Failures #2: Leaping the Right Distance

INTRODUCTION

In the last blog, we looked at an article in USA Today article entitled “The 18 worst product flops of all time.” These flops included:

1. Edsel by Ford Motor Co.

2. Touch of Yogurt Shampoo by Bristol-Myers Squibb

3. Apple Lisa by Apple

4. New Coke by Coca-Cola

5. Premier smokeless cigarettes by RJ Reynolds

6. Maxwell House Brewed Coffee by Philip Morris Companies

7. Harley Davidson perfume by Harley Davidson Motor Co.

8. Coors Rocky Mountain Sparkling Water by Adolph Coors Co.

9. Crystal Pepsi by Pepsico

10. The Newton MessagePad by Apple

11. Persil Power by Unilever

12. Arch Deluxe by McDonald’s

13. Breakfast Mates by the Kellogg Co.

14. WOW! Chips by Pepsico

15. Hot Wheels and Barbie computers by Mattel

16. EZ Squirt (colored) Ketchup by Heinz

17. TouchPad by HP

18. Google Glass by Google

We looked at three lessons to be learned from these flops. In this blog, we will look at another lesson to learn: The need to leap the right distance.

LEAPING THE RIGHT DISTANCE

Innovation is a lot like taking a leap into the future. But, as the USA Today article shows, not all leaps are successful. Think of it as being like leaping over a deep canyon. If you can leap from land to land, you succeed. But if you miss, you fall down into the canyon and fail.

Here’s the problem. The canyon of innovation is too wide to cross in one leap. Therefore, to successfully get across the canyon, you need to leap onto a small mesa in the middle of the canyon. Miss on either side of the mesa (too short or too long) and you fail. This is illustrated in the picture below. As we will see, many of the 18 flops failed in part by not leaping the proper distance.

1) Leap Too Short

The first reason for an innovation flop is to leap too short. This happens when your innovation improvements are incrementally too small to matter. Sure, it might be a little nicer or newer or better, but not enough to justify switching, particularly if you are charging an innovation premium price.

The Edsel (flop #1) was a nice car, but the innovations were minor compared to the hype, and the innovations were not enough to justify the premium price. The leap was too short.

Kellogg’s Breakfast Mates (#13) combined cereal, milk and a spoon into one “convenient” package. However, a test showed that the Breakfast Mate was only about a second faster to prepare than regular boxes of cereal with a normal carton of milk. In addition, convenience to the customer meant eating on the go, and you could not prepare and eat Breakfast Mate on the go. Finally, it cost a lot more per serving than the old way. In other words, Breakfast Mates leaped too short. It was not enough of a convenience innovation. The right leap would have been to go to breakfast bars—more convenient to prepare (just unwrap), more convenient to eat (on the go), and not as big a premium.

McDonald’s Arch Deluxe (#12) was a better burger than the regular one, but not enough better to justify the price or to get people to switch from better-burger restaurants. They did not leap enough and build really better burgers worth going out of your way for, like Five Guys.

Apple’s Lisa Computer (#3) was a fine computer for its time, designed for the business market. The problem was that it was not superior enough to justify a $10,000 price. Also, it was not superior enough to grab the attention of software developers to make programs for it. The switching costs for businesses was high and the leap was not big enough to justify the switch.

2) Leap Too Far

Just as bad a mistake as leaping too short is to leap too far. If you innovate beyond the ability of consumers to embrace or beyond the capabilities of technology, then you will fail as well.

The Apple Newton (#10) personal hand-held computing device came out in 1993, before the pervasiveness of the internet. Thanks to that, and the limits of technology at the time, the Newton was not a very powerful device. It tried to be the equivalent of the smartphone before technology, applications, and consumers were ready. It was a leap too far, by almost 20 years.

Premier Smokeless Cigarettes (#5), back in 1988, was also a leap too far. The market had not yet banned traditional smoking as much as today and the technology wasn’t good enough to make Premier Smokeless Cigarettes a pleasurable smoking experience. It took about 25 years before the technology and consumer sentiments caught up to make electronic smoking successful.

One might argue that Google Glass (#18) was also a leap too far. Concerns over privacy and functionality made it perhaps ahead of its time.

3) Leap Too Late

The problem when timing an innovation leap is that if you wait until the innovation is fully accepted, you are no longer imitating…you are following. True innovation has some risks, because you are trying to establish a market that doesn’t quite yet exist. If you wait for the innovation to get a firmly established by someone else, it is typically that someone else who reaps the benefit. They become the brand know for the innovation and get the first mover advantage.

