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Scott is the Managing Director of Innosight


Ventures. Scott has written three books on
Scott Anthony innovation, the latest being The Silver
Lining: An Innovation Playbook for
On:Disruptive innovation,Technology,Competition
Uncertain Times.

Scott Anthony

The 4 Ps of Innovation
11:32 AM Thursday June 10, 2010 | Comments ( 11)

A few weeks ago, an innovation team was painstakingly


Email
working through a meticulously crafted spreadsheet detailing
the growth potential of their idea. Executives trying to look Tweet This

smart lobbed in "gotcha" questions about specific assumptions Post to Facebook


in their calculations. Much discussion ensued.
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I was an observer in this meeting. I sat quietly and took some Print
notes. After the meeting the team leader said, "That was a
really good review. The executives were really involved and
we have deeper buy-in to our plan."
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"I don't think a single executive could tell you the essence of
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I explained how, based on the pioneering thinking from Rita you the tools and confidence you The 4 Ps of Innovation JUN 10
need to master public speaking.
McGrath and Ian MacMillian, I like to focus these discussions Kindle Isn't Dead Yet, and Other Reflections on
on three simple questions: Buy it now » Apple's iPad JUN 3

Are You Tapping Your Creative Capacity? MAY 26


1. "What size matters?" In other words, how big does an Guide to Better
opportunity have to be to matter inside a company? Business Three Critical Innovation Lessons from Apple MAY 18
Writing
2. "What is a simple calculation that crosses that bar?" One-third of How P&G Quietly Launched a Disruptive
professionals Innovation MAY 11
3. "What leads you to believe that calculation is plausible?" write poorly.
Don't be one of
Any marketer can quickly rattle off the so-called "4 Ps" of them.
marketing (product, price, place, and promotion). Innovators Buy it now »
should also be able to quickly recite the 4 Ps that capture their
idea's potential: population, penetration, price, and purchase Guide to 1. 12 Things Good Bosses Believe
frequency. Getting a Job
Whether you're
2. The 4 Ps of Innovation
Companies looking at a specific revenue target can simply a new college
multiply the addressable population, the penetration of that graduate, were 3. The Facebook Story Is About Agility, Not
laid off, or are Privacy
population, the price per purchase, and the purchase
seeking a job
frequency to get to annual revenues. Typically I suggest 4. Get Your Team to Stop Fighting and Start
change, this
people try to be quite precise about their target population, guide will help ensure that your next Working

give their best estimate based on in-market analogies of the move is the right one.
5. Why We (Shouldn't) Hate HR
pricing and purchase frequency, then determine what Buy it now »
penetration they would need to hit their targets. 6. The No-Drama Rule of Management

7. How (and Why) to Stop Multitasking


This deceptively simple calculation neatly captures many of
the elements of an idea's business model. Does the idea target a niche or a mass population? Is it 8. Cold Call Tactics That Increase Sales
an occasional or frequent purchase? What channel would support the target price point? What kind
9. Are You the Victim of an Invisible Promotion?
of support would be necessary given the purchase frequency?

http://blogs.hbr.org/anthony/2010/06/the_4ps_of_innovation.html 16/06/2010
The 4 Ps of Innovation - Scott Anthony - Harvard Business Review Página 2 de 6

Once you do the 4P calculation (and of course, if you add in a fifth — profit margin — you can look at 10. How to Challenge Your Industry Dogma
profits instead of revenue), the focus shifts to finding systematic ways to determine whether the
assumptions behind the calculation have any hope of being true.

The deep thinking that goes into creating complicated spreadsheets for ideas can be very useful. But
it also can be a way to mistake motion for progress. Make sure you can answer the simple questions
before you worry about the complicated ones.

More on: Disruptive innovation, Innovation, Leadership

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COMMENTS

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Mohammad Waheed 5 days ago

3 people liked this.

Great post Scott. Re: “Make sure you can answer the simple questions before you worry about the
complicated ones.”

When I was in 5rd grade, my dad told me when you go to take exam today, do all of the easy (not so hard)
questions first, and then try to solve the hard questions. That way you get more done in short amount of time.

It seems like we can use same strategy when answering today’s so called complex questions. I’m sorry to
say “today’s complex questions”, this implies we have more complex questions to answer than those who
came before us. But I will leave that discussion alone.

At my one of last employment, few developers and IT analysts were working on a new website for a client
who wanted to move away from using SalesForce.com and hired our company to develop something similar.
The software team spent many days figuring out what is the best way to export data from SalesForce so that
it is easy to import and all of the relationships between all entities stay intact. I joined their team and asked a
simple question “does our client care about old data from salesforce?” They said, why not, however, when
we asked the client, the client said, no, I don’t have any recent data in CRM anyways (small client).

Therefore, we could have saved few days our team spent in investigating and meeting time by asking few
Yes/No/Maybe questions up front.

Like Reply

Charles Prabakar 5 days ago

Manu Stanley and 1 more liked this

Well said Scott! It is unfortunate that most of us end up creating complicated spreadsheets (and the sad part
is, sometimes we end up answering wrong questions) instead of the simple projection based arithmetic
model (similar to your 4P model) that is good enough to answer the simple sizing questions within the
innovation problem domain. Your 4P model is all the more relevant, especially within emerging markets - as

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we often do not have standardized syndicated data readily available to size those opportunity spaces
accurately. This is where your extrapolation based 4P model is very helpful and I have personally found it to
be very beneficial in sizing innovation opportunities for emerging markets.

Another reason why we end up doing the opportunity analysis using complex spreadsheets is because of the
expectation of the leadership - as the first question invariably asked by leadership during a review is “where
is the source foot note”. And, if we do not have those syndicated data sources in the foot note, it is often
perceived to be “not an accurate sizing” - forgetting the fact that innovation is all about venturing in to
unchartered territories and so often we do not have standardized syndicated data readily available to
substantiate those numbers.

