How preparing for our first child helped me better understand why companies struggle with innovation
In this post you will read about baby gear market, customer discovery process, market opportunities, and why corporate innovation requires agility.
My wife and I are expecting our first child in less than 2 months, and what we experienced so far are enormous costs, huge unpredictability, and contradicting advice. The challenges and rollercoaster feel of the preparation encouraged us to put our ‘design thinking’ hats on and look more into the problem space of 'how first-time parents prepare for the baby's arrival’. The biggest chaos we encountered was acquiring all baby gear, so we focused on that.
After visiting shops, chatting with expert moms on Facebook, performing high-level interviews and desktop research, we identified the following problems - and sometime even ironic or funny controversies:
- the arrival of a new baby is very expensive for most families, on top of that, you are going to buy numerous things that you will barely use (if at all)
- first-time parents are quite unsure what those things will be, therefore it's hard to decide what to invest in and what to buy cheap / second-hand. And as every child is different, getting advice from others is not much help, either, rather a guess
- buying second hand is an option, but quite an unpredictable one (condition and quality of products, sellers’ attitude and cooperation, etc.)
'If only there was a rental solution with quality products that you could return for a fraction of the cost if you did not use it!' It would encourage purchases but limit the overall expenditure and anxiety of making the right choice - this became our value proposition hypothesis.
To test the value proposition, we conducted user interviews and ran a 200+ participant survey. The results clearly indicated that no matter how compelling our initial idea was, it might not be the right way to go:
- while rental pricing might be favourable in relation to the cost of new items, it is hard to compete with second-hand prices (especially as moms try to get rid of their old things – sometimes for free)
- mothers prefer ownership (almost) regardless of price. E.g., for the question "what rental price you would pay for item X", close to half of the survey respondents stated they would not want to rent. Period. (we see similar patterns in car-sharing – it’s hard to assign value to the comfort of having your own car when needed)
- some companies tried providing rentable equipment previously and found it unprofitable and full of operational hassle. The ones who keep on renting, are focusing on just a few items. For example, our ex-edUcate team member Sára’s company in the Netherlands focuses solely on clothes rental
While the initial hypothesis was disproved, we found a few rather exciting pain points:
A) more versatile and flexible baby buggies
- new ones are really expensive (some are comparable to the price of a used car...)
- it's very risky to buy used ones, due to the questionable status of product conditions
- you buy a robust, multifunctional model for the first 6 months, and then you need to replace it with a lighter model for the next 1.5 years. No single product works for the full 2-year period
B) a more “controlled” second-hand market
- buying second-hand items is many parents’ go-to-option when affordability comes into play
- however, on these markets (online platforms) fraud regularly takes place (e.g., someone asks for pre-payment but ‘forget’ to ship the goods)
- 2/3 of survey respondents would prefer safer, more predictable exchanges
C) job opportunities for stay-home parents
- the members’ willingness to contribute to baby / parenting related topics in Facebook groups is amazing. You just post a question and receive 30+ comments in a few hours. The commenters are usually parents staying home with their young ones
- our interviewees also expressed the need to “stay in touch with the adult world” and “do something else besides raising the child”
- there is a huge untapped workforce potential if a few operational problems are solved (e.g., remote and asynchronous work; flexibility of work commitment)
Based on the above experience, we see three main learnings:
Learning #1 - Corporate strategy limits the exploration space.
Pivots are easy for a startup passionate about the problem space: you change directions and follow the new opportunity. But what happens with innovators at large companies? E.g., designing new baby buggies would be out of scope for a retailer exploring the rental business. Even though you found something valuable (desirability, viability, feasibility all co-exist), it does not fit into the corporate strategy.
Learning #2 - Confirmation bias and fear of failure lead to bad decisions.
In the above case, you either drop the project and admit failure (good for the company, bad for your career) or let your confirmation bias convince you (and your superiors) to continue with the project. The second happens more frequently than you imagine (“if all you have is a hammer, everything looks like a nail”).
Learning #3 - Battling with corporate policies reduce your chances of successful innovation.
Innovation is hard and risky even without dealing with constraining policies that slow you down. The above quick customer discovery process took 2 people less than 2 weeks, working in the evenings and on weekends only. We used a monthly subscription survey tool for 40$ and less than 30$ for Google Ads. And if we wanted to go forward, we could build an e-commerce website prototype (thanks to Shopify) for a mere 75$ (drag-n-drop, without need for coding). What would it take for a traditional corporation?
If you want to go beyond the innovation theatre, you have to allocate the time, create the right circumstances, build innovation competences, and provide support for your innovative employees to do great work.
I believe that the above reasons push corporations to focus their 'innovation' efforts on optimizing their existing products instead of placing big bets. They rather invest in more established startups (scale-ups) fitting their strategy. Due to this, the question is: how much value do companies leave on the table by missing bit bets and entering too late in the game?
If you are interested in reading more about customer discovery and new product development, check out our innovation page for stories about NetPincér, Vodafone and OTP Bank.
About the author: Dániel Nőthig Cofounder, Enterprise agile and digital transformation expert, former McKinsey, Columbia Business School MBA