Product Innovation: Stop Inventing Cool Sh*t Your Customers Don’t Want!
Hey, Paweł here. Welcome to the free special edition of The Product Compass republished on Medium.
Our guest is Nathan Baird, the founder of customer-driven innovation and growth firm Methodry and the author of Innovator’s Playbook: How to create great products, services, and experiences that your customers will love!
P.S. Do not miss the Q&A section at the bottom of the post with free template Nathan Baird shared with us!
Product Innovation: Stop Inventing Cool Sh*t Your Customers Don’t Want!
Innovation is one of the most important endeavours of modern times. It creates growth for organisations and entire economies, improves customers’ lives, and creates meaning and fulfilment for individuals and teams, but it is hard, and our success rates are mediocre to poor.
According to consulting firm Booz Allen Hamilton, “For every 7 new product ideas only 1 succeeds.”
The Product Development and Management Association (PDMA) claims that “40% of innovations launched fail.”
Why do so many innovations fail?
We know from research and experience that more innovations and startups fail from a lack of customers than a failure of the product or technology. In other words, too many organisations still waste their time inventing solutions for non-existent customer needs!
In a study of 2000 product innovation projects, Robert G Copper identified the number one factor behind innovation failure was “a lack of thoroughness in identifying real needs in the marketplace”, with teams often “making assumptions in order to justify the project”.
Someone has an idea, and we jump to the solution and then start building a business case and proceeding into development.
Jumping to solutions
This jumping-to-the-solution mentality, so prevalent in the corporate and startup world, means teams are too often skipping or fast-tracking the all too important ‘front end’ of the innovation process.
The ‘front end’ of innovation being where customer needs are researched and insights are distilled, solutions are ideated, prototyped and tested and business models are shaped.
Speed in innovation is very important, but not at the expense of managing the innovation journey properly. In fact, it is often a false economy, with this rushing of stages resulting in more defects, more rework, and more costly failures in the middle and back end of the process. The further you progress along the innovation journey, the more time- and resource-intensive and expensive it becomes.
From their research, Cooper identified nine success factors of innovation:
- A unique, superior, and differentiated product with good value for money for the customer;
- A strong market orientation — the voice of customer built-in;
- A sharp, early, fact-based product definition before development begins;
- Solid up-front homework — doing the front-end activities well;
- True cross-functional teams — empowered, resourced, accountable, dedicated leader;
- Leverage — where the product builds on the business’s technology and marketing competencies;
- Market attractiveness — size, growth, margins;
- Quality of the launch effort — well planned, properly resourced; and
- Technological competencies and quality of execution of technological activities.
As you can see, five of the nine success factors are related to the front end of the innovation process (pre-business case), with a further two being equally attributable to both the front and back end. Of the five directly attributable to the front end, according to Cooper’s research, the first four have the biggest effect on success overall.
So, why would anyone in their right mind skip or fast-track the most important phases of innovation?
Apart from a lack of awareness, the time pressures to launch and our greater comfort in problem-solving and the hands-on work of the development phase are the main drivers of skipping or doing these stages poorly.
Underinvesting in the front end of product innovation
In a different study by Cooper, that dissected spending and resource allocation of 203 new product innovation projects, he noted that of a typical organisation’s innovation budget “only 7 percent of the dollars and 16 percent of effort (person days) are expended on the front end of the process.” Whereas “37 percent” is spent in the development stage of the back end. Now of course, spending in the back end is going to be higher, especially when there is capital expenditure, but this is a large imbalance between the investment of resources in the front end vs the back end.
But it gets worse. One in two innovation projects are failing in the development stage — meaning half of this heavy investment is on unsuccessful projects.
By the time you get to development, you’d hope that most poor ideas had been culled and you were achieving a higher than one-in-two success rate! But due to our haste and poor capabilities in the front end of innovation this isn’t happening.
But innovation doesn’t have to be this way!
Mastering the front end of product innovation
Designing, building, embedding, and executing a rigorous front end of the innovation process and capabilities is critical; it lays the foundation for everything that follows.
By increasing rigour upfront, not only do you increase your success rates, and decrease defects and rework, but you can then go faster later in the more expensive back end of innovation. As the old adages say, ‘a stitch in time saves nine’ and ‘more haste, less speed’.
In Cooper’s study of 2000 new product projects, he found that those teams who executed the front end of the project in a high-quality fashion achieved more than double the success rate, double the profitability, and double the market share of those projects that did these stages poorly.
Three methodologies can help your teams become better at the front end of innovation. These are:
- Design Thinking;
- Business Model Design; and
- Experimentation.
The key to success in adopting these methods is to use them in the right way, at the right time, and in the right sequence.
Step 1: Design Thinking
Start with Design Thinking by conducting empathy research to identify who your customers are, what’s important to them, and what pains and delights them. Then distil what these findings mean and where the opportunities exist to improve their lives.
We then use creativity, incubation, and a diversity of minds to generate fresh new ideas for these customer-centric opportunities. The high-potential ideas are selected and then quickly and cheaply brought to life as prototypes and tested and refined with customers.
Step 2: Business Model Design
Following validation that we have a desirable solution(s); we flow into using the Business Model Design to map out other components of desirability and then the feasibility and viability elements of the solution using tools like the Business Model Canvas.
Step 3: Iterate between Business Model Design and Experimentation
We then iterate between Business Model Design and Experimentation. This involves running experiments (prototype, test, and learn) to de-risk and validate the solution and business model.
Only once we’ve validated that we have a desirable (does the customer want it), feasible (can we technically and organisationally build it), and viable (can we make money from it) solution, do we move into the more expensive and time-consuming back end of innovation.
Getting the front end of innovation right is the key to unlocking innovation and startup success. Just like you wouldn’t skip laying the foundations when building a house, you shouldn’t skip laying the foundations for successful innovation.
Nathan Baird is the founder of customer-driven innovation and growth firm Methodry and the author of Innovator’s Playbook: How to create great products, services, and experiences that your customers will love!
He is one of the world’s most experienced Design Thinking practitioners, a former Partner of Design Thinking for KPMG, and helps teams build their innovation mastery and works alongside them to create innovations. Visit www.methodry.com.
BONUS: Q&A and free templates
Paweł: We had a chat with Nathan about the post. In my newsletter, you can find a list of questions I asked Nathan, his answers, and the free templates he shared.
Continue for free: Product Innovation: Stop Inventing Cool Sh*t Your Customers Don’t Want!
The questions I asked:
- What’s the difference between investing in the front end of product innovation and waterfall?
- How can we structure our empathy research results? Jobs to be done? Opportunities? Value Proposition Canvas?
- How can we structure our empathy research results? Jobs to be done? Opportunities? Value Proposition Canvas?
- Is desirability the same as value and usability risks? When should we think about validating the UX?
- When discussing Business Model Design, do you prefer Business Model Canvas? Lean Model Canvas? When and why?
- Does the back end of innovation also involve experimenting? What’s the role of getting early feedback from your customers?
Continue for free: Product Innovation: Stop Inventing Cool Sh*t Your Customers Don’t Want!
Thanks for reading The Product Compass!
It’s fantastic to learn and grow together.
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Take care, Paweł
