Step back a decade, however, and you'd see the popular press pounding Apple for the failure of its Newton-branded personal digital assistant. The company spent $350 million and failed. So did Sony, Motorola and Hewlett-Packard. All told, these companies blew about $1 billion in failed efforts to capture the PDA space.
Palm Computing succeeded where these titans stumbled. But in reality, Palm failed too. Its first product was called the Zoomer, which, according to one press account, "did lots of things, most of them badly." Because Palm's first bet was a smaller one, it could learn from its failure, modify its strategy and create a booming growth business.
Generally, when it comes to innovation, failure is the key to success. Substantial evidence suggests that successful innovation almost always springs out of a period of fumbling and failure. In other words, failing in the right way can position a company for success.
Generally, the worst time to fail is after spending hundreds of millions of dollars and thousands of hours creating a product or service that is hard to modify. But what if that failure comes early, with significantly lower investment in time and money?
Companies that fail in this way-fast and cheap-can develop critical competencies that help them improve their ability to create growth through innovation.
To embrace fast-and-cheap failure, companies need to change the way they approach innovation.
Step 1: Focus on key assumptions
Once managers acknowledge their first approach is going to be wrong, their goal should be to figure out how they are wrong as quickly as possible. Start this process by defining a generically "good" outcome. If it is a new product, what kind of revenue must that product earn? If it is a new marketing approach, how many consumers does the approach need to reach?
After agreeing on the outcome, then, carefully map out all of the assumptions that would have to be true for the approach you are working on to have a chance of meeting those projections. Also list all of the risks that might stand in the way of success.
Step 2: Design experiments
Smart experiments and risk-mitigation strategies are at the heart of the ability to fail fast and cheap. Instead of risking resources on uncertain strategies, companies can "invest a little to learn a lot" about the key uncertainties in their approach.
Experiments can range from simple activities such as small focus groups to more complicated activities such as launching a localized test market. Contingent contracts, employing consultants before making full-time hiring decisions and creating patent protection can be sensible ways to address key risks.
The way the Wright brothers tested the assumptions behind their early airplanes demonstrates the power of a "keep it simple, keep it cheap" approach. Many would-be aviators took the step of building planes they would attempt to fly. However, the plane would crash, and the aviator might perish. The Wright brothers took a different approach. They built small scale models, and in fact created a predecessor to today's wind tunnels. This approach allowed them to quickly cycle through designs to find one that had a higher chance of working without risking life and limb.
Step 3: Adjust
The final stage of the process is to utilize the learning of the knowledge-building exercise. Redirecting a novel marketing approach can be emotionally wrenching. Managers who have put in time and energy pursuing a particular path can cling to that path even in the face of countervailing evidence. Success requires an odd mix of humility (to recognize that despite your best efforts your initial approach was wrong) and confidence (to not give up in the face of disappointing results).
So set up milestones, and at each one carefully consider whether your increased knowledge means you should double down, keep experimenting, try a slightly different approach or shelve the project all together.
Palm is an instructive example. After the Zoomer flopped, Palm sought to gain clearer market insight. Once Palm learned that people were seeking a complement to their laptop computers, the company developed a straightforward device that allowed users to use an intuitive, simple writing style instead of relying on complicated, bug-prone handwriting-recognition software.
The key for marketing strategies is finding a way to quickly separate the winners from the losers. Following the approach described in this article can help companies front-load their failures, improving their odds of creating attractive new approaches.
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About the author
Scott D. Anthony is a managing director of Innosight, an innovation consultancy. Anthony has worked with Fortune 500 and start-up companies in industries such as print and broadcast media, consumer products and transportation and logistics. He co-authored the May 2006 Harvard Business Review article "Mapping Your Innovation Strategy."