The most common innovation project failures

I had the opportunity to speak to a leadership team that is considering building an innovation capability in their business.  I was asked a question I get infrequently, but one I enjoy answering.  The question is:  what keeps businesses from innovating effectively?  The answer that I think most leadership teams want is:  good ideas.  After all, it's easier to explain away the lack of innovation if you can say that most teams lack good ideas. But a lack of good ideas is almost never the appropriate response to the question. Most companies teem with reasonably good ideas, and in some cases great ideas.  No, the reasons that corporate innovation fails are many and varied, almost as differentiated as the number of industries and business models and management styles that are in evidence.

But there are a number of factors I can describe which severely curtain innovation success when corporations decide to do more innovation.  Those factors include:

• Failure to adequately define a customer need or business opportunity before deciding to innovate
• Failure to place the right people on an innovation task and providing them the tools and skills to succeed
• Failure to define what the word "innovation" means, and what type of outcome they expect:  incremental or disruptive, product or service or business model
• Failure to encourage any divergent thinking, allowing the innovation teams to quickly converge around ideas that resemble existing products and services
• Failure to allow time for discovery and exploration, allowing innovation teams to worry about the amount of time they invest in learning new things, always pushing for an answer as quickly as possible
• Failure to understand the customers' needs and expectations, substituting what internal employees believe that customers want
• Failure to provide the innovation teams with the appropriate compensation and reward models, and dividing their time between an important innovation activity and urgent everyday business
• Failure to think through how to transition a good idea (if one can emerge from such a poorly defined process) to product or service development and commercial launch

These factors occur and recur in almost every innovation activity I've ever been a part of.  Note that they have very little to do with "good ideas" and almost everything to do with management commitment, definition, resource allocation and other things that executives and managers are supposed to do well, regardless of the setting.

Most innovation is far too poorly defined and scoped, faces far too much pressure to move quickly and narrow its focus, rarely engages with markets or customers to discover new needs or expectations and actually encourages a divisive setting for team members, where people with passion for new ideas fight for oxygen and momentum with people who are on the team because they were assigned to it, and have no comfort doing work they aren't prepared to do and aren't compensated or rewarded to do well.

Oh, you'll say, what if we actually do all of these things well, and the ideas aren't all that good after all?  What if it really is an issue of bad ideas rather than culture and definition and management.  My response is that most companies have tried innovation without addressing any or most of the items I've identified.  I suspect (in fact I know) that if we can engage good people in the right setting with the right context, good ideas will flow.  We've just established such a negative petri dish for innovation and ideas that only poor ideas can possible dribble out.

Should you welcome or fear disruption

I was scanning through my Twitter feed when I came upon a tweet where someone was excitedly welcoming disruption in the financial sector.  Strangely, it was from an individual employed in the traditional banking sector.  This made me think of the old Simpson's show where Kent Brockman, the news broadcaster, is announcing that there are new alien beings taking over the earth, and that he, for one, welcomed the new overlords. Much like the traditional banker who welcomes financial disruption in his industry, this welcoming of your own destruction seems a bit unlikely. My response is that disruption is something you want to create or anticipate, rather than welcome and react to.

Just ask Tower Records if they "welcomed" a disruption in the distribution of modern music.  Tower and other retailers owned music distribution until Apple decided to disrupt the market by changing the media (physical to digital) and the channel (retail stores to web downloads).  As interested bystanders, some of us were winners, and frankly some were losers.  If you don't like listening to iPods or MP3s, if you are an audiophile, then in some regards you may consider yourself a loser, as higher quality music is now harder to find. In any "disruption" there are winners and losers, but few people are completely isolated from impact. The truth is that we don't fully understand disruption, and it's far better to be the disrupter and able to anticipate where the bull you are riding is likely to go, than the disruptee or in many cases even the innocent bystander, who gets gored without ever trying to actually interact with the bull.

