In my coaching work with growth leaders, one of the things we work toward is getting a proper balance of risk and reward in the projects they work on. There are some surprising relationships between these two areas, especially in the later portion of the innovation cycle. Clients are often surprised that one of the common issues I see in firms is not enough resistance to launching innovation into the marketplace.
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Initially, most assume that all friction in the innovation pipeline is negative, but the truth is that innovation needs to have well constructed and beneficial resistance to properly vet the idea and create high-quality innovation outputs. Much of the lean innovation work that is currently practiced is about bringing these “moments of truth” closer to the innovators, and allowing the unvarnished voice of the customer to get right to the innovator’s workstation.
What innovators are usually responding to when they use the word resistance, are headwinds that are made up of systems and processes of the firm at large that have little relevance to the work at hand. The higher-level truth is that the risk reduction systems that the firm employs for its core product lines are very likely related to performance as defined by its existing customer set. On the other hand, the risks of innovative products and services in their earliest stages are primarily market-related risks, which most core product development processes assume are a given.
I first noticed this when I was leading a product team for a components organization that sold into every cell phone manufacturer globally. We had a superior product and had a great worldwide market share, but due to the amount of (expensive) capital equipment it takes to build these devices, forecasting was absolutely key. We needed to get good at forecasting whether our customer forecast was real or just fiction.
In developing an accurate forecasting model, we had a view into everyone’s product development processes and discovered a surprising outcome:
Those firms that had the best track record at meeting their forecast also had the highest rate of what we called “early kills,” or products and services that made it through early gates, but were killed before going to market.
When we spent time going to the next level with these firms, what we found was that they had put in place very stringent marketing based proof points that were able to decide whether the device would meet its market objectives. These tests were remarkable for their reality, usually involving live units, live customers, and small limited geographies in a highly supported environment. By assuring the end customer had invested time and money, they could be sure they were on track.
This insight, along with a well-developed model for the macro market, allowed us to do a good job on our factory capacity forecasts, which drove profitability.
You see, these firms had done the math and understood that it was much, much less expensive to incur a development write off than to risk a market misstep.
There is an old joke about someone noticing an individual on a dark night going round and round looking at the ground under a street light. When asked what they were doing they said, “looking for my car keys.” When asked why they were looking there instead of near where their car was parked, they responded, “because this is where the light is.”
Every firm is guilty of looking for the keys under the light, i.e. setting the bar high in its area of competency, and missing the need to go deep on the portion of the business model that is not in their wheelhouse. This is especially true in technology firms, which get myopic about tech specs, to the exclusion of important marketing benchmarks and support for the launch.
So, if you are an innovator in a larger firm, pay attention to your firm’s weak area, and make sure that you go deep in it. For highly competent tech firms, this usually is marketing, and for great go-to market firms, it’s in the product or services details.
Pulling this all together:
- Costs sky rocket when you actually go to scale, and the cost of a high-quality market test is a great investment.
- The right thing at the wrong time is still the wrong thing.
- Taking charge of sunk development costs will serve the firm well on the whole, especially in business-to-consumer market spaces where launch costs are a large fraction of the total new product budget.
- Building that learning from the market test back into your innovation process will improve the entire innovation process. A beta product that is “killed” will likely have its best features reborn in a much better version.
- By strategically building in proof points in your innovation process, the quality of innovation will actually improve.
By making sure there are proof tests for those “blind spots,” your innovation success rate will increase, and you’ll help your firm develop much better peripheral vision.
In addition to my speaking and consulting work, I do reserve time to work with C-level leaders and subject matter experts through private, executive coaching relationships. If you’d like to learn more about how I can help you guide your organization to clarity, action and growth, please email me to schedule a 20-minute introductory session.
