The next time your management team meets to determine the fate of a recently introduced product or service, consider a post by Scott Anthony at Harvard Business Online. He argues that superficial success, or underperformance, might not give a full picture of actual potential. To make his point, Anthony presents two scenarios and asks which would appeal to your company’s executives:
Innovation A enjoyed blockbuster first-year revenues of $200 million thanks to “a clear value proposition, clever positioning, and a strong distribution network.”
Innovation B, meanwhile, had on a muddled business model and generated only $220,000 during its first year.
“It’s obvious, right?” he says. “Innovation A is the winning proposition.” But you knew there’d be a catch, and here it is:
Innovation A was Vanilla Coke. “It was a line extension that largely cannibalized sales of Coke’s other products,” says Anthony, with the note that Coca-Cola unceremoniously discontinued the flavor only three years later.
Innovation B—drumroll, please—was Google, which found wild success when it finally settled on an ad-based model.
The Point: “Before making a decision about an innovation,” writes Anthony, “make sure you know what type of idea you are evaluating. Then make sure you use the right metrics for that idea.”
Source: Harvard Business Online.