The Four Stages of Commercial Innovation

November 6, 2019

Throughout my career, I have focused on commercializing innovation. How do I define “commercial innovation”? It is about a company trying to create a new revenue-generating idea and then bringing that idea to market.

Companies do fine when it comes to incrementally improving a product line. But when they want to come up with an entirely new offering that will drive revenue, they struggle. That is sometimes because they put it in an incubator and don’t fund it. Or they spend more time putting together PowerPoints with grand visions, versus working with clients and an agile team to quickly assess the business value. What makes it commercially viable is ensuring that the good idea is important enough to a client that they will share in the investment and validate the revenue potential. This will be an iterative process where you go to a client, ask them to pay for it, and then go and build some more. That’s what commercial innovation is to me.

Anyone can talk to clients about what is possible and paint a vision. The client will often say, “It’s great — let’s partner.” That can mean that you just agreed to do free work for them, or that you can continue to have meetings with them. Again, no revenue is forthcoming.

If you are truly doing commercial innovation, you need the permission of the organization to talk to prospective customers without being afraid to ask them to invest. If you are successful at selling the value proposition and gaining their trust, and they committed to delivering and supporting the work, there is no reason they would not be willing to participate. But this will require a highly skilled team of consultative employees — ideally some with a professional services background — to advise the client and balance the client’s needs with the commercial goal of having broad client appeal. While the long-term commercial viability of the offering may eventually fail, the customer must understand that you’re committed, because they’re committing resources and their reputation is on the line. So you have to be 100 percent committed that you’re going to deliver an outcome and ensure the maintainability of the solution if it goes into production.

In the graphic below, I define four stages that I have seen successful projects go through on their way to the market: Incubation, Expansion, Maturation, and Commercialization. (You can also download a PDF of the graphic at the bottom of the page.)

What you are doing in the first stage is really creating a minor revenue validation point. In the second stage, you’re improving the solution and starting to show it to more customers. It isn’t until the third and fourth stages that the product is becoming fully baked and being sold and supported by the core business. I call this an incremental validation model, versus a “big bang” model. All along, you are ensuring your commercial assumptions still hold true and deciding if it makes sense to continue to pursue the commercialization of the idea.

To me, the word “commercial” in front of the word “innovation” means three things. First, there is a paying customer. Second, there’s a unique value proposition that drives customers to your solution. Third, you have a north star — an outcome that you are looking for. 


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