This was the main problem for Hewlett Packard’s Touch Pad (#17). HP waited until Apple made tablets their own with the iPad. HP’s Touch Pad was not meaningfully enough better hardware to unseat Apple. In addition, Apple owned the apps, content business and digital store, where everything was designed to work on the iPad.

Hence, HP failed due to waiting to late.

SUMMARY

Innovation is a leap into the future. If you make your leap too short, you will not create enough differentiation for success. If you make your leap too long, you will get ahead of the customer and technology, which are not ready for success. If you make your leap too late, you become a lesser also-ran rather than a leader. Therefore, when on the path of innovation, plan you leap carefully (length and timing).

FINAL THOUGHTS

Jumping is not the same as leaping, because you end up in the same place as you started when you jump. So, just because you are furiously doing something doesn’t mean you are leaping to innovation. You may only be jumping in place.

Failures #1: 18 Colossal Failures

INTRODUCTION

On April 16, 2016, USA Today had an article entitled “The 18 worst product flops of all time.” It was based on a study conducted by 24/7Wall St. to determine which were the most colossal new product failures since 1950. The 18 flops, and my interpretation of primary causes of the flop, are as follows:

1. Edsel by Ford Motor Co.

Key Mistakes:

·   Insufficient New Benefits

·   Too Expensive

2. Touch of Yogurt Shampoo by Bristol-Myers Squibb

Key Mistakes:

·   Confused Customers

·   Eaten by Mistake

3. Apple Lisa by Apple

Key Mistakes:

·   Too Expensive

4. New Coke by Coca-Cola

Key Mistakes:

·   Misunderstood its Brand

·   Trying to Win by Imitation

5. Premier smokeless cigarettes by RJ Reynolds

Key Mistakes:

·   Innovated Too Soon

·   Questionable Benefits

6. Maxwell House Brewed Coffee by Philip Morris Companies

Key Mistakes:

·   Confused Customers

·   Innovated Too Soon

7. Harley Davidson perfume by Harley Davidson Motor Co.

Key Mistakes:

·   Brand Extension Too Far

8. Coors Rocky Mountain Sparkling Water by Adolph Coors Co.

Key Mistakes:

·   Branding Issues

9. Crystal Pepsi by Pepsico

Key Mistakes:

·   Insufficient Benefits

·   Novelty/Fad

10. The Newton MessagePad by Apple

Key Mistakes:

·   Innovated Too Soon

11. Persil Power by Unilever

Key Mistakes:

·   Defective

12. Arch Deluxe by McDonald’s

Key Mistakes:

·   Insufficient Benefits

13. Breakfast Mates by the Kellogg Co.

Key Mistakes:

·   Insufficient Benefits

14. WOW! Chips by Pepsico

Key Mistakes:

·   Defective Product

15. Hot Wheels and Barbie computers by Mattel

Key Mistakes:

·   Defective Product

16. EZ Squirt (colored) Ketchup by Heinz

Key Mistakes:

·   Defective Product

·   Novelty/Fad

17. TouchPad by HP

Key Mistakes:

·   Innovated Too Soon

18. Google Glass by Google

Key Mistakes:

·   Pros overwhelmed by Cons

Over the next few blogs, we will look at some of the lessons to be learned from these failures, so that you can avoid them.

LESSONS LEARNED

Lesson #1: Innovation is Not a Panacea

These 18 innovation flops were huge, causing losses in the millions of dollars. Yes, they may have been outlyers, since most flops are less colossal. But that doesn’t mean that flops are rare. The article claimed that about 40% of new product introductions are flops.

I believe that the 40% failure number underestimates the problem. A lot of what is considered a “new product” isn’t really much of an innovation. It can be just a minor brand extension, like adding a new flavor or size. It is a low risk/low reward bet on a minor tweak. It is not a truly innovative new product.

If you only look at truly innovative new products, the failure rate is much higher—over half.

I know a lot of companies have a strategy based on some variation of “winning via innovation.” The idea is that future success will come from merely introducing new products. The problem is that if over half of innovations fail (and some fail spectacularly), innovation is not automatically going to lead to success.

Just because you innovate doesn’t mean you’ll win. If fact, the odds point in the other direction.

Innovation is more like a tool than a strategy.

Tools are great, but only if used to achieve a viable strategic purpose. For example, cost control is a great tool but not a strategy. It is meaningless to have the lowest cost of production if you are producing something nobody wants. The strategy must first tell you what is desired. Then, cost control can be chosen as a tool to help make it a reality.

