How to Kill a Unicorn

How to Kill a Unicorn Plot Summary

Introduction

In today's rapidly evolving marketplace, innovation has become an essential driver of business growth and competitive advantage. Yet the sobering reality is that up to 95% of innovation initiatives fail to deliver meaningful results. This staggering failure rate persists despite increasing investments in innovation programs and the proliferation of user-centered design methodologies. What's missing in this equation? The Two-Sided Innovation Model addresses this critical gap by challenging the conventional wisdom that focusing exclusively on consumer needs will lead to successful innovation outcomes. Instead, it proposes a balanced approach where consumer insights and commercial imperatives receive equal attention throughout the innovation process. By integrating what the author calls "Money" (business viability) and "Magic" (creative possibility) from day one, organizations can dramatically increase their innovation success rates. This framework provides a practical roadmap for creating innovations that not only delight consumers but also create sustainable business value—transforming innovation from a hit-or-miss proposition into a reliable engine for growth.

Chapter 1: The Two-Sided Problem: Consumer vs. Business Needs

The fundamental challenge in innovation is that it must succeed in two entirely different worlds simultaneously: the world of consumers and the world of the business serving them. Conventional innovation approaches tend to focus predominantly on one side of this equation, usually starting with consumer needs and only later considering business requirements. This sequential approach creates a critical disconnect that often dooms promising ideas. Consider a common scenario: an innovation team conducts extensive consumer research, identifies unmet needs, and develops a concept that resonates beautifully with target customers. Excitement builds as the concept performs well in testing. However, when the team finally begins to consider business feasibility—manufacturing capabilities, cost structures, distribution channels, strategic alignment—they discover insurmountable barriers. What started with tremendous promise ends with disappointment as the innovation never reaches the market. The two-sided problem exists because consumer needs and business requirements are fundamentally different yet equally important. Consumers seek products that solve problems, create delight, or improve their lives in meaningful ways. Businesses require innovations that leverage existing capabilities, align with strategic priorities, deliver sustainable margins, and create competitive advantage. When these two sets of needs are addressed separately or sequentially, the odds of creating viable innovations plummet. The banking industry provides an illuminating example. A major bank sought to increase customer adoption of multiple financial products but struggled despite offering competitive rates and promotions. The innovation team discovered that customers viewed each financial product as an isolated decision rather than seeing their financial lives holistically. Meanwhile, the bank's internal structure mirrored this fragmentation, with siloed divisions, separate IT systems, and incentive structures that discouraged cross-selling. The true innovation challenge wasn't just creating better financial products—it required solving both the consumer's need for an integrated financial experience and the bank's need for organizational alignment. Looking at innovation as a two-sided problem reveals that neither side can be solved without addressing the other. Like trying to hit a golf ball with one eye closed, approaching innovation with a single-sided perspective dramatically reduces your chances of success. Opening both eyes—seeing both consumer and business needs simultaneously—creates the depth perception needed for innovation to thrive.

Chapter 2: From Wow to How: Building Viable Solutions

The journey from initial concept to market-ready innovation requires bridging what can be described as "the wow" and "the how." The wow represents the big, differentiated idea that opens valuable new possibilities for consumers and companies. It's what excites innovation teams and delights potential customers. The how encompasses the practical questions of implementation: how the product will be made, at what cost, through which channels, and with what business model. Too often, innovation efforts fixate on the wow while neglecting the how until it's too late. This imbalance creates a dangerous dynamic where innovation teams become emotionally invested in ideas before determining if they're viable. When implementation questions eventually arise, they can't be answered satisfactorily, and promising concepts die on the vine. This pattern explains why so many innovations fail to reach market despite initial enthusiasm. The solution isn't to temper creativity but to bring implementation considerations forward in the process. Rather than addressing the how questions at the end of the innovation journey, successful innovators integrate them from the beginning. This approach doesn't constrain creativity—it channels it more productively. When innovators understand manufacturing constraints, distribution requirements, or regulatory hurdles early on, they can design solutions that work within these parameters or find creative ways to overcome them. This integration creates a virtuous cycle where business realities inform creative solutions, and creative thinking helps solve implementation challenges. Consider the development of an innovative medical device. A traditional approach might focus first on creating the ideal patient experience, then later struggle with manufacturing complexities or regulatory approval. A two-sided approach would bring medical regulations, manufacturing capabilities, and healthcare delivery systems into the initial concept development. The result isn't a compromise but a stronger solution that delivers both consumer benefits and business viability. The key insight is that the wow and the how aren't sequential phases but parallel and interconnected aspects of innovation. By giving equal attention to both from day one, innovators dramatically increase their odds of creating solutions that not only excite consumers but can actually be delivered to market. This integrated approach transforms innovation from a hopeful creative exercise into a reliable engine for business growth.

