The fine line between success and failure in business, product and service innovation is Darwinian.

We live in disruptive times that are Darwinian.

These days, we are frequently putting the old things out to pasture as new business concepts for products and services come out of nowhere – from any and every angle. It is a brave new world. No longer are well-known institutions safe. With businesses like House of Fraser and Top Shop almost going to the wall it seems that no-one is safe. Sometimes the axe falls on a business or industry, beheading the incumbent, without needing to get anywhere near them – simply the result of an innovation of something that fundamentally undermines the rocks that were once a stable baseline for these businesses to operate from. It is believed that Charles Darwin said something like, "It is not the most intelligent or the strongest of the species who will survive, but those who are most adaptive to change".

For the businesses above this is true; being killed off by the so-called fast fashion industry and the rise of companies doing business online like Asos and more latterly Boohoo where costs of doing their business are a fraction of those of a bricks-and-mortar retail business. Digital channels and associated convenience provide instant access to massive distribution at a very low cost, so with the right value proposition the writing is on the wall for those who don’t turn their head quickly enough. I will come back to the value proposition part later.

The cycle never ends.

The definition of what good looks like is also evolving ever so quickly. The innovation cycle is constant with many dead-ends ahead. It takes grit and determination to keep your head up; but keep your head you must do. I was listening to a talk on leadership by Will Greenwood (former England Rugby team player) recently and one of the things that really stuck with me was him recounting how they had worked with a sports psychologist in preparation for the rugby world cup in 2003 (which, of course, they won). The team had been taught that when someone else had the ball (he described it as 'when the ball was being looked after') they should take the time, perhaps just for a few seconds, to get their head up and look ahead for opportunities rather than focusing on what was right in front of them. Interesting idea when you have a man-mountain from the opposition running directly at you! But you get the thought – look too close and you simply won’t see.

For example, often a new business or product can be regarded as a failure because it doesn’t achieve the targets that are, surprisingly often, based on collective wishful thinking. And just because we want something to be true, it doesn’t mean that it will be. So perhaps the thing we also need to do, is check for defects in the yard stick we use for measuring success. In defining what success would look like, it is a common pattern for leaders, executives and investors alike to suffer from the restrictions of ‘bounded rationality’. They refer to this as 'experience' when they’re critically analysing something and making decisions. This is where they see world and the decisions they are about to take based on their cognitive ability to process what they’re seeing and hearing. This is vs. full rationality decision making that opens things wide for all eventualities. Apparently, scientists believe that we have eleven million bits of information coming into our brain at any one time but we are only able to actively process forty (yes, four-zero) bits concurrently. Hence why we develop default modes and suffer from bounded rationality thinking. The problem that occurs here is that people will apply business model thinking potentially from out-dated or irrelevant models that make their perception of success very different to what success is. Therefore, you see the same mistakes being made time and again because most people can / will only work with what they’re comfortable with. Peter Ralston is quoted as saying, “Your perception of the world around you is not necessarily the same as what is actually occurring”. Whilst his intent with this statement is more a spiritual one it also applies to what we see in business day-to-day. 

When people take time to better understand the inflection points of where the right business, product or service does the right thing to meet a customer need, at scale, this is where the magic happens. When developing a new idea there must be an exclusive focus on the customer proposition and experience and the reason why the product was conceived in the first place. The moment you move away from this you will trigger the sounds of the death knell for your business, product or service innovation and failure will become inevitable. The problem is that, for many, this sound can be so quiet that it is not even audible; i.e. I have seen numerous examples of where people are so invested in the wrong measure of success that they make poor decisions and either refuse, or are unable, to see what will become inevitable. Failure. 

Customers will be the judge and jury. 

