7 ways to reduce the risk of innovation in business
Projects promoting innovation in business needn’t be the risky, fraught affairs many consider them to be. Here are 7 tips for reducing the risk of innovation and increasing the chances of a successful outcome.
1. Innovation needs its own strategy
An innovation initiative, project, programme, plan, or scheme that is not anchored to an organisation’s business strategies will flounder. Just like they have a growth strategy or a retention strategy or a diversity strategy, businesses need an innovation strategy to help align departments, clarify objectives and set priorities. An innovation programme without a strategy to guide the processes of ideation, synthesis, prioritisation, investment, and the numerous decisions and trade offs that will be required along the way, is at serious risk.
2. Innovate within constraints
This speaks directly to the point above. Professor Robertson from Wharton University studied Lego’s innovation path and found that constantly starting on new ideas without properly planning for their execution was disastrous. A conveyor belt of new ideas can be just as damaging to business as no innovation at all. So an innovation strategy needs to set the boundaries for where to innovate, what criteria will be used to assess and fund ideas, and the process those ideas will go through to test them, and make them a reality or kill them off.
3. Innovate when the sun is shining
So often innovation is seen as a solution to poor business performance. Unfortunately, innovation that occurs as an afterthought or as a last ditch measure is often costly, and rarely delivers what is expected. Partly, this is because innovation is risky and requires time, and companies in trouble often have neither an appetite for risk nor much patience. To reduce the risk of failure, make new hay while the profitable sun shines.
4. Innovate iteratively
The best way to approach innovation is iteratively. Make small, regular bets so that risks are minimised. Each iteration is a risk, but a small one, so there isn’t much at stake, and people get used to it, so continuing to make these small bets gets easier.
5. Innovate with customers
This goes with innovating iteratively, as at the end of each iteration you have the perfect opportunity to check out what they think. With each round of customer feedback you then have the opportunity to persevere or pivot. Plus, if you suspect someone might be undermining your innovation you have evidence from actual customers to backup your decisions.
6. Innovation accounting
Innovation is not business as usual. You don’t know if you have a product that will sell, you don’t know if the product will even work, and may not even know what type of person might be interested in it. So you are going to need a different way of measuring progress. Innovation accounting replaces trailing indicators of success (sales) with leading indicators that show progress towards product/market fit. In the past Energized Work have called this fiscally responsible innovation and we are using this on our own products to inform staged investment based on various metrics.
You get what you measure. By using innovation accounting you will reduce the risks of using irrelevant and damaging measures for your programme.
7. Innovation skills
Did I mention that innovation is not business as usual? Typically people in large businesses are very good at running large businesses. Not many of them are cut out for running brand-spanking-new businesses. If they exist, find them. If they don’t, hire them. Don’t assume that the brightest and best in the existing organisation can innovate because they’ve have been successful in the current business.