The Two Least Used Words in Opportunity Development

16 August 2011

JH2 John Hemphill, Axxos Director

On a commercialisation diagnostic workshop I ran several years ago, there was a participant who had a very innovative financial product. Indeed, it was so innovative that he wouldn’t reveal the details of it, in any form, to the workshop group. So, I asked “if the product is so secret, how do you do customer interviews to validate it?” He smiled. “I interview myself” he said without a trace of self-consciousness

This is an extreme example of the most common problem in opportunity development. Inadequate market validation. Hence the Axxos aphorism - market validation are the two most under-used words in opportunity development.

Certainly there’s more to Opportunity Development than just Market Validation. But if you haven’t confirmed the customer problem you’re addressing, and the size of the market, and how well your innovative response will play, you’re putting yourself out at the end of a limb.

Let’s think about this for a moment. In our last blog (Towards the Sustainable SME) we introduced Spearhead Diagrams to describe the dynamics of SME development. Below are two examples of these.

SHG1The Diagram on the left shows good Market Validation and the type of flow-through you want.

The one below shows poor or no Validation and almost inevitable problems with taking the innovative opportunity to market because it is hard to generate New Business effectively - and thus almost impossible to create the productive and profitable Existing Business that makes you sustainable..

MA1Given a typical cost to take an innovative technology to its first international market is around $1m, the costs of getting Opportunity Development wrong are very high.

Here are a three cases studies (details changed to protect the unfortunate) of how to get it wrong:

  • A software development company drew on university input to develop a suite of practice management tools for paramedical businesses. After eight months of development, they tried it out on a range of real life businesses. Result – total flop, the tools didn’t do what real-life customers wanted;

  • Another software development company identified a multi-billion dollar problem in hospital practice. Taking on board investors and a very rational approach to solving the industry problem, they developed a suite of software.. However, introduction of this required a range of hospital professionals to change how they did things. These hated the product (which certainly worked). So back to the investors for more money to build a more user-acceptable version of the product;

  • An engineering company developed a set of products to reduce evaporation in irrigation channels using technologies they were good at. But when they compared what they could sell the products for to the cost of development they found development costs outran returns by about 4:1. They dropped the project and completely redesigned their product development process.

How do you avoid this happening? The download contains a short checklist for you based on our experience.