Why do so many innovations fail?  With many excellent books available on innovation, you'd think that the success rate of innovations would be quite high.  But still, an Ernst & Young report found that as many as 95% of new U.S. consumer products failed.  Why?  To begin to understand the challenges innovators face, consider two popular approaches to innovation: Disruptive Innovation and Blue Ocean Strategy.

Disruptive innovation involves creating cheaper versions of technologies that don't currently meet the needs of the mainstream market.  However, they do meet the needs of smaller, niche markets.  And as the technology improves, the innovation eventually comes to meet the requirements of the mainstream market as well, driving out the older technologies.

On the other hand, blue ocean strategy involves creating new markets where competitors don't currently exist.  Blue ocean strategists look at the benefits of current offerings, and create new offerings by increasing or creating factors that customers value, and decreasing or dropping factors that they don't.

I won't comment here on the advantages and disadvantages of either approach -- I'll save that for a later article.  However, notice that these are two viable but completely different approaches to innovation.  Successful innovation requires more than knowing one possible innovation approach.  It requires knowing how to execute the right approach for your company.

With that in mind, I've compiled a list of the 10 things that you must do differently, in order to innovate successfully within your unique organization.  These are arranged sequentially, so you can focus on one step at a time, as you progress through the innovation lifecycle.

Step 1: Choose the Best Approach for Your Team

As we saw above, you need to find the best innovation approach for your team.  Innovation can be driven strategically by the executives, or it can be driven from the grassroots by front-line intrapreneurs.  It can be led by marketing staff, or it can be led by engineers.  And lastly, new innovations can target your existing market, or it can create new markets altogether.

Understand your organization's strengths, and where your true innovators live.  Then choose an approach that uses those talents.  If your strongest innovators are front-line technical staff, then don't try to create a strategic plan for market-led innovation.  You'll only set yourself up for failure.  In this case, establish an intrapreneur-driven technology innovation approach, and let the innovators take the lead.

Step 2: Establish a Culture for Innovation

Successful innovation requires a culture that supports innovation.  There are several cultural traits that foster innovation, which we will discuss in later articles.  Here, we will touch on the one key cultural trait that you need to establish, if you want to innovate successfully: Accepting failure.

Failure is something which we try very hard to avoid, both organizationally and personally.  However, successful long-term innovation requires short-term failures.  Early failures are inexpensive, and they allow you to avoid much more expensive failures later in the process.  Encourage your innovators to experiment, to discover early what works and what doesn't.  To quote Thomas Edison:

"I did not fail; I just found 10,000 ways that did not work."

Step 3: Align Your Innovations with Your Strategy

Even if intrapreneurs are leading your innovations, those innovations still need to align with your strategy.  There's no use looking for ways to expand your business into entertainment if the executives are firmly committed to staying in healthcare.  Even if promising innovations were discovered, the projects would not receive the necessary executive support.

Communicate your strategy to the innovators, to provide the guidance necessary to focus your investment dollars.  If you are willing to consider expanding into new markets, communicate that as well.  Then, remain involved.  Focusing innovations on areas of strategic interest is the best way to ensure that they receive executive support, once real product development begins.

Step 4: Create Capacity for Innovation

A very common reason I've heard for a lack of innovation is that the budget just isn't there.  This is reasonable.  Especially during difficult markets, it's hard to allocate dollars to speculative activities.  However, the key term here is to create capacity.  That is, to expand the capacity of your teams without expanding your budget.

Yes, this can be done, and we'll discuss some techniques in a later article.  For now, we'll touch on one technique which seems straightforward, but is often ignored.  That is to spend your time doing things that add value, and stop doing things that don't.  I discuss this topic in greater depth in my blog post: A Leadership and Innovation Wake-Up Call.

Step 5: Organize for Innovation

Now that you know who will be doing the innovation, you need to decide how to organize them.  Should they benefit from company processes or should they operate without restrictions?  Should they report status regularly or should they be shielded from management interference?  Should you have focused innovation teams or should everyone spend part of their time working on individual innovations?  The question here is how tightly the innovators should be integrated into the rest of the organization.

Each level of integration has its strengths and weaknesses, and we'll discuss these later.  For now, you should think about how much integration fits best with your company size, your innovation approach, your market, and your organizational culture.

Step 6: Know When to Listen to Your Customers

... And when not to.  If you are targeting an incremental innovation to your existing customers, then these customers are a good source of information.  However, if you are targeting a new market, or even if you are targeting new customers in your existing market, your existing customers may not be the right people to speak with.  Remember, especially in the case of disruptive innovations, existing customers may see no value in an innovation, even though non-customers may desperately want it.

Find out what non-customers value, and target your innovation investment at solving those problems.  And remember, what they value may also be different from what they explicitly ask for.

Step 7: Implement Iteratively

The traditional waterfall approach to software development is fine when requirements are well understood and the risk is low.  However, neither of these is true for innovative products.  Requirements for an innovative offering will probably evolve throughout the project, and the risk of failure is quite high, as we've already seen.  The way to deal with this is to use a development approach that integrates change back into the plan.

Enter iterative development.  Whether you simply use phased development or you move fully into an agile environment, you need to be embrace learning and change throughout the project.  It will also allow you to be more tolerant of failure, because it is cheaper to fail after a few early iterations than it is to fail after executing robust analysis, design, planning, and implementation stages.

Step 8: Evaluate Progress Based on Knowledge Gained

Since innovative projects should be run differently from traditional projects, they should be evaluated differently as well.  The traditionally static scope, cost, time, and quality objectives will now change throughout the project.  So how do you keep these objectives under control?

For innovation projects, you also need to track what you've learned and what you still need to learn.  Is your understanding of the market and your project objectives better than they were in previous iterations?  If not, your innovation is at risk of spiraling out of control.  But if your understanding is improving, and the outstanding questions are trending toward zero, then you have an additional data point to forecast the successful completion of your project.

Step 9: Focus on a Niche

In his 1991 book, Crossing the Chasm, Geoffrey Moore presents the concept of a chasm between the early adopter group of customers and the early majority group.  My experiences mirrored his exactly: If innovators attempt to satisfy most of the needs of most of the early majority customers, then they will fail.  This is because they satisfied all of the needs of none of the customers.

What successful innovators need to do is to provide a robust solution to a niche.  That is, meet all (or almost all) of the needs of a small group of customers.  Once you have won those customers, you can begin to expand your offering to meet the needs of other customers as well.

Step 10: Prepare for Imitators

Innovators often lose out to imitators.  After all, the wildly successful iPod was not the first MP3 player on the market.  Apple just did it better than the groundbreakers.  But it is possible to put up a strong defense against those who would imitate your idea.

In a future article, we'll discuss how to defend your market position, based on the speed of market growth and the speed of technological evolution.  But there are steps you can take right now to strengthen your market leading position, including Intellectual Property barriers and branding.  Establishing IP barriers is becoming increasingly common, and is usually a necessary first step in protecting your investment.  Establishing a strong brand is also critical.  Despite the broad offering of comparable portable media players on the market today, your teen isn't asking for an MP3 player -- they're asking for an iPod.

Lastly

I hope you're finding these articles to be helpful in strengthening your product offerings.  Of course, in future articles, we'll continue to investigate these and other software management techniques in greater detail.

Let me know what you think!  How do you innovate?  We've already seen that there are many ways to innovate successfully, and I enjoy hearing how others do it.  If you have any questions, or if you would like more information on how to implement these or other software development processes in your organization, please feel free to contact me at Charles@CharlesConway.com.

If you know of someone who may find this article of interest, please forward it on!

Good luck!
Charles