How do you set a strategy for innovation in your products or services?

There are many approaches and to be honest some of the common ones are tactical rather than strategic. Let’s look at some possible criteria that you might use to select what your next new product will be.

1. Does it Meet our Corporate Vision and Business Strategy? 

This is a good generic criterion but it can be too broad to give you much help in choosing a specific product to invest in. So you should probably use this factor in conjunction with some of the others that follow.

2. Can We Master Technology? 

If there is a new technology or system that you can harness then you can look for a technology-led innovation.  Now you have to find an application for the technology that meets a customer's needs and for which they will pay money. This was the problem that Art Fry at 3M solved when he took a glue that did not stick (the technology) and made it into post-it notes – a radically innovative product.

3. Does it Meet a Customer Need?

This is probably the best known and most effective way to select new product developments. We survey customers, observe them in action, identify difficulties or needs and then develop a product to address these requirements. This is what Apple did with iTunes when it identified a service that music downloaders needed.

4. Can We Make Money Quickly?

Also known as the low-hanging fruit approach. We look at adjacent products or markets where we believe that we can make money by developing or acquiring a product. This tends to be incremental and tactical rather than strategic and is sometimes harder to accomplish than it first appears. However it is a proven strategy used by many FMCG companies who release different pack sizes, tastier flavors or novel combinations of products that fill holes in the brand map.

5. Does it Take us into the Blue Ocean? 

You draw value curves for your offering and those of your competitors.  Often the curves are remarkably similar. Then you ask whether you can differentiate your proposition by bringing out a product that offers dramatically more or less in some of the feature areas. This is what low cost airlines like Southwest or Ryanair have done successfully.

6. Does it Go Where the Brand Leads? 

A brand is a promise. So ask how your brand promise can be developed and fulfilled. A new product that does not fit in with your brand image breaks the promise and may well fail. So introducing an innovative mobile phone was well accepted for Apple but would have been difficult if not impossible for Dell which is so closely identified with PC clone products. Compared to other companies, Virgin finds it easier to break into new markets and new products because of its brand image as a rebel. For innovations to succeed they should fit with the image of the brand that the consumer holds. That is why Caterpillar who make huge excavators and engines could innovate with a range of boots that were tough and macho even though boots and earth moving equipment are vastly different markets.

Which approach is best?  Perhaps you should ask how your new product ideas rate against all of the criteria above. The more checks the better. Unfortunately, a check in every box still does not guarantee success.  But a negative answer to any of the questions does raise a red flag. Why develop a product for which there is no clear customer need?  Using this long list cannot ensure that you get a winner but it should help you to avoid too many losers. Having said all that, we must remember that there are exceptions to every innovation rule. Who would have thought that there was a customer who needed a pet rock? Yet remarkably the product was a winner!