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How Do Innovative Breakthroughs Occur?

How do Innovative Breakthroughs Occur? Why are there so few great products?

by John C. Botdorf

As I am getting ready to launch my sixth start up, I am forced to examine one of the great Entrepreneurial questions of our time. What makes a product compete on a world stage and why is it so difficult to become a global brand? Well, let us look at one of the most difficult achievements in sports, winning the coveted Triple Crown in horse racing. This feat is so difficult it may only happen a few times over a 50-year period. This begs the question; Is it the horse or the jockey? Or for that matter, is it the owner or the trainer? Well, the safe answer is it takes a combination of all four to really win a Triple Crown. Rare conclusion for me, I usually do not take the safe route.

What then makes an excellent product?  After studying this question for over 35 years, I have the answers. The problem is getting the allocation right. Like the Triple Crown, the general answer is not that hard, it is getting the underlying recipe right that makes the difference. Whether your product is a consumer good, a new SaaS app, or a new chocolate chip cookie formula that just crushes the competition, the principles are the same. Let us try and break this down. While variations of this thesis exist, remarkable success with products comes from two places. The first is the product itself, it must be unique, it must provide a terrific value prop to the end user, and it must be able to justify its pricing points with ideally a gold, silver and platinum version of the offering itself. If only it were this easy. 

The second trick to product Sainthood has to do with that elusive word, dare I say it, the “Marketing Plan.” Marketing is now so important to product greatness, the very idea is now spawning so many approaches to using technology, target marketing, artificial intelligence guidance, GEO fencing, Search Engine Optimization, data mining, Social Media strategies, intelligence polling, and customer satisfaction targeting, that we must now define what is a “Marketing Plan” suppose to do? We now need a technology plan to formulate the Marketing Plan. What ever happened to just getting the messaging right with a magazine ad?

I recently went seven for seven on Draft King nailing a string of sports bets. (Probably never happen again). How did I do it? I did not bet on the teams themselves. I bet on the math. You see, the probability of future success in any sales endeavor (including formulating the “Marketing Plan”) is equal to the sum total of getting the marketing and technology solutions not only right but in the right order. In this case, ascertaining your marketing success by betting on a series of marketing probabilities that can produce the highest possible outcome, considering the emotional variance that comes not only with sports betting, but also with how a consumer is going to resonate with your marketing message. This can be an elusive challenge indeed. Like trying to talk a horse into winning the Triple Crown.

We all know it is possible to achieve product superiority yet only a very few products or services really get it. Let us gleam some insight from a few examples. Let us look at the snack industry. According to a report by Mordor Intelligence, “the global market for snack food is expected to reach USD 762 billion by 2024, growing at a CAGR of 5.34%, between 2019-2024 “. (Mordor Intelligence, 2018). How then does any snack product create a dominate position in what is heading toward a one trillion-dollar market?

I recall while in college I worked the grave yard shift stocking shelves 35 years ago. Back then snacking products took up about one quarter of an aisle. Today, most large super markets use both sides of an entire aisle to stock the gamut of potato chips, crackers, and related snacks like peanuts and pretzels. Pretty crowded space. Most large chains now sport over thirty brands of just potato chips. Can you name the one or two snack products that stand out, market against the grain, and have nailed not only the product, but the product messaging?  Why are there only a few splendid examples in industries with dozens of competitors and thousands of products? It has to do with getting the product right and combining it with the right marketing plan.

Our first example is the global  “Doritos” brand. Very few products can stand the test of time. This iconic brand first hit the shelves in 1964, still increasing annual sales after 57 years. “Doritos was the top ranked tortilla/tostada chip brand of the United States with about 1.48 billion U.S. dollars’ worth of sales in 2017. “(, 2020). The Doritos brand has matured into a cash cow. In graduate school lingo this means that when products age, advanced marketing models suggest that spending less on advertising may make you more money when a product reaches market saturation and the product reaches cult status. 

