Why Innovation Fails
How do we get our employees to come up with more ideas? This is a question I have been hearing more and more from corporate leaders. And it is a good question to explore, because the more ideas we generate within our organizations, the better the chance that we will find good ideas. In the 21st century, we must design our companies for serendipity and encourage the sort of cross-functional collaboration that results in the cross-pollination of ideas and concepts.
And yet this article is also a cautionary note. Getting our teams to generate a lot of great ideas is just the beginning. Successful innovation is the combination of great ideas with sustainably profitable business models. In my experience corporations have a much bigger problem — what to do with good ideas once we have them. Employees who have been part of ideation sessions, are often frustrated because nothing substantive happens with the ideas they generate.
It can get worse. I have seen companies that run idea competitions or hackathons that are highly popular among their employees. But after the winner is chosen, they are awarded the grand prize of having to create a twenty-page business case! Such practices can stifle innovation.
Sometimes the winners are lucky. They are simply given money and resources to execute on their idea. Go to the lab, build it and they will come! Such practices are likely to lead innovation failures.
And so beyond creativity, every modern company needs a clear process for taking ideas from concept to profitable business model. One way to frame the conversation is to explore what can cause our great ideas to fail. We can then design our innovation frameworks to mitigate those challenges. With that in mind, this article will describe three main reasons why innovation fails.
Making Stuff Nobody Wants To Buy
Innovators are most excited about bringing their product ideas to life. They hate the cold wind of reality that is raised by questions about customer needs. And yet, all great business models are rooted in great value propositions. No matter what we do, our cool new products will not succeed if we are making stuff nobody wants. To make stuff people want, we have to spend time exploring their needs and developing empathy. What are they trying to accomplish in their lives? What are their jobs to be done? What would cause them to reach out into the world and grab our product? These questions are so foundational that if we do not answer them well, we will end up making products nobody wants to buy.
Selling Stuff Without Making Profit
Here is another dose of cold reality. It is possible to make stuff that people want and still lose money doing it. Innovation is not just about making products that will deliver value to customers. It is also about ensuring that we can deliver that value in a sustainable way. You cannot sell products at a loss and then make it up in volume. Sustainable traction means that our products pay for their own existence. As such, we have to ensure that customers are willing pay sufficient amounts to cover the cost of value creation and delivery. We need to find a price point that will cover the cost of customer acquisition and retention. And we need profit, which is surprisingly treated as dirty word in some innovation circles. Profits are how we will pay our own bills and sustain the company. We may not need to answer the profit question early in the innovation process, but it is a question we will eventually have to answer. If we don’t, our products will fail because we are selling our stuff without making profit.
Making Profits Without Scaling
Sometimes we can make the right product and sell it to customers at the right price for profitability. But beyond the early adopters, we can struggle to find the right growth engine to scale our product. This is often how first movers lose their advantage to fast followers. The first mover is the innovator. The fast followers become the masters of business model design and scaling. This can be really frustrating for first movers who will cry foul about fast followers ‘stealing’ their ideas. To me, this is a reminder that, as hard as we work to make cool products, we have to work twice as hard to cross the chasm and scale our products beyond early adopters. If we don’t do this, we are likely to be left behind and may even lose share in markets we have pioneered! That is the type of failure that results from making profits without scaling.
The Innovator’s Job
They are several other specific reasons why innovation fails (e.g. technology failure or team conflict). But if we drill those reasons down their essence, they ultimately result in the same causes for failure — making stuff nobody wants, selling stuff without profit and making profit without scaling. So while companies need to facilitate the serendipity that creates the sparks of creative ideation, they also need processes to capture the outputs of creative ideation and transform them into profitable and scalable business models. There is no better way to conclude this article than with a great tweet from Alexander Osterwalder who notes that:
Too many innovators and entrepreneurs think if they just find the right idea everything else comes easy. They got it the wrong way around. 1) The idea is easy. 2) The search and iteration for a value proposition and business model is hard. 3) Execution and scaling is where winners are decided.
This article was first published on Forbes where Tendayi Viki is a regular contributor. Tendayi Viki is the author of The Corporate Startup, an award winning book on how large companies can build their internal ecosystems to innovate for the future while running their core business.