|By Marketwired .||
|May 6, 2014 10:12 AM EDT||
LEXINGTON, MA -- (Marketwired) -- 05/06/14 -- When trying to get their ideas off the drawing board and into the market, most innovators spend too much time, energy and money using the wrong toolkit to solve the wrong problem. They try to come up with a "perfect idea" that will disrupt the market or change the world. And they apply the wrong management skills: operating and control systems that are optimal for day-to-day execution but often detrimental to the innovation process.
In reality, "perfect" ideas do not exist. Every new idea is partly right and partly wrong. In the "first mile" of development -- i.e., going from the drawing board into the market -- successful innovators use trial-and-error experimentation to refine their ideas and business model. Learning and applying such skills is the only sure path to gaining commercial traction and turning a great new idea into a viable business, according to Scott D. Anthony, Managing Partner and head of the Asia-Pacific operation of strategy and innovation consulting firm Innosight and author of the just-released The First Mile: A Launch Manual for Getting Great Ideas Into the Market (Harvard Business Review Press, May 2014).
The First Mile gives innovators simple tools to help them avoid some of the most common pitfalls of early-stage innovation. Anthony created these tools based on his work with both venture-backed start-ups as well as some of the world's largest companies -- learning from the successes and failures of innovators in businesses of all shapes and sizes, and in a wide range of markets.
"How innovators navigate the first mile will determine whether the idea flies or fails, potentially taking the entire company up or down with it," says Anthony. "Most businesses operate on a principle of maximizing certainty and minimizing mistakes, but the innovation process is rife with uncertainty, mistakes and failure. In reality, mistakes and failure are a necessary part of the process and invaluable in pointing the way toward success -- if you are properly prepared and know how to handle them."
Without The Right Skills, Innovators Are Vulnerable to Four Key Mistakes
When innovators start with the wrong objective, or misunderstand innovation's key imperatives, they are in danger of making four common and often disastrous mistakes:
- Running out of fuel: Money is the lifeblood of innovation. The right kind of planning ensures innovators have sufficient funding to keep the venture running long enough to get market traction.
- Hiring the wrong driver: Not every executive has the right skills -- it takes a unique combination of customer empathy and business savvy. A leader needs both to guide the venture successfully through innovation's first mile.
- Making a wrong turn: Innovators are often lured into empty market spaces with visions of big opportunity (e.g., "blue ocean" and "greenfield" opportunities), but sometimes these spaces are empty for a good reason and the market potential is illusory.
- Spinning out: Too many innovative businesses make the cardinal mistake of scaling too fast, before they nail the economics and business model. To succeed, first nail it, then scale it.
To Succeed, Address Three Burning Questions
"Successful innovation is all about proving you can answer yes to three key questions, rather than assuming they are all true," says Anthony. "Does anybody need it? Can we do it? Do the numbers work? If you can't answer yes to all those questions, and prove it, then the odds that you have a commercially viable idea are quite low. But if you can, you may be on a path to something big."
Three key development hurdles every idea must cross in the first mile:
1. Is there a need? - Prove a deep customer need. Establish that the customer exists; identify the job he or she is struggling to get done; prove the job is important and unsatisfied.
2. Can you do it? - Prove the concept. Confirm that the solution solves the problem repeatedly and reliably; demonstrate that it's superior to other options; define what it looks and feels like.
3. Is it worth it? - Prove the economics. Identify the sources of revenue, as well as the costs, resources and operations required to earn that revenue; identify a viable path to commercialization.
Leading an Innovation Effort Requires Specialized Skills and Systems
Anthony argues that most organizations are short on the right innovation skills, including: a willingness to experiment for its own sake; an ability to welcome and learn from the unexpected; and comfort with rapid course corrections. Most of today's top executives and managers don't have these skills because they did not grow up with the pace of change they face today.
He outlines four leadership mandates that are essential to navigating innovation's first mile:
- Piercing through the "fog of innovation" - Bias action over analysis to avoid "analysis paralysis"; focus more on learning than quantitative targets; use small diverse teams; and task decision makers with experimentation (i.e., don't let them just be "arm-chair innovators").
- Encouraging smart risk taking and not overly penalizing failure - Evaluate people more on successful behaviors than "objective" outputs; use asymmetric reward systems (i.e., large rewards for success and small penalties for failure).
- Knowing how and when to disengage, and ending the plague of "zombie projects" - Stop escalating commitments when you clearly hit a dead end; "shut it down, extract the lessons and celebrate the learning."
