LinkedIn Article by Jon Stout, published on 1/9/2017
Today is the first day of JP Morgan’s 35th Annual Healthcare Conference, a gathering of the biggest names and innovators in our industry. AbleTo will be in San Francisco this week, and no doubt one topic that will come up again and again will be innovation.
I live and breathe innovation as a central part of my role as head of strategy at AbleTo. Failure to innovate as a company would put us at risk of going the way of 98% of digital health companies that one Forbes contributor called ‘zombies,’ companies on their last legs without a path to profitability. If 98% seems surprising, you may be equally shocked to learn that only 61 companies that appeared on Fortune 500 list from 50 years ago are still in business. The case for innovation is obvious, yet somehow most companies still fail to bring innovative solutions to market. Why is true innovation so challenging? And what’s the solution?
A few years ago, I learned a simple yet powerful formula to serve as a guiding principle for any organization’s innovation strategy:
The Quality of Your Solution x Market Acceptance of Your Solution = Likelihood of Success
While it may seem obvious at first, there are countless examples of companies large and small ignoring these fundamentals. I have never built a strategy without consulting this simple formula. Companies face pitfalls when they love their product more than the market dictates, or worse, when they create a demand for their innovative offerings without the ability to execute. Execution is critical, and I’ll save that topic for another article.
Failure happens in one of two ways, by focusing only on the first part of the formula (‘Heads-down Innovation’) or by forgetting the first part of the equation altogether (‘Quicksand Innovation’).
Heads-Down Innovation: Building a Solution that Nobody Wants
We’ve all done it. We put our heads down and focus on the “new” innovative solution, a slimmer design, a faster process, a more powerful algorithm. We want to control the movement and squeeze innovation into our business so that it serves us well. But sometimes we forget to ask the obvious questions: Does anyone actually care? Do my customers want this? Will people pay more?
Take the example of Kodak. Kodak didn’t go out of business because they failed to innovate. In fact, Kodak invested heavily in innovation, leading the market in digital photography as a new industry was being born. However, they tried to shape the innovation so that it iterated on their existing business as opposed to really understanding what the market wanted. Kodak innovated with their heads down as their competitors listened to the market. Kodak’s effort to salvage their legacy film-based business spelled doom.
Quicksand Innovation: Selling Your Vision on a Weak Foundation
Understanding what the market wants is important. But if we follow our formula, we know that being able to deliver a high-quality solution is equally important. Early stage health care companies get asked hard questions from our prospects all the time: “What success have you seen at other customers? How quickly can you scale? How precise is your targeting?” I spent 12 years in a large managed care organization and shared responsibility for evaluating countless pitches from early stage companies who claimed they could help us achieve our strategic objectives. Trust me, we know when you are stretching the truth about your successes to date. We know when your ROI numbers are vastly overstated.
Be honest with what you can deliver. Be transparent as to when you can deliver it. You need to find the right partners who want to grow with you, and they are out there. If, by chance, you gain market traction on the “promise of success,” your business could easily implode when your customer starts asking to see the results. Laying the track a mile in front of the train can be done…but sooner or later, you are going to get run over.
Lesson: Focus on Both Quality and Market Acceptance Together
The ideal strategy accomplishes two goals at once, focusing on high-quality, outstanding products, and at the same time, remaining hyper-focused on ensuring that the people paying your bills embrace your innovation. Following this formula for innovation doesn’t necessarily guarantee success, but missing one piece of it may very well guarantee failure.
I look forward to reading your thoughts and stories in the comments. Do you have an innovation ‘formula’ that you can share?