Take Air B&B for example; where the founders Brian Chesky, Joe Gebbia, Nathan Blecharczyk piloted the original service in their home city of San Francisco as a bed & breakfast proposition offering a highly cheap rates and a highly personalised experienced. They went through a process of reimagining the most amazing customer experience and then adding much more. In a podcast interview on The Tribe of Mentors Chesky said that he considered what most people would regard as a five-star experience and then he built on it incrementally up to over ten stars. The experiences he developed were either not viable or not scalable but in considering the extremities of what might be possible, if he were to have limitless resources, he manages to free up his thinking and this enables him to challenge the constraints he placed on his own mind. In the process of trying to scale these ideas they were able to reign the experience back to something that could scale. Then, when they scaled the business some of the essence of providing such high levels of great customer experiences prevailed. 

The consequences of not doing this present themselves in the quality of decision making and the areas where you are placing your focus; especially the areas where you are willing to compromise. Too much compromise in the pursuit of measures on a defective or innovation-killing yard stick these days can be a trap door. People can and will drop your product like a stone in favour of someone else’s - simply because they have done a better job than you or stuck to the principle of developing something that customers will love. These days, people regard themselves as time poor through much distraction and cognitive overload, so they are not likely to re-invest their time in something that previous experience tells them was a waste of it. Again, consider Darwin’s evolutionary theory; nature will brutally kill off things that are no longer useful without blinking. 

The precarious paths between success and failure are separated only by a small slither. 

When laying out what success looks like, you would be well-advised to think very carefully about it. Of course, if you have shareholders and investors, they will be hounding you to return them some value in monetary terms, but they should be cautious because this very drive can make the whole enterprise fail. I have seen countless products and businesses fail because the pricing strategy did not support the desire for scale; in fact, it created barriers. Or the wrong short-term measure was being pursued. Return on investment calculations should of course show opportunity to break even and then make money but the important nuance here is that setting the right expectations of yield and profitability over time is essential. Aim too high and you risk your decision-making being compromised as you do things that detract from the purity of building a product or service with the customer experience at its core. Aim too low and you might struggle to get investment. The key thing that I have found is that sometimes it is better not to start if you can’t get this formula right – because the risk is that you invest a lot and generate no return. 

The most fundamental thing that is often missed is the clear articulation of the customer value proposition. i.e. ‘the why would anyone care?’ question. There is often much thought that goes into the technology, the pricing, the marketing but this question is commonly missed, yet it is the most fundamental one and often the most difficult to answer. The proposition is the thing the customer buys into. At a time when people are drowning in choice, the thing that you are doing needs to stand off the page as being different. Michael Porter’s 5 Forces aims to help people understand what can make your concept sink or fly in equal measure. He fundamentally lands on two main conclusions: what you do either must be tested against these forces and either be different (could be completely new) or have to offer something equivalent / alternative to an existing competitor at a lower cost / better value. 

Whilst models like Porter’s have been around for a while, they are still pretty valid to this day. Of course, they’re not one-hundred percent correct but they offer a very useful sense check for your business, product or service strategy. 

The only way you will win and maintain a place in a competitive landscape is to focus in on those things that consumers care about and keep evolving like you are disrupting your own business. In the Harvard Business Review article, To See the Future of Competition, Look at Netflix you capture the essence of a culture that embraces test, fail, learn as a fundamental part of its businesses success. Their idea is to invest in internal teams that disrupt the Netflix business model as a way of keeping it moving forward. These teams are set-up to create disruptive ideas that would destabilise their core business and, if they find one, they look at either how they can defend against it or adopt it themselves. This comes from a belief that, if they’re not thinking this way, then someone else will.  

In the time in which we currently live, if you can’t see where these threats are coming from you are probably building the chances of failure to pretty much one-hundred percent; if not right now or soon, then at some point in future. It is often true that in these cases people become too invested and apply confirmation bias rather than taking a full view of the customer landscape. Unfortunately, in the business world there are a lot of personalities, egos and people with agendas to push things forward that, on paper, look good but in realty don’t make any sense. They don’t make sense because the customer they are serving is not at the centre of their thinking. A business, product or service will only be successful if people buy / use and engage with it. It needs to do a job and keep evolving to survive.