The Top 5 Ways to Fail at Innovation: Lessons From Vegas That Should Not Stay in Vegas

Connected cars! Wearables! Virtual reality! Smart homes!

The drumbeat heralding the annual Consumer Electronics Show (CES) was once again deafening. Ever since the VCR, introduced in 1970, by Phillips, put CES on the map, it was clear that what happens every January in Las Vegas may not stay in Vegas; it could penetrate every aspect our lives.

That said, for every hit out of CES, there are hundreds of duds - even after they win awards and accolades. I find that the annual electronic extravaganza teaches us less about how innovations succeed, but more about how innovations fail. The insights into why they fail can help us navigate past the most common traps. Here are the top 5 ways to fail as revealed by CESs past:

1. Lots of hype; flawed product

Leading up to the 2007 CES, Microsoft had 97 percent share of the operating system market, according to OneStat.com. This meant their products were guaranteed to launch with much fanfare. However, such utter dominance is usually accompanied by several common handicaps: management incentives deter risk-taking; organizational priorities are on preserving harmony and consensus, which result in compromises and half-measures -- a recipe for flawed products; an overwhelming focus on not perturbing the core business means incremental innovation.

Microsoft's Windows Vista was a case in point of this combination of circumstances. When launched in CES 2007, it won the Best of CES in the computers and hardware category. Yet, 18 months later, Forrester Research reported that just 8.8 percent of enterprise PCs worldwide were running Vista. Its problems were many: incompatibility with other software, slowing down processing and numerous bugs and security alerts - each could be traced to the organizational challenges of an incumbent vested in the status quo. Vista found pride of place among Gizmodo's "biggest mess ups in tech history" .

2. Nice product; wrong price

Video-game consol es had always been textbook examples of "razors-and-blades" pricing: the game console (the "razor") was priced low to lure buyers, which would, in turn, drive up demand for the compatible games (the "blades") - thereby driving up prices for the games themselves. It was this pricing model that Apple (during the period that Steve Jobs had been ousted from the company; go figure) challenged with a game console packed with goodies -- a PowerPC processor, Internet access and a CD-ROM drive. The theory was to appeal to game developers by offering them a super-console with longer shelf-life, so developers would not have to constantly re-write their code.

In collaboration with Japanese toymaker, Bandai, Apple launched the Pippin, for 64,800 yen in Japan and, subsequently, for $600 in the United States. It went head-to-head with the popular Nintendo 64, which was a third of the price of the Pippin. The Pippin launched in CES 1996 and the San Jose Mercury News even declared: "Welcome to the future of cyberspace." For a consumer, however, committing to a console carried a significant risk: what if too few games are developed for that console? Despite all its other features, gamers hesitated before paying that kind of money for a new console - and the Pippin stalled. By 1997, Steve Jobs was back at Apple. Among his first tasks: to shut down the project.

3. Good product; no ecosystem

The Nokia Lumia 900 won the "Best in Show" award at CES 2012. "The Lumia 900 is a gorgeous device. It's beautiful," gushed a reviewer. A smartphone, no matter how gorgeous, is only as smart as the software on it. This is where, the Lumia 900 came up short. Developed after the acquisition of Nokia by Microsoft, it ran on Microsoft's proprietary Windows Phone software. Pitted against the giants, Apple iOS and Google's Android, Windows Phone had only 4 percent market share in 2012. This also meant that it was a distant third in what consumers really cared about: the app ecosyste m. App developers, naturally, focused their creative energies on the dominant systems, iOS and Android. Without a competitive abundance of functioning apps, the Lumia 900 had no chance to get by on looks alone.

4. Nice product, nice ecosystem but competitors evolve

Bill Gates appeared for his CES 2003 keynote with the SPOT Watch on his wrist. For an annual fee of $60, the SPOT would link to PDAs, phones, MP3 Players, radios, even coffeemakers and clocks, via a proprietary FM radio signal. The watch came in many designs from the likes of Fossil, Swatch, and even the luxury watchmaker, Tissot. Smartphones had not gained traction and the SPOT watch was well-positioned to offer a breadth of information at a glance. But then, smartphone technology progressed rapidly, with better displays and more functionality quickly rendering the SPOT Watch obsolete. The proprietary radio signal approach also cut the user off from other devices, while smartphone developers worked to integra te their products with other devices through standardization around WiFi and Bluetooth. By 2008, Apple had released the iPhone and the game was truly over: SPOT watches were discontinued.

5. Forgetting the "C" in CES stands for consumer

CES has been a favored TV launchpad. So it was no surprise that the "Best of CES" award in 2010 was won by Panasonic's TC-PVT25 series, one of several 3-D TVs launched that year. ESPN launched its 3-D sports network in 2011 in anticipation of an exciting new category. But, in practice, most people resisted putting on the 3D glasses at home. They tried them occasionally and then didn't bother. Additionally, the hassle of buying 3D-compatible gear, was another obstacle. Despite the allure, the 3D TV failed the test of human-centered design. ESPN cancelled its 3D network as well.

Do your innovations share any of these characteristics? Did you see something at CES that matched these profiles? If you did, you might want to think twice. T he blackjack tables at Vegas might offer better odds.

The Consumer Electronics Show begins in Las Vegas on Wednesday. Experts say virtual reality, "Internet of Things" devices, smart robotics and self-driving cars will be some of the hot tech trends. (AP)

Chakravorti is senior associate dean of International Business & Finance at Tufts University's the Fletcher School. He's also the founding director of the Institute for Business in the Global Context and author of The Slow Pace of Fast Change. Formerly a partner at McKinsey, he taught innovation at Harvard Business School.

This article first appeared as an op-ed in my Innovations column in the Washington Post.

Source: The Top 5 Ways to Fail at Innovation: Lessons From Vegas That Should Not Stay in Vegas