Most people think that innovation is inherently risky.

That’s not surprising when you consider that 60-90% of new products fail. But that statistic is misleading because it doesn’t take into account the specific types of risk bundled into it.

At a high level, there are two types of innovation risk.

1. Market risk which is the risk that people won’t buy what we make because we misunderstand their needs and competitive options.
2. Technology (or solution) risk which is the risk that we can’t make what people want.

There is general agreement that the biggest risk associated with new offerings is usually market risk. Nathan Furr and Paul Ahlstrom, the authors of the popular book Nail It Then Scale It, go so far as to say that, of new businesses that fail, “over 90% fail because they couldn’t get anyone to buy it, not because they couldn’t build it.”

The fact that “market risk” is so big is actually really good news! That’s because, if you can dramatically reduce market risk – and you can – then you can dramatically increase success rates.

Jobs-to-Be-Done (JTBD) enables companies to see markets differently and discover the target customers’ unmet needs in virtually any market, with precision, and in a highly actionable format. That flips the table and turns 60-90% failure rates to 60-90% success rates.

“I have probably done over 100 jobs-to-be-done projects and…not one has failed to deliver potential game-changing insights.”
– Jeff Baker, Head of Market Research and New Product Development, NetJets

It turns out that, in most cases, innovation itself isn’t inherently risky; the way most companies are going about discovering their target customers’ unmet needs is!

Just how risky an innovation initiative turns out to be is largely dependent on the industry and specific challenge. Creating a new drug to cure cancer, for example,  has limited market risk, but high technology risk. For many other industries/companies, the technology risk is minimal and the market risk is big.

Market risk can be minimized by discovering what target customers are trying to accomplish, how they measure success, where they struggle, and why. That’s what we do with JTBD.

Of course, there’s still “technology/solution risk” – the risk that you won’t be able to make what customers want – but the extent of this risk can usually be determined by defining the target customers’ unmet needs correctly. As Steve Jobs said:

“If you define the problem correctly, you almost have the solution.” ~ Steve Jobs

When you define the customers’ problem correctly, you can determine what it’s going to take to address that problem and whether or not you have the capabilities and resources to do it.

A lot of successful new products are created by using current capabilities in a unique way, re-configuring familiar capabilities to address the target customers’ unmet needs more effectively that anyone has done before, because no one understood the customers’ needs as well before.

One of the beauties of identifying and ranking the big unmet needs in the market before generating ideas is that firms can evaluate and select those opportunities that are attractive to pursue. That enables each firm to only pursue innovation initiatives that are within the firm’s risk tolerance.

How can you be brilliant at innovation? Get really good at defining the problem before you invest in generating or developing solutions.

“You don’t invent the answers, you reveal the answers.” – Jonas Silk, Inventor of the Polio Vaccine