Experimenting with ideas to figure out whether they hit or miss is too expensive. Although to many, innovation is a eureka moment of a creative mind, firms with a successful track record are profiting from a systematic methodology. As opposed to relying on the creative outbursts of genius and throwing many product ideas to the market, they are meticulously pursuing innovation theory for systematically ferreting out value from a selected few.
It’s too expensive in ferreting out value from innovation through hit or miss. According to some studies,”…92 out of 100 products fail to survive for more than one year on the market.” “Other sources show a failure rate varying between 75 percent and 95 percent, depending on the samples and definitions used.” To 84% of global executives, innovation is extremely important to their growth strategies. However, a staggering 94% are dissatisfied with their organizations’ innovation performance. To overcome it, should we engage more in brainstorming for getting increasing creative sparks for releasing many more products? On the other hand, companies like Apple extract a staggering amount of value from a handful of products. Moreover, how are companies profiting from the same products over the years and even decades? Is it due to luck or a creative outburst of genius? Or should we look for innovation theory for systematic ferreting?
Innovation success distills from systematic ferreting out value from selected ideas, instead of throwing more arrows towards the target
It appears that as opposed to performing random experiments in releasing one after another new product and relying on luck, successful companies like Apple or Toyota have been very organized. They have demonstrated their extreme strength in seeing the structure of innovation and being systematic in ferreting out value. These companies have developed a method in gathering, fine-tuning, fusing, and integrating ideas and technologies into their products and processes. Instead of relying on eureka moment of creative genius, they are showing innovation magics by standing on the shoulders of a long line of previous inventions—for getting jobs done increasingly better at decreasing cost.
Jobs to be done better—beginning of innovation theory for systematic ferreting
From diverse sources of data, firms know their customers far more than ever before. But their innovation processes remain hit-or-miss. Product developers’ too much focus on building customer profiles and looking for correlations in data, instead of understanding customers’ jobs to be done, appears to be the cause of high rate of miss. Customers buy or recruit products to get their jobs done. The selection of products varies, depending on preferences, situation, need for complimentary products, compatibility, and also infrastructure support. Moreover, customers are also looking for improved products to increase utility by spending fewer resources. Hence, for increasing the hit in creating offerings that people truly want to buy, innovators instead need to home in on the job the customers are trying to get done.
Finding improved products to get the job done better has been the inherent characteristics of human beings. Hence, human beings are after ideas to meet their growing desire to get jobs done better. In fact, creating and deploying this flow of ideas in the form of improved products has been at the core of our growing living standards. Ideas have been emerging as technology inventions. Innovators are taking advantage of them for innovating products, and most importantly, improving existing products. Hence, the market economy takes advantage of it by fostering profit making competition out of ideas. Our challenge has been to make our product stand out form possible options of getting target jobs to be done–for increasing the hit.
Invariably innovations begin the journey at loss
Irrespective of the ideas’ greatness, the emergence of innovation starts the journey with loss making revenue. It does not mean that all such products will never reach profit. How to figure out the noise is often daunting. For example, IBM’s smartphone Simon entered the market with a disappointing sale. At the end of one year, IBM discontinued the product. However, after 12 years, Apple started creating a history using a smartphone. One the other hand, despite the fanfare, Tesla’s electric vehicle still produces loss-making revenue. How to figure out whether loss making product reach profit needs a strong base of innovation theory for systematic ferreting out value from ideas.
To turn the loss-making revenue into profit, invariably, advancement needs to be made to improve the quality and reduce the cost. The journey of the redesign is at the core of turning the loss into magic. Is the underlying technology amenable enough to keep making the product better and also cheaper? Are there options to add features and improve existing features to make the product more suitable get jobs done? Along with finding answers of these two vital questions, the investigation should also proceed to exploit 3rd party component plug-in, improving computability, enhancing the infrastructure, and reducing the information and experience gap of the target customers. In the age of software and connectivity, innovators should focus on leveraging the scale, scope, and externality effect for turning the loss-making revenue into profit.
Diffusion demands innovation theory for systematic ferreting out value
Of course, to succeed, innovation must diffuse through different segments, starting from the early adopters, the majority to laggards. But where is the underlying strength for the innovation to keep penetrating in these market segments? At the end of the day, increasing quality and decreasing costs are the two edges the product should have to keep penetrating deeper in the market. Yes, advertisement help. But upon the recruiting product, if customers find that they perform crummy jobs, they will never buy the product to get the jobs done.
On the other hand, if the quality and cost remain unchanged, the product will stop diffusing. As we go deeper in the market, customers will be asking increasingly better quality at decreasing costs. Let’s look into the diffusion pattern of the mobile phone. The same mobile phone which Motorola released, in the 1980s, did not keep diffusing. In fact, successive better versions at decreasing cost kept driving the diffusion. Yes, scale helps to reduce the cost. But where is the core strength of the scale advantage?
Sustaining innovation—overlooked aspect of innovation theory for systematic ferreting out value
Often, we think that a great idea with the strong patent protection will keep producing profitable revenue. In reality, it does not happen. Once an innovation shows profitable prospects, the competition will offer replication, imitation, and innovation. Hence, the willingness to pay starts drifting downward.
Lets’ look into Apple’s magical iPhone. Despite the greatness of the idea of a multitouch-based user interface and patent barrier, Apple could not stop the competition’s response. As a matter of fact, by the end of the first year of launching iPhone in 2007, the sale came down to zero. Apple bounced the sale back by releasing successive better versions. Since then, Apple has been meticulously following this pattern of innovation to keep sustaining the market position.
In the absence of a systematic response along the line of sustaining innovation, Apple had to fold the magical journey of iPhone long before. Subsequently, it could have added another innovation failure record. By the way, not only Apple, this sustaining innovation strategy has been at the core of innovation success stories like Toyota or Samsung. In fact, the seasonal nature of innovation in the competitive market is a repeatable pattern. This behavior is longer a magic. It’s part of the theory of innovation.
Channing technology core and facing the reality of Schumpeter’s creative destruction
Every innovation faces the opportunity of creative destruction and the challenge of facing the Clayton’s disruptive effect. For example, Microsoft changed the technology core of its operating system for benefiting from the creative destruction of the graphical user interface. If Microsoft had not responded to it, there could have been a likely possibility of suffering from disruption due to the uprising if Apple’s Macintosh. On the other hand, Kodak suffered from disruption due to the uprising of creative waves of destruction of the digital camera.
Technology transfer, fine-tunning, and fusion for outperforming the competition with perfection
For profiting from innovation, you need technologies. Technologies are vital for making products better, and also preferably cheaper. You need technologies for adding new features, improving existing ones, and most importantly, for changing the technology core. How will you get all those ideas and technologies to implement them? Even for Apple, it’s not feasible to have all those technologies from internal R&D. The technology strategy should focus on sourcing from outsides. But the internal capacity should be strong enough for pursuing the relentless journey of refinement for fine-tuning and fusing them for outperforming the competition with perfection.
Hence, innovation is not all about showing magic. It’s not a fully random process. There are repeatable patterns or structures. The challenge is to conceive them as a unified theory of innovation for systematic ferreting out value. Hit or miss depends on how we leverage or ignore innovation theory for systematic ferreting.