How CEOs can avoid these three innovation killers

Fast Company

7 days ago

Successful innovation—especially breakthrough innovation that drives sustainable, long-term growth—requires getting a lot of things right along the whole innovation journey, from concept development to commercial launch.
Some of the key steps along this path are well understood and generate lots of attention, among them understanding and building product/market fit, soliciting customer feedback early, and gauging customer willingness to pay.
But even the best companies and the most innovation-minded, C-suites can get innovation wrong. In our book Predictable Winners, we leveraged the experience of hundreds of projects, analyzed company case studies, and examined a lookback study of 100 innovations.
As a result, we determined that several mistakes are quite common—and can put the overall success of an innovation at risk.
There are three deadly sins that stifle innovation. Most innovators make them. They are:
Sin #1: Picking the wrong early adopters
A key decision in any business—and a critical one for innovators—is determining who your target customers are and aren't. The right answer is a byproduct of effective customer segmentation.
For innovators, it's especially critical to identify early adopters. But doing that correctly is not as simple as it seems.
Many innovators assume that early adopters are simply those customers who are willing to use their products first. Not so. Anyone can sell a handful of products to friends, family, and tech junkies. The right question to ask during the initial market-testing phase is, which customers seem most excited and passionate about the product? Who is clamoring for the opportunity to try it? Early adopters are not just customers willing to buy your product before anyone else—they are the customers who love your product.
Their passion and loyalty help you build a sustainable base of customers who serve as a reference and can unlock network effects for later adopters. In other words, early adopters need to care disproportionately about your value proposition. Often, they are a subset or micro-segment within a broader group you have identified through your segmentation process—often the 'bull's-eye' of that customer segment. Lululemon's initial strategy was to target young women with active lifestyles for their line of fashionable but action-friendly apparel. Within that segment, female yoga teachers became the early adopter group. Intuitive Surgical found that the early adopters for their da Vinci robotic-assisted surgery systems were not, as expected, cardiac surgeons but rather urologists who loved da Vinci because it gave them their first-ever option for removing prostates via a minimally invasive surgical procedure.
As an innovator, you need to intentionally define the early adopters. Then, determine what the subsequent target customer segments will be. The right group of early adopters can build a lasting foundation and help unlock the customer runway. Intentionality makes this a strategic and conscious choice. Don't let your early adopters just happen to you.
Sin #2: Playing chess with yourself
A great innovation will generate swift, fierce competition. Many innovators are surprised at the speed and intensity of competitive response.
In fact, one of the most common mistakes innovators make is to underestimate their competitors and underinvest in understanding how their competitors will respond. They're too focused on their own product and their own customers. They do insufficient research on their expected competitors—and on the individuals who lead those companies. They subconsciously bias their moves based on what they want the other side to do. They assess competitive responses far too optimistically and fail to anticipate the full range of competitors' actions. As a result, they often underestimate how quickly competitors come to market and how much impact that speed to market can have—this holds true in markets as different as pharmaceuticals and automotive (e.g., Tesla's launch of the Model 3).
What these innovators are doing is playing chess with themselves instead of the competition. When you do that, you're always tempted to have your opponent play the game you want them to play. This is just human nature, right?
A better move is to conduct a wargame. An effective wargame forces you and your team to role-play as if you were the competitor. If you can do that successfully, you will be well positioned to understand how and why your competitors go to market. That means you will be able to predict their behavior—which in turn, will enable you to pursue the right strategy to win in the marketplace.
Wargaming demands that you gather data on your competitors. These days, there's typically no shortage of data available. But many innovators do this homework incompletely. Keep this in mind: you can't know your competitors too well. Data gathering will help you understand their true competitive advantages. The exercise will help you understand the range of competitive actions but also keep them in bounds. In effective wargaming, many ideas for possible actions can come up, but in most cases only a few paths will appear to be rational and likely.
The focus should be on competitive advantage. Let's keep it simple: A competitive advantage is the reason a competitor wins. Often, there aren't that many entries on that list, and they're not necessarily the most inspiring attributes. They may be strong relationships with hard-to-reach customers, control of a channel, expertise with manipulating a raw material, brand longevity, size of an installed base, and so on—all examples of real, tangible competitive advantages, which are both hard to replicate and contribute significantly to a winning strategy. Again, your competitive homework needs to help you to understand what's on the short list for each of your key competitors.
