(PDF) The Rapid Innovation Cycle—An innovation and market testing process for new products and services development

how to successfullylaunch new companies, fewer have

practical experience; and thus success rate of new

companies is low (a rule of thumb success rate often cited

by Venture Capital partners is about 1 in 10). The Rapid

Innovation Cycle seeks to provide a low-risk method to

practice business thereby ideally improving the success

rate of entrepreneurial startup companies and / or

intraprenurial corporate projects.

The conventional hurdles to enter the marketplace are

sufficiently large to prevent the majority of people

interested in innovation from ever attempting to start a

business that revolves around a product or service idea.

Typical factors affecting innovation are a region’s

education and human capital, governance and corruption,

macroeconomic management, regulatory framework and

gender equity (López-Claros, 2021).

It is unclear how reducing the barriers to creating

innovative companies via innovation processes like the

RIC might impact the public—would quality decrease?

Would people’s safety be put at risk? Would innovation

happen at a faster rate? Would large companies be

challenged by underdogs, thereby improving product and

service offerings in general?

However, it is hypothesized that the Rapid Innovation

Cycle can actually help answer these questions in the

sense that if an entrepreneur and their team execute

successful market tests that suggest positive return on

investment for their business opportunity, they can be

more confident about investing more into their customers,

the product, the service and the business in general rather

than lose it investing in an unwanted product or service

solution.Venkataraman (2003) describes that “a fear of

realizing the downside of creating a new business biases

one towards analysis. A bias for analysis significantly

decreases the probability of business entry, but increases

the probability of success.” The data collected from the

RIC should assist these types of analyses and therefore

increase the probability of building a successful business.

A.Opportunity Recognition (OR)

The first phase of cycle allows anyone using the RIC to

identify market opportunities.Sarasvathy (2002)

describes “opportunity recognition”as an obvious

existence of both supply and demand that is identified

and is consequently brought into existence by a new or

existing firm. In the context of the RIC, this phase

typically includes effective brainstorming, seeing

problems as opportunities, constantly looking at the world

with fresh eyes, asking questions like: “what bothers you?

What causes you pain in your business? What keeps you

up at night?”,looking for workarounds (Figure 5),

traveling and any other form of seeing the world around

the observer as a source for numerous market

opportunities.

Figure 5: An example how looking for workarounds can help

identify a problem and define a market accepted solution.A

simple door wedge is nothing new, but applying it to a different

problem and adding features that may be interesting to different

customers present new business opportunities. People exposed to

this “market experiment” subjectively said they would pay about

$US 4.00 for a gadget that costs less than $US 0.40 to produce. The

next step would be to actually sell at that price and see what

percentage of people would actually pay the “claimed” buying

price of $US 4.00.Also a price skimming strategy could also be

used.

“Entrepreneurial opportunities are rarely found,

they have to be created and earned.”

(Venkatamaran, 2003)

Sarasvathy (2002) further identifies an entrepreneurial

opportunity consisting of three key characteristics: 1) A

new idea / invention that will possibly lead to the

achievement to one or more economic ends, 2) beliefs

about things favorable to the achievement of these

possible valuable ends, and 3) actions that generate and

implement those ends through specific new economic

artifacts.

At the end of the Opportunity Recognition phase, the user

has a large number of recognized market opportunities

and some ideas of technical solutions for them. But now,

the participants need to choose the best or most promising

opportunity depending on their goals. This filtering

process happens in the Solution Selection phase.

B.Solution Selection (SS)

Amongst the number of potential market opportunities

generated in the previous OR phase, the RIC participants

evaluate which idea is best suited for market testing. The

plethora of ideas is quickly filtered by time limitations,

financial constraints, the team’s technical abilities and the

availability of other resources. All filtered ideas should

be saved for future venture development.

The “typical” market study which assesses competition,

market size (both in revenue and people), trends, and

other information relevant to a market / industry

represents one component of solution selection but are far

from the most important selection criteria. Traditional

marketing studies are conducted with the assumption that

the customers within this segment actually know what

they want from a product or service. Consumers however

have been academically proven to be unpredictable when

they make purchase decisions (Armstrong, 1991). In fact,

a typical quote (often referred to as the business tycoon

Henry Ford) that describes such situations is