As a result, European businesses are forced to reinvent themselves and look for new sources of profitable growth.
A key lever senior managers can use is the role of innovations and how these are developed and successfully brought to market by the organisation. A metric of success for innovations is whether the business will be able to gain new customers or cross-sell the existing customers that a company has today – however do all this in a profitable manner.
But the rules of the game specific to innovations are changing.
Businesses don’t have the time (and often face less resources than they had in the past) to fully test, develop and bring a new product or service to the market. Even then only 1 in 10 new products were considered successful.
So how to win? For many businesses it means using a more agile approach when it comes to innovation. Being agile requires different mindset among the senior leaders of that business:
- It’s all about speed to market or ensuring to be first to market before your competition
- It’s all about having a product/service that meets the “minimum viable” and a product or service that meets a market need. Having the mindset of being comfortable to introduce a new offering that is 80% “ok” and not getting stuck to get to the 100%
- It’s all about introducing the first release (even in pilot mode) and then making future iterations and improvement over time
- It’s all about getting feedback from the market early and getting the community of your first customers (or beta customers) that are active with you and guide you as to future developments
- It’s all about accepting failures, and that it’s encouraged by the senior management team
- It’s about getting your IT team flexible and able to work in a “scrum” style – develop something that is good enough and then improve over time
For sure your innovations need to answer a problem that your target market faces and you have to ensure that your target customers are willing to pay something to get this problem addressed. In 2016 and in the context of the development of “uberization” a key success factor is empowering customers as a result of your innovation.
In addition a business needs to reflect on whether it can scale this new product/new service if it faces increases in market demand.
A final observation is that companies need to ensure they define the value that it will be created to the customer – for example in B2B environments, a company first needs to quantify the impact that its customers will realize from the new product/new service. In function of this value, determine what is a fair price that the company could charge (to capture a share of this value), and relative to this price, assess what the costs to deliver will be. Hence if your company faces costs that do not enable a fair price then they need to rethink their strategy. In the old days and when less alternatives existed in a market category where a company played, these companies built a product, determine the cost and assigned a price (a cost plus). But today that strategy will rarely work.
In addition different customers could get different levels of value from the same product/service – hence the importance to assess the value and align with the pricing strategy. Company generally tackle value understanding and pricing strategy too late in their innovation process.
In 2016 we hear increasingly about “crowd” innovation, “crowd” sourcing, “crowd” funding. This is a new concept that is also a game changer. A company could tap a network or community to get either sources of new ideas, or support a launch or even to get a new product or new venture financed.
Instead of just using the brain power or resources from within a company, in 2016 it is about tapping externally to new entities or groups to generate, develop and implement ideas. A company can now access a world of widely distributed knowledge and expertise. The walls between a company and the external environment have been broken – and hence for future innovations a company should not depend just on its own resources or research but instead tap the “crowd” or the “social community” as a source of innovations and make this a competitive advantage.