In my last article “Why Promising Bold Ideas Often Never See the Light of Day,” I identified a major reason why bold new ideas and strategies get scuttled early on is because we are too quick to judge the merit of new ideas based on what we believe to be true. We literally kill it before it has a chance to take shape and form.
Any discussion of evidence in the early stages of the innovation & strategy process hinders our ability to cultivate a breakthrough strategies beyond what we think we know today. Thus we end up dismissing great possibilities for the future, and focusing on safe bets that perpetuates the status-quo. Eventually this tactic leads to market decline as new competitors out innovate us and customers’ preferences evolve.
Improving our odds for success
We can never predict the future with 100% certainty. But we can increase the odds of success by implementing a discovery based innovation process allowing us to move forward and make the best decisions we can based on what we discover and learn as our journey unfolds through the innovation process.
The first challenge in conducting an innovation journey is to not frame concerns and issues as “go/no-go” decision points at the onset. Instead, we want to identify and list all our concerns and then reframe them as “a condition that must be true for a bold idea to be a market success.”
By framing concerns as a “condition that must be true,” we open the dialogue to exploring future possibilities. The conditions we identify become a set of hypothesis that we systematically test and validate allowing us to consciously make the best decisions to achieve market success.
Based on each set of test results, we either validate and concept and move forward, or reject the hypothesis under test and refine. Or kill the concept now that we have sufficient data to make an informed decision.
Enumerating Conditions that must be true for this idea to be a success
There are a several approaches we can use to systematically define the conditions that must be true for an idea or a strategy to be a market success. Martin and Lafley call this process “reverse engineering.” Starting with what a possible future looks like (the desired outcome – i.e. successful new breakthrough product), identifying all the conditions that must be true, and create a set of assumptions based on these conditions to test and validate our hypothesis.
Another approach we can use is called the “Reverse P&L” created by Rita Gunther McGrath and Ian Mac Million. In their approach, we start with what we believe the “steady state” profit must be for a company to consider the bold idea worthy of investment.
With this method, we start at the bottom line (the required profitability defined by your business objectives), and create a reverse P&L by working our way down through all the assumptions associated with revenues and cost that lead to our required steady state profitability objective.
The assumptions identified in the reverse P&L method are used to define the conditions that must be true for the idea to be a success. In my article Putting Theory Into Practice Part 7: Identifying Key Assumptions Upfront, I go into more detail how the reverse P&L is used to conduct a discovery based innovation process.
A Quick look at The Seven Point Strategy Framework
Martin and Lafley define the Seven Point Strategy Framework as a method to identify the necessary conditions that must be true across seven business categories that defines the business model. The seven categories are:
Industry Analysis 1) Segments: What must we believe are the strategically distinct segments?
2) Structure: What must we believe about how attractive the target segments are?
Customer-Value Analysis 3) Channels: What must we believe the channel values? 4) End Customers: What must we believe end customers value?
Relative Position 5) Capabilities: What must we believe about our capabilities and how they stack up against our competitors? 6) Costs: What must we believe about our costs and how they stack up against our competitors?
Competitors 7) Reaction: How must we believe our competitors will react to our actions?
Your innovation and strategy making teams can use this framework to wrap their head around the conditions that must be true in order a bold idea and strategy to be a market success. The team should generate all the conditions they believe must be true in each of the seven categories.
Like the assumptions created using the Reverse P&L method – these conditions layout the core set of hypotheses the team must validate in the discover and test phase of the innovation process. But which conditions are the most critical? And which ones should they focus on first? We will address these questions in future articles.
Until the next time, discover what must be true in order for your bold idea to be a market success! Kevin