Chapter 3: The Stretch Factor: Big Ideas without Breaking the Business

The Stretch Factor addresses a persistent tension in innovation: the relationship between ambition and implementation. Conventional wisdom suggests that big, disruptive innovations are inherently riskier, slower, and more expensive to execute than incremental improvements. This assumption often leads companies to play it safe, focusing on minor enhancements rather than bold new directions. However, this perceived correlation between scale and difficulty is not inevitable—it's a function of how innovation is approached. At its core, the Stretch Factor represents how far an innovation stretches a company's existing capabilities, strategies, and business models. The key insight is that breakthrough innovations don't necessarily require breaking the organization to implement them. The most successful innovations create significant disruption in the marketplace while minimizing disruption to the company itself. This seemingly paradoxical goal is achievable through deliberate choices in how innovations are conceived and developed. When plotted on a matrix of marketplace disruption versus company disruption, four distinct innovation territories emerge. The lower-left quadrant represents high company disruption for relatively modest market impact—innovations that require significant organizational change for limited return. The upper-left quadrant shows potentially transformative market opportunities that demand substantial company transformation. The lower-right represents incremental improvements leveraging existing capabilities. The upper-right—the sweet spot—represents innovations that create significant market disruption while leveraging existing company capabilities. Real-world examples illustrate this principle in action. When Samsung developed translucent LCD technology, they faced countless potential applications across dozens of industries. Rather than attempting to enter unfamiliar markets directly, they focused on commercial refrigeration—an industry where their core display technology capabilities could create transformative value without requiring Samsung to become a refrigeration company. By providing the technology to established manufacturers, Samsung created significant market disruption while minimizing internal disruption. The path to landing in this sweet spot lies in approaching innovation with a dual focus from day one. Rather than starting with unconstrained ideation and later trying to force ideas to fit company capabilities, successful innovators look for intersections between emerging customer needs and the organization's existing strengths. This approach doesn't limit ambition—it channels creativity toward opportunities where the company has the greatest right to win, dramatically increasing the odds of successful implementation.

Chapter 4: Strategic Focus: Making Innovation Choices that Matter

Strategic focus represents the critical difference between organizations that generate interesting ideas and those that consistently deliver successful innovations to market. Research consistently shows that the single biggest predictor of innovation success isn't the creativity of the ideas but the clarity of strategic focus before any ideas are developed. Without this focus, innovation efforts spread thinly across too many opportunities, resulting in inadequate resources for execution and difficulty making decisions. The challenge begins with how innovation projects are framed. Many initiatives start with overly broad mandates like "explore emerging technologies" or "identify growth opportunities." These open-ended explorations may generate excitement but rarely deliver tangible outcomes. The most successful innovation programs, by contrast, establish clear strategic parameters before ideation begins. They define specific territories where innovations will create meaningful value for both customers and the business. Effective innovation strategy makes explicit choices about where to play and how to win. This requires synthesizing insights about consumers, the company, channels, and the broader category to identify high-potential opportunity spaces. The strategy pinpoints intersections where unmet consumer needs align with the organization's capabilities and strategic priorities. These choices narrow the playing field to define a uniquely winnable battle and the commercial value of winning it. This strategic narrowing may seem counterintuitive to creativity, but it actually creates what innovation leaders call "the art of the mismatch." By concentrating the organization's creative, technical, and commercial resources on a clearly defined challenge, you create an overwhelming advantage against that specific problem. Rather than diluting resources across many possibilities, strategic focus creates a force multiplier effect. The innovation challenge becomes a specific problem to solve rather than an amorphous search for ideas. Time Warner Cable's entry into home security illustrates this principle in action. Instead of pursuing the broad concept of smart homes, they defined a focused strategy targeting home security as their entry point. This choice leveraged existing company assets (data lines, customer relationships, field technicians) against a specific customer pain point (security systems limited by landline dependence). This strategic clarity enabled them to rapidly develop, launch, and scale a successful new business while avoiding the pitfalls of competing head-on with established security providers. The power of strategic focus extends beyond individual projects to innovation portfolios. By making deliberate choices about which opportunities to pursue and which to set aside, organizations can allocate resources where they'll create the greatest impact rather than spreading them thinly across too many initiatives.

