What makes a great innovation isn’t the idea but what is done with the idea. Many great ideas never survive the “first mile” of the innovation journey. That is a time of both exhilaration and risk. During the first mile, what is wrong with an idea often comes to light—if you’re lucky. If fatal flaws don’t become apparent until the scaling phase, much time and money may be lost. So it is critical to approach the first mile with a disciplined process of discovery that will return the most valuable lessons at the lowest expense. A roadmap can help, featuring two reminders: Be D.E.F.T. and Have H.O.P.E.
Scott Anthony described the hidden challenges that make the first mile of an innovation journey particularly hazardous and explained a process to overcome them.
The first mile of the innovation journey is the most perilous.
Many innovation ideas never survive the “first mile” of the innovation journey. That is the exhilarating time when a concept seems like a sure bet, but you don’t know how it will translate into a successful strategy. Through testing and adjusting, you’re searching for a solution that: 1) customers love; 2) you can deliver reliably; and 3) will make money. Next will come the scaling phase, but it is the first mile that is the most precarious.
While many first-mile challenges exist, two realities are often overlooked amid the excitement of launching a new business venture, and overlooking them can result in a venture’s untimely death (see case study). These realities are:
1. Customers lie. What customers say they will do and what they actually do are very different. Few can realistically project how they will respond in a future situation. For instance, with world-class health care available in Singapore at 80% less cost than in the United States, medical tourism seems like a great idea. Patients can get an elective surgery done (like hip replacement) plus a world-class vacation and save money to boot. Potential customers react to the idea enthusiastically, sounding as if they would come in droves. But it turns out that flying 9,000 miles to go under the knife in a foreign country isn’t something many people would do.
2. You can’t cash a spreadsheet. Spreadsheets for untested ideas are little more than relationships among made-up numbers. They always look good or the ventures wouldn’t even be considered. But the variables might be off base for multiple reasons. If it takes three years for revenue to ramp up instead of the projected one, for instance, much more in resources would be sucked away in the meantime. Entrepreneurs often forget not to believe too strongly in their spreadsheets. Moreover, great-looking spreadsheets can kill an innovation whether or not the numbers are off; for example, if the numbers attract lots of investment capital that is used for scaling up too soon. That is what happened when Scott Anthony rolled out his “laundry kiosk” venture in India. The idea was loved by customers, the press, and venture capitalists alike. But the cash-rich business fell apart because it expanded too quickly, before getting unit costs under control and while still putting out fires (figurative and literal ones!). “What I wish we had done differently,” he said, “is not to have raised so much money.” Premature scaling is one of the most common causes of new business failure.
Case Study: Razor Rave
In 2010, Scott Anthony set out to disrupt the men’s haircutting market in India with a great idea: a mobile barbershop truck. Razor Rave provided a more hygienic haircut than barber kiosks on sidewalks and a cheaper haircut than traditional barbershops. With low overhead, only 12 customers a day were necessary to break even. And actual in-market research demonstrated that people would get into a truck with a razor-wielding stranger. But a fatal flaw in the business model went undetected in the research phase: the “hero barber problem.”
The barbers soon saw themselves as the crux of the business owing to their customer followings— and demanded higher wages. This made the model’s math no longer favorable. The plug was pulled on Razor Rave after just four months of operation.
A process roadmap can help navigate the challenges of the first mile.
Two acronyms provide advice to help innovators navigate the first mile successfully.
1. Be D.E.F.T.
• Document your plan. Writing a business plan is an often-skipped step that should not be avoided. It helps you appreciate how much must go right for your venture to succeed. While you need to research the idea in depth, you don’t need to write a Ph.D. thesis. A 15-page snapshot of highlights is more than enough, illustrating both that you have done your homework and that you know what it is that you don’t yet know.
"A spreadsheet for a new idea is nothing more than the mathematical relationships between largely made-up numbers.” "
– Scott D. Anthony
A process roadmap can help navigate the challenges of the first mile. Two acronyms provide advice to help innovators navigate the first mile successfully. 1. Be D.E.F.T. • Document your plan. Writing a business plan is an often-skipped step that should not be avoided. It helps you appreciate how much must go right for your venture to succeed. While you need to research the idea in depth, you don’t need to write a Ph.D. thesis. A 15-page snapshot of highlights is more than enough, illustrating both that you have done your homework and that you know what it is that you don’t yet know.
• Evaluate it exhaustively. Assess your plan from every angle: do the strategy, story, and numbers all make sense? To pinpoint your idea’s strengths and find the weaknesses to fix, ask yourself if your idea has these hallmarks of successful businesses:
- Is there a real need? There should be an important unsatisfied job to be done.
- Can we address it? Reliably? In the face of current and future competition?
- Is it worth it? The numbers need to work to create value.
• Focus on key unknowns. Know the compelling points of the business case, but don’t lose sight of how many success variables you don’t know. The First Mile Certainty tool offers a simple way to gauge where your idea might pose the most risk. Just check the source of your evidence that the three hallmarks of success are present; you have more certainty the further you are from the red extreme and closer to the green.
