commercial success from innovation
DESCRIPTION
Guaranteeing the commercial success of an innovation is a key challenge across industries. In fact, a surprisingly high percentage of companies initiating a radical innovation – i.e. an innovation which consists of a novel technology bringing novelty to the market - fail to convert them into commercial success. In this presentation, I look at some examples of successful and unsuccessful launches across various industries to explore and uncover what it takes to take innovation all the way. Although different industries require different approaches to innovation commercialization, we observe that the barrier to success often is not a failure in technology but the reliance on a commercialization strategy that is not sufficiently innovative. To fuse both the technology/science side and the innovative market perspective, a grassroots innovation process – in which innovation is generated bottom-up with support, however, of top management – is a good approach. Following such a process allows companies to find the “sweet spot” which is a combination of matching an unmet customer need with a great solution and a profit generating strategy. Successful companies have in common that they identified the right commercialization strategy for their innovations. To achieve this, three steps in successful commercialization are essential. First, developing a solid hypothesis on the market through observation of customers: Customer intimacy -instead of customer surveys- is the key to success here. Dropbox, PatientsLikeMe, and Tesco are good examples of how a market hypothesis through observing the customer led to a successful innovation. Second, experimentation (on a limited scale) to validate that hypothesis early on. Experiments are the best way to find out whether your solution could be effective for your customers. Third, finding a matching business model: pricing and costing is an essential part of the innovation process and not just the job of specialists. Throughout these 3 steps, learning and adapting are key in becoming successful as you can be sure that you will not execute according to the plan. You thus need to prepare for failure in innovation because otherwise, you are probably not innovative enough.TRANSCRIPT
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Commercial Success From Innovation
Prof.dr. Stefan Stremersch Erasmus University Rotterdam IESE Business School Rotterdam, the Netherlands Barcelona, Spain [email protected] [email protected]
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A Great Solution
Unmet
Customer
Needs
$trategy
Generating
Profit$
In Search for Commercial Success…
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… From a Structure Perspective…
Science Market
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1. The Visionary Leader
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2. Delegate Responsibility to Functions
R&D has the responsibility to come up with innovative ideas and solutions
Marketing has the responsibility to understand
customer needs
Degree of Involvement in the job
R&D/ Engineering
Marketing
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“Highway to Hell”
Discovery (Idea Concept)
Development (Prototyping Manufacturing)
Launch Growth
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3. Grassroots Innovation
Grassroots Innovation – emerges from the grassroots.
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Grassroots Innovation: Cases
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Grassroots Innovation at Alcatel-Lucent
N. Camacho, I. Verniers, C. García-Pont and S. Stremersch (2012), Alcatel-Lucent: Marketing the Cell Phone as a Mobile Wallet, IESE Business School, Case M-1279-E. Link: http://www.iesep.com/es/alcatel-lucent-marketing-the-cell-phone-as-a-mobile-wallet-83845.html
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iTREK: Open Innovation with Students
Discovery (Idea Concept)
Development (Prototyping Manufacturing)
Launch Growth
Degree of Responsibility and Passion
R&D/ Engineering
Marketing
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Symbiosis Between Science and Market
“Stairway to heaven”
Market: Discover unmet customer needs and hypothesize how they can be solved
Science: Discover new technology and hypothesize how it can be used to solve user needs
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… From a Process Perspective…
The Shortest Distance From Lab to Market
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
When you make a business plan, the only thing you know for certain is you will not execute according to the plan
“Everybody has a plan until they get punched in the face.” Mike Tyson
Developing Your Market Hypothesis
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
How Do You Find What’s In the Horizon?
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“Prediction is very difficult…”
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“…especially if it's about the future.” Niels Bohr
Nobel laureate in Physics (1922)
Hypotheses from Observation
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“We found Koreans are the second hardest working people in the world. So we devised a way to have the store come to the people.”
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Hypotheses from Observation
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Hypotheses from Observation
Few
Many
Customer Intimacy, Not Customer Surveys.
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Early Validation of Your Market Hypothesis
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
Early Validation: Can Only Be Done by Doing It!
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“If you shipped your product and you’re not ashamed of it, you’ve probably shipped too late.”
Reid Hoffman Executive Chairman and co-Founder of LinkedIn
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Validation from Experimentation...
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Validation from Experimentation...
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Validation from Experimentation...
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Validation from Experimentation…
“Blockbuster” Roll-Out “Controlled” Roll-Out
Business Model
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
Business Model for Mobile Payment
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Consumer’s Bank (Card Issuer)
Payment Card Network
Merchant’s Bank
Merchant Consumer
N. Camacho and S. Stremersch (2012), Rabobank Corporate Netherlands: Turning the Smartphone into an Engine of Bottom-Line Growth, IESE Business School, Case M-1286E. Available from: http://www.iesep.com/
Business Model for Mobile Payment
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App-based Model
A Full Solution for Merchants
Software-as-Service
44 65 94 106.6
235 267
324 Avgerage Fare (EUR)
How Can Ryanair Fly You So Cheap?
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2 4 6
5.5 1
0
10
20
30
40
50
60
70
80
90
Advertising revenue per passenger
Subsidies
Credit card handling fee
Priority boarding
One bottle of water
Checking-in bagagge
Ticket price
Cost = EUR 70
Profit
Ryanair Economics: London-Barcelona
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In Summary: The Hot Spot of Commercial Success
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
A Great Solution
Unmet
Customer
Needs
$trategy
Generating
Profit$
No Profit Failure
No-Customer Failure
Competitive Failure
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In Summary: The Hot Spot of Commercial Success
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Learn and Adapt
Learn and Adapt
Market Hypothesis
Early Validation
Business Model
A Great Solution
Unmet Customer
Needs
$trategy Generating Profit$
In Summary: Conclusions
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• Grassroots innovation: essential in a firm’s innovation strategy to fuse market and science
• Formalize functional co-operation: Avoid highway to hell
• The only thing you know for certain is you will not execute according to the plan
• In innovation, prepare for failure. Otherwise, you are not innovative enough
• Learn & ADAPT!
• Customer Intimacy, not customer surveys • Validate quickly by doing it on limited scale • Pricing and costing is an integral part of the innovation
process not the job of specialists
