Innovation
Don’t keep your options open

The courage to narrow your venture down for commercialisation is what separates merely viable innovation projects from truly successful ones, says Suvi Nenonen.

 

All viable innovation projects reach a stage where all the pieces finally seem to fall into place. The new technology actually works. We know – at least on paper – that we can scale it up. And what is even better, the market opportunities are abundant: everyone could use this new widget/service/material. 

Despite the budding euphoria, this stage is also the most dangerous phase of the innovation process. Yes, there might be tens or even hundreds of application areas for the new technology. But nobody can be everything to everyone, not at least during the early stages of commercialisation. Thus, the courage to narrow your venture down for commercialisation is what separates merely viable innovation projects from truly successful ones. 

 

Find a narrow and enthusiastic niche – or two

Even the largest mass markets start small. Just think of the early users of personal computers, handheld mobile phones and first cosmetic products: hobbyists, wannabe Gordon Gekkos, and royalty are not really population-rich segments that deliver exciting business case calculations.

Despite their limited sizes, these segments were good starting points due to their narrowness and enthusiasm. You can wrap your brain around these niches – and thus it is easier to start developing a resonating value proposition. 

Furthermore, these customers were genuinely interested in purchasing the new products. The earlier you can move from the PowerPoint phase to an actual business phase, the easier it is to perfect your product – and to document the proof of concept. 

Nothing is more powerful in convincing less pioneering potential customers than successful implementations and customer testimonials.

However, it is good to keep in mind that experimenting with your initial market niche is exactly that: an experiment. And sometimes experiments fail. So, at least in some cases, it may be worthwhile to proceed with a couple of narrowly defined niches in parallel – which still is very different from the undefined “our innovation is everything to everyone” approach.    

 

Use multiple segmentation criteria

When looking for the malleable niche for your technological innovation, you should strive to use multiple segmentation criteria simultaneously. The standard way of segmenting your markets, Igor Ansoff’s product category vs. geography matrix, tends to be too broad-brush for commercialisation purposes.

 Let’s assume that you have developed a new solution to weed prevention that could be used in horticulture and viticulture. Trying to get things started by merely narrowing this down by adding “Australasia” as the geographical dimension is probably not going to be very helpful. Who would you call to make an appointment? What attributes should you emphasise in your marketing? However, if you are able to focus on organic vineyards in New Zealand, you already have a much clearer picture of your prospective customers and what makes them tick.

 

Think narrow to hit it big

Companies in small countries such as New Zealand or Finland find this exercise of narrowing your innovation initially down particularly scary. This hesitation is understandable as the sizes of the home markets in these countries are usually plainly too small to sustain the entrepreneurial firm. 

Continuing the above example: as less than 10 percent of New Zealand vineyard land is currently certified as organic, limiting your initial market to a maximum of 4,000 hectares can be frightening. 

However, the global potential of organic vineyards is already a completely different ballgame, and in global context having a sharp focus and a tight story helps tremendously.

Additionally, in the best case scenario you are able to diversify your business later on to other, adjacent application areas: non-organic vineyards and various horticulture sectors. 

And in any case, having a sharp initial niche helps in transforming your commercialisation project from a wild goose chase into a manageable – and thus potentially successful – endeavour.

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Associate Professor Suvi Nenonen works at the University of Auckland Business School’s Graduate School of Management and teaches in the MBA programmes. Her research focuses on business model innovation and market innovation.

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