Schumpeter explored this idea when he wrote about creative destruction.  Innovation creates entirely new ways of solving customer needs and new value propositions, but almost always destroys existing means of creating value.  Look no further than Blockbuster if you want to understand disruption, by both Redbox (positional disruption) and NetFlix (technical disruption).  Every act of creation by one party is an act of destruction to someone else.  That's not to suggest we should fear innovation, but in fact we should respect its power, and harness it to our benefit, rather than simply expecting it to work on our behalf.  Innovation doesn't work that way; you are either the innovator, the intended beneficiary of the innovation, or you are what the military often politely calls collateral damage.  In this case collateral damage specifically refers to the business model or value proposition the innovation was meant to undermine, but it extends to the network of solutions or adjacent products and services that are no longer as valuable once the innovation is realized.  For example, it wasn't just Tower Records that was disrupted, but a whole value chain of suppliers, merchandisers, packagers and so forth, with ripple effects even to the music producers.

Rather than cavalierly "welcoming" disruption, you should fully understand its power:

 - Welcome its potential
 - Respect its power
 - Understand the blast zone associated with disruption
 - Be the disrupter or at least allied with the disrupter
 - Disruption is a blunt instrument with no sympathy for its victims - it does what it does, regardless of the impact or circumstances.  Therefore it's much better to be on board with the disruption rather than sitting by and welcoming it.
 - Become more proactive rather than reactive 

Welcoming disruption to your industry is naive and foolish.  Bringing disruption to your own industry is risky but can have benefits.  Disrupting an adjacent industry, doing what Apple did to Tower or Netflix did to Blockbuster, is the ultimate disruption position.

Barely scratching the surface

It's funny to me to read about the impending death of innovation, or how innovation doesn't add any value, or how often you can read about new innovation methods or techniques when most people haven't ingested the basic tenets yet.  For all the talk about innovation, for all the "I'm so over" innovation eye-rolling, it would be nice to admit a really simple fact that is as plain as the nose on your face:  80% of the people in most organizations simply don't know that much about innovation.

I have to remind myself of this constantly, because I'm not going to be surprised anymore by "innovators" in organizations who don't know who Alex Osborne is, or was.  Or can't tell me what Doblin's Ten types of innovation are.  Or cannot adequately define the difference between incremental innovation and disruptive innovation.  Recently at a professional association meeting we were talking about helping our colleagues understand "best practices" in innovation.  As lofty and potentially arrogant as that sounds, my advice was to start more simply:  how about if we just ensure they know the basic practices before we worry about "best practices"?

To me it seems the best analogy for the state of innovation today is something like this:  We are like the 49ers, the Americans in the middle of the 19th century rushing to California, because it's been reported that there's gold in the streams.  A handful of people are getting rich finding gold nuggets in the streams, simply there for the finding, never realizing that seams of gold lie just below the surface, waiting for someone with vision and passion to dig a bit deeper.

Where innovation is concerned most organizations have a similar experience to many of those who rushed to California.  They make finding the gold sound simple, they send people with no mining experience into the field to find the "nuggets" lying around, and everyone gets frustrated when the exercise doesn't pay off.  Eventually, most of the 49ers end up in other roles, settling down in a new territory rather than continuing to look for gold.  We are all guilty of flirting with prosperity, toying at the edges of innovation possibility, never fully committing to discover all the value locked up just below the surface.

There are good reasons for this willful ignorance.  When confronted with a virtual "sure thing" that maintains a moderately successful status quo or risks something for a potential windfall, managers and executives will almost always bet on the "sure thing".  Sustaining day to day operations, making the numbers each quarter, not rocking the boat pays off.  Meanwhile we are expected to do some "innovation", so we send out the unprepared to search for ideas in the wilderness, never surprised when they fail to find value, even when it was right there in front of them.  Later we are shocked when competitors or new entrants mine the same fields and find seams of gold.  But by then the executives and managers who provided only lip service to the exploration are long gone, safely ensconced in new roles where they'll reinforce the status quo in the face of unrelenting change.

