Are You Innovating Too Quickly?

Corporate CEOs are often chastised by the business press for moving too fast or too slow to make fundamental changes. But Michael Schrage suggests that focusing on that metric is a fool’s game. Much more reliable is the metric of how fast your customers and clients are willing to change. Their inertia matters more than your momentum.

In some industries, customers have been successfully trained to turn on a dime. Look at mobile phones, personal computers and social media. For over twenty five years now — and with a tip of the cap to Moore’s Law — consumers have been trained to expect something faster, better and (cost-effectively) cheaper on a faster-than-annual basis. Readiness to change is now an everyday part of their rational expectations. That doesn’t mean they will change or even that they are predisposed to change; it simply means that competitors in those industries will likely lose if they can’t change at least as fast as their customers. The folks at Dell and Nokia have learned this the hard way.

At Electrolux, for example, the company has implemented a new “70% rule” for testing its new product innovations to make sure it’s not getting too far ahead or falling too quickly behind either its customers or competitors. Electrolux CEO Keith McLoughlin has declared that new product prototypes have to enjoy at least a 70% customer preference rate in blind competition with best-selling rival products. “Speed to market” isn’t what’s driving the change. The goal is assuring that the firm’s ability to innovate is effectively aligned with the customers’ willingness to value them. The 70% rule helps identify and clarify their customers’ readiness for change.

Read full article » blogs.hbr.org/schrage/2012/11…

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