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03.15.2019 #news

Growth Guidance: Why 8 out of 10 isn't Good Enough

Growth Guidance: Why 8 out of 10 isn't Good Enough

It is sometimes said that Great is the enemy of the Good, but at Sia Partners we would argue that the true choice is between Great and Inadequate. Great is the only correct choice.

Much of the current innovation theory focuses on the principle of making something just good enough, not too expensive, boot-strapped, fast, acceptable. The logic is that there is only so much money to go around, so stretch it as far as it will go, then put something out in the market, test, learn, fail fast, move on. You know the language, the words, the theory.

Now contrast this with your own buying habits and choices and ask yourself what you actually do when these offers are presented to you. Do you buy something that is just good enough or do you buy something terrific, exciting, desirable. Which is it?

Let’s take a simple example: going out for dinner. We'd like you to think of your favourite restaurant--the one you go to most. How full is the restaurant? How often do you go? How much do you typically spend? How many people do you go with? How positively do you feel about the restaurant? Now think of your second and third favourite restaurants. Ask yourself the same questions. Are the answers similar or radically different?

In our experience, the responses follow a similar pattern. You go to your favourite restaurant once a week, your second favourite once a fortnight, your third once a month. Your favourite restaurant is full every day of the week, your second favourite is full on Saturdays and Friday evenings, your third is often empty. You love your favourite restaurant and talk about it with all your friends, whereas you like your second favourite and would see it as one of a few options. And so on and so forth.

Let’s translate your personal experience into the commercial outcomes of these restaurants. We're going to guess that the absolute favourite makes money hand over fist. Yield is high. Wastage is low. Prices are reasonable and not too low. Average spend is high. Tips are high. Staff turnover is low. Suppliers and supplies are consistent. Whereas the second favourite restaurant will do okay but not nearly as well, makes some money but nothing remarkable. And the third, maybe it is struggling.

When asked to score your favourite restaurant, we imagine you gave it a 9 or 10 out of 10. And the second? Maybe 8? Maybe 7? The third: 6 or 7.

Great corresponds to a 9 or 10. And Good corresponds to a 7 or 8. Ok corresponds to a 5 or 6. Going back to the original point: is Great the enemy of the Good? Or is Good the enemy of the Great? And in the context of innovation and bringing new propositions to market, where should you pitch your efforts?

The point, which should be clear by now, is that most corporates are setting their expectations from Innovation too low. Minimum Viable Product doesn’t have to mean average or not special. Nothing kills innovation more spectacularly or more rapidly than lack of commercial success. Winners in today’s markets must aim to be so special that they become a ‘no-brainer’ with target consumers.

The golden lesson: only 9 or 10 out of 10 will do!