Looking at customers, Planning, Making the choice – Three simple rules that experience has taught us in order to successfully innovate

Our industrial sector is almost entirely composed of small and medium-sized companies that have based their fortunes on the (successful) intuition of one person (the entrepreneur). The history of many Italian companies tells of widespread industriousness in past generations. It is about intuitions that arose around a specific problem, which the entrepreneur perceived in the field, in the factory where he worked (this is the case of the worker or craftsman who set up his own business), to cite an example.

It is clear to most how that entrepreneur’s innovative drive and that way of generating direct and field innovation has not been viable for perhaps a few decades now. Reality is complex, the pace of technological innovation has increased dramatically, markets are global and articulated, subject to forces not always easy to crack with the simple aid of intuition.

The competitiveness of the Italian system, never ceases to amaze anyone, and we know how much the beating heart of that competitiveness lies in the creativity of our businesses, as well as the resourcefulness of the entrepreneurial system.

But if we put all these considerations together, the complexity of today’s markets and the rapid evolution of technology on the one hand, and the creativity of businesses on the other, we realize that we need to add a piece that connects the three elements. A bridge that brings together the context and creativity of our Italian system.

Innovation, as we often read, is creativity plus delivery (delivery, finalization, translation into facts and processes the creative insight). And for this to happen, several elements are needed that add rigor and method to the innovation process. The variables that come into play in the innovation process do not simply dictate adequate governance of the technological dimension. The product or service that will be launched at the end of the innovation process needs to have a buyer market, whether companies or individuals, that will have to recognize its qualities and differentiating factors. It will therefore be necessary to identify a problem, or in broader terms a need of customers to be identified as part of a rigorous market (and customer) analysis work.

Roncucci&Partners’ experience in delivering technical assistance to 25 anti-Covid item companies in 2021 provided an effective opportunity to directly identify the main weaknesses of our companies in terms of innovation and to identify the best practices for a successful outcome. With the overall goal of making them more competitive and prepared to face the challenges of a market which is strongly changed by the pandemic, the plan designed by Roncucci&Partners explored the different key areas of intervention in the innovation process: production, business organization, commercial, legal and financial aspects.

Below are three elements of weakness and suggested responses to contain them. These responses involve those essential elements which affect corporate culture and top management closely, starting with the entrepreneur himself:

“Our product is different from others because we have added a feature that others do not have.”

Rule 1: Look at customers. An innovation will be successful if it can meet a well-defined customer need that is not currently being met by any competitor operating in the geographic market covered by the company. The risk we often run is to fall in love with the technological insight we had, to build a product around it, and then consider the market response only at the end of the innovation process. It is an innovation turned upside down, in which often the confrontation with the market, analysis and marketing evaluations take place at the very stage of bringing the product to market: “the product is done, now let’s try to sell it and figure out to whom and how to sell it.” We intuitively grasp the risk associated with this approach. Successful innovation starts with considerations and assessments of customer needs. Virtuous innovation also looks at the competition, but only to see if there are products on the market with the same potential. And so, with a fair amount of simplification, the best approach would be, “Our product is different from others because it does something that customers (current or potential) can’t find around (and will be willing to pay better for).”

“We developed the product, got the licenses and all the certifications, but we actually hadn’t thought about how to distribute it and our sales force is inadequate.”

Rule 2: Plan everything, from start to finish. An investment in innovation is an ensemble of controllable and uncontrollable variables, such as perhaps no enterprise initiative can collect. These are small mammoth tasks that affect every aspect of business life. All functions are involved, well beyond (where it exists) research and development: engineering department, production, sales, communications, marketing, finance, and so on. All levers of the company are called upon to contribute in the delivery of a new initiative. Planning means lining up all the variables possibly before the innovation project is started, in order to have an idea of the predictable outcome.  Product or service innovation, or business model innovation, requires assessing upstream critical production issues as well as commercial ones; it means planning for the purchase of new machinery, such as strengthening the distribution structure, assessing the cost of raw materials such as selling prices. Leaving out certain aspects at the planning stage can make the assessment itself difficult as to whether an innovation project should be initiated. Thus again, a better approach idea: “we are evaluating the development of a new product, we have obtained licenses and all certifications as planned, and we are realizing that in parallel we will have to strengthen our sales network, in order to be ready, once the product is ready, to successfully bring it to the market.”

“The new product has been certified; everything is ready. But our core business (or our current products) absorbs a lot of energy and is doing very well. Let’s see, maybe we transpose it into a brochure and see what happens.”

Rule 3: Make the choice. Unless the innovation is explosive, the success of an initiative requires time, method, money, and patience. Planning helps to make the right choices and weigh different scenarios. Having assessed the best path, it will have to be pursued over time, investing the appropriate resources for the success of the initiative itself. Innovation is a gamble and as such, it is risky; it has to be innovated frequently before it pays off. Over-ambitious innovations do not pay off.

The experience of supporting the 25 companies revealed the brilliant Italian entrepreneurship, but it also confirmed an insight that Roncucci&Partners often finds over its consulting experience: when the creativity and enterprising spirit of our Italian companies are matched with method and managerialism, they know how to take the extra step to maintain and increase their level of competitiveness.

 

Gabriele Anzalone

Previous articleWellness Economy Boom