In this article I explain why innovations that are close to an organization's current product range do succeed and that the chance of this happening is much smaller with non-core innovations. There are 7 reasons why successful non-core innovations can fail.
My previous article “The difference between Core and Non-Core Innovations” ended with the following picture:
The illustration shows that the Core innovations can land reasonably easily in the exploitation organization after realization. This is understandable because the items that are delivered here usually concern:
- Improvements or modifications to the current product or service
- Expansion of the product or service portfolio with products or services that fit in seamlessly and have virtually the same target group
- Things of which it is completely logical for everyone that this should be done
- Matters for which the current business model does not need to be adjusted. Think about
- Different pricing model, for example from sales per unit to subscription models
- Different distribution model, for example delivery to the customer's home instead of via a store
- Another sales model, for example sales via social media such as Instagram instead of via a regular webshop.
- Another partnership model, for example a partner who supplies and maintains the AI component of a proposition
The common factor here is that the product/service is not essentially different for the organization. The company may see it as a major innovation, but if you look at it from an outsider's point of view, it's not really a revolutionary change.
For the Explore projects (non-core) that route is a lot more complicated. I call this the non-core crossing. In the illustration you see a person that is almost drowning and a shark swimming around.
Many of the initiatives that innovative teams have worked on with great passion have at some point outgrown the exploration phase. This point is usually at the moment that product-market fit has been achieved:
At that point, a customer group has been reached that is willing to pay for the solution (and is already doing so). However, the customer group is too small to achieve economies of scale, and the product/service as it is now delivered is not scalable itself.
The company must look for ways to scale after the proven product-market fit.
Help, there is no landing spot!
If nothing has been arranged and the team cannot continue itself, the team has to work to find a landing spot. The team needs the established organization to achieve scale.
The team often has the competences (and desire) to bring a proposition to product-market fit, but other skills are needed to achieve scale.
Unfortunately the 'Core bridge' is not available for a number of reasons.
1. Internal network
First of all, there is often a dedicated team that has operated separately from the organization to gain speed. The exploitation organization is then deliberately kept 'outside' of the development. But this sometimes lacks the internal network needed to find a new owner.
2. Failure risk
Why would you, as a successful manager in the Exploitation sector, take this risk? Despite some earlier evidence, it is still very uncertain whether the scale-up will succeed. The initiative is still relatively small and will demand a lot of attention compared to other matters. In addition, the proposition can also be competing with its own propositions…
3. Re-engineering is needed
The team worked quickly and cheaply and achieved an optimal result. But they also occasionally cut corners to deliver. They may have delivered several hundred items, but scale-up may require thousands. In short, for both physical and virtual products, manufacturability, safety, scalability, etc. must be reconsidered.
4.Crossing the Chasm
To achieve product-market fit, the team focused on the “innovators” and “early adopters”. However, the “early majority” has different expectations. These are so-called pragmatists, who want a product that works well, preferably with proof that it does indeed work. This means not only re-engineering the product itself, but also the value proposition and the way of promotion. This in turn adds to the risk of failure, as a result of which not everyone feels compelled to 'adopt' the new proposition.
5. Not invented here
Each Business Unit is often involved in innovation itself and has a preference for its 'own' initiatives rather than an initiative developed 'elsewhere'. Even if this comes from your own organization.
6. Exploitation KPIs
The moment we start assessing the new initiative based on operating standards such as Return on Investment, payback period, acquisition costs per customer, etc., the new initiative will score less well.
Of course, this one cannot be missed in the list: budget. A separate budget is often not reserved for the transfer from exploration to exploitation, while it does require a considerable investment in both man-days and out-of-pocket costs. It is understandable that the business unit manager would not put their hard-won budget at the disposal of something so 'risky'.
How can we do this better?
In this article, we discussed 7 reasons why successful innovations can fail. It is actually incomprehensible that organizations invest a lot of money in exploration and then watch with sorrow how the successful, remaining propositions fail. It should not be necessary to look for a landing place, it should be clear in advance, already during development, where the concept can land. In the next article in this series I will therefore explain how you as an organization can provide a structure for these opportunities.