How potential breakthrough offferings get killed off. One key to winning the brand relevance battle by creating new categories or subcategories is to evaluate and select the right concepts to develop. In doing so there is a risk that a concept with high potential is not funded or has its funding cut-off. As a result a firm loses the opportunity to create a new category or subcategory in which the firm could hold an ongoing advantage and a potential source of profits and growth. The problem is hard to correct because the results of such decision often are forever hidden . What kills concepts with potential to make a difference with an innovative offering? Many are terminated by a gloom and doom bias that takes on several forms. Pessimism about technological advances . GM killed the EV1, a battery operated car in 1998 just before a breakthrough in battery technology occurred— in what the GM CEO Rick Wagner opined in 2005 was GM’s biggest strategic blunder. Synthetic detergent was under development at P&G for five years when the firm killed the project. Luckily a P&G scientist pursued the effort without permission or funding and five years later Tide was born. Had the firm enforced their decision, P&G would still be a soap company. In contrast, Toyota charged their product team to come up with the Prius, despite the fact that at the outset the technology was inadequate. There was a commitment to find or create the necessary technology. Market size estimates are based on existing flawed products . Digital readers, termed e-readers, were around for a decade but had never gotten traction in part because accessing books was difficult and the units were clunky. Then in November of 2007, Amazon launched the Kindle with its Whispernet fast down-load system, its 30-hour battery life, a book-like reading experience, and a market buzz. The Kindle sold over 1 million units in just over a year and made sales of prior products irrelevant as points of reference. Belief that offering limitations are fatal. Mint, for example, the personal finance service, had trouble getting funding because the judgment was made that no one would provide personal financial information. However, they proved that judgment to be wrong because they were able to argue that their read-only system was not vulnerable to moving money around, their track record of never once having been compromised was persuasive, and their use of third party brands such as VeriSign and Hackersafe ensured safe communication. The right application is not identified . Intel, during the development of the 80286 microprocessor that began in 1978, came up with fifty possible applications. The personal computer, the ultimate application that became the basis for the Intel business for decades, did not make the list of 50. This failure was in part due to an understandable inability to forecast the development of a host of supporting technologies and software programs that made the PC a runaway success. A powerful technological breakthrough with the right creative effort will find an application. The wrong market is targeted . Joint Juice is a firm founded by an orthopedic surgeon who had the breakthrough idea of making glucosamine, effective in reducing joint pain, available in a liquid form. The initial target market, young to middle-aged athletes was disappointing, but a refocus on an older demographic, people who wanted lower-calorie, less-expensive products, resulted in a successful health business. At the early stages a variety of markets should be on the table. A niche market cannot be scaled . The ultimate reason to kill a potential offering is that the market is too small. For that reason Coca-Cola avoided the water market for decades, a decision that was a strategic disaster in retrospect. The reality is that niche markets can grow and can go mainstream. Nike, Starbucks, and SoBe are examples of brands that have successfully scaled their value proposition. Two implications. First, be sure to make assumptions and judgments with some depth of analysis. Beware of snap decisions based on instinct or superficial metaphors. Second, be willing to accept some risk. The future is also hard to forecast. But the upside of the creation of a new category or subcategory can be strategically important and can justify the acceptance of risk. It can provide a business platform for the future and a profit flow that can support strategic growth. A firm needs to take care that a bias toward doom and gloom does not too quickly result in the wrong decision.
Posted on: Tue, 23 Jul 2013 08:33:28 +0000
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