Crossing the innovation commercialization chasm
It is commonly accepted that introducing more innovative products is a key strategy to stay ahead of competition, grow revenues and earn market-leading profits. However, turning this vision into a reality is a difficult process for every company. Every manager has seen innovative ideas falter due to their firm’s inability to bring a concept or prototype to a market-ready, production-proven launch, a milestone known as commercialization. Accurate data is hard to come by but various sources put the commercialization failure rate at between 50-66% of all initiatives. High failure rates waste scarce capital and time and may be the biggest reason why corporate innovation strategies falter…and why many business sponsors hit a career speed bump.
We have studied commercialization successes and failure for over 20 years. Below are six of our best practices:
Make commercialization a priority within the corporate innovation strategy
Many firms simultaneously pursue multiple innovation initiatives – and hope one bears fruit. Typically, short term concept and prototype development activities receive fixed funding commitments. As commercialization activities are often a couple of years out, their investment commitments will often be weaker and low-balled (frequently to make the business case look better). For example, we have seen new, breakthrough technology fail to get to market because management was unwilling to adequately fund sufficient marketing and product programs. Successful commercialization efforts require a committed multi-year capital plan and mandate to ensure sufficient support.
Get closer to the customer
A poor understanding of customer needs and requirements is a major reason innovations are unable to garner vital customer interest during the commercialization phase. This problem begins early, in the concept development and prototyping phase when innovators fail to gain enough, objective customer feedback. One way to avoid this knowledge gap is to complement traditional quantitative and qualitative research with specialized research tools like ethnography, anthropology and conjoint analysis. Another approach is to bring the customer directly into the innovation process. All of these techniques will help company’s gain a deeper and more holistic understanding of the customer, as well as channel and supplier needs in critical areas like price sensitivity, design and usability.
Pre-empt competitive reactions
Bold and aggressive competitive moves can kill innovations once they enter the commercialization phase. Managers need to study the mindset and competitive position of key competitors in order to predict their potential behaviour. To accomplish this, managers could run a business war game or simulation to model competitive reactions and identify an innovation’s vulnerabilities. For example, we conducted a war game with a communications firm looking to introduce a new, innovative service. The client wanted to analyze a competitor’s potential technology and pricing reactions and to design counter-strategies.
Get the management systems right
Very often, the accompanying management systems – processes, practices and structure – play a significant role in hindering commercialization efforts. A 2010 McKinsey survey on Innovation identified a numbers of management challenges including: a lack of formal accountability for innovation, poor or conflicting measurement and reward systems and ill-defined priority setting. In other cases, an organization’s traditional approach to innovation creation – for example, centralized and siloed R&D centers – is often less productive in getting compelling innovations to market versus an Open Innovation approach.
Watch out for stakeholder misalignments
Many, high impact innovations fail because key stakeholders such as suppliers, channel partners and even a firm’s sales force have not aligned their priorities and resources with the innovator’s commercialization strategy. In particular, we recently witnessed a market-beating, new product flounder when channel partners and internal sales operations were not ready (or willing?) to promote and support the launch.
Remember, patience is a virtue
At the end of the day, successfully commercializing an innovation with the right positioning at the right price is not easy. Creating the winning combination of attributes – in areas like product performance, manufacturability, and serviceability – takes time, trial & error and patience. Well known innovators like Apple, P&G and 3M are known to nourish and tweak their innovations over many years.
For more information on our services and work, please visit the Quanta Consulting Inc. web site.