This cuts both ways, though. Sometimes, your competitive advantage may simply be the flexibility to do things your competitors can't. Among U.K. supermarkets in the early 1990s, Tesco was always a little behind the market leader, Sainsbury's: lower share, lower margins, and a more down-market positioning. Ten years later, Tesco was twice the size of Sainsbury's. How did that happen? While it's true that Tesco innovated, for example with its loyalty program, the big reason they were able to gain share was simply that they built more stores. Sainsbury's—with the founding family still owning a significant stake— targeted a hefty 21% return on equity. Tesco, by contrast, was happy with 18%. This helped fund expansion and gave them more freedom to respond to low-price discounters. Investors were happy, too, because they could see the company was growing and gaining share.
The disciplined competitive analysis that results from wargaming can reveal similar trajectories. In our experience, we have seen 'aha' moments arise when previously hypothesized actions or scenarios are proven to be off-base and are replaced by more likely and more nuanced expectations for competitive responses.
But—and this is an important caveat—not all competitive responses and not all business strategies are rational. This is where knowing individual leaders pays off. Factoring in the styles, track record, and biases of competitors' leaders is essential if you are going to anticipate their moves.
No matter how you proceed, keep in mind that the essential point of wargaming—and indeed, of most steps along the path of innovation—is to never assume that you are smarter than your competitors. Don't underestimate them. It's almost always better to over estimate them—and then be pleasantly surprised when they play into your chess game.
Sin #3: Discovering barriers to adoption only when you launch
All of the innovation planning in the world comes to nothing if the new product or service fails at launch. There is one goal at launch—customer adoption. Here is where planning can and must pay off.
Perhaps the most impactful mistake innovators make is failing to develop a deep enough understanding of their customers before launch.
In particular: Before launch is when you must proactively identify and mitigate barriers to adoption that can spell the death of your innovation.
The last thing you want is to find out that there is something that keeps your customers away from your product—and that you only found out about it when you've started commercialization.
True, you can still take action at that point. But your options are severely limited. At best, you can adapt and find a way to overcome them. At worst, you can scuttle your launch—and hope you don't scuttle the company along with it.
Best practitioners understand the whole scope of the customers' purchasing journey and all the possible barriers that arise at each step. It is also essential to understand the relative importance of these barriers. How severe are they? And how many of your potential customers do they impact?
Once you have a thorough handle on your customer purchasing dynamics, you then can—and must—make it your key prelaunch objective to identify and mitigate those adoption barriers.
Those barriers are simply 'reasons not to adopt.' They vary by customer segment, by stakeholder, and by where they occur along the purchasing journey.
You won't necessarily be able to impact all of them—but if you anticipate them, you can at least know which ones you may be able to impact. Take a systematic approach—use the customer purchase journey as an organizing principle. This journey can be generalized into several phases: Awareness, Consideration, and Conversion. Many other versions of the customer journey (or marketing funnel) exist. You can tailor them to your specific needs.
Uber succeeded in identifying three barriers—not having the legal right to operate locally, not having enough drivers, and not attracting enough customers. With that knowledge in hand, Uber was able to formulate a plan of attack. Without the resources to lobby each local market, Uber chose to ignore the established regulatory framework, first establishing itself as a gig economy alternative for drivers and a less expensive, more convenient option for customers. Only then did it address policymakers—using its drivers and riders as a political force. The company had specific plans to overcome the adoption barriers for each target community. Incentives and bonuses helped build driver ranks. Careful analysis quantified how many consumers might 'leak' out at each stage of the customer journey and indicated how to mitigate those barriers (and which to prioritize). Extensive (and localized) advertising and marketing along with safety features like GPS tracking served to allay consumer concerns and turn them into Uber riders. Many of Uber's tactics were questionable—not all were praiseworthy. For example, their decision to ignore local regulations in some communities was rightly subject to sharp criticism. But Uber's story does serve to illustrate how a systematic approach to barriers drives strategic choices—and how those choices in turn drive adoption.
Uber also illustrates that not all adoption barriers are created equal. It turns out that in many situations, it's possible to quantitatively assess the impact of each adoption barrier, and this assessment can help you prioritize the order in which to tackle them. An effective way to do this is to conduct a 'leakage' analysis along the customer journey—simply stated, how many customers 'leak out' from the purchasing journey at each step? Understanding why such leakage occurs, where it is most significant, and what steps you as the innovator can take to minimize leakage can be very powerful.
Sin no more
While there is no doubt that the innovation sins can be deadly, they can also be overcome. A systematic approach is the key. By anticipating competitors' actions and establishing a deep understanding of the customer journey—and by establishing gates and safeguards at each critical step—it's possible to greatly reduce the risks of innovation and ensure that the process of developing breakthrough products and services will be predictable—with much greater odds of success.