One of our corporate clients asked us to have a look at an internal venture. They’d invested tens of millions into it over the previous few years.
The idea was pretty clever, and strategically it fitted a space that the company wanted to own. The trouble was that that commercially it didn’t work. No engagement. No usage.
The platform economics didn’t work. After working through the details it was clear that the value propositions for the different stakeholders was unclear at best. Then there were lots of questions about who the customers were, how vague would be created and shared.
If it had been a start it might have got seed, but it wouldn’t have got series A.
Our recommendation was that it should be quite killed. Eventually it was – deprioritised, de-funded and then disappeared.
It was a hugely expensive way to learn about amarket and what customers wanted – and very ineffective.
The problem wasn’t that the company had tried to do innovation and that it had failed. You always get a lot of failure when you do innovation. The problem was that it had bet so big when it knew so little.
Bad innovation is taking big risks. It hurts when they fail. Good innovation is taking small risks. Nobody cares if it single bets don’t work.
A £40 million bet is a bad way to play. Far better to start with lots of £5k bets. If you start winning there – by learning cheaply from customers that a problem or market exists – start betting bigger. If you don’t win – change the nature of the bet or play somewhere else.
[You can keep doubling down – but the rare cases where that works doesn’t make it a universal rule that you should].
With your small bets ask specific questions:
- Does this problem really exist?
- Do customers care enough?
- Is there evidence for this market?
- Could this business model actually work?
If you get evidence. Make another bet. Only keep betting as the odds shorten in your favour