What they don’t tell about innovation
Innovation is something that you can't refuse, conceptually. Who would become obsolete? Of course, nobody. So, if you tell some manager if innovation is good or not, everybody will tell that innovation is the pillar of companies grow and so on.
Well, that’s right, I love innovation, and everybody should. The matter is about what you may don’t know about it.
The form of innovation
Well, innovation is not all the same. Innovation is something like tools: You need them to build a house, but screwdriver or hammer is not the same. Innovation works on three different areas of the company, so we have:
- product innovation: this is what we see if we close our eyes and think about innovation. This is the innovation that brings to the product creates a new business opportunity. Think about the car; when Ford stops to sell horses and place cars into the market, that was due to product innovation.
- process innovation: this kind of innovation is for sure less cool. This doesn’t produce new products but improves what happens inside the company. So its focus is not on sending rocket on Mars, but on more concrete things, like make the company more efficient. This will optimize the costs, reduce time to market and let us make more with less
- business model innovation: time changes for everybody, and also for business models. Think about the software. 15 years ago, most of them were sold in a CD, paid in advance, and maybe cracked. Some vendor tried to make upsell by selling updates, often rejected by the customer to contain costs. Now, all producer moved to a subscription plan, and this gives them monthly revenues and loyal costumers. Well, also this kind of innovation doesn't seem too much cool, compared with product innovation, but as You can image, can save your business.
Why does products innovation fail?
I’m not speaking about the fact that you may invest in a product and the market reject it. If You are an entrepreneur You are aware that all investment is a bet and you may lose. The matter is that, in most case, it is not a marketing fault, but your. We often do a lot of common mistakes that will lead to a bad product or bad result.
- Too big goal for you: Who would invest in small things? The dream of all entrepreneur is to win the big bet and became billionaire in a month, so I understand the will of making a huge project. The matter is that You don’t have to measure only the potential of the project, but also the risk and, moreover, the capacity of finishing and sustaining the project. It will be great to create another google or another Facebook, but, this will lead to success? No. Forget the market is full. Image there is no search engine and no social network. Have you the right people to build the right project? Have you the strong need to persist, when product won't sell? Have you enough money for marketing? Are you experienced in customer care? Note that the most question is about the after, not about the production phase.
- obstinacy: in common sense, we need courage to goes on something. Nothing more false, in product innovation. The courage is to cut off something that doesn’t sell or doesn’t work. There are many cases when you have to do it, ad it could be not your fault. Market changes, customer need changes, mistaken happens. Don’t think about how much money you spent, but how much you will spend later if you will postpone this
- Too much sentiment: A product is not a child, is just a company investment. So, if you get the right offer, sell it. If the product doesn’t work, cut it. If you don't’ like the idea but there is a good business plan that convinces about results, invests in it. Better to become rich selling something you don’t like, the build the coolest product and keep it no your warehouse.
- no plan: Never start without a plan. The business plan is a good point to start, but after the project starts you need to go deep into details. In most cases, we focus mostly on the implementation part, especially in a software-based product. Have a product that works as expected and performance is something we have to take for granted, thinking about the project. What we have to focus, is the market. Yes, I know, focusing on sell when you don’t have the product sounds like building the roof without the house. I’m not telling to overlook any phase, but to focus on each one. So, our plan must cover all aspect of the new product and all the duration of product life. Of course, next week will be detailed, next month will be clear, next year will be just an idea. The important is to keep it updated and clarify it step by step.
- will be like others. I already spoke about the mistake of try to make a product bigger than us. Another mistake is to try to make a replica of something already exists. It is an easy temptation. You see something working, and you do the same. “If they sell it, I can do the same”. The matter is that the user can choose between you and others, assumed that you have the same product quality and performance. This fragments the market and make hard for all to sell, but penalize the last come in. The ideal solution is to discover the Columbus eggs and create your niche. The matter is that more the market is undiscovered, bigger is the risk. Especially in the tech sector, if something is not done yet, it’s unfeasible or usefulness. So I tell to avoid red markets and that blue ocean is hard to find, what to do? In most cases stay on the “orange” market is OK, but you have to bet all into distinction. So, defined what your product must have, invest more in some distinctive feature to make that comparison with other brings users to you. And remember that distinction is not only features (expensive) but also the way you sell or service that you ship with the product, like customer care.
Why does process innovation fail?
Most people think that process innovation may be simpler then product one, I am not sure this is true. This is common because if you think about this comparison, you will focus on the investment and the effort of doing\improving a new product. This is a bad point of view, in my opinion. Measure the effort of this activity by money is good to understand the risk but not for the complexity. Product innovation is a deterministic process, I mean: you plan it, you schedule activity, you got the result. The project may win or fail, be cheap or get into debt, but that is, just another project into the company. Process innovation is different. It have to deal with people, and people reject chanced by default. If you think that you are the boss and you can simply tell “do it”, You are away from reality. People not motivated to do something will do it wrong, without passion and, as You will lose focus on it, will came back to the old way. From this point of view, people are similar to babies, and must be educated using this escalation:
- Education: This is the most powerful tool you can have. Explain benefits, bring people into the project, motivate… and You will have allied to sustain the change.
- Carrot and Stick: Even if you try to educate people to change, there may be something that doesn’t collaborate. Give some incentive may help. That it is the last chance, but in some cases, it may work. However, my experience tells me that only if people are promoters of change, you can do process innovation. If they refuse it, it’s hard to have the same result. It is from the people nature, People are averse to changes, and the people that conserve the job by the knowledge they didn’t share more. I hope Your company is free from such people, but there are many places where people do the same job, in the same way, every day, keeping it secret for all, with the only scope to become indispensable. Well, with these people, do You think there is some chance to win the match?
My last sentence is quite hard but this teaches us another secret: process innovation must be lead by the right people, and often from fresh people that don’t have any fear about changes and about hurt bad habits. So You may lead to think that’s a good option to delegate this to an external consultant, that doesn’t have any scruple to apply breaking changes. On most cases, the risk of having something that doesn’t match the company vision or the business is high because people that came from outside don’t know anything about You. In case this is a must because you didn't get the result with internal resources, it is important to find almost a field-specialized consultant (i.e. if you are a software company, find somebody that worked a lot with a company like your).
Why business model fails?
There is nothing good or wrong into business models. They are just a way to get back some remuneration for the services or product you sell. Someone help you to sell, keeping a good cash flow, another no. Some that one time works now is obsolete. The matter is that times change and you have to keep updated. Moreover, the company is often built around a business model: change it may mean change all, and this may scare. But times and market changes and You have to change with them. Many companies start selling services and at one point get financial credit to start selling products, then abandoning service area. Other starts with a product and when the product is obsolete, use its internal team to sell service. It can be that you start with a product, and thus induces some excellence into the company, then you can start a spin-off. Think about Amazon starting selling IT service, after they realized what they have could create a business greater than the marketplace.
So, what we learn about innovation?
I focus more on the mistake than what to do because I think most of us know all the theory of innovation. My last consideration on it:
- Business model innovation has to be done from an entrepreneur, other from managers.
- You need the courage to create a startup on a product, and it’s hard to reach the market, but it’s harder to cut off.
- Start with a plan. Follow it. Adapt the plan if you need. There is a compromise between going randomly or be blunt.
- People will be a critical factor in process innovation. Keep people motivate your company because it’s hard to change them with money or threat.