A brief Q&A about innovation
Q. If the answer is Value Creation, what is the question?
A. What is innovation?
Q. Wrong, try again
A. What is successful innovation?
Right! So, what’s the difference between innovation and successful innovation? 80%. That’s right, 80%. That’s the approximate percentage of new ventures that fail. And the primary reason for failure is simply that they do not create enough additional value for potential customers. In this case, additional value means benefits above and beyond what is already available in the marketplace. Think differentiation!
In his book “Innovation Engine,” author Jatin Desai says:
“…highly differentiated products and services have an 82% success rate compared with 18% for me-too offerings. Since most companies are incrementally competing against rivals, this may explain why so few are able to product above-average shareholder returns.”
If customer value creation is so important, how do you learn about the opportunities to create new value for potential customers? As I have often said, you should ask your target market if you have questions. The questions should not be like “what do you need,” but should be questions like these:
- What are you trying to do?
- Where are your pinch points?
- What makes you frustrated or angry?
- What makes your employees frustrated or angry?
- What do your customer’s customers do?
In addition to asking questions, you must blend into the background and observe customers at work. Your objective is to see if you can identify areas where your skills and talents can be used to make customers’ jobs easier. For example, faster, cheaper, better quality, more environmentally sustainable, and better for the people doing the job.
If you go through this process diligently, with enough customers, you will eventually find many areas where you think you (and your team) can innovate a solution that will be in the 20% of ideas that survive.
As shown below, these areas will fall within three levels of difficulty.
Simple opportunities
These are routine and easy to solve. It doesn’t mean they have all been solved; people will quickly conclude that your solution should be free (or nearly free) because it looks cheap and obvious. The world does not need another pencil or sponge, although the person who created the Scrub Daddy (Aaron Krause) certainly is raking in lots of money.
Complicated opportunities may require the “right” level of innovation
These are a “giant step” up the ladder from the simple opportunity. They require multiple people with different skills and experiences to make progress. And time and unexpected challenges are always a battle. But when you have the solution, it can be duplicated. However, there is a significant opportunity to create a successful business. Still, it is critical to protect your IP (intellectual property) and get your brand message out quickly to a large group of people.
Complex problems
These are complicated problems on steroids. Each customer may have a unique set of challenges. Some customers will be delighted with your offer, and it will fall flat on its face for others. Also, when you start, there is no assurance that you can succeed.
Both SpaceX and Tesla are complex opportunities. As I write this, it appears that both businesses will succeed, but the outcome is still not guaranteed. Success requires deep pockets and a focused vision.
Moving forward with innovation
To continue this journey, you must pick one difficulty level and move ahead briskly. This is like the Goldilocks story:
The complex is too hard, the simple is too easy, but the complicated is just right! Hard enough to differentiate your solution from others that are available and maybe even discourage others from modifying your key and providing enough value that the open market will be significant. Also, the risk of failure is significantly below the risk level for complicated solutions because the need for “sexy” innovation is nonexistent.
The moral of the story
To grow, you must talk to the market, take risks, and ensure you have the talent and competence to succeed while discouraging competitors. And here is a post about successful innovation at GE Healthcare.
Related article: Innovation At GE Is Strong In Spite of Financial Problems
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization create more innovation in your service department, please contact us or check out some of our free articles and white papers here.