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The statistics about innovation failure rates in healthcare are sobering. It’s commonly acknowledged that more than 95% of new drugs fail human studies. Of the remaining 5% that do get to market, over a third1 fail to meet their commercial objectives. Given the considerable investment required to develop new drugs and therapies, can innovators in pharma and healthcare really afford to fail for avoidable reasons?

In my recent presentation at the Partnerships in Drug Delivery (PODD) Conference in Boston, I discussed this challenge, CDP’s journey to improve the return on innovation investment (ROII), and some of the counter-intuitive lessons we’ve learned along the way.

Why do new innovations fail so often?

Building on CDP’s twenty years of experience in product development and a review of the literature on innovation success and failure, we’ve identified a number of important reasons that innovation fails unnecessarily. Some of these will be no surprise to innovation professionals:

1. Failing to link the innovation to the existing business strategy.
2. Failing to demonstrate a viable revenue model.
3. Failure to secure sufficient resources to develop the innovation.

We also found two additional factors that are equally important, yet receive much less attention.

4. Limiting scoping assumptions. It’s understandable that companies with decades of experience in the healthcare industry think that because they know the market and the challenges it faces well, they are well-placed to address them. Of course this expertise is critical for healthcare innovation, but often it’s not enough.

As Einstein said, “we can't solve problems using the same kind of thinking we used to create them.” Breakthrough innovations are often the result of new thinking from outside the industry that is able to challenge the limiting assumptions that previously restricted performance.

It’s not just about industry perspective either. Just because your previous product launches were a masterful display of engineering (and you have a building full of PhD’s), doesn’t mean that the next innovation will come the same way. In fact, if you’re not truly multi-disciplinary in the capabilities and perspectives with which you view your innovation challenges, your technical brilliance is more likely to be undermined by an incorrect marketing, supply or commercial assumption. Another avoidable failure.

5. Incomplete link to insights. It’s no surprise that an evidence-based, actionable insight onto an opportunity is important for innovation. However, while many companies are good at identifying new insights, it’s often seen as something that Marketing does. And when the insight turns into an idea, and the idea to an R&D project, this insight is often lost in translation. The soul of a once-great idea, watered down and distorted… is it really any wonder that these investments don’t achieve their commercial objectives?

Is there a root cause?

In developing our process at CDP to address these five failure mechanisms head-on, we’ve noticed a common factor… ideas. The way ideas are often used in innovation, they are a solution-specific hypothesis. That is the idea defines a particular execution, based on an assumption of what the market ‘needs’ and what business model will succeed.

When these ideas are evaluated, companies often rely on the judgment of senior executives. (You could call these judgments, HIPPOs – the Highest Paid Person’s Opinion). These opinions are usually based on past experience, and as investment advisors say, “past performance is no indicator of future results..”

Does this experience sound familiar to you?

The exceptions that prove the rule

Clearly innovation can succeed despite these failures. We all know of great innovations that started with that simple idea. But also consider the billions spent on ideas that don’t go to market because some quiet assumption later turned out to be not true.

We think there is another way. One that’s evidence-based and systematic. CDP has developed a new innovation framework, proudly building on the powerful methodologies and processes that have been proven elsewhere – but also adding tools of our own. It‘s a framework designed to address these failures and improve decisions about where and how to invest your time and money in innovation.

As an aside, it’s been my experience that creating insights and ideas is rarely the innovation bottleneck – rather its knowing which of many ideas to invest limited resources in.

There are considerable and unique innovation challenges faced by healthcare and pharma industries. But reducing innovation failure rates in healthcare has the potential to transform the lives of millions of people, and it doesn’t have to be based on hypotheses anymore. Can we afford not to take a more systematic approach?

If you’d like to join us on our journey to improve innovation outcomes in healthcare, please do get in touch.

Alan Cucknell
+44 (0)1223 264428
hello@cambridge-design.co.uk

1 – https://newproductsuccess.org/white-papers/new-product-failure-rates-2013-jpim-30-pp-976-979/

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