Innovation: Debunking the Myths (Part I)

Over the past 20 years, Ipsos Vantis has evaluated over 12,000 new product ideas across a wide variety of sectors...specifically: durable goods, financial services, consumer electronics, technology and communications, health, alcoholic beverages, and automotive. Innovation is critical to the success of these sectors, but there are a number of misconceptions surrounding the process. With good research, the myths are exposed, and the winning ideas prevail.

Generating ideas and innovating new products and services is a challenging yet potentially rewarding endeavor. While they do so unknowingly, most companies follow misguided practices that can have a detrimental effect on the development of an idea and its ultimate market success.

Throughout our years of testing thousands of ideas and concepts, there has been an opportunity to observe and analyze the level of in-market success. In working through this process, Ipsos Vantis has identified many misconceptions regarding innovation processes and methods of predicting success.

Myth 1: Innovation Is a Distinct Business Practice

While innovation is important and requires specialized and focused expertise to do well, it is STRATEGY and DIFFERENTIATION that are the distinct business practices.

Losing site of this distinction leads to two problems:

• Commercialization considerations are not given enough thought in the innovation process. Often, one part of the organization takes the germ of an idea to a certain point of development and then transfers it to another part of the organization to commercialize. The "handshake" between these two entities is often not seamless, and even counterproductive.
• Even though everybody knows innovation should be consumer--not technology--driven, innovation is still too far removed from the voice of the consumer and the notion of differentiation. Why? Because of the pressure on an innovation practice to be productive, prolific, and to seek out "low hanging fruit."

The outcome is that innovation is viewed in isolation vs. placed into the overall strategic context, and this leads to too many bad ideas absorbing company resources. Some of the following myths deal with how to link innovation more closely with strategy and putting it in a more commercial context to limit this inefficiency.

Myth 2: Speed to Market Is a Critical Factor

Speed for speed's sake, except in very special instances, is rarely effective. This is not to say that speed is unimportant. In some cases it is very practical - particularly in terms of hitting near term revenue targets. However, the focus should really be on identifying an effective due diligence process for the organization and then working to make it as efficient as it can be. There is a lot of literature that challenges the "first-mover" advantage. It is not news that being first to enter a market is not always (or even, usually) best, but the problem is more insidious than the fallacy of first-mover advantage. If a company imposes artificial deadlines or lets the mere availability of the technology dictate launch timing, it is often a losing proposition. Witness, the early products in each of the following categories:

1. DVRs - TiVo, from a consumer perspective a complex product at the time of launch, got to market quickly, but without an easy-to-understand message or the resources to sell a complex message in commercial practice (i.e., at point of sale).
2. Satellite Radio - The satellites were built and launched before the business model was stress tested. Lessons from diffusion of terrestrial radio were applied, but today's environment is much denser with competing content and that, among other things, has affected growth rates.
3. MP3 Players - Remember Diamond Rio? No early players in this space adapted to or anticipated (well) the dearth of content, rapidly changing product capabilities, or increasing competition.
4. Alternative site blood glucose meters - Built and commercialized on the premise that diabetes patients care a lot about taking blood samples from someplace other than their fingers, but the benefit was not as important in practice as it was in concept.
5. Smart Cards - Advertised heavily in some big markets but proven only in tightly enclosed spending communities (e.g., paying for transportation in Hong Kong).

There are two common threads with all the examples above: 1) on some level these concepts probably held high consumer appeal, but that was not, or has not so far been, enough to make a big, profitable, sustainable business; 2) the limiting factors (and it's easy to be a Monday morning quarterback), but in hindsight, they all seem relatively clear and knowable at the time of launch via research. Somewhere, steps were skipped in proper assessment of the idea.

We know well from our experience that skipping steps in a thorough evaluative process can lead to significantly increased risk of failure. Figure 1 shows Ipsos Vantis' experience where skipping important development steps is even more risky than pioneering a category.

It is important to go to market with the following:

1. A thorough understanding of the category dynamics and the trajectory of the trend on which you are capitalizing
2. A contingency plan to deal with the unexpected
3. A plan to create competitive barriers and respond to competitor actions

Where Ipsos Vantis sees the most deficiency, is with "2" and "3" above. From a business perspective, there is generally an enormous amount of activity focused on how "big" the "big idea" actually is, and little activity focused on a contingency plan and /or a plan to erect competitive barriers when the environmental dynamics change. From a research perspective, systematic testing of alternative marketplace scenarios is rarely done. One answer is to use research for the active assessment of items 2 & 3 above, combining simulation market research tools and game theory principles.

The Moral of Our Story

So with these first two myths debunked, what have we learned?

First, innovation is not a business practice that functions in isolation. Instead, innovation is a part of the company culture and a strategic element for success. What does deliver greater success is a closer linkage of innovation strategy, marketing, and research in the new product development process.

Second, don't inflate the critical nature of speed to market. Reckless speed kills. Companies that study, know, and understand their market, and are able to then link that knowledge to market trends, have higher commercial success than those that rush in for the quick buck.

Watch for future instalments as we dispel the misconceptions about the innovation process and offer guidance on how research can improve commercial success.

More innovation Myths:

• Innovation: Debunking the Myths (Part II)
• Innovation: Debunking the Myths (Part IIII)