The odds of success with a new business are quite low and only 20-25% of new businesses launch successfully, gaining product and market fit, scaling up, and becoming viable companies.

According to a recent survey, many incumbents have been slowly expanding their portfolios of corporate ventures with dedicated budgets, governance, and even operating models. Recently, the global economic situation has even accelerated this trend, with a 21% increase in companies citing new business building as one of their top strategies (McKinsey, New Business Building Survey, 2020).

It must be noticed that, despite general belief, technical feasibility issues are not among the most common causes of failure, but are flawed assumptions about the desirability of the new product or service for customers. In particular, incumbents face a challenge here for many different reasons.

Validating customer desirability can be a challenge for incumbents used to a top-down approach, and particularly when their culture biases them to seek perfection in planning and predictability in execution. This aspect is especially true if past failures have made them loath to take on more risks.

This kind of approach often leads to the focus on solutions and product features, rather than creating an offering that not only serves a purpose but connects to the emotional and social lives of customers and even attempts to anticipate how it could change in the future.

A good approach is to observe customer behaviour, imagine a new concept, develop a workable minimum viable product, and then test it by observing, rather than asking, how customers respond to value propositions and calls to action.

Another common mistake is to rely only on familiar forms of customer and market research, such as focus groups and quantitative surveys, or worse, on gut feelings among board members.

A successful practice is to involve customers in the design process from day one and to collect continuous qualitative feedback to validate the understanding of customer preferences, classify them in terms of market reach and impact on functional, emotional, and social outcomes for the customer, and then verify technical feasibility.

Furthermore, it is fundamental to make good use of the time before launch to acquire customers along the funnel, create awareness of the benefits of being first in line as a new customer influencing the new product or service, build contact databases of people involved in the early rounds of testing, and then develop an active waiting list or seed a customer beta product for customers before the minimum viable product launch.

It is good to remember that no amount of information yields perfect insight, so companies should engage customers from day 1 and be comfortable working with ambiguity and uncertainty along the way.