In previous posts, I have defined innovation as the combination of creative ideas with sustainably profitable business models. While it is good that companies invest in R&D, there is also the need to find “the architecture of revenues” for all the breakthrough products we are working on. This means that innovation teams should spend time searching for the right business models for their breakthrough ideas. But what exactly are they searching for? To make it more concrete, it is helpful to think of searching as a process for answering a hierarchy of key business model questions. There are possibly more questions that others can think of, but below are six key questions that I have consistently found useful in guiding innovation teams along their innovation journey.
Question 1: Can It Be Done?
This question speaks to the technical risks in any project. Will we be able to create what ever breakthrough we are imagining? The seriousness of the risks depends on the nature and complexity of the product or service. A number software products do not present that much technical risk. In other words, they can be done. However, for other more ambitious projects such as driverless cars, electric cars, healthcare or pharmaceutical products, technical risk is a genuine concern. In other words, there is often still a lot of work to figure out whether the product can be done at all.
Question 2: Should It Be Done?
While resolving technical risks often falls neatly into most company’s R&D processes, there is still a tendency to ignore market risks. In other words, even if we solve for the technical risks, is there anybody in the real world who cares about the product? What problems are we solving and for which customer segment? Is there are a real customer need out there? It is often hard for innovators to accept that customers don’t really care how clever they are. Customer care about their own problems and aspirations. So in addition to answering whether something can be done, we should also answer the question of whether it should be done at all.
Question 3: How Should It Be Done?
Once we are certain that it can be done and it should be done, then we have to figure out the right solution to give to our customers. A lot of smart innovators fail at this stage. They have discovered a customer need that is facing a good market. They also have a great piece of technology that can solve the problem. However, when they start developing their product they do so without involving the customer. This often results in ‘clever products’ that nobody knows how to use. Even if the technology could have solved the customer’s problem, the way the product has been put together becomes the barrier to adoption. Sure, it can be done. But it is just as important to do it the right way.
Question 4: When Should It Be Done?
In The Wide Lens, Ron Adner describes a critical blind spot that most companies working on innovation projects have. This blind spot speaks to timing. There are often things that have to happen with a company’s external ecosystem before a breakthrough product can be launched. To what extent does your product’s success depend on the successful commercialization of other companies innovations? To what extent do you need key partners to adopt your innovation before customers can fully experience the value proposition? Innovators who have ignored these questions have failed by being ‘too early’. While you may get accolades as a great inventor, this is no comfort when fast followers come behind you and take over the market. So timing is important. Make sure the external ecosystem is aligned and ready before you go to market.
Question 5: Can It Be Done Profitably?
In addition to figuring out how to make a great solution for our customers and delivering it to them at the right time, we should also spend time figuring the rest of our business model. Where will we create and deliver value? How will we reach customers to tell them about our product and/or deliver it to them? How much will it costs us to create and deliver value? How much will customers pay? How will we get to breakeven or profitability? The answers to these questions are key to the survival of our product in the market. While creative breakthroughs can change the world, this is much harder to do when you don’t have any real traction in the market.
Question 6: Can It Be Done At Scale?
Finding a real customer need is not that same thing as finding a market. It is important to ensure that the customer need we have identified represents a large enough market for us to make profits. However, finding a great market does not automatically mean we will succeed at scale. It is important for us to figure out our growth engines and ensure that as we grow we are maintaining product quality and excellence. It is also possible that the costs of scaling can render our business model unprofitable and unsustainable. All these issues have to be actively identified and resolved if our breakthrough innovations are to reach their full potential.
These are the six questions that innovators must answer to succeed, and these questions must all be answered at some point. Ignoring one or two of these questions can place our breakthrough product ideas at risk. It is important to note that answering these questions need not be done as a linear process. It can be done in parallel. Innovators should examine all six questions and identify where their riskiest assumptions lie and then tackle those first. At the same, there is a hierarchy within the questions and assumptions. For example, there is no point in exploring questions about scale, if you haven’t identified a real customer need. Treat the questions as a loose guide to your work. And here is to wishing you all the success in your breakthroughs!
This article was first published on Forbes where Tendayi Viki is regular contribution. Tendayi Viki is the author of The Corporate Startup, an award winning book on how large companies can build their internal ecosystems to innovate for the future while running their core business.