Throwing too much money at marketing may actually hurt cash flow once this occurs. People buy Doritos because there is not a real product that competes with the taste, texture, and satisfaction from well, the actual recipe. Big win here on the product itself. Side note, it took Frito Lay hundreds of millions spent on past advertising campaigns with Doritos to create this cash cow. 

Now let us look at how another snack product is creating market dominance by being different.  What up and coming snack product in this space thinks “outside the box,” has a loyal consumer demand in a highly competitive market, and sits on this crowded snack aisle by itself. Think Bailey’s Irish Crème Liquor. Is there really another great Irish Crème spirit? The answer in the snack space is Cheetos. The marketing campaign for Cheetos is off the chain. There is not another product that can produce the same texture, taste, or customer satisfaction. 

Ever see thirty brands trying to sell a product like Cheetos? Cheetos is the Doritos of 30 years ago. It is pumping millions into ad campaigns to protect its turf. Ten or twenty years from now, Cheetos could evolve into an even bigger cash cow without the need to spend so much on advertising. It is on its way to becoming a cult product. Besides, who can argue with a cool cat as a brand logo? The Cheetos product newest ads target new markets, new consumers, and are funny. Great campaign, excellent product. They got the allocation right.

Ok, lets do one for the techies. In the midst of Google and Facebook launching product after product to help us run our lives, (or actually run our lives) what new (at the time) tech product found a billion-dollar hole in tech land needing to be filled. Remember, the best products follow the KISS rule. For you new Entrepreneurs, this means “keep it simple stupid,” that is keep your product simple to use and understand, and keep your core value prop simple to digest. The answer to the tech land question is of course Twitter.

Twitter is an interesting case study on both product analysis and marketing. After years of development losses, Twitter went public in 2013 recording losses of over $400M at that time. Moreover, Twitter did not record its first profit until 2018 when they earned $1.2B after recording losses of well over 2B over fifteen years (Luckerson,2016). Recent challenges have seen customer declines from 326M users to 321 users, down five million in recent quarters. (MicroTrend, 2020). Is Twitter a success?  

By most standards Twitter is a successful product with an excellent value prop. They found a better communication solution despite the vast array of email solutions, E-Commerce mail products, and social media portals that each offered some degree of communicating with followers, but none as effective as twitter for reaching millions of users quickly and cheaply. Twitter is a great “better mousetrap” story for a niche value prop. Can you imagine the organics of their initial elevator pitch? I have a great idea. I found a way to send two sentences to millions of people at the same time. Good luck with that. Yet, Twitter deserves huge accolades for turning a simple idea into a billion-dollar business.

Having addressed the importance of nailing down the right marketing and product formula, we shall now look at how does an Entrepreneur create a product breakthrough? First of all, most real creators are already vastly different people. They come with a different DNA. They think different. They use phrases like “it is all wrong” referring to the current product landscape. They do not invent normal products. They invent products that annihilate the competition. I recall in start up number five (now called zerodownsoftware), the tech founders decided that computer networks did not need to fail and further that existing disaster recovery solutions “were all wrong.”

I recall a meeting at the Pentagon with several high-ranking computer experts. After the Deck presentation for our next-gen software capable of running applications live in multiple locations, (avoiding the need to ever recover if one site went off line) these Ivy League military experts launched into our CEO, reminding him what they just saw in the “Deck” is not possible and furthermore, it cannot ever be done. In all fairness we did violate several laws of gravity related to the current technology solution-sets.  Our CEO just sat there as one by one he just took the bullets, almost becoming a contest for the next general or PH’D to exceed the negative comments from the prior opinion. After what seemed about 20 minutes of non-stop verbal shots at our CEO, he waited until they ran out breath. He finally stood up and said, “I understand the trepidation on how and why our solution cannot work given today’s architectural designs for software. That is why we did not use those methods.” The greatest one-liner in business I have ever heard.  

The great thing about a true innovator is we tend to fall into one of two categories, either somewhat arrogant and perhaps even delusional toward the goal set, or just plain genius possessing visionary intelligence that is not only next-generational, it can be so far ahead of the curve that it compels smart investors and VC’s to use phrases like “he or she is crazy” or the more politically correct “they are out of their mind”. This is a good clue you are either a gifted visionary (a 1% er) or more likely you are some combination of delusional and a bit nutty. Back to getting the allocation right.