Chapter 5: Bending Capabilities: Leveraging What You Already Have

The most successful innovations often don't require building entirely new capabilities from scratch. Instead, they ingeniously bend and repurpose existing organizational assets in novel ways. This approach dramatically increases the speed and success rate of innovation initiatives while reducing cost and risk. The key insight is that a company's capabilities should be viewed not as constraints but as canvas—a foundation for creativity limited only by the imagination applied to them. At its essence, capability bending requires innovators to look beneath the surface of what a business currently does to uncover its deeper, more flexible competencies. Rather than seeing manufacturing equipment, technologies, processes, or expertise in terms of their current applications, innovators mentally "unbundle" these capabilities to discover new potential. For example, a food company might recognize that its expertise in flavor formulation could extend beyond its current product categories, or a logistics company might leverage its route optimization algorithms in entirely new markets. This perspective shift starts with asking different questions. Instead of simply understanding what production equipment does today, innovators should ask: "What else could this equipment do?" This question often stumps even veteran operations professionals who have never considered their assets through this lens. The most valuable insights often come from exploring the 5% of production processes with the greatest flexibility, where small changes to inputs can create significantly different outputs. Human capabilities represent an equally important but frequently overlooked asset. Long-tenured employees often carry institutional knowledge about past experiments, discontinued products, or alternative methods that may hold solutions to current challenges. These "capabilities in waiting" sometimes lie dormant until connected to emerging market needs. Exploring what a company has tried in the past, even if those efforts didn't succeed at the time, can uncover valuable assets that align with today's opportunities. The craft spirits producer Tuthilltown Spirits exemplifies this approach. As a small newcomer to the whiskey category, they faced the daunting challenge of competing against established brands with aged inventory. Rather than accept the conventional wisdom that quality whiskey requires years of aging, they bent existing capabilities in new ways. By using smaller barrels and developing novel techniques like "woodpeckering" (creating honeycomb patterns in barrel staves to increase surface area), they accelerated the aging process to produce premium whiskey in a fraction of the traditional time. This capability bending created both a distinctive product and a sustainable competitive advantage. The most powerful capability bending often comes from creating new combinations of existing assets. When Coca-Cola developed PlantBottle technology, they strengthened its environmental impact by connecting it to their existing recycling initiatives. This pairing of innovations—one reducing petroleum in new bottles, the other increasing recycling of used bottles—created greater sustainability benefits than either could achieve alone.

Chapter 6: Transformational Questions: Finding New Possibilities

The true alchemy of innovation lies not in generating answers but in uncovering transformational questions. When competitors in a market all pursue answers to the same questions, they inevitably cluster around similar solutions, creating a strategic gravity that limits differentiation and growth. Breaking free from this gravitational pull requires asking fundamentally different questions that challenge underlying assumptions and open new territories for exploration. Transformational questions have unique characteristics that distinguish them from conventional inquiries. They pack a healthy disrespect for present reality, daring to challenge fundamental aspects of categories, businesses, and consumer experiences that have been taken for granted. They illuminate what innovators call "the problem behind the problem"—not just addressing surface symptoms but tackling deeper underlying issues. Most importantly, these questions create a paradigm shift in how we think about a challenge, opening entirely new solution spaces. Consider a bank seeking to increase savings among its customers. The conventional question—"How can we make financial education more effective?"—had led to a proliferation of similar approaches across the industry: brochures, calculators, seminars, and games. Looking deeper, innovators discovered a more transformational question: "How can saving compete more effectively with spending?" This reframing revealed that saving had lost its anchoring rituals and emotional rewards, while spending had gained both through e-commerce and modern retail experiences. The solution space shifted from education to creating new rituals and emotional experiences around saving. Finding transformational questions requires specific techniques. One approach is temporarily forgetting what you know—setting aside industry expertise and entrenched paradigms to see challenges with fresh eyes. Another is moving the metaphorical camera around the room, looking at challenges from unexpected perspectives. A hospitality company seeking to improve its loyalty program discovered transformational insights by exploring loyalty in other contexts—marriages, friendships, even pet relationships—rather than just studying competitive loyalty programs. Perhaps most importantly, innovators must learn to hear "the thundering sound of what isn't being said." In conversations with those top-tier hospitality customers, the striking absence of any language about actual loyalty revealed that industry loyalty programs had evolved into transactional games rather than relationship-building mechanisms. This realization led to the transformational question: "How can our loyalty program work and feel more like human loyalty?" The resulting innovation created a program based on lifetime value rather than annual metrics, fundamentally changing the relationship between the company and its best customers. The power of transformational questions extends beyond consumer-facing innovations. When Samsung sought to expand its LCD business into new markets, the transformational question "Why does a video wall need a wall at all?" led to an entirely new product category: self-supporting, modular display systems that could be assembled in minutes without underlying structural walls, saving weeks of construction time and thousands of dollars.