Where do we place the blame? And, more importantly, how do we encourage people to explore innovation beyond the surface?  There are a couple of places we can explore to create change.

First, the business schools.  Many executives and managers have business school experience, either undergraduate or graduate.  In those programs they receive training in accounting, finance, marketing, operations management, sales, human resource development and information technology.  They learn to be managers, not explorers.  We need to radically rethink the education programs for our future business leaders, who will need to combine management skills with exploration and experimentation skills.

Second, the risk-reward spectrum.  From 1945 until today, western businesses have lived in a bubble of their own design.  The US and to a great extent western Europe dominated international business and set the stage for how things got done.  With the rise of China and other countries, and the slow decline of Western Europe, the competitive landscape is changing.  The pace of change is accelerating.  While older management tools still hold true, they only hold true as long as markets and competitors respect them.  We need to innovate management philosophy just as fast as we learn to innovate new products and services.

Third, and related, is business culture.  Culture and bureaucracy create their own realities.  Like it or not these are living, breathing entities that have their own opinions about change and can enforce those opinions over a longer cycle than the average tenure of a CEO.  This means that visionary CEOs and leaders need to partner with customers and investors to shift the culture of organizations over time, with buy-in from everyone, so that the culture is forced to change, rather than ignore the signals and slowly wither.

This should be a golden age of innovation, yet in many regards we are barely scratching the surface, content to pick up the small nuggets we stumble across while just below our feet there are seams of gold ready to be dug up, if only we'd truly commit to the work necessary to innovate regularly and consistently.  Whether we look at the Federal Government, where agencies like NASA used to regularly turn out new science and discoveries, or universities, where new science and creativity is increasingly stymied, or corporations, which have the bandwidth and the power to do far more innovation yet shy away at the investment, every constituent could easily do more, and with only a little investment and commitment unlock so much more value.  Are we content with this level of innovation?  Are we as consumers, as taxpayers, as participants in the educational systems, OK with this half-hearted commitment, resulting in mere trickles of innovation when there's an entire aquifer of ideas and innovation under our feet?

Innovation decreases with knowledge

Did the headline of the post grab your attention?  Did you think I was going to assert that dumb people are better innovators?  Nothing of the sort.  However, I think I can positively assert that bringing all of your knowledge to bear on a problem that needs innovation is often exactly the opposite of what you should do.  Here's why.

If you can solve a problem with all of the knowledge you possess, drawing on everything you know and expect to be true, you are narrowing your range of solutions and calling on past experience.  Most likely you are solving a problem the likes of which you've seen before, and replicating past solutions.  Nothing wrong with that, but the solution is unlikely to be new and different.  You see, drawing on all of your knowledge and experience is what the vast majority of us are paid to do each day, becoming "experts" in our specific domains.  And the more knowledge and expertise you have, the less likely you are to draw on new information or question your frameworks or perspectives.

To create something completely new and different, to "innovate" in my terminology, means to rethink how a problem is addressed, or even framed.  To look at a problem from a completely fresh perspective, not bringing all of the experience and knowledge to bear.  In other words, to look at a problem with a "beginner's mind" perspective.  You know who does this especially well?  Children, because they don't have experience or a pre-conceived frame of reference.  They want to know "why" a problem has been solved in a particular way in the past, rather than accepting that they way it was solved in the past is the right way.  Sometimes they even ask why something is considered a problem at all.

When we at OVO researched the traits that innovators share, we found time and time again that the best innovators are people who have the capability and willingness to explore problems and opportunities with a "beginner's mind" perception, who were willing to set aside all the conventions and knowledge and expectations and look at a problem as if for the first time.  The sainted and frequently referenced Steve Jobs was good at this, and other heralded innovators are as well.  But this approach works against the grain of everything we've been taught, and how we are managed and rewarded.  Very few people are willing to strip away all they know, and appear as naive children when looking at a corporate challenge or opportunity, yet that kind of exploration and discovery is often what's needed most, not another round of application of decades of experience which simply reinforce the status quo.

