Blue Mine Group

Innovation strategy development (part 2)

Continuing the innovation strategy development process. Once you select your strategy team, it should schedule and hold a series of workshops to define and problem solve the key market development issues facing the company. Over a period of several weeks, the team should work through the following types of issues

• 1: define overall market development goals. What are we trying to accomplish? What specifically will represent success?

• 2: identify and prioritize target markets.  What are the range of markets we could go after? What are the key demand and competitive characteristics of each market? How do our capabilities match each market? Which is best in terms of market opportunity and our strengths?

• 3: define offering guidelines. In broad terms, what are the key needs of our target market? What are their options? What are the key benefits we need to offer to meet their needs better than other options? How do we need to be priced? What risks do we need to overcome?

• 4:  define channels to market. What are the range of ways we could reach our target market? What direct and indirect sales channel options are there? What communications options are there? Which of these make best sense in terms of fit with our target market, our offering, and our resources?

• 5: agree market development roadmap. While there needs to be significant flexibility in charting the course over time, having and updating a roadmap will help the management team become aligned and work together to commonly understood and supported goals.

The goal of these sessions is to define the broad guidelines for the venture. This provides a clear framework within which the team can operate, and makes clear what the company is doing, and equally importantly, what the company is not doing.

Innovation strategy development (part 1)

While most ventures pay lip service to the importance of a good strategy, strategy development is often not well understood or practiced. Too many ventures develop strategy on the fly, or allow the thoughts of the founder or largest investor to dominate.

The best approach is to form a team of key stakeholders (founders, managers, investors) and work together through a relatively structured process to address your primary market, product and channel options. All stakeholders will be best served by applying the “wisdom of the team” to the strategy development process.

It is also best to have an outsider act as facilitator, to enable all primary stakeholders to focus on the content of the discussion, not the process.

Market challenges facing new ventures (part 4)

This is the last in a short series of posts on the challenges facing new ventures.

Challenge 4.      Established industry structures work to prevent the entry of new innovators. Most industries have evolved over many years, and have a clearly defined structure of established vendors at each stage of the supply chain, investors in the current industry structure, and an established communications structure of media, events, and trade organizations. The internet and other technologies have begun changing this, but in most cases new entrants to a market still encounter a large, established set of vested interests that are initially suspicious of, and likely to fight against, a new intruder.

The result of these market challenges is typically experienced by the venture most fundamentally as a lack of customers. Cumulatively these challenges often cause great stress for the venture’s founders, investors, employees and other stakeholders, including:

·         uncertainty of which markets to pursue

·         lack of clarity as to the right product features for the market

·         an inability to agree on or even express “who we are” and “what we do”

·         lack of visibility and awareness in the market

·         lack of a pipeline of sales opportunities.

Recognizing, and thinking through, these market challenges is the first critical step on the path to addressing them effectively.

Market challenges facing new ventures (part 3)

Challenge 3. Customers don’t know about the innovation and its benefits.

Even if the venture has a clearly identified customer, and a clearly superior offering, it needs to overcome significant problems in reaching and educating customers about its solutions. Everyone is extremely busy and has little time available to even consider their own needs, never mind look for a solution. In addition, everyone is constantly inundated with marketing messages (estimates are in excess of 2,000 per day) and communications of all sorts.

Rising above the noise, and getting people’s attention just to focus on the problem and how you can solve it, is very difficult, and getting harder all the time.   

Market challenges facing new ventures (part 2)

Let's continue looking at the challenges facing new ventures taking innovative products to market. In this post we'll examine the second of four key challenges.

Challenge 2.      Customers have a wide range of options. Almost all markets are by definition competitive. Monopolies, if they exist, do not last long. There are also nearly always multiple ways to solve any need or problem. So any new innovation must meet the customer’s compelling need better than all other options. Buyers will typically, consciously or unconsciously, consider three things when evaluating options:

a.      Benefits – to what extent does this solution meet my needs?

b.      Costs – what is the total cost to me of this solution versus others?   

c.      Risk – what risks am I exposed to, and how can I mitigate them, by considering this solution?

New innovations frequently focus on the first of these – product feature superiority over existing alternatives. Often, but not always, this is empirically true, and customers can understand the benefits. However, new ventures are often much weaker in terms of cost and risk. Because they are cash flow constrained, the venture frequently needs to sell at a premium, and cannot match incumbents with the economic ability to discount. In addition, the risks to a customer of a new, relatively untested product are high. 

The problem the venture faces is that most customers in most markets are conservative – so costs and risks are bigger considerations than benefits. In many markets, new innovations need to offer a 10x or better improvement in benefits to overcome customer inertia and offset the perceived costs and risks of trying something new.

Market challenges facing new ventures (part 1)

New ventures face at least four core challenges when taking new product or service innovations to market.  Over the next few days I will briefly discuss each of them.

Challenge 1.      It is not clear who would be the best customers for the innovation.

    One of the most central challenges facing any new venture is to figure out “who is the customer”? The innovative idea and the product subsequently developed is typically based on at least a notion of who the customer is, and what their need or problem is. However, new ventures commonly have not thought through in sufficient detail key issues about the target customer, including these central questions:

a.      Who specifically has the need or problem?

b.      How easy is it to identify and reach that person?

c.      How urgent is that problem for that person? How likely is he or she to spend time and energy looking for a solution? 

d.      Even if the person is convinced, does that person have the ability to purchase a solution at your price point?   

Innovation strategy

Innovation strategy is a rapidly developing specialty within the broader field of strategy. Driven by a set of thought leaders including Richard Foster, Geoffrey Moore, Peter Drucker, Clayton Christensen, Henry Chesbrough, W. Chan Kim, Renee Mauborgne, Don Tapscott and Chris Anderson, innovation strategy is becoming a recognized body of knowledge of great importance to business leaders. See here for a list of core books in the field.

Much of this thinking originates in the technology industry. The rate of change, competitive pressures, short product life cycles, and other factors made the traditional strategy tools inadequate. In recent years, innovation strategy had broadened into a wide range of industries.

Today I was in four strategy sessions - a wireless company, a software company, an engineering consulting firm and a plumbing supplies manufacturer.  Despite the wide range of products and services, low tech and high tech - all were exciting sessions, all were filled with real passion, and all were populated by visionaries and innovators in their respective fields. The principles we'll explore in this blog applied equally well to all of them.

We're fascinated by this rapidly evolving field, and want to focus this blog on exploring and exchanging ideas about innovation strategy with fellow practitioners.  We look forward to the journey!