- Fostering connections to external experts, customers, and employees - Build formal and informal networks; leverage the "wisdom of crowds"; increase opportunities and avenues for collaboration.
As examples of successful innovators, Anthony points to companies like:
- W.L. Gore & Associates, maker of Goretex, puts experimentation at the heart of its culture: incentivizing teams to self-form around new opportunities, but also regularly giving out "sharp shooter" awards to those who "put down" dead-end projects.
- Netflix built its disruptive technologies and business model through a rigorous and disciplined approach to experimentation -- not just in moving from DVD rental to streaming video, but also in original content production.
- Adobe smartly managed the risk behind transforming its business model from prepackaged software to a software-as-a-service model by testing key assumptions in Australia before spreading the new model globally.
- Citi launched a global collaboration hub that brings together employees from around the world -- its first global challenge in 2011 generated 2,300 hundred ideas from 45,000 employees across 13 business units in 97 countries.
- Unilever maintains a "street" at its Indian headquarters in Hindustan where new product teams pitch ideas to employees.
The First Mile Imperative: Maximize the "Trial," Learn from the "Errors"
"All innovation ventures go through multiple course corrections before finding the exact right path," says Anthony. "In this process, one's arch nemesis is uncertainty in all its forms -- especially assumptions and rosy predictions that the innovator fails to question or verify."
Anthony urges innovators to follow a process called "DEFT" to test their assumptions and prove the commercial viability of their ideas:
- DOCUMENT: Identify hidden assumptions using tools like questionnaires, a single-page "idea resume" or "business model canvas."
- EVALUATE: Appraise the idea from multiple angles using role play scenarios, pattern based analysis and financial models like reverse income statements.
- FOCUS: Narrow and prioritize uncertainties using "certainty tables" and "impact assessment" to focus on the risks with the greatest potential impact.
- TEST & ADAPT: Design in-market and thought experiments that help maximize learning and apply the lessons, so you can refine your business model and strategy and reduce your risks.
He invokes many case studies to illustrate the tools and process steps, including:
- Procter & Gamble's use of computer simulations -- running nearly 10,000 market scenarios -- helped them sharpen their approach to developing in-market trials for a new probiotic product.
- Godrej & Boyce's spot sensitivity analysis to test consumer purchasing power and price points for its successful battery-powered refrigeration system "chotuKool."
- Medtronic carefully crafted pilot programs at a handful of hospitals in India, to develop a disruptive business model that brings pacemakers to patients who sorely needed them, but historically couldn't access or afford the technology.
- U.S. Navy's early testing protocols for radiation shielding in nuclear submarines.
"Great ideas and businesses are forged in the heat of the marketplace, and they never survive their first contact with the market totally intact," says Anthony. "Companies and entrepreneurs need to get past the myth of the 'perfect idea' and focus on trial-and-error experimentation, which is the true test of innovation. If you are systematic in breaking down your assumptions and proving your idea in the market, then you and your idea stand a fighting chance at disruption, and maybe even changing the world."
For a copy of The First Mile or to speak with Scott D. Anthony, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications at +1 (212) 255-8386 or [email protected].
ABOUT SCOTT D. ANTHONY
Scott D. Anthony is the Managing Partner of Innosight. Based in the firm's Singapore office, he leads its expansion into the Asia-Pacific region as well as its venture capital activities (Innosight Ventures). He has worked with clients ranging from national governments to companies in industries as diverse as healthcare, telecommunications, consumer products and software. He is the author of The Little Black Book of Innovation (Harvard Business Review Press, January 2012) and The Silver Lining (Harvard Business Review Press, 2009). He is the co-author with Clayton Christensen of Seeing What's Next (Harvard Business Review Press, 2004), The Innovator's Guide to Growth (Harvard Business Review Press, 2008) and Building a Growth Factory (Harvard Business Review Press, 2012).
Innosight is a strategy and innovation consulting firm that helps organizations navigate disruptive change and manage strategic transformation. We work with enterprise leaders to identify new growth opportunities, accelerate innovation initiatives, and build capabilities. Innosight is based in Lexington, MA, with offices in Singapore and Lausanne, Switzerland.
Sommerfield Communications, Inc.
Software AG helps organizations transform into Digital Enterprises, so they can differentiate from competitors and better engage customers, partners and employees. Using the Software AG Suite, companies can close the gap between business and IT to create digital systems of differentiation that drive front-line agility. We offer four on-ramps to the Digital Enterprise: alignment through collaborative process analysis; transformation through portfolio management; agility through process automation and integration; and visibility through intelligent business operations and big data.
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