Posts Tagged ‘risk’

“Coupling” – A sure way to reduce new business risk

Friday, September 19th, 2008

Failure is the Norm

To anybody involved in the business of new venture, new products and new services the risks are well understood.

Indeed statistics would show that most new ventures fail, either totally, or in reaching anywhere near forecast revenue targets. Most of all, really new things have an alarmingly high failure rate.

Would you believe the facsimile machine was actually patented in 1898? That the personal computer would have been a flop had it not been for the development of word processing and spreadsheets; that the photocopier took more than 10 years to come into common use and the internet more than 15?

Whilst business is tough and fraught with risk; businesses founded on really new and novel concepts is even tougher.

Humans resist Change

It is common knowledge that people resist change, for change has the potential to disrupt life and the status quo and may lead into unchartered waters. Better to remain the same and let life go on. This is quite a normal outlook for most people and quite understandable, after all, who want to embrace the risk associated with change?

Innovation, which has as its underlying principle the value adding of incremental changes to things represents little risk for business and customers alike.

Just look at the motor companies, they are reluctant to completely redefine their models and bring about potential market disasters such as the infamous “sea change” model Edsel Ford on the 1950’s.

Instead, what car makers do is incrementally improve models. Make slight changes, and perhaps every four years, in step with their competitors, bring out slightly modified shapes, but most often retaining the same generic name, such as the Ford Falcon or Ford Mustang.

This is safe and people adopt such incremental change with little or no difficulty.

Whilst Innovation, defined as “Change that Adds Value” properly implemented can largely remove market risk, what is the risk mitigation strategy for really novel ideas.

The answer lies in “Coupling”

Would you believe that one of the most successful technology products in history was the Compact Disc, and what a new and novel technology this was, but its impact was immediate, despite its total novelty?

How did this happen?

The answer lies in clever marketing where the CD was not introduced as some weird “off the wall” contraption, but simply as a better vinyl record.

The novelty and newness of the CD was virtually eliminated by coupling it to the “common or garden” record. It was not new, it was just a better way of doing something we were all doing, purchasing playing and storing music.

This is a classics example of coupling.

Relate what it is you have to the market norm and sell it and simply a better way of doing things we are already doing.

There are countless examples of this, even simple ones such as the cordless phone; not a new contraption, but a common phone released from the shackles of its permanent wire connection.

What’s the message?

The simple message is that when launching something of high novelty try and remove some of the novelty be relating it in some way to things or products people are already doing or using.

Couple to the existing mindset and the risk of failure will be far reduced.

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