If You Think Innovation is Risky, Try Irrelevance

If you think innovation is risky, try irrelevance.

Three mistakes that cause leaders to unduly pull back from innovation:

1) Failing to validate customers’ unmet needs before investing in the development of solutions. Study after study has shown that the number one cause of innovation failure is misunderstanding customers’ needs. Betting at the racetrack is risky but investing in new ways to address known unmet needs removes the largest risk factor and is likely to provide a high ROI. Every investment should be made in a known opportunity space.

2) Applying the risk/reward tradeoff theory to new product portfolio management. The risk/reward tradeoff is helpful when managing a mutual fund because it’s impossible to determine how well each firm is positioned for success in its market. But if you identify and rank all your target customers’ unmet needs with statistical validity before investing in the development of solutions, you get to pick the most promising opportunities to target (those with the greatest reward) and minimize your risk at the same time.

3) Holding off on innovation because it is too expensive. While it is true that some upfront investment is required, once you have identified and ranked all of the opportunities in the market (i.e., your target customers’ unmet needs), you get to decide which ones to address, if any, and how. Unlike the ostrich, it is always better to know the reality and respond best you can. Sometimes the best way to address an unmet need is simply by developing new messaging and positioning without any cost for product development.

Playing it safe may be the biggest risk of all. A recent McKinsey study showed that companies that invest in innovation through a crisis outperform peers during the recovery by as much as 30%.

The critical skill that every business needs now is the ability to discover what matters to customers and how their changing needs will impact your business. Whether you seek to adapt your core business to shifting customer needs or capitalize on new opportunities created by COVID-19, we can help. Let’s talk.