Every startup and innovation is based on the idea of bringing something new to the market. It can be something new on business model side--new technology, manufacturing, channels and distribution, or a new profit model. Or it can be on the demand side, be it a new brand, product, pricing approach and experience.
But just being new doesn't guarantee success. Remember that 85 percent of new products fail per Nielsen and none of us are using Apple's Newtons or drinking New Coke.
The way to avoid failure is to pick the right kind of new thing. New comes in three flavors: cheaper, better or different. Understanding each is essential to knowing how your business will succeed.
Cheaper: There Can Only Be One
A lot of startups and innovation are focused on cheaper, whether it is on the retail side like Aldi and the upcoming entry of Lidl or Dollar Shave Club, which was acquired by Unilever for $1 billion. This can be an effective version of 'new', as who doesn't like something that is cheaper and just as good in quality. But this is not so simple to execute. My observation across my two decades of growth strategy across hundreds of categories is only about 10 to 30 percent of consumers make purchases based on solely based on the lowest price without caring about quality or other benefits.
Additionally, the consumers you win on price, you will lose on an even lower price. Michael Porter, the famous Harvard Business School professor and strategy guru, noted that it is not enough to be a low cost player but you have to be the lowest cost player. To quote another great strategist, Christopher Lambert in the movie Highlander, "There can only be one."
Better: Don't Go For Extra Credit On a Pass/Fail Exam
Most startups and innovation are focused on better. But whether better is worth paying for is a function of how good it is now. There's not a lot of demand for making something pretty good a little better. I call it going for extra credit on a pass/fail exam. And a lot of startups and innovation do exactly that.
Many categories are at a stage of evolution where things are pretty good now and incremental improvements don't move the needle. It used to be only rich people had access to great products. But now a billionaire and an average joe can both enjoy a $4 cup of coffee from Starbucks, an iPhone that has more computing power than the space shuttle and drive a Prius with double average gas mileage.
Startups and innovators must remember we live in a world of "first world problems." Focus on real problems (e.g., obesity, loneliness and food waste) and industries people hate (e.g., cable providers, insurance, banking) and you'll have much greater success.
Different: Think Like Steve Jobs
Everyone knows the famous Apple slogan, "Think Different," but few actually do it in their startup or innovation. Keurig is a great example of this. They pivoted from talking about Keurig as an easier way to make coffee to it is great coffee, made simply with amazing variety. The 300+ brands you could choose from in your Keurig was what made the coffee great. They didn't set out to make the very best coffee, nor the best machine. They had great coffee and a great machine, but were the best at variety.
Different unlocks a multitude of demand. The meal kit delivery people are offering different as well. It's not a restaurant, it's not delivery, nor is it grocery shopping, but something in between. But for meal delivery to be successful, they had to solve for freshness. They solved it with the help of NOVA Chemicals, who innovated a breakthrough pouch that preserves the freshness of pre-cut ingredients to unprecedented levels. But even better, they were the first to create fully recyclable packaging for this pouch. Different and better at the same time.
Ideally, you crack the code and create a startup or innovation that is different, better and cheaper. Most great companies fit this bill, like Netflix and Amazon. But my suggestion is start with different first.