Are innovation risks of different kinds? Well, since there are several types of innovations, there are several types of risks.
Will you actually be able to make the product you’ve set out to? If so, will you be able to market it economically? If so, will the customer see enough value in it?
On 25 May 61, US president Kennedy announced that America will put a man on the moon and bring him safely back, before end of 60s. Hearing this on radio in the Kennedy speech to the nation, NASA scientists jumped up. They had no idea at all how to achieve it.
In 2011, Netflix had a $ 16 million market value with their mail order DVD rental. They decided to enter the digital streaming market with a brand called “Qwikster,” an easy alternative to mail order DVDs. Unfortunately splitting the company between Netflix’s mail order DVDs and Qwikster’s DVD streaming made things more complicated — not to mention it resulted in a 60% price increase for those who wanted both services. The company lost 800,000 subscribers and its stock price dropped 77% in four months.
In October 2010, Gap, known for everyday basics, tried to redo their image to appeal to a more hip crowd, They launched a new logo in an attempt to be more modern. Within 2 days, there was unbelievable backlash from the public. It appears that Gap did not understand who their target market is — the people who want the basics and aren’t interested in trendy styles. Their loyal customers felt that Gap was changing their image for the worse and lost a connection with the brand.
Let us take a recent example. Google has just paid $3 billion to acquire Nest, the company making web connected home gadgets. It is already possible and the route to market is clear. But, will people like their kitchens, bathrooms and gardens controlled by smart phone Apps? That is the risk called – Will people see value in it?
There are risks of technology, risks of route to market and risks of acceptance.
In the next post, we’ll talk of what we can do about such risks.