Similarly, it is useless to innovate if you are creating innovations which will flop. Just because something is new does not mean it is the right thing to produce. Innovation only succeeds if you are using it as a tool to implement a greater strategy—a strategy which takes into account all the greater issues like image, branding, positioning, switching costs, consumer trends & habits, etc.

The strategy is the vision of what will win. Innovation and cost control are just some of the many tools you can use to achieve the vision.

Make sure your strategy embraces desirable outcomes rather than just embracing a particular business tool, like innovation.

Lesson #2: Don’t Mess With The Mouth

A friend of mine in consumer research used to say that consumers are particularly sensitive regarding anything that goes in the mouth. They may be forgiving of shortfalls and miscues in other areas, but they expect something a lot closer to perfection when it comes to things put in the mouth. Mess up on things put in the mouth and you will pay a heavy price.

This makes sense, since:

• Health issues are at greater stake;
• Image Issues are at greater stake (You really are what you eat, including the brand image of what’s eaten).

This seems to be verified by the results. If you look at the list of 18 flops, half of them (nine) are items put in the mouth. If you count the fact that people were mistakenly eating the Yogurt Shampoo, it becomes 10 items.

The lesson here is that if you are innovating around items that go in the mouth, be especially careful. People take these more seriously.

Lesson #3: Innovations Need to Work

Some innovations fail because the new product was defective. WOW! chips caused “abdominal cramping and loose stools,” not something desired in a snack food. Persil Power laundry detergent destroyed clothes at high temperatures. The Hot Wheels and Barbie names were put on computers which didn’t work. It’s no wonder why these innovations failed.

You may start with a great idea. But, if the actual product does not deliver on that idea, then the idea is irrelevant. Make sure the product delivers on the promises.

SUMMARY

Innovation is not a panacea for success. On the contrary, random innovation is probably more likely to fail. To minimize failure, innovation needs to be seen as a tool to create a larger strategy. In addition, the innovation needs to live up to the requirements of the strategy and not be defective. Finally, one needs to be extra careful when innovating around products which go in the mouth.

FINAL THOUGHTS

This is just the beginning. Two more blogs on innovation are to follow.

Strategic Planning Analogy #405: Three Steps to Success

THE STORY
Awhile back, I wrote a book on strategic planning and sent it off to the publishers. Below is a very rough and condensed paraphrase of the type of ongoing dialog I had with the publisher.

Publisher: Your book is very comprehensive and integrated. In one place, it provides a complete approach as to how to do strategic planning.

Me: Thank you for the compliment.

Publisher: No, that was a criticism. Business leaders do not want to buy an all-inclusive, integrated, comprehensive approach to planning.

Me: Why not? Isn’t a comprehensive, all-inclusive, integrated approach the best way to do planning?

Publisher: Maybe so, but for a business person to buy into YOUR comprehensive approach, it requires the reader to abandon THEIR current approach. Business leaders have big egos. They’ve been successful in the past…which is why they are currently a business leader. Therefore, they think they already have a pretty good idea as to how to do things well. All they are looking for is a handful of useful tips they can add to their knowledge base to make them a little better at what they already do. Your book does not do that.

Me: So lists of simple tid-bits about planning sell, but writing about comprehensive planning approaches fail?

Publisher: That’s right.

It was not too long after that conversation that I got the idea to write about planning as a series of short, stand-alone articles. Each would be based on a little story with an analogy. It lead to my book “Strategy is Like Barbeque Sauce,” which in turn lead to my starting this blog.

THE ANALOGY
This same idea for books on planning applies to any other communication about planning. Just as a great integrated book on planning is of little value if the audience doesn’t want to buy it, a great integrated plan is of little value if those who have to implement it don’t want to buy into it.

In writing my first book on planning, I made the mistake of confusing the principles of good planning design with the principles of good planning communication. Well designed plans tend to be complex and integrated—a holistic approach. The idea is to design something where the power of the outcome exceeds the sum of the individual parts. Tradeoffs are made throughout the organization in order to get everything aligned in the direction of competitive advantage. This creates a synergistic strength which is stronger than any individual action and difficult for others imitate.

A great example is Apple. Their success is due to taking a complex and integrated approach to their strategy. They didn’t just introduce another mobile phone. They introduced an entirely new integrated business model—phones, apps, app store, and Apple stores, with cool design and easy integration holding it all together.

My mistake was to think that just because plans should be complex, integrated and holistic, so should be the communication of the planning process. But this fails to take into account the stakeholders of the strategy. Stakeholders like things to be simple and easy. For example, the approach used to introduce the iPhone was very simple and focused on ease of use.