"If the customer says there’s a need, you know nothing. . . . If the customer has used your idea, you can feel more confident. If they’ve paid for it repeatedly and are telling their friends, that’s a good sign you’ve hit on something that matters. "
– Scott D. Anthony
• Test, learn, and adjust. By using the First Mile Certainty table, you can find the areas of least certainty, which require the most testing. Test rigorously and adapt quickly. Find quick and dirty ways to test that can teach you more for less expense of time and money, such as:
- Basic desk research like talking to people familiar with the market.
- Thought experiments like imagining competitive responses, looking for hidden risks.
- Focused, limited feasibility tests in the market.
2. When Testing, Have H.O.P.E.
The scientific method can help you understand and manage the risks of the first mile as you test to learn. That is because when you form a Hypothesis, define Objectives, and make Projections as the method requires, you necessarily make a mental model of what is likely to happen. That greatly aids understanding of the variables that will affect your idea’s success. Execution is done in a way that tests projections.
Scott Anthony helped Medtronic successfully launch an innovative program in India to find people in need of pacemakers, loan them the money to afford the devices, and implant them. The scientific method was rigorously employed to test hypotheses on the idea’s many unknowns before rolling out the program.
The “Be D.E.F.T./Have H.O.P.E.” process helps entrepreneurs speed through the first mile of innovation, and Innosight uses it with every client.
Innovating within large organizations is trickier, as they are culturally ill-disposed to these processes.
Less than 1% of new business ideas generated within organizations ever impact the bottom line. There is implicit resistance given that people in organizations act in ways to “protect their host.” But if leaders prioritize the right initiatives and cultivate the right capabilities, the culture can grow more conducive to the processes successful innovation requires. Three points of advice:
- Focus resources on the opportunities with the most promise. Someone must be dedicated fully to an innovation project, falling asleep every night and waking up every morning obsessing about the idea. Too often human resources are spread too thin over too many ideas. They will never get through the first mile that way. Free up the people working on those losing projects, and you will find you have plenty of resources for the most promising ideas.
- Don’t reward risk-taking results; reward the right process. The measuring stick is how quickly and efficiently the processes used facilitate learning.
- Build parallel disciplines. Cultivate two very different disciplines within one company: run today’s existing business with the optimizing skills of a good corporate planner and discover tomorrow’s businesses with the approaches of a venture capitalist.
Managing Partner, Innosight
Scott Anthony was named managing partner in 2012. Based in the firm’s Singapore offices since 2010, he has led Innosight’s expansion into the Asia-Pacific region as well as its venture capital activities (Innosight Ventures). In his decade with Innosight, Scott has advised senior leaders in companies such as Procter & Gamble, Johnson & Johnson, Kraft, General Electric, LG, Credit Suisse, and Cisco Systems on topics of growth and innovation.
Scott has written extensively about innovation. He is the author of The First Mile: A Launch Manual for Getting Great Ideas into the Market (Harvard Business Press Books, May 2014). He is the co-author of the eBook Building a Growth Factory and author of “The New Corporate Garage,” in the September 2012 issue of Harvard Business Review, as well as The Little Black Book of Innovation. He is the coauthor of the Harvard Business Review article “How P&G Tripled Its Innovation Success Rate.” He co-authored Seeing What’s Next with Clayton Christensen and was the lead author of The Innovator’s Guide to Growth and author of The Silver Lining. He has written articles for many prominent publications and serves as a judge in The Wall Street Journal’s Innovation Awards. He has a regular column at Harvard Business Online.
Scott chairs the investment committee for IDEAS Ventures, a SGD 10 million fund Innosight runs in conjunction with the Singapore government. Scott has served as an active Board member for two companies incubated by Innosight, helping those companies develop and execute their strategy and raise external expansion capital.
Scott is a featured speaker on topics of growth and innovation. He has run more than 100 training workshops, and in 2008-2009 served on the faculty of the Leadership, Innovation and Growth program at General Electric Crotonville. He has appeared on Good Morning America, CNBC, and FOX Business.
Prior to joining Innosight, Scott was a senior researcher with Clayton Christensen, managing a group that worked to further Christensen’s research on innovation. He has also worked as a consultant for McKinsey & Co., a strategic planner for Aspen Technology, and a product manager for WorldSpace Corporation. While at McKinsey, he co-authored a publicly released report on the United Kingdom’s economic prospects.
Scott received a BA in economics summa cum laude from Dartmouth College and an MBA with high distinction from Harvard Business School, where he was a Baker Scholar.
Angelia Herrin (Moderator)
Editor for Research and Special Projects, Harvard Business Review
Angelia Herrin is Editor for Research and Special Projects at Harvard Business Review. At Harvard Business Review, Herrin oversaw the re-launch of the management newsletter line and established the conference and virtual seminar division for Harvard Business Review. More recently, she created a new series to deliver customized programs and products to organizations and associations.
Prior to coming to Harvard Business Review, Herrin was the vice president for content at womenConnect.com, a website focused on women business owners and executives.
Herrin’s journalism experience spans twenty years, primarily with Knight- Ridder newspapers and USA Today. At Knight- Ridder, she covered Congress, as well as the 1988 presidential elections. At USA Today, she worked as Washington editor, heading the 1996 election coverage. She won the John S. Knight Fellowship in Professional Journalism at Stanford University in 1989–90.
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