Jan Van Veen is the founder of MoreMomentum - make sure to follow his work @ moremomentum.eu

Do you every now and then experience major pushback when you try to get momentum in one of your important service innovations initiatives? In your board and amongst other stakeholders there is doubts about it is the right thing to commit to and invest in right now. What is the expected ROI? Do customers ask for it? Will it not potentially jeopardise current business, brand and customer relationships?

You are not alone.

For sure, one of the risks many manufactures is being too risk-averse. Today even more than before, we need to have entrepreneurial habits, mindset and practices to reap any benefits from today’s transformative trends. “No Guts - No Glory”.
At the same moment, we also see businesses taking big-bet risks with big investments, ambitious rollout programmes and then failing to get results.

As a result, they have even more pressure on their performance and reduced momentum for ongoing service innovation.

The Problem

So, one of the key questions is: How can we reduce risks of service innovation and at the same time improve quality and capacity of innovation.

There are many kinds of risks related to service innovation or – more in general - business innovation. In this article, I focus on the risk of taking wrong decisions about innovation initiatives, particularly when the level of uncertainty and unpredictability is relatively high.

Many ideas for service innovation are based on assumptions about the 1) problem, 2) the envisioned solution, 3) the ability to capture the value and 4) the ability to deliver the value. Quite often, these assumptions are implicit, not well articulated and not validated. Too often, we tend to skip the validation of these assumptions and try to get funding, get the strategic commitment and to move on full force ahead in developing and launching new services.

As a result, you may experience:

• Difficulties to engage convince decision-makers and stakeholders and get the required budget.
• Pushback from stakeholders whose active support you need to make the envisioned changes happen.
• If you do get the budget and support, after spending a lot of time and money, you discover that the new solutions do not generate much value. Clients do not buy the services. New internal solutions get a lot of resistance or hardly bring results.
• Altogether, momentum for business innovation declines, while it is mission critical to increase momentum for innovation to thrive in our rapidly changing world.

The Solution

The innovative and dynamic industry leaders set themselves apart through their strong focus on continuously testing critical assumptions from the at very early stages of the development process onwards. Only when all critical assumptions have been validated, they will start increasing investment levels and put any stakes in the ground for the launch.

Let’s elaborate on how this works, based on a real-life example.

The idea of an equipment manufactures is to offer in-house maintenance departments of clients a portal to easily access the right product documentation and manuals. This would be a subscription-based service.

The first iteration of testing and adjusting could look as follows:

Step 1: Document essence of innovation

• What exactly is the problem to solve, in this case a customer problem?
  First version of this was that clients have many different types and versions equipment and spend a lot of time in finding the right documents and manuals the received with the products. Too often, they start working with the wrong manuals at hand.
  With some rough estimations, it was calculated how much time was wasted on an annual basis.
• What is the solution?
  An online portal to easily navigate to the right manuals and documents and access online.
  This would save a lot of time for the employees of the in-house maintenance department and reduce risk of working with the wrong information.
• What is the commercial model?
  Sell the subscriptions to existing clients – the installed base with a low-barrier monthly fee
• Are you able to deliver/build the solution?
  PDF-files and customer information on installed base are readily available.
  Need to find the right portal platform available in the market.

Step 2: Define the critical assumptions which will determine the success of the new service

In the very early phase of the innovation project, the focus will probably be on to validate the problem (is it indeed an important problem which they really want to solve now) and solution (do they see the value and fit of the envisioned solution)

• Assumption 1: Clients indeed spend a lot of time finding the right documents before they can start executing their work with the documents. Solving this problem is important for them and they are willing to pay for a solution.
• Assumption 2: Clients will go to an online platform to find and access the pdf-files
• Let’s leave it here for the first iteration and gradually enhance insights before expanding on other assumptions and tests.

Step 3: Design a low-cost experiment to validate these assumptions

There are many ways to do this without even building a first version of the portal. Think of a slide deck, a video or animation, a few mock-up pictures of the portal pages or a one-page brochure. Discuss with 10-20 clients your view of their problem, the envisioned solution and a rough ball-park figure of the fee. During these discussions you will get a lot of feedback and be able to further explore their problems, already tried solutions, alternatives solutions and the value of your envisioned solution

Step 4: Run the test and document the feedback, new insights and data.

In a fairly short time speak with 10-20 clients about your ideas, showing the materials from the previous step and have in-depth conversations about their challenges as an inhouse maintenance department.

Step 5: Evaluate and adjust

Interestingly, the estimated time to save with the portal seemed accurate, but this did not resonate with clients. The potential benefit was too low for them to spend time on (considering a subscription for the portal, making sure all staff know about it and start working with it). 

They appreciated the idea of having the manuals and documents available online, but actually expected that as a given after buying the equipment.

Jumping into conclusions, this would mean the portal as a subscription service would not be a viable idea and should be abandoned.

However, triggered by the discussions about the challenges and problems of the clients, a new picture for the new service emerged:

• What exactly is the problem to solve?
  Inhouse maintenance departments are under major pressure to improve their performance at lower cost. Users of the equipment are not happy about the mean-time-between-failure, the first-time-fix-rate and the resolution time.
  As a fairly small maintenance department, their learning curve of improving was slow and they have little insights on how an excellent maintenance department works and what benchmarks are for performance. This was their main concern and priority.
• What is the solution?
  Clients believe that (online) tools to help improve the end-2-end process and building on best practices could be very useful. They would like to learn more about how the manufacturer could provide such tools.
• What is the commercial model?
  Sell the subscriptions to existing clients – the installed base with a monthly fee
• Are you able to deliver/build the solution?
  Most information like historical data of installed base, best practices, diagnostic tools, customer information are available.
  Also various tools as used by the manufacturers service department are available too.
  Complexity does get higher, about how to make this available for clients. Also new legal aspects need to be investigated.

So actually, quite encouraging, good food for a second iteration of the 5 steps described above.
The first iterations will focus on getting feedback on your vision of the customer problem and your envisioned solution. Gradually you will move to the ability to capture the value (with a good business model, pricing model and sales model) and the ability to deliver the value.
Gradually you will also look for feedback based on behaviour of clients and not only their verbal feedback during conversations. The proof of your pudding is in the eating of your clients!

Common practices for this are letting (potential) customers

• Register for an email list to be notified for any news about your new service innovation
• Pre-register for an upcoming service and maybe even ask them for a down-payment
• Contribute with input and feedback
• Join a pilot
• Buy the very first version with limited features (for an attractive early-adopters-fee)

In each iteration, you will get more data to take better decisions on abandoning, adjusting, pivoting or pursuing your service innovation.

Conclusion

By embedding experiments to validate the critical assumptions of innovations in your development and decision-making processes, you can:

• Maximise your chances of success
• Reduce the risks of perusing non-viable ideas before putting any stakes in the ground
• Reduce investments in development ideas making it more affordable to have multiple innovations at the right time

How well are you and your innovation teams following this or similar process of testing with experiment?

I would like to recommend you and your teams to review your development process and assess how you can take this to the next level.

Let’s start by spending an hour or so to assess just one of your current service innovation initiatives.  Take it through the 5 steps I described in this article and write it down on 1 or 2 pages.

You can use my worksheet Service Innovation Experiments. You can download it here.

Essence:

For sure, better testing assumptions with these 5 steps will help you make you service innovation projects more successful. The real value of these techniques is – however - to strengthen your business innovation capabilities. This is crucial to be successful in today’s disruptive times without jeopardising todays successful business.