Business Owners Take Risks- Grow Your Business with Innovation

All entrepreneurs are gamblers because business owners take risks. But clever business owners do whatever they can to reduce the odds.

 

So how would you like to improve your odds of business success from less than 30 percent to better than 80 percent?

 

Failing Big Time

 

If you’re NOT smart then you’re most likely to be part of the 45% of small businesses that fail in the first two years or the 90% that fail in the first 10 years of existence.

 

I’ve mentioned before in this column that the primary causes of business failure relate to:

 

  • a lack of a business framework;
  • management incompetence (See “Do You Have a Skeleton in Your Closet?” ;
  • not having a well-developed set of business capabilities; and/or
  • not directing those capabilities where they are most likely to be successful.

 

Let’s say that you do have a framework, you are a competent manager, and you have a well-developed set of business capabilities.

 

Can you Still Fail?

 

The answer is yes because you can be applying all your efforts into products and services that are marginal, that don’t generate sufficient profit for survival and growth. Ask Motorola, which lost half a billion dollars on the Iridium phone and satellite project that nobody was prepared to pay for.  Note that US companies are generally wasting around $100 billion per year on their 50 to 90 percent of innovation projects that fail. Most entrepreneurs don’t have the luxury of cash reserves to cushion them against an expensive failure.

 

What you need are products and services that meet a significant market need, where you won’t be marginalized, where your products and services are more than commodities just competing on price.

 

Growth Through the Innovation Process

 

And this is where the starting question relates, about whether you want to increase your odds of business success from less than 30 percent to better than 80 percent. You improve the odds through an innovation process.

 

How do you introduce an innovation process into your business?

 

If you are at the 30% success rate end of the spectrum like Motorola then you probably work on the concept of generating lots of ideas for products and services and surely one of these will be hugely successful.

 

On the other hand,  there is, a company that has innovated a process for innovation success, and it’s the best approach I’ve seen for building growth into your business. The strategy calls this process Outcome-Driven Innovation (ODI) and they are achieving a success rate of around 80 percent for their clients compared with the average 20-30 percent with traditional methods.

 

Strategy innovation is based on three basic tenets:

 

  1. Customers buy a product or service to help them get a job done.
  2. Customers use a set of metrics (performance measures) to judge how well a job is getting done and how well a product performs.
  3. Those customer metrics make possible the systematic creation of breakthrough products and services.

 

ODI uses an 8 step process for innovation:

 

  1. Formulate an innovation strategy.
  2. Capture customer inputs.
  3. Identify opportunities.
  4. Segment the market by desired outcomes.
  5. Define targeting strategy.
  6. Position current offerings
  7. Prioritise development pipeline
  8. Define breakthrough concepts

 

During a recent visit to Australia, I met with Bruce Burton, the Managing Director of Strategy for the Asia Pacific region. Bruce expanded on customer metrics. “Any job can contain from 50 to 150 different metrics in the customer’s mind.  These metrics are actually outcomes the customer desires from the job to be done.  But most customers can’t readily articulate them, and most businesses don’t understand them. If you can tap into these successfully then you are well on the way to innovating successfully.”

 

The Right Customer Inputs are Key

 

Bruce highlighted a key point about working with customer inputs. “Customers are very clear on what outcomes they want, but they are not the most qualified to give you solutions. Asking for solutions rather than desired outcomes can lead you astray. You need to focus on statements from them that define minimizing something, or improving something. “

 

“Coca-Cola found out this the hard way after spending $4 million on market research. Interviewing over 200,000 people to develop New Coke. This was one of the most embarrassing product failures of all time.”

 

“Compare the innovations we have witnessed in the job of shaving. To get this job done we are looking for outcomes of a readily available razor that gives a shave quickly. A smooth area of skin after the shave, no nicks, no blood, and no rash.  The solution for quicker shaves was provided with the three blades in the razor. Tthe need for no nicks was met with the lubricating strip, but you wouldn’t expect the customer to give you those solutions.”

 

Gillette had already innovated from the strop razor to the safety razor with a replaceable/ disposable sharp blade. Then with a disposable razor, then to the multi-blade razor. The current Mach 3 solution provides all of the outcomes I currently have in getting this job done.  Gillette owns the market and have significant control over pricing the product.

 

Identifying Opportunities

 

Bruce added information about the process steps to identify opportunities. “First you need to define and understand the outcomes the customer desires, and the priorities they have for those outcomes. Next, you want to know how well those outcomes are currently being co-created by existing products and services. The most under-served outcomes with the highest priorities are likely to be the areas where you can have the most impact on the market.”

 

Better Marketing Focus

 

What is also very apparent from the outcome-driven innovation process is its impact on being able to improve your marketing. Because you are very clear on what outcomes really matter to your customers you can apply a much sharper focus:

 

  • On business development – targeting your efforts only on areas with the best opportunities as defined by your customers.
  • On market segmentation – only focusing on those who require that outcome, regardless of age, gender, socio-economic factors, size of business.
  • Your promotion material and merchandising can be directly related to outcomes.
  • Your Brand Promise can be very clearly related to the outcomes that you know your customer wants to achieve.

 

Better Capabilities Focus

The practice of improving your business capabilities – business tools and people skills – can be directly related to those areas which add value to your customer’s desire to achieve their outcomes perfectly. In other words, your Brand Delivery can be perfectly aligned with your Brand Promise.

 

Are you ready to improve your odds of business success? Next, we need to talk about surveys and metrics.

 



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