Tue | Oct 16, 2018

Francis Wade | How to scale up a new innovation

Published:Sunday | June 17, 2018 | 12:00 AM

Sometimes, good ideas for new products and services include the seeds of their own destruction. How can this problem be discovered and prevented, thereby ensuring the success of your latest, greatest idea?

As a company innovator, you are excited. Your original concept has taken off with higher-than-expected sales or conversions. Customers are buying because you uncovered an unmet need before anyone else.

While congratulations are in order, it's also a dangerous moment because you are entering uncharted waters filled with new obstacles.

They are not coincidental. Your success has bred them. Being ready for them takes real ingenuity, and you must use your imagination to deal with this unique situation. Here is a useful framework.

The Balanced Scorecard is built on the notion that a company's strategy can be viewed through four distinct perspectives: financial, customer, process, and people. While your firm is actually an interconnected whole, there's value in viewing it indepth from these separate angles.

In addition, the PESTER Model offers a fifth 'external' perspective. It's shorthand for Political, Economic, Social, Technological, Environmental and Regulatory/Legal forces, which affect every company.

Here's a way for your planners to use all five dimensions to examine your company's existing state and future dangers.

 

Step 1: Create a current day snapshot.

 

Together, the team develops a joint view of the performance of business via the five perspectives. This involves far more than looking at a few numbers. It means finding the drivers of today's successes and failures in a group discussion, which includes every stakeholder.

While it's a challenge to bring all members of your team to common agreement, the effort is necessary for subsequent steps and shouldn't be rushed. In both technical and emotional dimensions, there must be a meeting of the minds.

Tip: use layman's language.

 

Step 2: Simulate future growth scenarios.

 

Here, you imagine different kinds of success. For example, contrast hyper and moderate sales increases and their impact. What if the market were to grow in response to your product, as it did when Digicel first offered mobile phone service?

As you detail these scenarios, find one you are most willing to realise. Then, carefully assign it a future year, which takes you just beyond the moment when the current burst of sales is projected to end.

 

Step 3: Look for hurdles in the five dimensions.

 

Now for the creative part. As customers respond, where is your system likely to fail first within the five perspectives?

Financial: Will cash-flow problems develop? Many companies who experience rapid growth wind up with high receivables that run them straight into bankruptcy.

Customer: Can success bring new competitors into the market, offering fresh discounts or features?

Process: Where would you run into a lack of capacity? Will ad hoc processes begin to break down once volumes increase? The fact is, most new products and services are developed by small, informal teams. They work well in the early days, putting in extra hours at little cost to them and their families. It's a sacrifice that's not sustainable.

People: Where will you see a lack of talent? To develop the initial offering, you probably used well qualified, trusted individuals with a depth of experience. Now, to match new sales volumes, you must hire from the second and third tiers. By definition, they aren't as productive and need to be trained.

External: In a highly regulated industry, is it likely that the regulatory rules may change in response to your product? Could the authorities react by limiting the market, reducing your profit-making potential?

While taking these five perspectives is a beginning, my experience tells me that the most difficult topic to discuss is that of leadership.

Founders, CEOs and chairpersons are often reluctant to craft plans for succession, putting off such uncomfortable issues for others to suffer through. They neither train their replacements, nor make provisions for catastrophes which may render them unable to lead.

There's also an unwillingness for companies which belong to conglomerates to consider changes driven by their ownership. It's easy to overlook the fact that in these groups, other people can decide to use a company's profits, or surpluses in the public sector. The owners, in the absence of compelling counter-arguments, may simply choose to invest elsewhere, pay dividends or reimburse the group office for the original risk.

Companies that don't properly consider all these factors expose themselves to rude surprises, thereby jeopardising the enterprise. Fortunately, it's not expensive to make plans to meet these challenges. They represent a critical investment that's well worth the value.

- Francis Wade is a management consultant and author of "Perfect Time-Based Productivity". To receive a Summary of Links to past columns, or give feedback, email: columns@fwconsulting.com