And, as the publisher said, you don’t want to insult the implementation stakeholders or bruise their egos, either. They just want simple lists to add to what they already know.

THE PRINCIPLE
The principle here is that two separate skill-sets are needed to ultimately succeed in planning. One is the skill-set for plan design and the other is the skill-set for communicating the plan execution. The characteristics of these skill-sets are different, and you will have significant difficulties if you confuse the two.

The Two Skill-Sets
The skill set for plan design is all about a holistic, integrated approach. It is about finding a unique way to put all the pieces together in order to win.

On the other hand, the skill set for plan execution is all about simple check lists. It is about dicing up the work into easily managed (and measured) chunks which can be assigned to people (and easily added to their daily work load).

If you don’t believe me about the power of lists, just look at the business web sites which provide lists of their most popular articles. There always seems to be a disproportionately higher number of articles with a number in the title—a number referring to a small checklist. For example, current articles in the American Express Open Forum include:

• The Leader's Checklist For The Startup Manager

• The Best Advice I Ever Received: 3 Top Executives On Tips That Count

• Top 10 Excuses For Not Going Global

• 4 Marketing Ideas That Are Sure To Make A Splash


The problems arise when the checklist approach is applied to design or the integrated approach is used for execution.

Problem #1: Checklists Used During Design
If check lists are so popular why not use them during the design stage? I’ll tell you why. It doesn’t lead to a good plan design. You can put all sorts of steps on a planning checklist—looking at strengths, looking at weaknesses, looking at the environment, writing mission statements, and so on. If you do each one separately and just check it off when it is done, then the work is not building to a creative solution. At best, you will get some small incremental improvement.

No, if you want truly innovative and revolutionary strategies, you need to change your world view and your thinking on complete business models. You need to rethink the entire process, as Apple did with the iPhone. It is a messy and creative process, requiring one to hold a lot of concepts in one’s head simultaneously. It is not a series of discrete tasks that can be done one at a time. There is a back and forth tug on various trade-off options and scenarios. The secret is in the gestalt—how the parts play together—not any individual piece or pieces.

Just remember the Edsel. Each part of the design of that automobile was individually optimized, like a checklist. The grill was designed separately from the headlights or the hood, or the tailfins, and so on. Although each part was designed well on its own, when all of it was put together on the car, it was a disaster. There was no gestalt. As a result, there was no success.

Problem #2: Integrated Approach Used During Execution
However, just because a holistic approach is necessary for design, it does not mean that the approach needs to continue to dominate through execution (as I discovered with my book). Although the integrated approach may allow people to envision what the whole picture should look like, they may not have a clue as to what their particular role is to make it a reality. The end result can be anarchy. Although a little anarchy is good in the design stage, it is poison during execution.

Unlike the Edsel example, if you instead start by first designing the whole (the gestalt), you can then later begin chopping up the tasks into each part which needs to get done (the opposite of the approach used for the Edsel). The constraints of the gestalt are already known, so the individual work on execution of each part will still work towards creating the greater whole.

By chopping up the tasks into lists, one gets several advantages. First, you can assign responsibility for each task. That way, everyone knows what they are to accomplish. Confusion is eliminated. Second, with responsibility comes accountability. Management knows who to deal with when the execution falls short of intended results. Third, it is easier to develop metrics for each task. That way, you can better measure performance. Fourth, by chopping up the tasks into modules, you can create a more sophisticated time-line for execution. Finally, it is easier to develop a motivational incentive plan when the tasks are more narrowly defined and more specifically assigned.

SUMMARY
The skills needed to design strategy are different from the skills needed to implement the strategy. Strategy design requires a holistic gestalt approach—simultaneously building the design of the entire business model. Strategy execution requires cutting the gestalt into its component pieces (and put on a checklist), so that responsibilities and accountabilities can be assigned and measured. Therefore, strategy design and execution should each be approached differently—using the approach consistent with its unique characteristics. Problems ensue when the approaches are flipped. For example, the individualized checklist will never lead to revolutionary, innovative strategy design. At best you will get incremental advances. At worst, you will design the next Edsel. Similarly, if the implementation is left at only the gestalt level, you will end up with confusion and anarchy, not efficient execution.

FINAL THOUGHTS
Did you notice I titled this blog “Three Steps To Success”? If that’s the kind of title that appeals to people, then I’ll use it. Think about that when giving a title to your strategic execution. I know that a lot of successful firms select about three key strategic items they want to accomplish that year and then give them a fancy title like Key Result Areas or Key Strategic Initiatives. If you give a great title to the checklist, it will get more attention during discussions.