September 21, 2020

Innovation Success: Recognizing Bad Ideas and Killing Them Early

Many companies use a phase-gate (or stage gate) process to drive their innovation activities. Somewhere between Phase 1 (Scoping) and early Phase 2 (Business Case Development), many organizations fail to ask certain questions that are crucial to fully vetting a concept – or fail to ask them in the right way. This should be a time for brutal honesty because missing something in this phase can be quite costly.

Recognizing product strengths and weaknesses and developing a solid understanding of the competitive landscape is difficult without market context.  When clients are investigating opportunities in unfamiliar markets, they often miss things that become crucial later on in the process.  Here are our observations on the most common blind spots and related failure modes for innovation programs:

Insufficient probing of customer needs

Customer feedback is a core element of Phase 1 and 2 processes, but lots of teams fail to ask the right questions, or fail to ask questions in a way that isn’t biased to a favorable outcome. Even if you can show that your concept would solve a problem and that solving this problem would create value, you still need to understand the bigger picture – consider the following questions:

  • Where does the problem you’re solving rank in terms of customer priorities?

Many customers have a long list of needs, and aren’t willing to devote dollars or mindshare to solutions that don’t address their top priorities. Understanding the bigger picture will allow for more accurate assessment of the market potential of your concept.

This question also helps to get at valuation – You don’t need a price point for an early stage concept, but you certainly need some benchmarks for understanding the potential value to customers to assess if the juice is worth the squeeze. Figuring out where the problem fit in context of customers’ day-to-day concerns and pain points can help inform this analysis.

  • What potential downsides does your approach to solving a problem carry for the customer?

Many companies fail to fully consider the problems inherent in their technology and approach. If your widget solves for Problem X but makes customers lives harder in other ways, that’s a trade off that deserves careful study. Similarly, there may be costs related to solution adoption that extend beyond the product or technology: Value chain dynamics are frequently overlooked in early stages of concept vetting, but play a huge role in whether or not programs are successful. Can your solution provide enough value that it will outweigh other purchasing considerations? We’ve seen plenty of companies overlook issues that are somewhat obvious to outsiders, and on this point there’s no substitute for an independent, critical eye.

Failure to think strategically about the competitive landscape – now and in the future

Chances are your solution isn’t the only game in town, and customers have alternatives.  Companies that take the time to really understand the pros and cons of competitive alternatives (those in the market today and those in development) can get a much better sense of how their concept would need to be positioned.

  • What alternatives might emerge in the next 3/5/10 years as I work to bring this concept to market?

Depending on the product development cycle in a given industry, you may spend years developing a product for a validated market need only to find that the market has changed, new solutions have emerged, and the assumptions on which your business case rests are no longer valid. This is, perhaps, the most painful way for new product concepts to perish.

Identifying the early stage alternative approaches that could beat your solution to market or enter shortly after is essential to building a full picture of program risks. While we wouldn’t advocate eliminating a program simply because others are working to solve the same issue, we do think ongoing market monitoring and re-evaluation of competitive dynamics is a must-do.

  • With whom will I be competing, and what does that mean for my strategy?

Companies need to consider which types of competitors they’d be head to head with and weigh the strategic implications of entering the market – is a program likely to put you in conflict with an existing customer or partner? Will your mid-size corporation be competing with giants that have near unlimited resources? In many cases, these types of strategic conflicts are foreseeable even in early stages of scoping, and if identified early, can help your organization focus resources on more attractive opportunities.

Not asking what price point the market will bear for the new solution

Establishing a pricing strategy is typically reserved for later stages in the process, but it’s important to understand the ballpark range of what customer would pay to solve the problem(s) your solution is targeting.  The earlier you understand this the better, as limited willingness to pay can challenge the viability of new solutions.

  • Who is the decision maker, and how do they think about value?

Make sure you know to whom you would be selling, and what they care about. This is particularly important in B2B markets, where often end users – who might see value in the product – are not always controlling the purse strings.

Understand to what your solution will be compared, and benchmark pricing against that. Are you offsetting costs elsewhere?  If not, what metrics would be used to establish the value of your solution?  How does that translate into dollars?

Looking at a broader set of considerations when evaluating early stage innovation programs will allow companies to better focus scarce resources on opportunities that are more likely to bear fruit.  While you don’t need the full answer to every question in phase 1, each of these questions should be asked to identify the key market uncertainties, establish realistic expectations, and prioritize issues for further investigation.

Related team members

Craig Belanger
Senior Partner & Co-Founder Boston
Richard Crumb
Managing Partner & Co-Founder Menlo Park
Rachel Eschle
Partner & Co-Founder Boston
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