Original post: http://blog.giddy.io/2018/01/24/why-does-your-company-fail-to-innovate-you-are-running-the-wrong-plays/
You probably view NPI as the way that products come to market. But the new product introduction (NPI) process is also the reason why so many new products never make it to market.
Those of us who develop products for major corporations have a common problem: We desperately seek to launch market-defining innovations, yet we consistently fall short—launching products that at best offer incremental improvements and, perhaps more often, feature parity with the competition.
Despite our best efforts, nearly all new product launches are unremarkable. Why?
I spent the first 10 years of my career as a design engineer for two product companies. I can tell you that there is no shortage of innovative ideas. Yet there is a shortage of innovative products. In my experience, the products that are actually manufactured and distributed represent only the visible tip of the iceberg—maybe ten percent—of the innovation occurring within a company, while a vast body of innovative thought and development remains beneath the surface, never exposed to the public.
Considering the number of remarkable product ideas that exist within a company, product launches are extremely rare events. Nearly every innovative idea in your company is destined for the same fate: Failure to launch.
The New Product Introduction (NPI) Process is great—but not for everything
I’m young (is 38 still young?), but I’m told we have been playing this game the same way for decades. I’m also told that the way we have been running our innovation plays has, by and large, worked. But if you look around, you’ll see the same signs I see: We live in a world with an abundance of brilliant and energetic people with easy access to capital. Most breakthrough innovations are coming from startups, not from incumbents. Businesses that once appeared stable are being disrupted at a rapid pace by companies that are operating under an entirely different set of rules.
Most companies have reduced innovation to a process called New Product Introduction – NPI. The goal of NPI is to pump a steady pipeline of safe and reliable products and services into the marketplace to keep companies competitive. NPI helps companies maintain a competitive edge.
We’ve come to view NPI as the way that products come to market. But the NPI process is also the reason why so many new products never make it to market. How can this be? Let’s take a quick detour to consider a critical concept—validated vs. non-validated innovation.
The Innovation Validation Continuum
All new product ideas exist on a continuum. Validated ideas are those for which a company already knows how to capture value. Ideally, a company can map every step of the value chain: from the supply chain, through a retail transaction, and into the user’s home. When every step of that value chain is understood, the product’s value is understood—the product idea has been validated. Companies exist to define these crucial value chains in every conceivable way. Competent companies are those that are best at managing value chains.
Companies are not as good at dealing with ideas where one or more links of the value chain are undefined. The more links in the chain that remain undefined, the more risky an idea appears. Product ideas that have many unknown value chain links can be classified as non-validated. Non-validated innovations are those for which a company is unable to predict the value—usually because the company lacks experience or the market has yet to emerge.
Non-validated product ideas represent the biggest growth opportunities for companies because, instead of cannibalizing sales of existing products, non-validated products create a new category.
The NPI Playbook is tuned to handle innovations and product launches on the validated side of the continuum, where certainty reigns. Non-validated innovations are anathema to the NPI Playbook. The problem occurs when we attach the assumptions inherent in the NPI process to non-validated innovations. Most companies view their product pipelines as a funnel. The top of the funnel usually has a lot of ideas that span the entire spectrum from validated to non-validated. What comes of out the bottom of the funnel is a slow drip of highly validated products.
So you say you want to innovate, but...
As product developers, we have become accustomed to launching products in a specific way. The NPI process dictates that we should do so. There are a couple of assumptions built into NPI that have become major impediments to launching groundbreaking new innovations.
First, NPI assumes that the cost of developing and launching a product is on the order of millions of dollars. Most large companies are convinced that the best new innovations are those that have nearly instant potential to gain significant market share. When these companies consider product launches, they think of multi-million dollar, multi-year projects.
Second, NPI processes consider secrecy as a key competitive advantage. Nearly every enterprise R&D lab includes multiple layers of security, requires NDA agreements, and threatens punishments to employees who disclose its secrets. This secrecy is designed with the assumption that competitors are closely monitoring a company’s actions with the intent and ability to copy or disrupt.
I’ve seen products that routinely failed to make the cut under the cover of confidentiality become hailed as major breakthroughs when developed in the open.
...there's a problem here.
These two assumptions combined create an enormous impediment to innovation. Why? Because well-trained managers will always seek to minimize financial risk, especially on high-dollar investments like new products. You've been in these meetings: Product managers create financial projections like break-even analyses or net-present value estimates to quantify the opportunity. When comparing a break-even analysis on a highly validated innovation versus a non-validated innovation, the validated innovation wins every time. It only takes one influential dissenter to express doubt in a sales volume projection to label a project as too risky, thereby sending the idea back to the innovation team for another month, quarter or year.
Next, by imposing a blanket policy that all products must be developed under confidentiality, your company is reducing its chances of developing the next groundbreaking product. It is hard enough for an enthusiastic employee to build support for an idea for which there is little precedent. The blanket policy of confidentiality reinforces a systemic bias against non-validated innovations by tamping down market enthusiasm for potentially groundbreaking products. Over the last 4 years, I’ve seen products that routinely failed to make the cut under the cover of confidentiality become hailed as major breakthroughs when a company allowed the concepts to develop into products in full view of the public.
How about a new playbook for product innovation?
All companies want to launch breakthrough innovations, yet very few succeed. Those that do generally rely on either luck or the instincts of a product genius. I can’t recommend adopting either of those strategies.
Instead, I recommend adopting a new playbook—at least for ideas that fall into the aforementioned “non-validated” class. Non-validated innovations demand an entirely new approach. Where great uncertainty exists, there is often great opportunity. This opportunity will thrive under two conditions:
1. Start small: Scale the product with market demand.
The alternative to the multi-million dollar product launch is the concept of building to demand. This may mean building as few as 1-10 units of a product. Or it may mean literally offering a product for sale before building a single unit. In today’s highly connected world, there are a multitude of ways to do just that, including crowdfunding, e-commerce, and email promotion. Under this principle, all that is required to sell a product is a picture, a pitch, and a price point.
Today, all that you need to validate a new product is a picture, a pitch, and a pricepoint.
2. Be open: Engage the market as early as possible.
Engaging the market while a product is still in development feels scary to most people accustomed to enterprise business practices. Yet smart startups have long-since abandoned the concept of “stealth mode”—where product development is kept under wraps during development—in favor of “customer development,” a simple process of offering a product to target customers as a means of validating product-market fit.
Companies must realize that, in the realm of non-validated innovations, openness is often the only way to gain enough information and confidence to make the next investment in the new product. Meanwhile, the perceived drawbacks of openness (primarily the belief that competitors will steal and commercialize your idea) has long-since been debunked. Ideas are only as good as the implementation behind them, and your competitors have the same reservations about new ideas that you do. In this world, what differentiates you from your competitors is willingness to actually engage in the practice of innovation. When you are successful—and only after success has been demonstrated—your competitors will follow you.
You've read this far, so like, what are you going to do about it?
This new playbook offers a different set of outcomes. Where NPI yields only rare launch of fairly predictable products, this new playbook results in the frequent launch of diverse products. The NPI playbook forces executives to say no to a lot of great ideas. This new playbook offers a way to say yes to the most exciting ideas. The NPI playbook requires the allocation of dozens or even hundreds of people per product launch. This new playbook envisions the launch of a product per year per person. The NPI playbook measures product launches in years. This new playbook measures product launches in weeks.
Your company—YES, even normal people like you—can launch groundbreaking products! It can be done on a budget. The new playbook for product innovation enables your most passionate people to bring their ideas to life.
Are you ready to engage in the practice of innovation? If yes, drop me a line at firstname.lastname@example.org, and we'll get to know each other better.