THE DIFFERENCE THAT…
THE DIFFERENCE THAT MAKES ALL THE DIFFERENCE
When, on the heels of a recent speech about innovation effectiveness, a Twitter-weaned twenty-something asked me to sum up in one sentence what stands between innovation success and failure, I laughed, asked how many commas and semicolons were allowable, then sucked it up and gave it a go.
“The difference between success and failure lies in knowing that a great idea, a great product and a great business are three completely different things.”
As obvious as the distinction seems on the crisp white page, it’s blurred in the messy throes of innovation projects with alarming regularity across companies great and small, at great cost to shareholders.
Of these three separate pieces of the holy trinity of innovation – great idea, great product and great business – a great product is the most straightforward.
A great product does a useful thing in an effective, feasible and compellingly differentiated way. In an age of stage gate systems stacked with failsafe checkpoints, this has become the least failure-prone leg of the stool.
The trouble is that a great product is often mistaken for the answer, rather than a helpful piece of it. Design-led innovation models – born in creating products – have a genetic bias toward obsessing over the product at the expense of the rest of the picture. But in the end, a great product is necessary but thoroughly insufficient to innovation success.
A great business is a different animal, defined by its ability to sustain and scale over time, make good money relative to other things one might do by deploying the same resources elsewhere, create sustainable competitive advantage, intelligently use existing assets without overstretching what a company knows how to do (stretch is healthy, overstretch is fatal), and fit the strategic imperatives of the company behind it.
And what of a great idea? In our practice, we define it this way: a great idea defines an addressable gap in a market, and points the way to a transformational product and business to fill that gap.
To highlight the distinction, look first at innovations that nailed just two of the three pieces.
TiVo was unequivocally a great idea, opening the big market for DVR to free busy consumers from the tyranny of the time slot. It was a great product, spawning instant addiction. But it has missed as a business, largely because it pitted an upstart with no underlying competitive advantage against the quasi-monopoly of cable companies who control the flow of content into the home. Little surprise that TiVo’s market cap now sits at 10% of its peak.
LeapFrog was another. Turning electronic games into education (or education into games) was a brilliant idea, creating a win-win for parents and kids. Its products were well accepted. But the business was a disaster. The miss was that it adopted a route to market via the toy business, which is famous for its tight margins that crimp the style of even the biggest players in the business. Like TiVo, LeapFrog has seen its market cap drop by about 90% from its peak.
What does nailing all three look like?
Exhibit A: Vitamin Water. Turning water from a source-obsessed business of pure, ancient retrospection into a fortified lifestyle tool for modern healthy living was a brilliant idea. Brought to life with a visually disruptive functional flavor system to bust the retail clutter, a nimble ability built to pounce on emerging flavor and ingredient trends, and a premium price point, it sold for $4.2Billion.
Exhibit B: Spanx. As the national girth continues to grow, the idea of reinventing the bygone girdle for the 21st century woman was sheer genius. Its seamless products and sassy branding have won kudos from Oprah to the stars on the red carpet. And its annual revenues are on a billion dollar track.
How exactly one pursues and constructs a play that nails all three pieces is a topic for a longer tweet (and perhaps a future column in this space), but it starts with this simple, oft-forgotten reality that a great idea, a great product and a great business are three completely different things.
by Mark Payne, President and Head of Idea Development at Fahrenheit 212
Business Insider, June 2011