Evaluating Product Innovations — proof, potential, & progress
A guide to the diagnostic technique for evaluating product innovations based on agile customer validation, and linking the technique to the process of managing product innovations to fast-track progress and achieve success.
In this blog I have presented a framework to evaluate, score and rank one category of innovations — Product Innovations.
Product Innovations, are tangible solutions usually owned/acquired by customers who are willing to pay a price for the value delivered.
Product Innovations, are those innovative solutions in a tangible form (hardware + software + computing) owned/acquired by the customers who are willing to pay a price for the value delivered. In delivering said value, the innovator usually develops technology or applies what is already available to solve a problem in a manner that creates gains, reduces losses, brings about desired changes or generally desired outcomes to the target beneficiary. The word Product primarily signifies the commercial nature of the innovation and also refers to the practical aspect that the financial upside of the Innovation and for the innovator lies solely in the commercial success of the product in the market.
Why evaluate Product Innovations?
Evaluating product innovations (from the earliest stage of the innovators coming up with innovative solutions and up to when they become proven products adopted in the market) is necessary for many reasons. Most commonly rating and ranking innovations is done in the context of offering prizes, selecting innovators for grants, identifying startups with innovations for incubation or angel investment support, identifying innovations within corporates for investment as potential new product launches etc.
To make these evaluations as much fair, objective, and based on outcomes that matter, the evaluation criteria usually covers aspects related to the innovativeness (or novelty) of the solution, the sophistication of the technology developed or applied, the feasibility of the concept/design, the impact it is likely to create in terms of social change or economic gains etc. More importantly the evaluation looks into the commercial viability, particularly the market or business potential. Usually the commercial aspects and the data presented to indicate the market/business potential of the product innovations are based on a lot of assumptions, and have the risk that they may end up as over hyped estimates.
Estimating the market potential/performance of the product innovation is possibly most accurate in the case where the innovation is in a product category that already has reasonable adoption in the market. If the product innovation is a new type of a product — as in a new product category, or is a significantly (radically) changed version of an existing category, then estimates of market performance are to be taken not with a pinch but a sack of salt.
More novel or radically different the innovation is lesser the confidence on the estimates of its market potential!
Innovation should ideally be recognised for how novel the idea is, and how radically differentiated it is from what already exists today. More the novelty better the innovation!
Sound logical right? But if we are evaluating product innovations on the basis of outcomes that are linked to indicators or parameters associated with the market/business potential, then lesser the degree of novelty or differentiation in the innovation that much the better, because we have greater confidence in the estimates of the market potential.
How do we break this inherent paradox with respect to evaluating innovations?
Is there a way for us to evaluate innovations based on outcomes?
And yet ensure that the highly differentiated new product ideas don’t lose out to those with lesser degree of uncertainty because they are incremental innovations. What would those outcomes be?
Can we qualify customer-motivation, customer-acceptance, and customer-commitment as leading indicators of higher market potential? These dimensions represent significant elements of risk inherent in innovation. Can we set outcomes on these dimensions such that they help assess innovations ?
In the case of incremental product innovations the ‘Valuation Risk’ of estimating the market/business potential is very low as compared to more seriously differentiated or radically different innovations.
On the other hand if we go with the ‘Validation Risk’ there is a possibility of coming up with a evaluation criteria for product innovation that works equally well for incremental as well as radical innovations.
Note: You may read my other blog on the topic of Valuation Risk versus Validation Risk as they apply in the context of product innovations. You can do this later, and read on now!
For any Product Innovation, Validation Risk is associated with the following factors:
#1 Problem definition & Customer selection and specificity
#2 Problem significance & magnitude
#3 Motivation level of target customer to solve the defined problem
#4 Quantification & its acceptance by the target customer of the value proposition offered by the innovation
#5 Adoption barriers that will prevent target customer from experiencing the value proposition
These factors tie directly to the dimensions of customer-motivation, customer-acceptance, and customer-commitment and by evaluating these factors we link the potential of product innovations to their progress achieved on these dimensions.
Product Innovation Rubric
In FORGE, inspired and guided by the resources of thought leader organisations, experts and programs, we have focused our efforts in developing a rigorous process of managing innovations. This process along with the attendant tools, techniques, and milestones, guides innovators to systematically address each of the factors and to neutralise the Validation Risk inherent in their product innovations.
A diagnostic tool to guide innovators through a fast-tracked process of validating inherent risks by linking their progress to customer-acceptance and customer-commitment, and thereby evaluating their true market potential.
Innovators come up with innovative ideas to solve real-world problems, and they would use tools enabled by fundamental science or applied technology to do so. From the earliest ideation stage onwards it is essential to profile/measure the Validation Risk inherent in product innovations, and work meticulously to neutralise the risk.
To aid this process, make it competitive, fun and effective, we have come up with Product Innovation Rubric— a framework that scores Product Innovations on a on a scale of 0 to 100 — a Product Innovation Score, consisting of 5 equal weight factors with a max score of 20 points each. Each of the 5 factors in turn have qualified or descriptive sub-levels that indicate a measure of the Validation Risk as measured by the corresponding factor.