In my opinion, the root cause reason though is - that we are not using the right problem solving method for
the right problem space as I had alluded in one of my earlier blogs. For Innovation type of problem spaces –
by and large, we have to go with the “shoot the dot” or the "connect the dot” type of problem solving methods
(very similar to your 4P model) and for standard strategy problems, we can go with the hypothesis based
complex spreadsheet based opportunity sizing techniques. These types of guidelines hopefully create the
right expectation mindset within the leadership ranks so that innovators can pick and choose the right
problem solving method (like your 4P model) for the right problem domain. This does not mean complex
spreadsheets are bad. After we get the momentum going with this simple 4P model– of course, we must
come back and validate those initial numbers with the complex spreadsheets – especially, when we add
profit calculations in to the mix - as you have alluded.

Regards,
Charles

Like Reply

Jason Bresnehan 21 hours ago

I believe the 5th P of innovation is Pursuit of Luck. Innovators regularly develop innovations that are perhaps
not ready to be commercialised now, but one day, given the right set of circumstances or as a result future
random events the innovation may be more commercial.

In other words innovation for innovations sake is necessary, regardless of whether it can pass the first four
Ps now. It's enough that people within companies and entrepreneurs are simply innovating to see what
happens - innovating to Pursue Luck.

http://thepursuitofluck.com

Like Reply

Ghost 1 day ago

How is this pioneering or innovative thinking? The 4Ps that you cite -- population, penetration, price, and
purchase frequency -- is just a convoluted way of saying "discounted cash flow."

In fact, the 4Ps that you cite are basically the same as the 4Ps that marketers always use.

Place is just another way of saying Population,, i.e., Where do I sell the product or Where can customers
actually buy my product? Place is another word for Distribution -- how many people (population) will I find at
my distribution channels?

Price is the same as Price.

Purchase Frequency is a combination of Price and Place -- where does a consumer buy the product? Does
the consumer want to buy it multiple times? Can they buy it multiple times? Can they afford (price) to buy it
once or multiple times?

What you call Penetration is the same exact thing as Purchase Frequency! Of the total customers that see
my product, what percentage of them made a purchase (whether once or multiple times)?

Profit Margin is a fifth P? The profit margin is already taken into account in the Unit Price, or it can be seen as
the positive/negative NPV in the discounted cash flow model.

Like Reply

Ghost 1 day ago

How is this "innovative thinking?" The 4Ps that you cite -- population, penetration, price, and purchase
frequency -- is just a convoluted way of saying "discounted cash flow."

Like Reply

Peter Stansbury 3 days ago

Good post Scott, there are so many 4 Ps floating around that do not define their problem space anywhere
near as succinctly as the classic original. The 4 you quote do seem to pass this test!

Each of them is interesting and, as you say, captures an essential element, but also provides a simple

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number that can be challenged and validated using common sense, expert knowledge or sensible estimation
(or a combination of the above). I have also seen too many complex spreadsheets which often use and
abuse research figures from companies like Gartner in the hope they will provide the necessary reassurance
to support a bright idea.

It is also useful if it introduces a common language and approach. If the senior executives become
accustomed to this they can spend less time trying to be clever and more time really challenging the
essential items.

Best regards,

Peter

Like Reply

Ed Nair 3 days ago

No doubt that the most powerful ideas come in deceptively neat and small packages ....so if you are not able
to make one, it means that one needs to gain more clarity and breakthrough in thinking. Scott has done this
for evaluating an innovation idea.

But it requires real smarts to apply it well. For example, when the iPad was at an idea stage, how well could
we calculate the values of the 4 Ps.......it would be an exercise backed by massive research, simulation
models, and pure gut instinct.

Like Reply

Fahd Alsaadi 4 days ago

Good one Scott!

I can add that even if its necessary for the project (or required by leadership) to go into the complicated small
pieces of details and create sheets and sheets of data, It would be more effective for everyone to focus on
the 4Ps of innovation first and if the project turns out to be feasible, then we can move to stage two and
spend more time on the complexities.

Its about increasing the effectiveness of innovation management (or leadership), where all the projects are
subjected to the 4Ps of innovation, before being approved for a more detailed study.

Thanks

Fahd Alsaadi

Like Reply

TusharKhosla 4 days ago

Hi Scott

I am not sure at what stage of opportunity evaluation on innovation development and mainstreaming journey,
was the discussion around complicated spread sheets.

I find 4Ps inituitively appealing for incremental or regular innovative ideas, but not for radical, bold or
breakthrough ideas. There are several examples wherein all the 4Ps mentioned get completely redefined,
once the product or service get market reality test.

If I were to choose another P to underline the evaluation process, it will be Positionning. What position
(potential appeal) the new innovation has with regard to solving customers problems better, cheaper, faster,
.....

Innovative ideas often have differentiated approach/ strength that can be leveraged to effectively redefine the
ways customers have been addressing their stated/unstated needs and management discussions need to
focus more of strength of the differentiation, innvative idea provides, then worry on being precise on
projected revenues/ profits.

Todays governing paradign is to experiment-learn-plan, instead of learn-plan-pilot.

Reflect!

Like Reply

Krishnasrikumar 4 days ago

Excellent Sir,

As a management student and a regular reader of HBR blogs , this comes across to me as on the most
relevant blogs till date!! 4P model , simple but sharply piercing and makes you sit upright and think ,
SHOULD I BUY IN now??

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Thank you Sir for this post. Keep it coming

Regards,
Krishna

Like Reply

Amm 5 days ago

yeah .. no doubts in that 4 Ps help alot for the marketing purposes... They are the backbone i think

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