New product innovation is at the core of any business strategy and it’s scary stuff. It is where big bets are made on the future and real money is placed on the table. Develop and launch a successful new product and watch the money roll in……launch a bomb and start polishing your resume!
There are two distinct parts to getting your innovation strategy right. Picture an X/Y graph. On the X axis is the cost and time to develop the product. Risk Analysis (Monte Carlo simulations) and Stage gating are excellent tools companies can use to keep this process moving and costs under control. The Y axis is the potential market size. For most companies this amounts to nothing more than a wild guess. Sizing a market before a product is introduced is only possible with a Customer InSight (Conjoint) study. Done right these studies can size a market even when the product is in the conceptual stages. Get this wrong and no matter how cool, how innovative, how on budget or on time your product is, only bad things will happen. Here’s why.
Remember the Segway – the first self-balancing human transporter? The mysterious invention had everyone buzzing long before it was launched and promised to change the way we travel. The dynamic stabilization system at the core of the Segway was initially developed to help wheel chairs go up and down curbs. Gyroscopes and tilt sensors in the Segway monitor the user’s center of gravity a 100 times a second allowing a person to scoot along upright on two wheels. Developed by entrepreneur Dean Kamen, the Segway was rolled out with a lot of hype and fanfare on ABC’s Good Morning America show in 2001. TrÃ¨s cool technology, lots of pre-launch market awareness and market hype – what else could they have done?
The mystery about Segway is that all the ingredients seemed to be there! Here’s the conundrum. Every time I see a mall cop riding one I stop and stare because the technology is really amazing. However, the reality is I don’t want one – I wouldn’t know what to do with it! In all the R&D and marketing hype someone forgot to determine if there was a market willing to pay for it. So just how did the wheels fall off the Segway and what can we learn:
- Don’t believe in your own magic: Segway had a solution looking for a problem. No matter how awesome the technology, it must solve a customer’s problem.
- Know your customers: Innovation is more than just cool products and market hype. It may not look like it from the outside but behind all that “cool” is a lot of hard work and customer understanding.
- Innovation is about filling the needs of the future: A Customer InSight (Conjoint) Study can accurately predict future customer purchase behavior and would have told Segway the market was very small.
An innovation strategy is not about eliminating risk but rather it’s about managing risk and increasing the odds of success. Intuition and gut feel have an important role to play in the conceptual stages of innovation. However, once conceptualized, it is important to use the tools like Risk analysis (for product cost control) and Conjoint analysis (for market sizing). These tools can reduce the risk of new product innovation significantly. Don’t roll out a Segway. Use the tools and roll out a winner!
1. Segway Human Transporter By Mary Bellishttp://inventors.about.com/od/sstartinventions/a/segway.htm