In 1989, Pepsi Co. introduced a new product which they believed would change the soft drink game forever. The so-called “breakfast cola drink” was “Pepsi AM,” and it completely failed within the first year. It turned out people didn’t want to drink cola first thing in the morning, and the gamble cost Pepsi millions. More recently, Barnes and Noble introduced the “Nook,” an e-reader designed to compete with the Amazon Kindle. A book company releasing an e-reader in 2009 doesn’t seem like a terrible idea, but sales of the Nook have been dismal. Executives admit the company did not invest enough in quality or marketing, and product sales continue to disappoint.[1]

Innovating your product and service lines can be risky.   It may require you to stray from what you know, diverting time and resources into uncharted territory.  But when undertaken wisely, that risk can help you diversify your revenue streams, scale up your company, and build new skills and capacity in your employees. Here are a few things to consider before wandering into new territory.

Start Slow

While the prospect of a totally new product or service might be exciting, there may be some lower-risk opportunities for innovation that you ought to consider first. For example, incorporating telematics systems into your sweeper trucks can give clients access to useful data and information, increasing the value of your sweeping while keeping the service essentially the same. Consult with your customers about what problems or issues you might help them solve before introducing something completely out of left field.

Framing Choices for Customers

Always take into account how new offerings will look in comparison to what you’re already selling. In his fascinating book on human decision making, “The Paradox of Choice,” sociologist Barry Schwartz describes a high-end kitchenware catalog that was having trouble selling a $279 bread machine.[2] In a Hail Mary move that no one thought would work, the owner decided to offer an even nicer machine right next to the original one in the catalog, priced at $429. Hardly any units of the new machine were sold, but sales of the $274 machine doubled! The decision point was framed differently. On its own, the original bread machine seemed too expensive for most customers, but when the choice of that purchase was positioned next to a higher end model, people felt the original was a bargain. Remember that new products and services could change the relative value of your existing products, even if their costs stay the same.

Involve Your Employees

Besides diversifying your revenue streams, innovating can provide an opportunity to involve employees in the creative process. When looking to reward an outstanding employee, you may be limited in the financial or promotional incentives at your disposal. But including a great employee in the development of a new product shows that you value their skills and perspectives. You may also benefit from that person’s unique perspective into customer needs or changes in the market. All of this can help an employee feel more invested in their work by involving them in the broader mission of the company.

For more information about this article or any other please feel free to contact us.  We love to hear from you.  From all of us at NiteHawk.

[1] Gilbert, Ben. (4 May, 2018). 25 of the biggest failed products of the world’s biggest companies. Business Insider. Available at http://www.businessinsider.com/biggest-product-flops-in-history-2016-12.

[2] Schwartz, Barry. (2004). The Paradox of Choice. New York: Harper Perennial