The Idea in Brief
Too many companies tackle new growth without a game plan. Instead, they reuse old growth strategies that worked in the past. Or they fumble to figure out markets that might welcome the technologies incubating in their labs. Consequently, the plays that worked so well previously are no longer effective. And hit-or-miss efforts to force new growth often spawn costly innovation failures.
Yet you can innovate better, faster, cheaper. How? Anthony, Eyring, and Gibson suggest these steps:
- Develop and execute an innovation game plan.
Pick your playing field--markets where the best opportunities are hiding and where you can play to your strengths.
Analyze major innovations in those markets to identify criteria your opportunity must meet to succeed.
Develop a strategy for ensuring that your project meets those criteria.
And fund the project conservatively at first, to force your innovation team to learn and adapt as it moves forward.
Innovation won't ever be completely predictable. But play the game systematically, and you pull ahead of rivals still relying on trial and error to spur new growth. Your reward? Higher-quality innovations produced more quickly--with sharply lower investment.
The Idea in Practice
To become an innovation champion, Anthony, Eyring, and Gibson recommend these steps:
Pick Your Playing Field
You face a bewildering array of possible markets for innovation. To narrow your choice, aim for markets lying somewhat out of--but not too far from--your core business. Find customers using existing products in unusual ways or using products for things they weren't designed to do. These behaviors signal the need for innovations.
Software provider Intuit noticed that small business owners were using its personal financial software package because they liked its simplicity, compared to more complicated offerings designed for small businesses. Intuit optimized the program for these customers, branded it QuickBooks--and quickly dominated the product category.
Identify Success Criteria
Analyze major innovations in your targeted market's history to identify common elements shared by successful offerings.
A consumer health care products company had identified at-home diagnostics as a key growth area. By analyzing the history of home diagnostics (pregnancy kits, blood glucose monitors), it identified eight characteristics shared by successful innovations. These included: diagnosing the condition is currently difficult, inconvenient, or expensive; competitors have difficulty duplicating the product; and the company could effectively communicate the innovation's benefits to target consumers.
Develop Your Own Innovation Game Plan
Assess your innovation opportunity against the success criteria you identified. Brainstorm ideas for ensuring that the opportunity meets the criteria.
Procter & Gamble wanted to bring a leading brand to China. Success criteria included low cost but "good enough" performance. Yet stripping out functionality to lower costs would annoy demanding consumers--not a criterion for success. P&G's plan? Start in smaller Chinese cities, where consumers would embrace limited first-generation products because no legitimate alternatives existed. After resolving the inevitable kinks in producing such a low-cost product and improving quality, P&G would take the offering to larger cities.
Execute and Adapt
All innovations unfold in unpredictable ways. To boost your chances of success, follow the principle "Invest a little, learn a lot."
Teradyne, a semiconductor test equipment maker, saw an opportunity to create smaller, cheaper, and easier-to-use machines. The CEO demanded that the innovation team achieve early profitability before he invested significantly in the project. This requirement forced the team to find a foothold market they could attack quickly: manufacturers who produced inexpensive commodity semiconductors that perform basic computations in household appliances. These manufacturers--who couldn't previously afford Teradyne's offerings--loved the new product. It took off, creating a substantial growth business for Teradyne.
Copyright 2006 Harvard Business School Publishing Corporation. All rights reserved.
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Harvard Business Review
by Ron Adner
In developing your strategy for a particular innovation, you also need to consider complementary innovations that will have to succeed in order for your offering to attract customers. And you must gauge and address the risks inherent in these dependencies. Adner explains how: 1) Assess your innovation's feasibility, considering likely appeal to customers, competition, and your project team's effectiveness. 2) Identify projects that must succeed before yours can--looking for potential delays and setting expectations accordingly. 3) Determine who must adopt your innovation before consumers can--such as manufacturers. 4) Select market opportunities that carry the lowest external risk: that posed by outside partners who must coordinate their innovations with yours in order for you to succeed.
Harvard Business Review
by Bhaskar Chakravorti
Successful innovation strategies also take into account the full range of users who must adopt your product in order for it to succeed. For example, a bank won't embrace a faster transaction-processing system unless other banks with whom it communicates also do. To convince all relevant users to adopt your innovation: 1) Envision the outcome you desire--anticipating all players' initial responses and counter-responses--and develop strategies supporting the ideal outcome. 2) Position your innovation as complementary to influential players' offerings. 3) Align incentives to distributors, would-be adopters, and other key players that motivate them to embrace your offering. 4) Design flexible product and marketing plans that enable you to make changes in the face of unexpected challenges.
Harvard Business Review
by Henry W. Chesbrough and David J. Teece
To be effective, your innovation strategy must also stipulate what kind of organizational structure will best support implementation of your project. Can your innovation be developed independently of other innovations? (Think a car-engine turbocharger that doesn't require redesign of the entire vehicle.) If so, opt for decentralized, virtual organization: partner with smaller, competitive vendors to get the technologies you need--quickly. Will your innovation generate value only when accompanied by complementary innovations? (Think Polaroid's need to develop new film and camera technology to profit from instant photography.) If so, go with centralized, fully integrated organization to coordinate the interdependent innovations.