Friday, September 07, 2012

Improving Innovation with increased market awareness

A global economic slowdown in 2012 has increased the competitive pressures, while the economic pressures has increased in the complexity of corporate finance. In such a challenging environment, there is a growing consensus that innovation is stalling or even decreasing. The high failure rate of product innovation is often sighted as an evidence to the slowdown.

The ecomonic crisis in the USA & Europe, ageing population in Japan, Germany and the subsequent economic slowdown in Asia has led to an ever increasing price pressure from customers and suppliers, low-cost competition, and high expectations for profitable growth from investors and shareholders. To respond to these challenges, product companies must change the innovation process to achieve a higher level of innovation efficiency to remain competitive and drive top-line growth.

Accoding to IDC survey, only 25% of all projects result in a product that reaches the market and after that 80-90% of products fail in the market place. This implies that a vast amount of product development efforts gets wasted. In today's world, companies cannot afford frivolous & wasteful innovation.

The new mantra is "Effective & Effecient Innovation"

The new paradigm of innovation calls for a different approach towards innovation. The old view of treating innovation as an inherently unstructured and unmanageable process must go. Instead a holistic view of innovation landscape must be embraced to maximize the returns on R&D investments.

While the required resources needed for innovation is getting increasingly scarce, companies have responded to it by:

Investing in project management process and management tools.
Setting up globally distributed R&D centers.

While the investment in project management process & tools has made innovation projects meet the timelines and budgets, but that has not refelected in product success.

Globally distributed R&D centers has addressed the resource scarcity and increased the pace of innovation. But again global innovation has not translated into product success.

So in last decade 2000-2010, companies have improved the effeciency of innovation process and in the process companies released an ever increasing numbers of new products. The volume of new products introduced in the last decade is unprecedented, the rate of product failures has also sky rocketed.

In other words, companies found a faster ways to fail!

While failures are the stepping stone for success, companies cannot afford to failures. So the way companies innovate has to change.

Innovation Gap - The Market Blindness

Obviously there must be some mistakes in the innovation process - which is leading to such high failure rates.

As a product manager and an innovation coach and innovator, I have obsserved few interesting innovation gaps.

The most startling gap is called as Market Blindness - which has several facets:

1. Customer Agnostic Innovation
2. Eco-system Agnostic Innovation
3. Economy Agnostic Innovation
4. Me-too Products Introduction
5. Confuse the customer with Innovation
6. Agile product developement
7. Accounting($$) driven Innovation managment

In today's gloabally connected market place, the market is so dynamic that the innovators are often blind to the actual market requirements. So when the product finally hits the market - both the innovators and customers are equally confused - leading to product failure.

For example, Nokia rushed Lumia 800, 710 & 900 on Windows 7.8. Microsoft then went ahead and announced Windows 8.0 - which will not run on Lumia 710, 800 & 900! Obviously, customers will not rush to buy Lumia 920 which runs on Windows 8.0!

This is a classic case of complete market blindness.

In the rush to innovate, innovators forget about the customers. In many cases, engineers working on the innovation have no idea of what the customer wants & needs. The function of customer research is often handled by marketing. In large global organizations, the innovators and customers never come face-to-face, which often leads to customer agnostic innovation. Many software products fail because the innovators failed to understand the customer needs.

Today Companies have to depend on external eco-systems for the success of new products. For example, Smart Phones needs carriers, Apps & App market place to succeed. If the eco-system does not exist, the product will not succeed. HP's TouchPad tablet is an classic example of eco-system agnostic innovation.

Many products need certain econmic conditions to succeed. During the course of innovation, if the underlying economic condition changes, then the innovation will fail in the market place. For example, Concord, the supersonic plane failed in the market because it turned out to be too expensive to operate and customers were not willing to pay the high ticket prices.

Imitation is the best form of flattery, but that does not prevent companies from launching mee-too products. Sony tablet, Sony Xepria, LG Andriod phones etc have failed because these products could not differentiate themselves for the market leaders.

Innovative products should please the customer and not confuse them. Too often, companies release products that are really confuses the customer. Blackberry playbook was one such example. Customers could not make sense of why they could not check their emails on Playbook and why playbook had to be paired up with a phone.

Innovation is good, but too much of it in too short steps is a bad thing. Agile product development is a hot concept in the industry - where companies release regular updates to the product on a fixed time periods. Having too many releases confuses the customer - which one to buy? Should I wait for the next release? In the end, customer may defer the buy decision or just buy and become dissatisfied with the purchase. The Personal computer industry and software sector is notorious in this. Companies like Dell, HP, have so frequent product releases, and each release is a minor enhancement over the previous one. Such a high volume of product releases has killed the WoW! Factor out of their innovation. Customers no longer jump in joy by seeing a new product - instead mearly yawn or totally ignore the new products.

Improving Innovation with increased market awareness

In the course of product innovation, companies have invested heavily into product design, project managment & developed a plethora of tools (CAD, CAE, CAM etc.). But in the process have almost forgotten the poor customer.

The focus on greater effiency has made companies rely on partners for market eco-system development. Companies have decentralized & outsourced various functions which caused critical information to be fragmented and scattered across the world - often operating in deparmental & geographic silos. As a result the innovation teams are often working blind in their own silo, toiling on products which customers may not need.

In order to be successful, companies will have to make their innovation process more customer centric and innovators must be aware of market needs and market conditions.

I have written several articles on Customer Co-creation as means of innovation, Anthropology as an innovation tool to highlight the need for market awareness before, during and after innovation.

I have taken R&D engineers to customer sites - to let see and observe customer operations first hand to help engineers understand customer needs and this has led to successful products. In the long run, the process of customer engagement during the innovation cycle must be institutionalized and built into project management process.

Marketing organization must also be plugged into the innovation process and must provide constant inputs during innovation process. See: Product Innovation Management and Marketing

While successful companies have led with fewer products - but with a far greater success rates. The key difference between success & failure is market focus and tenacity.

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