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Understanding that many innovators deal with limited resources, should they first invest in prototyping or should they follow their instincts and shoot for delivering a commercial product sooner rather than later? I think there are several matters to consider:

• The window of opportunity and time to market
• Available resources and cash burn rate
• Risk management and confidence level on the path forward

If we agreed that an innovator is meant to be first to market by definition, most would expect to be able to take the lead, to grab a substantial market share and to realize higher growth rates and margins until competitors manage to catch up. Timing the market is not easy and, in many cases, innovating means implementing accelerated development schedules with very little room for trial and error.

• It should be noted that there are examples of innovators whose product happens to be launched before the market is ready to adopt it, thus failing to realize the business. This can happen to advanced technologies whose value chain is not yet put together and to products which might require changes in user behaviors that can take place at a slower pace.

There are ways to mitigate risks. Quality management principles are meant to show very little or no tolerance for defects. This approach can involve safer and, most likely, longer product testing and development schedules. The question for many innovators is whether a safer strategy meets their time to market requirements. Over-engineering can lead to higher product costs, lower margins and being late to market.

Some companies value speed instead. As an example, many web services happen to be launched as beta versions. This means their products can be buggy and glitchy. But if a number of users happen to agree to give them a try, product managers get valuable feedback on what works and what doesn’t prior to releasing a commercial grade version.

• Interestingly enough, there are quite a few 2.0 applications out there in what appears to be a permanent beta stage. This can be leveraged as a strategy to deal with potential product liabilities, as users agree to terms and conditions that specify that they are using the service at their own risk.

One other consideration is whether a given product is considered to be “mission critical” as part of a given system. Many networking products happen to be in the middle of data traffic. Should they fail to perform, that can trigger a negative chain reaction which can negatively impact other services.

• So, in many cases, accelerating the product’s launch means delivering a first release with limited functionality, adding additional features in subsequent releases. The question is whether a first bear bones release can secure the company’s market leadership or whether it might just disappoint expectations, enabling followers to quickly learn what it really takes to get the right feature set to market.

At this point, I would like to refer you to my previous posts on real options in R&D, which would apply to corporations looking into developing a serial innovation strategy for repeated success. Filing patents, building Proof of Concept prototypes as well as lab and field trials allow companies to exercise the right to eventually make further investments to launch a commercial grade product, or to reserve the right to do so at a later stage when market conditions might be more favorable.

J. de Francisco
Arizona, 20 May 08

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