The following insights are based on a workshop conducted by consulting firm Simon Kucher with leaders from Insignia Venture Partners’ portfolio companies in March 2024.

72% of innovations end up failing commercially, according to a survey conducted by consulting firm Simon-Kucher with over 1,500 global executives. Such findings are in line with findings from similar studies conducted by Harvard Business Review and product management associations. 

With the amount of time, effort, and money put into developing products and bringing them to market, it’s important to understand how innovations fail, why they fail, and ultimately what can be done about it. This is all the more urgent in the current economic climate where profitability and financial runways are stretched, presenting new challenges for early-stage businesses to stay afloat. 

In the book ‘Monetizing Innovation’, experts from Simon-Kucher identified the common mistakes companies fall prey to when developing new products, leading to four kinds of product failures: 

1. ‘Feature shocks’: Trying to fit too many features into one product. By cramming too much into a single product, businesses risk confusing and alienating customers, undermining uptake. 
2. ‘Minivations’: Undercharging relative to value delivered/perceived by customers. If price does not align to value, then businesses risk leaving ‘money on the table’ because customers would have happily paid more. 
3. ‘Hidden gems’: missing out on big bets that would have paid off. Some companies can be overly risk averse, especially if the product deviates from their perceived core offerings, leading some to miss out of big opportunities.  
4. ‘Undead’: Holding on to failing products. In early-stage innovation, it’s important to ‘fail fast’. If a product is irredeemably failing, it’s sometimes better to move on than to try and salvage the remains.  

We can all think of examples to fit the above scenarios, but beyond understanding how products fail, it’s also important to pre-empt this from happening at all. Based on Simon-Kucher’s extensive project experience, the genesis of commercial demise often has its roots in poor planning. Early-stage businesses often over-index their efforts in solving for product development, whilst leaving commercial considerations as an afterthought. 

A prime example of this is price. Across Simon-Kucher’s engagements with B2C and B2B companies, they have often observed that companies often put product before price. Price, in short, is often missing from the product-market fit equation, which is a common mistake that can have severe consequences. After all, price is a measurement of value and plays an outsized role in determining sales, the lifeblood of any sustainable business. 

To this end, there are at least three best practices that businesses should adhere to, to give their innovations their best chances of survival and success:

(1) Design product around price, not the other way around 

In a classic example of the ‘tail wagging the dog’, businesses often rush to develop products and features they perceive to be valuable to customers, and then slap a price on their offerings based on internal hypotheses. This kind of internal bias can be lethal; often businesses spend considerable resources developing product features that either do not resonate in practice or are not monetizable. This can burn through significant resources (and time) and alienate customers as businesses test-and-learn to find the ‘optimal’ offering. 

Instead, it’s better to first understand what customers want to see, what they’re willing to pay for, and then productize accordingly. By prioritizing the value and willingness to pay talk early, you can take the guesswork out of product development by working towards a market-validated product, rather than taking shots in the dark. 

(2) Leverage segmentation to tap pockets of willingness to pay 

Based on Simon-Kucher’s experience, one size often fits none. Customers often have different willingness to pay because they place different levels of value in different product attributes. Trying to solve for the ‘average’ customer often means very few winners, and a whole lot of losers. Take water as an example. It may fundamentally be a commodity, but to the extent that you drink water from the tap, a convenience store-bought bottle, or a hotel minibar commands significantly different levels of value, willingness to pay, and thus price. 

Segmentation thus helps you better monetize because you can design your offerings around what different segments want, and then price accordingly. This allows you to reach more people and unlock more demand than what you otherwise would with a blanket approach. Moreover, segmentation is most successful when based on behavioural factors or needs (because they are actionable and reflect value drivers) rather than demographic ones (since these seldom tie back to willingness to pay and may fall foul of price discrimination regulation).

(3) Understanding price beyond just the numbers 

When businesses do come round to considering price, the first question is: how much should we charge? Whilst no doubt salient, we often find that how you charge, i.e., the price metric and model, is just as important as how much you charge. This is important as the price metric should ideally reflect the nature of the value you provide to customers, as well as scale to allow you to share in their success. 

Among other things, the ‘right’ price metric will vary depending on industry (norms and standards), customer requirements (e.g., cost predictability), product nature (how customers use your product), and operational considerations (complexity, feasibility). For a SaaS company, for example, a common trade-off could be between charging by users (seats, MTUs) or usage (API calls, outputs, queries). There are pros and cons to each, but finding the right metric could mean the difference between strangling your sales and letting you scale.  

The workshop conducted between Simon-Kucher and Insignia uncovered a host of common problems and questions faced by Founders and early-stage businesses that cannot be fully explored here. To learn more, consider exploring Simon-Kucher’s proprietary content in Monetizing Innovation and subscribe to our newsletter to get easy access to more related content.