Now that we have defined the entrepreneurial mindset let us cover the ground rules for a product breakthrough. When I founded ATS (number six) I stated we will not waste our time creating a “an active lifestyle product” that already exist or does not exist with our designs. Further we wanted to seek a target acquisition to attract investment capital with a proven cash flow model in place. 

Moreover, we wanted more than cash flow, we wanted a customer list for our ATS line of products. We are buying the horse and the jockey. One take away here is the value of having a first mover advantage while also being able to leverage your foundational assets. If you are buying a synergistic acquisition why not split the $1M dollar marketing campaign between two companies, thus cutting your customer acquisition cost in half. In the short run you have higher margins and little to no competition. Then come the copycats. Hence the reason to pre-seed your product launch with an effective IP strategy. 

Every company I founded or co-founded had this element. Inherent in creating real breakthroughs is to release the notion of why it cannot be done. Nothing great can ever be achieved if existing theories are recognized as the present day best of breed solutions. They may have been best of breed at the time of creation, but with increased knowledge comes increased possibilities. New advances in CAD-CAM designs, advanced raw material options, computer optimization through pattern recognition and data analytics are making what was impossible just five years ago, now possible. 

Better yet, these windows are shrinking at ever faster rates. New products that took ten years to develop are now coming to markets in less than three years, in some cases mere months. Case in point, the new Covid-19 Vaccine. 

Breakthrough mentalities are based on the success of multiple failures. It is not the product failure that matters. It is the lessons gained from it that count. You must go backwards to achieve real breakthroughs. The trick is to get closer to the end game with each successive iteration in your product development curve. You cannot cite the alphabet until you master A, B and C. Same with product breakthroughs. It is like three-dimensional chess. As you develop real innovation, the front end is easier to get to, however, scalability, production limitations, technology bottlenecks, and consumer messaging will all play havoc with your proto-type or alpha breakthroughs. If the solution does not exist in the world we live in, then you must set out to transition to the new world order.

The new questions about conventional designs will eventually lead to answers that do not exist under conventional wisdom. Time to import new thinking. I have found this new world order may not exist in the United States, but is likely that at least some or part of the answer exist in another place in the world. Limitations are created by localized or national conventional wisdom that cannot envision or does not have access to, a higher form of thinking. Good reason to scrap the playbook and rebuild the foundation. 

Too many products are built on old designs, old ways of thinking, and limitations by people in authority who are not visionaries. Not their fault in many ways, very few people have the talent needed to dive into a new world order whose methodology is based in unconventional thinking which by analysis involves the notion of real pain before economic gain. This is and always will be part science and part creation by utilizing elevated thinking as part of the invention process.  

Accountants use to call this “Research and Development,” the process of actually inventing a better mousetrap. Today companies buy start-ups to short cut in house research while also reducing R&D investments. Hard to convince the Board of Directors the company needs to spend $25M to $100M plus and take five years to figure something out. 

Better to let twenty companies try and pay $300M for the one company that did figure it out. Looks better on the Shareholder Report when you buy a proven product that has a more predictable future. Entrepreneurs are now the R&D department for the highest bidder. Just remember, repackaging an old idea with incremental functionality is not usually inventing. Back to playing it safe. This is a fantastic way to gain average at best returns for your shareholders.

Artificial Intelligence is not a buzz word for having the newest marketing gimmick. It is an emerging science that will need to merge several supporting technologies along with many vertical solution sets to the point where companies can see real changes in ROI in their marketing budgets. A.I. is a notable example of real invention taking place.

Like that new chocolate chip cookie breakthrough, the final product needs to feel, act, and perform quite different from what is now the conventional product leader. If the inventor is a bit off center, seems a hair arrogant, and gets bored with most people, well that might be a clue to either run away or take a deep dive that extends well past the limitations of conventional thinking. Finding, investing in,  or creating a real breakthrough product is challenging work but it can change your life and the years working at it will suddenly make sense. 


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