The more you apply what you know, your frame of reference, your perceptions and your conventions to a problem, the more likely you are to create "ideas" that resemble the solutions you already have.  Yet that is what most corporations constantly reinforce.  Instead, the same corporations seeking interesting or radical new ideas should ask 1) if what they think are problems are really problems 2) how they might address the problem from a naive, almost childlike point of view or 3) if they were encountering the challenge for the first time, with no past experience or worries about existing investments.  Or, perhaps, you could use your "bring your child to work" day to do real discovery and innovation, because children don't carry around all of the expectations and conventions, and aren't all that worried about what other grownups think about their ideas.

Can your organization, its culture and its leadership allow enough child-like exploration and discovery to flourish to allow really new ideas to grow, or will the culture constantly reinforce expertise, knowledge and convention, continually generating very similar versions of the same ideas?

Day to Day Innovation Survey Results to date

Many of you know that we are conducting a survey of innovation practitioners.  If you haven't responded, please take ten minutes to provide us your insights.  To encourage you and to provide a mid-survey report, I thought I'd reflect on a few findings to date.

Remember that we are interested in what the people who are actually "doing" innovation think.  There are plenty of surveys that report what CEOs or senior executives think, but not enough is heard from the people who are responsible for day to day innovation projects and activities.  Thus we want to hear from you, and will report on what we've heard to date.  Here are a few of the findings so far.

Expectations versus Outcomes

So far, our results indicate that executives think innovation should focus on increasing differentiation, growing revenue and increasing profits, but in actuality a good deal of the innovation you do is focused first on cutting costs, then on entering new markets and growing revenue.  As we expected, so far there's a gap between what executives think innovation should do and what you are actually doing with innovation day to day. 

Aligning innovation to day to day priorities

We asked you to tell us how closely aligned executives' expectations for innovation are versus the day to day priorities and commitments.  Over 60% indicated there was little or no alignment.  This means that many executives are saying the right things but their goals aren't filtering down, or that existing culture or reward systems are reinforcing status quo.

Incremental to Disruptive

While executives talk about "disruptive" innovation, our survey results so far demonstrate that the vast majority of respondents report that their innovation work is very incremental.  Two-thirds of respondents to date place their innovation focus at very incremental or incremental.  This shouldn't be surprising, since incremental innovation is more predictable and less costly.

Still poorly defined

We also asked you about the definition of the "front end" of innovation.  Over 50% of the respondents said there is no defined innovation process or very little definition of the front end, while only 20% indicated they believed the front end of innovation is well defined.  There is still a lot of opportunity to define and improve front end skills and methods.

What happens if an innovation "fails"?

We asked you to report on what happens when innovations "fail".  50% of you reported that those innovations are "swept under the rug" as if they never happened, and a quarter of you reported that a failure can cause executives to lose confidence in an individual.  Corporations are still struggling with a zero defects mentality in a time when experimentation and innovation WILL create failures.

Keeping up with the Joneses

Over two-thirds of those who responded felt that their company was failing to innovate at the same pace as competitors and new entrants, and almost 75% of respondents felt that they'd accomplished less with innovation than was possible within their organization.

The results so far suggest that while innovation is a key strategic focus, it's still taking time to filter down to a day to day activity, frequently losing out to other priorities.  The front end in many companies is poorly defined and much of the innovation work is incremental.  Many of you worry about your internal innovation pace and losing out to competitors and new entrants.  Innovation failures are frowned upon and few people have a chance to develop new innovation skills.

What about you and your firm?  Do these statistics ring true or do you have a different take?  The survey will remain open for another two weeks.  Please take a few minutes to let us know what your day to day innovation activities are like.  Feel free to email me your feedback or comments at info@ovoinnovation.com.