8 Questions to Mitigate the Risk of Innovation

There’s a big, obvious reason more companies don’t innovate: risk. Too often, people’s advice is to embrace risk, which is basically like saying, “Oh, you’re scared of risk? Well, stop being scared of it.” As if that’s going to help. Instead of embracing risk, what if we mitigated it?

Starting from scratch to releasing a viable new product in the market, what do you think the probability of success is? 

Online, you’ll find many claims that 80 percent or more of new products fail, but as researchers George Castellion and Stephen K. Markham outlined in the Journal of Product Innovation Management, this is a myth. Empirical studies since 1977 place the true product failure rate at 40 percent or less. With a solid innovation process, you can drop that statistic further, to 30 percent or less.

Innovation doesn’t have to be as risky as you might expect, with a big caveat: you need to do it the right way.

After decades of experience in product development, we’ve created a process to minimize the risk of innovation. The secret? Knowing. Every step of our process is about knowing, because knowing mitigates risk. These six questions function as knowledge gates (as opposed to stage gates), helping you to spend your time and money wisely.

#1: Problem Seeking: Do you have a good problem to solve?

You always have to start with the problem. If you start with the wrong problem, nothing else matters. You could develop the most innovative solution in the world, and it will be useless. Solutions only have value if they solve something people care about. 

Too often people rush over this step. As soon as they identify a problem, they dive into solutions. Take the time to brainstorm and consider lots of problems. Look for the pain points to figure out what is needed: a real problem that, if solved, would improve people’s lives.

#2: Problem Seeking 2.0: How will you sell a solution to the problem? 

Identifying a good problem is only part of the challenge. You need to not only solve the problem, but also sell your solution. If you’re going to invest in developing a new product, you need a return on investment. Don’t wait until after you’ve already developed the product to figure out how to sell it. 

Do initial market research with potential customers. How important is the problem to customers? Important enough that they would buy a solution? Where would they buy such a solution?

That leads into the second key component of problem seeking: distribution. How will you get the product to customers so they can buy it? 

Too often we meet innovators who think if they create a great product, they can just call up Walmart HQ and get it placed on the shelves. It’s not that easy. If you don’t have a clear picture of how you’re going to distribute the product, you shouldn’t be in the business. 

#3: Support System: Do you have a partner you can rely on?

We tend to glamorize individual inventors, but duos have been responsible for some of the most impactful innovations. The Lumière brothers gave us movies, the Wright brothers gave us the airplane, Steve Wozniak and Steve Jobs gave us the Apple computer.

Particularly today, innovating has grown more complex. Success rarely happens alone. You need at least one business partner—somebody you share your soul with who can help shoulder the load. You will face challenges. If you don’t have a partner to pick you up when things are down, you’ll be far more likely to quit.

#4: Solution: Which solution is most promising?

When you first brainstorm potential solutions, ignore risk. Throw out lots and lots of ideas and fragments of ideas. 

The next step is to write concept sheets, detailing how you might implement the idea. This is a good time to reference patent archives. At this point, you’re less concerned about potential patent infringement and more interested in learning from what came before and stimulating outside-of-the-box thinking.

Then it’s time to funnel your ideas down to the top three, and this is where risk mitigation comes in. You build a multidimensional matrix ranking based on a number of risk factors: the feasibility and difficulty of the solution, the potential payoff, the alignment with your particular expertise, and so on. After choosing the most promising solutions, you can proceed further in development.

#5: Scientific Feasibility: Is the solution possible in theory?

We once worked with a company that wanted a door that generated electricity when it was manually pushed. The energy would then be stored in a battery, to be used to open the door automatically when the handicap-accessible button was pressed. We built a prototype, and it worked: every seven manual pushes generated enough electricity for one automatic open. The company then told us they were expecting it to be one-for-one. Well, that is simply not scientifically possible, because of friction and energy loss.

Before building a physical prototype, you need to start with a mathematical model that proves the solution is feasible. Don’t invest in anti-gravity, perpetual motion, and other impossibilities. Only pursue solutions you know can work. 

#6: Protection: Can you patent some part of the solution?

Let’s say you go through all the work of product development and create an amazing, successful product. Great! But what’s to stop another company from coming in and copying your product, reaping all the benefits without any of the work? Nothing—unless you have a patent. You need to be able to patent some part of the solution to protect yourself.

#7: Market Validation: How will customers respond to the product?

With a feasible solution in mind, it is time to do more-detailed market research. The initial market research determines potential. This market research validates. 

Through focus groups and customer surveys, work to answer these questions:

  • Does the product solve the problem?
  • Does the product have a competitive advantage?
  • How much are people willing to pay for the product?
  • What are the required features to get people to buy the product?

Market validation provides the needed information to decide whether to proceed with development. 

#8: Logistical Feasibility: Is the solution possible in practice?

Sometimes a solution is possible in theory but too expensive or logistically challenging to be practical. Consider the logical feasibility of the solution, from development to distribution:

  • Cost: How much will it cost to develop and produce the solution? Is the forecasted value of the product worth the cost?
  • Regulations: Are there regulatory hurdles? What will it take to overcome them? 
  • Manufacturing: Where will you get the materials to produce the solution? Do you have the manufacturing capability to actually produce the product?

It’s easy to put off these questions until you’re forced to deal with them, but by then, it may be too late. Plan ahead.

Increasing the Odds of Success

Innovation is inherently risky. You will never be able to eliminate the risk entirely, but you can increase your odds of success. With each knowledge gate, you learn enough to make an informed judgment call: Should we keep investing in this innovation?

At PCDworks, by using this approach, we've successfully developed innovative solutions for fifty-plus companies across a range of industries, racking up more than thirty patents along the way. 

This is what embracing risk is really about. You don’t embrace risk by ignoring the potential dangers and plowing forward anyway. That’s stupidity, not bravery. Embracing risk means facing it head-on with a step-by-step approach to gain knowledge, replacing uncertainty with certainty.

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