Innovation can be a risky business. There is a limit to how long a business that fails to innovate can survive, especially in these times of such dynamic change.
Whilst it definitely is “innovate or perish”, innovation is not without its risks. In our experience innovators and inventors usually deliver great solutions, but where they fail is most often in the marketplace.
Improve, don’t invent
It’s generally far safer, in terms of market risk, to improve a product that everybody is using rather than create an entirely new one that often requires costly marketing to generate awareness and in some cases even attempt change people’s behaviour.
What’s your target?
One of the first things we advise is to explore the position of your product on the Market Risk Map we developed quite some years back, but it’s just as valid today.
Broadly speaking there are three types of markets:
- Industrial/commercial – where it’s usually possible to establish the “Value Proposition” or cost benefit of implementing a new idea or approach.
- Consumer markets is where it’s often hard to establish a quantitative value proposition, but it’s a market where we know the public engage, for food, consumer goods and domestic needs.
- Fashion where nobody can say with any certainty if a new product, that is largely unnecessary in any case, like a $100,000 dollar watch or designer handbag, will ever sell. No quantitative value proposition exists for such markets.
Additionally, there are two other major considerations, novelty/newness or lack of newness.
Things that are entirely new that may require a change of behaviour or learning to use are often far more risky than things that are simply slight improvements on existing practices.
For example, the first credit card that took more than 10 years to realise significant buy-in from users, compared with the touch card that was quickly adopted compared with the “swipe to pay” card.
The Market Risk Map
The above can be simply summarised on the “Market Risk Map” which is one of the first “go to” places we suggest you use to evaluate the likely risk of a new product or practice.
What’s the message?
Market risk is the biggest risk with new products. Make sure you determine just where your product or service fits on the risk map in evaluating its likely success.
Products of low novelty that are innovations or improvements to existing products that are located in the bottom left corner of this map are by the far the least risky. Compare that with products in the top right-hand corner of the map where the risk calculation is little more than a lucky guess. In our world of innovation, we always try to eliminate the need for luck.