LAUNCHING AN INNOVATIVE PRODUCT?
5 KEY REASONS WHY YOUR MARKET STRATEGY IS LIKELY WRONG!
Time and time again, we receive enquiries from people who have great innovative products, but just cannot get adoption and are at their wits end as to why they cannot achieve sales. How frustrating?
In reality, there are some very simple mistakes that put businesses in this position. In this blog, I want to be very explicit as to what you can learn from disruptive innovations and the market entry strategies that will give you the highest probability of success.
At first glance, you will see these 5 key reasons for failure as “counterintuitive” to what many believe is the right way to gain traction in the marketplace. However, statistically we know that market entry is much more successful when following some basic rules.
Below are the 5 key reasons that your market entry will fail.
1. You’re targeting the high-end market
It seems logical to think that “if we land this BIG fish, then we will eat for a lifetime”, however there are so many reasons why trying to land the big corporate is a contributing factor to many failures.
Big firms have high expectations, long procurement processes, large bureaucracies and low tolerance for products that are not perfect. And as a new entrant to a market, you should be “testing” the market with a Minimum Viable Product to validate that your innovative idea is solving a problem that many need solved. You may be a small business, focused on scaling. Even if you land the contract, the demands a large corporate can place on you as a market entrant can be so impractical that it can bring your business to its knees.
Instead of chasing the big fish, focus on either the low-end market or non-consumption market. This way you can work with this less demanding segment who simply want and value what you have to offer and are much more tolerant even if your product is not exactly “perfect”.
2. Pricing for Profit not Adoption
Your primary objective of entering a market is simple; adoption. Getting users to adopt your innovative product, validate that someone out there wants, values and needs it enough to pay $xx for it is fundamental in a soft launch market entry strategy. Profit comes down the track so within your market entry strategy, and particularly if you are sourcing capital investment, be sure to be budgeting and cashflow forecasting to continually invest in adoption strategies as opposed to profits. There are many reasons why you want adoption over profit in this early-stage market entry phase.
- You are validating that businesses or consumers want, need and value your product as your primary objective
- Because you are targeting a low end or non-consumer market with an MVP (minimum viable product), you want to create a base mass of users to then learn from them how to best improve the “performance” of your product. This is a critical component of then developing the strategies of crossing the chasm from early adopters to early Majority Market
- Drive momentum – by soft launching and gaining adoption at a manageable growth rate, you can manage the development of your product, expand distribution at a controllable rate, improve operational functions, increase brand awareness and generally avoid the term “death by growth”
3. Competing on the Basis of “Better Performance”
Now this is counterintuitive however statistically we know that as a new entrant competing against incumbents (your competitors) on the basis of “Better Performance”, you have less than a 14% chance of winning. That’s right, less than a 14% chance which is basically bringing your strategy into the realm of “will you be lucky?”. 77% of the reason of the more than 80% failures in innovative product launches are due to external factors such as incumbents (your competition).
Think of it this way; if you were a powerful company and a new entrant came into your market, trying to steal your profitable customers… would you just sit back and allow that? No! Incumbents that you threaten WILL respond, and in many cases, very aggressively.
Your market entry strategy should aim to stay “under the radar” of incumbents. This is why targeting the low end or non-consumer market is so successful. If you steal the low end, not so profitable customer from a large competitor, they are more likely to be quite happy to see those customers off their books; this strategy is unlikely to illicit a response from the competitor. Just what you want while you grow and become stronger before taking them head on. Think of “Grilled” in how it has entered the market, grown and become powerful and is now taking on the likes of McDonalds head on (and sometimes in a very cheeky way).
4. You don’t know the market well enough
Assumptions followed by action, are the death of many innovative market entries. Assumptions followed by action are full of danger and in most cases new entrants get it totally wrong. Instead, yes, make your assumptions, but do the research to “validate” your assumptions. Or in fact, equally as powerful is when you “invalidate” your assumptions.
Know your market and know it extremely well. Things you should be able to answer succinctly are things like:
- What is the size of the market, locally, nationally, and globally?
- What are the market segments within your targeted market?
- What do you customers want, need and value in how they strive to succeed in their business?
- What is the job they are trying to do (more on this in number 5)?
- How are they doing that job right now? What ways are they executing workarounds?
- How big of a problem is it?
- Who are the low end or non-consumption customers who do not have access to solutions now, or cannot afford them or the current solutions are too complex?
- Who are your competitors? And remember, don’t limit competitors to what you consider to be the direct competitors. Even non-consumption is a competitor where you need to understand why it is that people do not currently consume.
While all 5 key reasons are important, knowing your market, what the opportunity really is and all the behaviours around how this target market works, thinks and acts can be most fundamental to your success or indeed, your failure.
5. You have a Solution seeking a Problem
Far too many times we see innovations from people who “had a great idea” but have not found the “job” that this great idea does for businesses or consumers. In other words, they have come up with a solution and trying to find a problem that it solves. Often these types of great ideas are very feature based. They are what we call “sustaining innovations” and I hate to be the bearer of bad news; but almost always, where the solution is a cool feature, they fail. The greatest way to test your idea as to whether it has a probability of success is to define the “Job to be Done”.
The Job to be Done concept is so powerful.
Let me give you an example;
Getting a package from point A to point B is a job that many businesses and consumers have. 150 years ago, Stage Coaches took weeks and weeks to get a parcel from Melbourne to Brisbane. Then came along the innovative railway train. The job is the same, but the job could be done so much efficiently and effectively, and as critical mass grew, the price of sending via Railway compared to a Stage Coach, enabled easy access to a variety of purchasers. Then holy moly, we were able to send a parcel on an airplane. Job is still the same, but now instead of taking a couple of days on the Railway, I could have a parcel sent across the country and be there the next day. And what do we now foresee and in fact are beginning to experience? Drones; the job has not changed in 150 years, but innovation is allowing people to choose more accessible, simple to use and lower cost per unit methods to do the same job.
Where you totally nail the Job to be Done, targeted at the correct market entry segment, as an MVP (minimum viable product), your probability of adoption is extremely high.
You see, we really don’t need to have this massive blight on individuals and society with so many great ideas failing. Instead, we simply need to focus on the facts and statistical information on what causes failure. When you know the formula of how to enter the market and follow basic steps then you increase your probability of success. It doesn’t mean that execution is a breeze; far from it. But it gives you the framework to learn, adapt as you gain deeper and deeper knowledge of your right market segment to enter and gain adoption. Which by now, hopefully you know, is the basis of building a sustainable and scalable growth model to success.