How to keep your innovation projects from capsizing
From the process, to the budget, to evaluating ideas, when it comes to innovation processes and projects, there are a variety of pitfalls that can cause projects to fail. As long as managers in key roles take a few essential decisions and enter the fray with the right attitude, many of these pitfalls can be avoided.
Insight in brief
- Whether your goal is better products or services, optimised processes or superior business models, continuous innovation is a must.
- Some companies are better at running innovation projects than others.
- This blog post looks at five factors that play a key role when it comes to successful innovation.
In 1625, King Gustav II Adolf of Sweden commissioned a product innovation intended to give him a decisive competitive advantage over his rival King Sigismund III of Poland. This was the galleon Vasa, a magnificent warship intended to cement his dominance in the Baltic Sea.
The key mistake during development and construction may, however, have followed a familiar pattern. Legend has it that five months after beginning construction, the King himself requested a new feature – double the planned number of cannons. This change had a drastic effect on the ship’s stability.
The Swedes even carried out a system test. Test manager and fleet commander Vice Admiral Klas Fleming ordered 30 sailors to run from side to side across the deck to test the ship’s stability.
Product innovation Vasa lasted just 20 minutes before sinking ignominiously a kilometre out of Stockholm harbour.
Innovation as competitive advantage
Innovation drives our economy and is a constant force in the world of business. Over the past ten years, I have had the privilege of being involved in innovation projects in a wide range of industries.
Again and again, I find myself mulling over the same questions. Which factors really make the difference in real-world practice? How can mistakes be avoided? What strategic decisions make the difference between success and failure?
In my view, the purpose of innovation is to obtain a competitive advantage – albeit such an advantage is always only temporary, as our example above neatly illustrates. Even if it had been constructed correctly, the Vasa would still be of little use today. Continuous investment is therefore a must.
Competitive advantage manifests in particular in better products, better services, better processes or a superior business model – it’s about efficiency, reduced costs, rapidity, maximising profit or adding value for customers. In the age of digitalisation, that might mean a core IT system for insurers, bank customer portals, digital solutions for patients, medical devices, consumer goods, and so forth.
Below, I’d like to talk about five areas that play a key role in realising successful innovation – but that also conceal a number of pitfalls.
1. Choosing the right approach
There are two areas where the right course needs to be set even before an innovation project gets underway – motivation and goal setting. With business model innovation, the goal is to stay ahead of the competition by having a better business model. Right now, the standout example in my view is platform business models, which enable companies to earn money from transactions without actually producing or owning products.
Over the last decade, as the internet has matured, another standout area has been user-centred innovation. In this case, the goal is to create added value for customers or users and make your products or services more attractive than your competitors’. The best-known user-centred innovation process is without doubt design thinking.
If you start from a position of business model or user-centred innovation, you will rarely find yourself making any fundamental mistakes at the beginning of an innovation project. Pursue innovation for innovation’s sake, on the other hand, and success is largely a matter of luck.
2. Focus on the value added by the technology
Similarly dubious is allowing your innovation project to be motivated by shiny new technology. In today’s world, technology is of course a key player in innovation. Often, however, it’s about being adventurous in your use of that new technology. Blockchain offers a salient example. Half the nation set out in search of the next killer blockchain app – and came back empty handed.
One big mistake is to take a use case and compare a promising new technology with an existing one. The argument that the existing technology does it better and faster can quickly lead to the new idea being drowned at birth.
I recommend observing the following fundamental rule: if you’re looking for a killer application for a new technology, focus on the value the technology adds for the business, rather than its technical features.
Blockchain-based systems, for example, enable networks of equal partners with no central authority (ecosystems). That begs the questions: What roles might ecosystems play for my company in the future? Which of these roles are relevant for us? Where are the threats, where are the opportunities? Note that these questions have at first sight nothing to do with blockchain.
3. Choose the right time to filter your ideas
One thing I see often is that immature ideas get kicked about for too long, making it impossible to make any kind of decisions about putting them into practice. This is especially true for new products, but also occurs with extra features or services, such as an app for a consumer appliance (e.g. a toothbrush or coffee machine). It may be that people are too quick to criticise new ideas or that different teams end up in a war of attrition over competing ideas.
The list of mistakes that can be made during the creativity phase is long. Here are a few real-world examples, along with tips on how to avoid them:
- Ideas come in for criticism while they’re still being generated. I recommend the maxim, “Never criticise the idea, only the implementation”.
- The situation turns into a fight between competing ideas. Successful creativity techniques ensure that a range of people or even groups are involved in shaping an idea. This ensures that the idea belongs to everyone and enjoys broad support.
- Ideas are looked at from a single perspective only. The end result is correspondingly uninspiring. It’s important to ensure that the teams involved in generating ideas are as interdisciplinary as possible and boast a wide range of different perspectives.
- It still happens far too often that people neglect to think about the benefit or overlook the fact that a solution to the problem they are seeking to solve already exists. Something I cannot recommend highly enough is the NABC (need, approach, benefit, competition) method – really useful for evaluating or developing an idea. Using this method, you can get to the nub of and ask appropriately searching questions of even the most complex ideas in just an hour or two. A welcome side effect is that using the NABC model means that you’ve already put together the pitch for whoever is going to decide whether to proceed with your idea (see figure 1).
Abbildung 1: NABC Betrachtung
4. Reduce uncertainty – it's all about the first third
In real-world projects, budgets are often discussed largely before project start and when it becomes clear that the budget is going to overrun. As far as budgeting at the start of the project goes, it's surprisingly common to encounter the attitude that a precise, foreseeable result can be achieved with a fixed budget in a set time frame.
Once the project is up and running, budget discussions then tend take a back seat. But this can turn out to be a major mistake. That’s because a lot of key decisions and questions only come to the fore once the project is underway and is starting to deliver clearer insights. And that often has significant implications for the budget.
At this point, it’s worth taking a look at the cone of uncertainty. Figure 2 shows how the degree of uncertainty evolves over the course of an innovation project. Based on this, I offer the following two recommendations:
- If you’re about to embark on an innovation project, it’s important to understand that it’s impossible to accurately predict how much investment will be required beforehand. While it’s perfectly possible to define a budget for the project, if you do so, you have to accept that functionality may have to shrink to fit that budget.
- If you fail to make the essential decisions that need to be taken to reduce uncertainty in the first third of the project, you're pretty much guaranteed to run into budget problems later. This often becomes apparent only when you’re running out of money and the end of the project is still nowhere in sight. There are key project decisions to be made in many different areas, for example regarding business models, user groups, product design basics (for both digital and physical products), architectures and mitigating technical risks.
Abbildung 2: Cone of Uncertainty
5. When it comes to decision-making, just get on with it!
Reproducibly achieving successful innovation is the result of an innovation culture which manages to strike the right balance between high degrees of both freedom and responsibility. In addition to people, working methods, tools, structures, etc., etc., a key factor is the values that guide people’s day-to-day work.
It’s amazing how often companies do no more than pay lip service to their values. Innovation favours the bold. Hesitancy in decision-making, lengthy horse-trading in large committees and a gradualist mindset are poison when it comes to getting a head start on the competition.
I would therefore start any large scale innovation project by asking: Does the company, and does everyone involved have the courage to go down this route? Failing along the way is something that the business needs to be able to take in its stride. In our example above, what was missing with the Vasa was the courage to admit to having made a mistake. During the ‘system test’, the ship rolled alarmingly from side to side. The Vasa should simply never have been launched.
This article first appeared in the May issue of changement!, the magazine for change processes.