Introducing something new to a routine can bring about either positive or negative change. For instance, modifying your daily schedule to include time at the gym can introduce positive, healthy change. Taking a walk with your family after dinner might be a positive change in your routine – giving you a chance to talk about your day and connect with those you love.
Unfortunately, change is very difficult for any group larger than one. It’s easy to convince ourselves of the benefits of going to the gym or taking a family walk, but not everyone else is readily convinced. The kids might complain that they are tired, and teenagers might say it’s nerdy to take a walk. In addition, to deciding to change, we must have the willpower to stick to the change or it will fail.
Change for Innovation
Of course, innovation is all about change. We design and develop new products to introduce change in functionality, markets, or profitability. These changes might be incremental and operationalized into a routine. Yet truly game-changing innovation is radical and requires not only new systems and processes, but also new attitudes.
Historically, new product development (NPD) has been viewed through two lenses: routine, incremental innovation and radical, disruptive innovation. Routine innovations include new products that are updated for color or style on an annual basis. Other incremental innovations include product modifications that adopt improved raw materials, quality testing, or reduced cost structures.
Each of these elements can impact the end-user, so a process must ensure consistent development activity. This business model is sometimes called “exploitation” as the company is trying to take advantage of its market share, customer knowledge, and operational efficiency. Exploitation as an innovation strategy is common for risk-averse, cost-conscious firms.
Radical or disruptive innovations introduce significant changes to a marketplace. For example, cell phones have replaced landlines, paper address books, and appointment cards. Disruptive new products eliminate raw materials and byproducts in chemical processing or reduce handling of goods by error-prone humans, replacing movements with robots. Radical innovations create unique change and new opportunities for companies, end-users, and suppliers.
To succeed at radical change, companies must excel at “exploration”. This means leadership is willing to pivot the strategy while testing and learning from new business models. Organizations must be flexible, nimble, and trusting to adopt radical change. Management understands that some areas of research will pan out while other areas of exploration will not.
We see change fail when organizations have a strategic mismatch between their risk tolerance for change and the innovation process deployed for new product development. A company that values experimentation and learning will succeed with radical innovation because their business systems and processes support flexibility and seeking new opportunities. Likewise, a firm that adopts a cost-efficiency strategy can be very successful with routine, incremental innovation processes. Changing colors, switches, and knobs is more a question of manufacturing capability than of tackling new technical or market opportunities. Incremental innovation is better supported by routine and repeatable systems rather than approaches focused on experimentation and learning.
Change fails, therefore, when the business strategy conflicts with the NPD process model. For example, heavy-duty, staged-and-gated NPD processes tend to fail with disruptive innovation. Documentation and fail-safe decisions built into waterfall systems are too bureaucratic to allow for quick hypothesis testing and learning. Similarly, trying to implement an Agile NPD process into an organization driving cost efficiency through product development will lead to failure. When these teams try to work quickly, eliminate waste, and iteratively design, management will intervene to slow down and adopt risk-averse milestones and steps in the process. In either case, the desired change will fail.
Preventing Change Failure
Innovation is all about change. New product development is the primary way for businesses to grow revenue and maintain market share. However, understanding your company’s strategic risk factors determines whether you will be successful with a given NPD process. Seeking cost-efficiency turns innovation into another routine business process with consistent and predictable outcomes. Tackling new markets and new technologies requires flexible and adaptable business systems, favoring a hybrid or Agile approach to product development.
To learn more about strategic risk factors and designing the right NPD process for your organization, please join me for a special 6-week course starting 24 January 2023. Register here for Designing a Hybrid Product Development Process.
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