Innovation and the Challenge of Uncertainty

The core problem with innovation is uncertainty.  Despite your best intentions and well-disciplined efforts, there is a distinct possibility your new product or service may not succeed in the market.

The Inherent Uncertainty of Innovation

Uncertainty is inherent to the very nature of innovation – creating something distinctively new and valuable means that you are necessarily venturing into the unknown.  Yet, to paraphrase the US military, some factors are “known unknowns” and others are “unknown unknowns”.

In the first category are well-defined issues like weak customer demand, poor channel access, technology performance issues, cost blowouts, organizational conflicts, and competitive response. These are a few of the many common factors that can stand between your innovation efforts and the success you seek. Being aware of these risk factors can help you devise ways to minimise them.

However, although uncertainty can be reduced, it cannot be eliminated entirely from innovation. There will always be unknown unknowns that resist your best efforts to control and mitigate them. Some may stem from an inability to fully understand the known unknowns, others perhaps to your implicit assumptions being flawed. By definition their nature is impossible to predict ahead of time, so the best advice is simply to expect the unexpected and plan accordingly.

Managing Uncertainty for Innovative Success

Faced with this uncertain landscape, organizations with a strategic commitment to innovation use a variety of methods to manage uncertainty and improve their chances of success.

Some of the common ways you can manage uncertainty in innovation are to:

  • Generate a large and diverse number of creative ideas
  • Design “better” ideas and concepts that are more likely to succeed
  • Evaluate and screen existing ideas or concepts more rigorously
  • Obtain superior insights into customer needs to guide idea generation
  • Improve concepts with rapid prototyping and customer feedback
  • Launch and learn in the marketplace, with rapid evolution of your offering
  • Set up modified management practices to support new products and ventures

You can implement each of the above approaches with a variety of different techniques. For instance, you could generate creative ideas through brainstorming (and variations such as ‘shifting’), employee suggestions, customer feature requests, value chain analysis, journey mapping, and so on.

Furthermore, these approaches are often used in combination as part of an over-arching innovation framework such as the Stage Gate method, Design Thinking, Lean Startup, Discovery Driven Growth, and Outcome Driven Innovation. Each framework is guided by an overall philosophy about how and why innovation fails to deliver the expected results, and prescribes a set of actions and methods intended to mitigate the key problems and improve your chances of innovating successfully.

Just remember that, regardless of the innovation framework you choose, to innovate successfully and consistently you need to become very good at managing uncertainty.

Is your idea worth pursuing?

There’s a big difference between an idea and a successful business (or a successful new product/service). Here are a few quick thoughts on how to evaluate whether your idea is worth pursuing as a business opportunity:

1. Is there a compelling need? Do people really need the solution you are proposing? Or is it just a ‘nice to have’, something they might think about doing sometime if the mood strikes them. Too many consumer internet businesses fail this test, in my opinion – they may have some novelty or coolness value but this erodes very quickly. If you’re going to build a real business, you need to be serving a compelling customer need.

2. Will they pay for it? The gap between “yeah I’d buy that” and “here’s the money” is surprisingly large. This means that asking people about a potential product/service is not as useful as actually getting real customers.  One framework that may help is to consider what drives value for the customer – e.g. the value of a published report, software-as-a-service, or tangible product typically depends on its own quality; but the value of a marketplace or advertising opportunity depends on  how many of the right people are using it.

3. Is there a viable business model? Can you deliver the product/service at a cost that is sufficiently less than people’s willingness to pay? This is a common stumbling block since the devil is in the details and things inevitably cost more and take longer than you expect. Chances are your initial business model will need to be evolved after you launch, but it’s still worth doing some sanity checking first before you spend time on it. Also, if your business model only works “at scale” – e.g. a marketplace – then you need a good answer to how you will actually getting to scale without going bust.

4. Are you the right people to launch it? Execution counts for a lot in business. It’s not just how good your idea is, but whether you have the capabilities, expertise, network, and resources to make it happen. Sometimes it may be a cracker of a business idea, but you’re simply not the right person to build that business. Partnering may be a solution to this, but then again maybe you should just move on to your next good idea.

What do you think? Are there other key issues you would suggest someone consider in evaluating their next big idea?