The 5 product innovation mistakes and how to avoid them

Caroline Parnell
Nov 16, 2020 · 8 min read
Photo by Riccardo Annandale on Unsplash

Most companies talk a lot about the importance of product innovation for their business. And yet their processes, culture, and management are usually 100% focused on exploiting the core business and milking their existing cash cow.

And when they do try to innovate with something new, the failure rates are high, often reported as 60–80% failure rates for new product launches.

So, what are the main reasons why product innovation fails? Below are the 5 reasons that I see as the most common and some thoughts on how to address them.

1. Backing product ideas too early

There can be 3 common pitfalls with early product ideas:

  • A solution without a real customer problem or that doesn’t satisfy customers' needs well enough to change their behaviour.
  • It doesn’t have a validated long term business model. Customers may have the problem but not be willing to pay for something to fix it.
  • It might not fit with your business's core competencies and there are other businesses better placed to win.

The international design consultancy IDEO frames this tension with the desirability, viability, feasibility venn diagram.

What to do instead?

Stay in the problem space until you’re sure you understand it

Engage diverse perspectives and use design thinking tools to help with this.

Keep your early work and experiments low cost

Have a clear way of ranking your ideas against each other

Previously I’ve successfully used the below 4 criteria to evaluate new product ideas:

1. Customer delight: does your idea delight customers better than the alternatives?

2. Business value: does your idea drive business value? (eg revenue, profit or cost reduction)

3. Fit with strategy: does this idea fit with the broader business strategy and vision for the future?

4. Complexity: what is the likely cost, time, and risk involved in delivering this idea?

2. Internal processes not set up for innovation

Existing company processes are usually setup to protect the business from risk. This often means new high-risk ideas get killed too early or they are forced to submit hefty fictitious business cases before they’ve even started.

And when the process isn't fit for purpose, this encourages people to operate outside your process. Whilst this can sometimes work more often it creates chaos, duplication across teams, and no way for stakeholders to know if someone has truly hit on a breakthrough idea that needs resources.

What to do instead?

Spend time setting up a process that works for your company

How to approach setting up a process:

1. Speak to teams internally about what works and doesn’t work with how innovation is managed today.

2. Speak to other companies to understand their best practices.

3. Use resources available that give step by step guides on how to do this. I can recommend the Corporate Startup and Be Less Zombie as great books to start with.

Turn ideas to 1 pagers

This is a simple way of ensuring all ideas cover the important aspects and can be compared to each other. It also helps avoid lengthy PowerPoint decks than can distract from the idea itself.

There are lots of examples of 1 pagers that you can find online and John Cutler has detailed some great questions to include here. Create a template that includes the most relevant questions for your business.

Setup a stage-gate process

  • Frontdoor process: A clear way to submit ideas for them to be prioritised and assigned to the relevant person.
  • Discovery: Early research into the customer insight, business opportunity and technical feasibility. The aim here to understand more about the idea and the potential benefits to the business.
  • Design: Using design thinking techniques to come up with and prioritise all the different ways to address this idea in the best possible way.
  • Validate: Customer experiments to test your biggest and most risky hypothesis associated with those ideas.
  • Build: The first stage of building the final product that you plan to take to market. This should be a light touch MVP to start with but it should still be compelling enough to give to real customers.
  • Growth: Once you’ve achieved clear product-market fit, this stage is then about driving scale and ensuring your product is fit for multiple users.

Measurement of the health of your process

  • Soft measures: These measure the overall efficiency of the process. For example, the number of ideas at each stage, the speed of progress, and the % conversion from the initial idea to customer trial and eventual launch.
  • Hard measures: These measure the KPIs that your business cares about usually revenue or profit. For example, the overall future profit potential of the product ideas in your process can be measured by an estimated value x % likelihood of the idea being launched.

Continuously improve your ways of working

3. Lack of flexible funding and resources

In the worst case, if you come up with your game-changing idea in January you could be at the very least 12 months away from having any budget or resources allocated.

What to do instead?

If your business is serious about new product innovation, it is worth getting approval for a pot of capex and opex that can be allocated to new product ideas within the year.

It should be clear to the senior team that this funding will drive new revenue streams but the product areas aren’t known yet. The best ideas in your company can then get allocated funding to be tested and if they get far enough to be launched and scaled.

Stakeholders can assign this resource to product managers as part of the stage-gate reviews.

Flexible resources

4. Customer testing too late in the ideation process

This all results in us waiting months before we get an idea in front of our customers. And this usually means we are too invested in the idea by then. This can be financially invested in money or time, but it can also be an emotional investment by the people that are working on it.

What to do instead?

Test ideas earlier and more regularly than you feel comfortable. When you test early, you can be detached and objective about what you hear. And of course, there is then plenty of time to adapt it. See further information on how to do this in my article below.

5. Lack of an experimentation culture

Culture is often defined as a company's ‘personality’ or ‘the way things are done around here’.

Sometimes companies contradict what is important. Large companies especially often talk about the importance of innovation and yet they don’t include this in people's objectives, experimentation isn’t visibly rewarded, and worse still, people’s careers or roles are negatively impacted when a new product idea fails. All these act as signals to employees to continue to focus on what is safe — focus on short-term profit, don’t experiment, and don’t be associated with any new risky product idea.

What to do instead?

  • Encourage people across the business to get involved. Innovation and future business growth shouldn’t be the responsibility of a few teams but something the whole business should care about. Create rituals like hackathons, design sprints, and internal ideas competitions that the broader business can get involved in.
  • Encourage those directly involved in innovation to continuously evolve how they work: training, reading, attending conferences, and learning from others in other companies.
  • Ensure appropriate measurement for new ideas. Yearly appraisals based on short term profit don’t work. Instead, have quarterly objectives focused on what matters for the stage that the product is at. For example, at validation, it’s probably looking at the amount of product hypothesis you have proved or disproved.
  • Link career advancement to ongoing innovation activities. Make sure you have appropriate incentives and career paths in place to attract and retain the best talent.

Remember that new product innovation is risky by its nature. So you’re not aiming for anywhere near a 100% success rate.

You want a culture that embraces experimentation and a lean process so you avoid wasting investment until you have evidence your idea will be a success.

Keep reviewing your ways of working, keep trying new things, and keep learning.

Thanks for reading. As always, I’d love to hear your comments & thoughts below.

Product Management and Innovation

Product strategy, new product innovation and continuous improvement.

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Caroline Parnell

Written by

Product Leader and Mentor. Previously at O2 and Vodafone. Interested in product development, innovation and helping teams thrive.

Product Management and Innovation

Product strategy, new product innovation and continuous improvement.

Caroline Parnell

Written by

Product Leader and Mentor. Previously at O2 and Vodafone. Interested in product development, innovation and helping teams thrive.

Product Management and Innovation

Product strategy, new product innovation and continuous improvement.

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