Innovation is a mystery. At least so it seems. Having walked the path multiple times (forth and back), we have learned some things about innovation management the hard way. And now we want to share them with you. They will help you demystify innovation and lead to more effective efforts in becoming an innovative organization.
If your company has already taken a few steps towards driving innovation you might be familiar with one or two of those situations. And if you’re just starting out, then our learnings will help you to understand what exactly you’re getting yourself into (also maybe check out our Beginner’s Guide to Innovation Management first). So, let’s dive deeper into the three things that no one tells you about Innovation Management!
Innovation is a numbers game
We all know the stories of successful billion-dollar startups who just happened to have that one great idea. When you look at these unicorn stories, they seem to have something magical about them. The founders identified that one big opportunity and executed it successfully. They are the superstars of entrepreneurship and we all strive to become as successful as them. But embracing the image of “that one big idea” is flawed, especially from a corporate innovation perspective.
Corporations are often stuck looking for that one great innovative idea that will become the next big thing. The problem is, that 90% of startups fail and there is no reason for this to be different in a corporate environment. Sure, corporates have a lot of resources so you might think that they are more likely to succeed. But startups don’t just fail because of a lack of resources. The most common one is that they build something there is no market demand for, however, there are many other factors that come into play.
The solution
If corporates want to take innovation seriously and go beyond the cultural and educational impact of initiatives such as idea boxes, hackathons, and intrapreneurship programs, they need to start acting like venture capitalists instead of making big bets on a few ideas. Venture capitalists know that most of their investments are not the next big thing. That’s why they select their investments carefully and make a lot of small bets in the hope that one of them will make a return greater than the cumulative investment. Corporations have the resources to follow the same strategy and can systematize their innovation efforts. In other words, they can avoid the pitfall of placing a small number of big bets and start placing a large number of small bets. But first, innovation needs to become a leadership priority.
How to make innovation happen
A proven 4-phase approach to help you execute innovation projects.
Innovation Needs Both Top-Down and Bottom-Up
Some innovation managers have a hard time within their organizations. They might be seen as the department with the funky office space, the dreamers who talk about digitalisation and culture shift. Or the ones who run workshops, just to entertain the rest of the company. Even worse yet, they might be seen as the ones draining resources from business lines but not adding anything to the bottom line.
If we are 100% truthful, we need to acknowledge that in some cases this might be true. When organizations blindly run idea jams and start funding teams working on ideas that are not in line with the organization’s strategy, business lines get irritated and start wondering what the hell “these people” are working on. If you just follow a bottom-up approach with no strategic guidance, innovation activities often end up running in vain.
Senior leadership needs to take innovation seriously. The drive for culture transformation and the strategic guidance for innovation needs to come from the top down. Having a clear innovation strategy gives the necessary guidance to everyone in the organization, and helps to bring people on board. If innovation is made a priority throughout the organization and it is clear what fits into strategy and what does not, organizations can utilize the advantages of the bottom-up approach.
Decisions Should Follow an Evidence-Based Approach
We have discussed that organizations benefit by starting to place a large number of small bets, instead of a small number of big bets. But with this approach, another thing becomes very important when it comes to making investments: following the evidence. Because even if we are not talking about that one big bet, it still happens that projects continue to live for too long. Motorola invested billions in Iridium, the satellite phone, developing it for years, only to see it go bankrupt within months.
Decision-makers often struggle to make good decisions on innovation efforts. Sure, they understand that Return on Investment is not a good indicator for early-stage projects. They struggle to find an alternative. If this happens, it’s quite easy to get blinded by shiny PowerPoint presentations and visionary promises. But there is a better way.
Validation is key
Decision-makers can ask the right questions to innovation teams. What evidence do you have? How many customers have you talked to? Have you only talked to them, or have they also acted on their interest? On the other hand, teams have the necessary guidance through the evidence-based approach. They learn that their idea is based on assumptions and they start collecting evidence to validate or invalidate these assumptions. Presentations and decision-making processes shift from hypotheticals to more tangible discussions. Decision-makers should make their investment decisions based on the evidence provided by the team to prevent projects from getting a life on their own without delivering any outcome.
The Innovation Validation Blueprint
Already discovered a business opportunity? Find out how to tell the difference between a profitable idea and one that isn’t.
Conclusion
Innovation is a numbers game, that helps to avoid the pitfall of making large single bets and starting more projects with a smaller amount of funding. Providing the right strategic guidance and making innovation a priority of top leadership creates buy-in and makes sure that innovation efforts are not running in vain. Making evidence-based investment decisions prevents the funding of projects that do not deliver any value for too long and guides innovation teams to validate their critical assumptions. Following these three points will not guarantee that your organization will find the next billion-dollar idea. But it will increase your chances and make your innovation efforts more effective and fruitful.
Do you need support figuring out how to successfully run innovation? Don’t hesitate to get in touch and get advice from one of our experts!
