And how we might reduce the risks and increase the odds of success.
In 2009, as a rookie reporter for the Wall Street Journal, I contributed to a story on “reverse innovation” written by my then- boss, Eric Bellman.
Companies as diverse as Tata Motors, Godrej and General Electric among others had announced plans to sell stripped down, cheaper versions of their products in India to cater to the “fortune at the bottom of the pyramid”.
As with all innovation, many of the ventures we featured in the story failed to make the mark. The Tata Nano being the most well-known among them.
There was not much thinking about what those consumers needed or wanted or how they might be different from consumers with more disposable income.
And yet, there's a lot we can learn from those failures too.
The reason over 90% of innovation fails is because corporates assume too much and test too little. They lack a systematic, scalable and repeatable methodology to de-risk new ventures.
Lessons from Godrej ChotuKool
At a time when fewer than one in five Indian homes had a refrigerator, Godrej figured it could attract a huge new group of consumers if it could get the price right.
The Godrej team pursued a customer discovery approach guided by U.S. based consultants.
It sent surveyors into village huts for months at a time to discover the needs of farm families. They noted how people bought groceries for daily use, made meals from what they had bought that day. They also observed people had very little space in their homes. How they used earthenware pots to keep water cool, boiled milk to keep it from spoiling and avoided the need to keep anything else cool by using it quickly.
The "ChotuKool" fridge they designed, opened from the top and was about 1.5 feet tall by 2 feet wide. It had no compressor. Instead, it ran on a cooling chip and fan similar to those used to cool computers. It used high-end insulation to stay cool for hours without power.
By keeping it small and reducing the number of parts to around 20 instead of the 200 that go into regular refrigerators, Godrej was able to sell it for only $70, or one third of the price of a regular bottom-of-the-line fridge. It also consumed only half the power so it kept electricity bills at a level the poor can afford.
The problem was that after initial market success, sales of the ChotuKool quickly declined and after two years only 15,000 had been sold.
Chotukool served a need that did not exist in the eyes of the consumer.
(Photo: Godrej and Boyce)
Blind faith is not a strategy
ChotuKool died a tragic death because it missed out on one crucial thing. It didn’t tick all the boxes.
When it comes to successful innovation, you have to have a product that’s viable, that’s feasible, and that the customer genuinely wants.
Two out of three – well, that’s just plain bad. It might be a feasible, viable idea, but if your customer doesn’t desire it, then it simply won’t sell.
Could be that your idea is sought-after by your customer, but your solution is too complex to roll out in a cost-effective way.
Assumptions are what get in the way of innovators being able to tick all these boxes. That’s why testing your assumptions is of paramount importance.
Three things you must test for BEFORE going to market
- Is my idea desirable? Do people want it because it solves a real unmet or underserved need that enables you to create value for a customer?
- Is my idea feasible? Do I know how, both technically and organisationally, we will deliver and capture that value?
- Is my idea viable? Am I able to capture that value and deliver a financial return back to my organisation?
Lastly, you have to have evidence for all of these things.
Things that people want, that you know will generate a return, but that you don’t know how to build? That’s impossible…
Things that people want, that you know how to build, but you don’t know whether it'll generate a return? That’s fantasy…
And finally, things that you know how to build and generate a return, but you don’t know whether anyone wants it? That’s pointless…
Remember – just because you can do something, doesn’t mean you should.
A proven process that removes the guesswork
The good news is that you don’t actually have to do any of the above on your own. At Studio Jigsaw, we do this work with you.
Our newly launched corporate venture builder eliminates uncertainty by codifying the methods of the world's fastest-growing companies, helping you to rapidly identify, validate and scale new ventures, products and services while reducing the risks.
Think of it as an experimentation playground within the framework of the organisation.
To find out about more, drop your details.