Chapter 7: B2B Innovation: Navigating Complex Ecosystems

Business-to-business (B2B) innovation presents unique challenges compared to consumer-focused innovation. While consumer innovations typically involve a relatively simple business system—a manufacturer, perhaps a retailer, and an end user—B2B innovations must navigate complex ecosystems with multiple stakeholders, each with distinct needs and decision-making authority. Success requires understanding and addressing this multi-dimensional complexity from the outset. The fundamental difference in B2B innovation is that it's rarely sufficient to focus exclusively on the end user. In many B2B contexts, the end user has limited influence over purchasing decisions. For example, in developing an interactive vending machine technology, the innovation team needed to consider at least seven different stakeholders: the technology provider, equipment manufacturers, consumer packaged goods companies, vending operators, service technicians, location owners, and ultimately consumers. While consumer appeal was necessary, it wasn't sufficient to drive adoption. This complexity demands what might be called "ecosystem ethnography"—deeply understanding the business problems, pain points, and priorities of each key player in the value chain. The most successful B2B innovations create distinct value propositions for each stakeholder rather than assuming that value for one player will automatically translate to others. For the interactive vending example, the value proposition for technology providers focused on opening new markets for their components. For consumer goods companies, the value centered on creating a new brand-building channel. For vending operators, the emphasis was on reducing operational costs through real-time monitoring. Another crucial aspect of B2B innovation is identifying the ecosystem's power dynamics and pecking order. Not all stakeholders have equal influence over adoption decisions. Successful innovations target the market makers whose buy-in can trigger a cascade effect throughout the ecosystem. This requires looking beyond obvious customers to identify the players with the greatest influence over system-wide change. Often these influencers are motivated by business problems entirely different from those facing other ecosystem members. Google's struggles with Google Wallet illustrate the consequences of underestimating ecosystem complexity. Despite strong consumer value propositions, the initiative faced resistance from credit card companies demanding high fees, phone carriers developing competing services, and retailers slow to adopt necessary technologies. Without compelling value propositions for these intermediaries, the innovation stalled despite substantial investment. The approach to B2B innovation requires a shift in mindset from solving a single problem to orchestrating a system where multiple actors win simultaneously. This doesn't mean compromising on the core innovation but rather shaping it to create strategic alignment across diverse stakeholders. The most successful B2B innovations aren't necessarily the most technologically advanced but those that most effectively navigate the complex human and organizational dynamics of their target ecosystems.

Summary

The Two-Sided Innovation Model fundamentally transforms our approach to creating breakthrough innovations by recognizing that success depends on simultaneously addressing both consumer needs and business imperatives. When these two forces collide and collaborate from day one, they generate innovations that not only delight users but also create sustainable business value. This integrated approach dramatically increases success rates, turning innovation from a hit-or-miss proposition into a reliable growth engine. In a world where traditional innovation methodologies fall short despite good intentions, the Money & Magic framework offers a practical alternative. By embracing strategic focus, bending capabilities, asking transformational questions, and navigating complex ecosystems, organizations can consistently deliver innovations that make it to market and thrive. The model doesn't reduce ambition—it channels creativity toward opportunities where companies have the greatest right to win. This approach transforms innovation from a hopeful creative exercise dominated by fear of failure into a disciplined practice characterized by fearless execution and consistent results.

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Mark Payne

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