Analysis from the partner in the company Eldey Consulting Group Nikolay Molchanov. Innovation is the life of a company. Were talking about the start or about the factory with fifty years of history.
From the development and launch of new ideas on the future of the business. Companies spend billions of the invention product categories or the revolutionization of the old. But a large part of all innovation turns out to be economically unsuccessful. The company invests in R & d, then manufacturing and discovers that the new product does not use the expected demand.
The costs incurred are written off to losses or company spends more money trying to convince buyers that they like the product. For example, the creation of high-strength Kevlar colocon the worlds largest chemical concern DuPont and it took 25 years and $700 million. After that, employees spent another 10 years trying to find a market niche for your product.
Unfortunately, most entrepreneurs dont have hundreds of millions of dollars and decades. To avoid wasting money then it is better to think about potential problems associated with the launch of new products and services now. Practice Eldey Consulting Group coincides with the theory of management.
Failures of new products and innovations is often underestimated due to three obstacles. Suppose a company has developed a new product. For her it is a holiday. On the wave of excitement coming up with the brighter ways to set off a new development from the competition, demonstrate the resulting benefits.
Actually, in the beginning it is more important to define its proposal so that it became understandable to consumers. The product becomes clear when a potential customer can easily carry it in one category or the other. We are aware of the benefits of one offer over the other only in comparison, therefore, before the buyer starts to understand the proposed benefits, it is necessary to understand, to compare a new product.
That man took the new proposal to some known category, he should easily answer at least one of three questions. If you have trouble understanding, is the easiest and working way is to use analogies.
Compare the new product with something familiar. “pomelo is like a grapefruit, only bigger”, “its like a regular lamp, but it works 10 years”. The less in comparison to abstract words like “better, better, more reliable”, the better. If you are helping the buyer to determine the category to include your product, be extremely careful.
Category has a decisive influence on the thoughts and actions of the buyer. Saying that “the computer is like electronic calculator”, then have to explain why it costs a hundred times more expensive. Companies have long assumed that people will be delighted to accept new products that carry more benefits than are already on the market. But the attractiveness is evaluated by the purchaser on the level of subjective, not objective value.
The real benefit for the customer may indeed outweigh the costs, but the perceived losses may exceed the perceived benefits. As a result, the buyer chooses the former solution, even if it is objectively worse.
The user evaluate the innovation using the reference point, which acts as an already purchased product or service. The desire to get something new goes hand in hand with the need to give up something that we have. People view any improvements relative to existing product benefits, and all shortcomings as losses. But losses have a greater impact than acquisition.
Against the innovative product is the effect of endowment — what we already possess, becomes “our charm”. For example, you will agree to bet $10 thousand, if you win the same amount with 50% probability. Most people refuse. The benefits must outweigh the losses in two or three times and sometimes more.
The company is looking at the situation from his point of view. While developing the new product for months or years, they know how it works, understand what problems it solves, and is well aware of the shortcomings of existing proposals. The lack of positive features of their product from its competitors is perceived as a serious drawback.
And the advantages of competitors do not appear noteworthy. In assessing the opportunities associated with launching new products, we are guided by the “Factor 9”. People overestimate the value of the goods owned.
For a product, it is not enough to simply be better than its predecessor. Ask buyers “in the forehead” why didnt they buy a new product, as a rule, pointless. Such marketing research is a waste of money. Usually people answer. “because its too expensive”.
This response is quick to say hes logical and socially acceptable. Our recommendations for closing the gaps in attractiveness tend to fall into one of four categories: New products often require the buyer to change the established pattern of behavior.
Following this, there are additional costs, as well as psychological discomfort. The more must change the behavior of the buyer, the higher the resistance the new product. Usually companies do not take into account exactly this point. Executives believe that the most important is the uniqueness and the breakthrough nature of the proposal.
Our experience suggests that if you decide to go solely on the innovative benefits of the product, it had better be a cure for cancer. We distribute the products depending on the extent of the necessary changes on the matrix Behavior Change Gap. In order to reduce the estimated cost of changes, it is better to invest in areas where it will have a greater effect.
We use the model ACCORD. What to do companies to have their product adopted. Depending on the situation: