
  • New engineering and design.  No matter how good the idea is, it must go back to the drawing board to be engineered and perfected.  Since most companies have experience tinkering with products but not creating products, new product design and development is often outsourced.
  • Validation.  Once a prototype is ready, companies will take it through a number of qualifying validations with potential customers.  This research is expensive and often misguided, because a really new product or service may be difficult for existing customers to evaluate or place a value proposition on.
  • Development.  Did we say early that resources are scarce?
  • Launch and marketing.  This is actually something that larger firms should do well, but often don't, because they don't understand their new products, buyers or channels.  There's some expense in getting this right.
Becoming more innovative

Now, the question becomes not "how do we get more ideas" but rather "how do we make it less onerous and expensive to move ideas to market".  This is the question that executives should be asking themselves.  Ideas are easy, and even reasonably good ideas are somewhat plentiful. Yet in the midst of abundance most companies can't point to even one or two radical or disruptive products that have launched and are driving revenue and profits.

We've got to either reduce the effort, reduce the cost to market, or both.  Reducing the effort means creating a methodology and/or pathway for new ideas that doesn't have to jump through all the hoops.  A simplified, clarified way to take good ideas to market quickly, leveraging people from all functions who understand their roles.  This requires defining a path to market and training people on how to get things done, rather than how to find problems or risks and stop the process.

Reducing costs or at least planning for the costs is a little trickier, because most companies cannot simply take all the costs out of the equation.  For new products there is design and development cost, but working to an MVP can help.  Further, planning for and budgeting these costs doesn't cut the cost but does improve access to funds.  
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posted by Jeffrey Phillips at 5:19 AM


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