Innovate better


Much has been written about the challenges of generating and commercializing innovation.  It is a truism that any company that can translate more innovations into commercial success will be able to outflank competition, improve financial performance and better meet customer needs.  By leveraging new technologies and practices, firms can build new experimentation capabilities that will improve their odds of success.  However, these approaches would have to be baked into the innovation generation and commercialization process.

Most companies make fewer but larger innovations bets – often missing key data on customers, costs and competitors.  An experimentation-focused company, on the other hand, looks first to place more, smaller bets or experiments.  The role of these tests are to generate critical internal and external learning around consumer uptake, usage etc.  As such, they must be quickly designed, deployed and measured  Innovations that pass muster have fewer data gaps and will more quickly secure management attention and resources, thereby increasing its chances of success. Like any significant change, however, building an experimentation capability will often require a process and cultural shift within the organization.

Below are 3 ways firms can use experiments more to develop better ideas, faster and at lower cost.

Open up the innovation process

Managers can increase the intake and vetting of new ideas by opening up their innovation and R&D effort through ‘Open Innovation’ strategies that foster linkages with entrepreneurs, suppliers, universities and other firms.  Many companies have successfully deployed this approach including P&G, 3M and Eli Lilly. To successfully implement this practice, organizations need to adopt an ‘open innovation’ mindset as well as ensure there are supporting management systems.

A good first step for managers should be inward, by breaking down internal barriers like geographic, departmental or data silos that limit the cross-pollination of ideas and technologies.  Firms can also implement a variety of innovation-enabling strategies such as deploying gamification systems, fostering horizontal job mobility and creating collaboration platforms.

Exploit enabling technologies and processes

New tools now give managers the ability to perform quick and dirty, yet feedback rich, experiments in real-time.  For example, Amazon has the capability to quickly run and measure a number of different online marketing, design and functionality tests aimed at different customer groups.  In the consumer and industrial goods sectors, rapid advances and falling costs in 3D-printing technology gives managers the ability to quickly ‘print’ prototypes and test market small batches of customized goods.  This capability avoids the cost and time of developing tooling and sourcing bulk product orders.

The emergence of online virtual worlds such as Second Life, Eve Online and Habbo give enterprises a new channel to test new products and get intimate with their target consumers. These environments are ideal for measuring innovation interest, simulating retail conditions and exploring competitive reactions. By using Avatars to represent themselves online, consumers can provide rich feedback on their needs, especially in sensitive areas like healthcare.

Leverage the crowd

A number of new operating models are exploiting the power of the ‘crowd’ to deliver concept or product feedback, provide decision making support or raise capital.  Organizations like Netflix, IBM and the X Prize Foundation have used crowdsourcing to leverage a large number of people (often through online collaboration tools) to address specific tasks that can benefit from collective wisdom or effort. Crowdsourcing practices have proven to reduce the cost of software testing, spark creativity, raise fund for early stage ventures, and solve difficult technical challenges. Despite its value, crowdsourcing practices should be used prudently.

Predictive markets are another method to forecast the success of an innovation.  Predictive markets are based on the notion that the buying decisions of many individuals within a speculative market can produce an accurate prediction of a development or an event’s occurrence, success or failure.  The current market prices are interpreted as predictions of the probability of the event (e.g, product launch) or the expected value of the parameter (e.g., the likelihood of its success). These tools are considered sufficiently accurate for many businesses like Siemens, Pfizer, and GE to use them internally for product planning, innovation assessment and evaluating marketing ideas.

Building a core competency in experimentation does not happen overnight. Leaders may need to re-tweak their management systems, workflows and cultures to more willingly tolerate failure, share information better and leverage external input, partners and resources. However, those that can embed experimentation within their organization will gain a significant competitive advantage.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

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