Gene and I spent a weekend at a small condo in Aix-les-Bains, a small town on an Alpine lake in France. This town has a stunning casino that dates from the Belle Epoque era, with mosaic ceilings that rival some I’ve seen in the grandest cathedrals.
Everything from the marble on the floor to the artwork and furnishings displayed opulence and grandeur. It was the kind of place where a person would be proud to lose a lot of money. The casino owners could afford to create such an atmosphere because they knew that the odds were always in their favor.
What if you could tune your innovation engine so that the odds are in your favor?
Research from the Product Development Management Association shows that the odds of success for a new product are about 2 in 5. That is, only 40% of the products that make it all the way through product development achieve the company’s goals for sales, revenue generation and profitability.
This “hit rate” doesn’t include products that get cancelled in late development, after all the expensive investment has been made. Not only does the company lose all of their investment in development, they may also risk customer relationships or expose themselves to liability for warranty claims. The company’s leaders may lose confidence that their people can deliver the innovation they need for organic growth, and their investors lose patience and go elsewhere. The human cost can be worse than the financial costs.
Product development organizations have been trying to improve the hit rate for new products, but so far, they haven’t succeeded. The 2-in-5 odds have held steady since the earliest studies were done in the 1950s, despite all the new IT systems and design automation, innovation management practices and the widespread adoption of phase-gate Product Development Processes (PDP)s.
After seeing the results we get from programs that use the Rapid Learning Cycles framework, I now think that low hit rates arise from the way that phase-gate processes and human nature drive people to make decisions too early and validate them too late, as our natural creativity leads us to start too many projects. The Rapid Learning Cycles framework overcomes the first of these root causes.
The Rapid Learning Cycles Framework Improves the Odds in Three Ways
The Rapid Learning Cycles framework pulls learning forward and pushes decisions later. When innovation teams can do that, they develop better ideas at the very beginning, cut doomed projects to free up resources for better ones, and accelerate product ideas with the most promise.
Stack the Deck from the Beginning
The earlier we go in product development, the fuzzier the “front end” becomes. The Rapid Learning Cycles framework provides just enough structure and accountability to ideation processes to pull learning forward that needs to be done at this phase to have an impact.
The earliest learning cycles focus on understanding target customers’ needs, ideally through direct observation and focused conversations with people all along the value chain.
For example, when Steelcase decided to pursue the education market, the next step wasn’t just brainstorming a list of product ideas. Instead, Steelcase designers spent a lot of time in classrooms and talking to everyone from School Board Superintendents to janitors. The Node Chair concept emerged from a deep understanding of customer needs, and of Steelcase’s unique ability to address those needs.
The Rapid Learning Cycles framework supports this phase of development by pushing decisions later. This encourages teams to explore the landscape around a new area of customer need without making commitments prematurely. Designers draw lots of concept pictures — not just one or two. Engineers do broad technical feasibility studies, rather than just validate a point solution when it’s too early to converge on one. The final concept that emerges from this process is a lot more robust because the team knows a lot more about this concept — and all the others they discarded along the way.
It’s easier for teams to do this work within the structure of the Rapid Learning Cycles framework, and for management to support it. The earliest stages of product development are always going to be creative and messy, and therefore at odds with a corporate culture that craves predictability and efficiency.
The Rapid Learning Cycles framework gives teams freedom inside the learning cycle to find and develop ideas, and provides frequent opportunities for sharing and check-ins with the leadership team about how the evolving ideas fit the company’s mission and strategy. The Rapid Learning Cycles framework allows teams to be messy and creative as they learn, while providing innovation sponsors with just enough structure and definition to integrate these projects into a corporate environment.
Discard the Low Cards Early
Some product ideas look good, but have hidden obstacles. When innovation teams find these hidden challenges early, they can make faster decisions about when it’s time to move on to something that is more likely to succeed.
As investment increases, innovation programs gain a lot of momentum that can make them hard to stop when major blocking issues come to the surface. Teams and their sponsors get attached to new product ideas, trying their best to make things work in the face of overwhelming odds. Teams with a lot of momentum may find that they don’t even see these obstacles until the team runs right into them.
In early product development, ideas should be just that — ideas that teams are exploring. The Rapid Learning Cycles process prompts teams to ask themselves questions about what they know, and what they still need to know, in order to move the idea to the next phase. That helps bring blocking issues to the surface faster, so that the team can move on to something else before they’ve spent half a year of their lives on it, and before giving up feels like failure rather than just redirection.
The Rapid Learning Cycles framework pushes expensive decisions later so that these blocking issues have more time to surface, too. A company is a lot more likely to continue to fund an innovation project that has not yet reached the point where they need the company to write a big check for full-scale prototypes and tools. They are more likely to write those checks if teams themselves are able to recognize when they’ve run into an obstacle that isn’t worth the effort to overcome, before those checks need to be written.
Push the High Cards to the Top
When the innovation team has something good, the Rapid Learning Cycles framework helps set it up for success. Since the team has actively sought to close their most important Knowledge Gaps early, they will be able to make the earliest implementation decisions with higher confidence. As a team moves an idea out of the idea phase, they start to make fundamental decisions about key partnerships, lead customers, architecture, etc. that are hard to undo later.
This is especially important if the product is a breakthrough innovation. These programs are notorious for how often they run into serious problems that cause massive delays, budget overruns and missed expectations — and how often the organization rejects them out of discomfort and risk aversion even if they claim innovation as a core value.
When a market or technology is new, it’s even more important for the team to pull learning forward, because we don’t have the experience to make good decisions without learning about the alternatives. By pushing decisions later, teams preserve flexibility to quickly overcome obstacles. For leaders who seek safety and confidence, the Rapid Learning Cycles framework provides concrete demonstrations of meaningful progress and risk reduction.
“I Thought We Had to Break All the Rules to Innovate”
The best product development teams know there is no point trying to violate the laws of physics, and professional artists know if they sit around to wait for inspiration, it will never come. The Rapid Learning Cycles framework provides just enough structure to pull the messy, creative work of innovation, even when executives are risk-averse and everyone seems to have run out of ideas.
It’s easier to find that breakthrough innovation when teams have the space to explore. It’s easier for executives to give them that space if the executives know that their resources won’t be wasted on ideas that have major problems lurking below the surface that the team isn’t trying to find.
Within the Learning Cycle, teams do whatever they can to learn and create. At the end of a Learning Cycle, they share their progress, reflect on where they are, and decide where they need to go next, even if that’s onto another idea. That simple rhythm of exploration and consolidation helps establish a rapid pace of learning that carries all the way through the development process.
The Rapid Learning Cycles Framework Accelerates Innovation
These benefits build up over time. As teams demonstrate that the Rapid Learning Cycles framework makes them more predictable and more capable of delivering innovations that succeed, the leaders become more willing to accept projects with more risk.
They know that the Rapid Learning Cycles framework will help teams find legitimate reasons for killing the project early if they exist, and if not, the Rapid Learning Cycles framework will help the team deliver the project in a reasonable time at a reasonable cost.
By pulling learning forward and pushing decisions later, product development organizations give themselves the ability to tilt the odds in their favor so that the products they develop are more likely to achieve the success they had envisioned.
