Two answers you need to improve innovation success
I was talking recently with a colleague who had been working in corporate innovation for quite some time. He was discouraged because he felt his innovation activities were really insightful, and had resulted in a product offering that had great value for customers. But in the end the business decided not to commercialize his idea.
As we dissected the opportunity and the outcome, two issues became clear. First, while the customer need was undeniable, eventually it proved to be outside of corporate direction and strategy. The need was just far enough outside the bounds of what the company defined as its scope that he struggled to get executives to buy in. While they had been happy to explore the market and need, they weren't convinced enough to enlarge their offerings. That decision was probably influenced by the second issue: while the need was easily defined, the customers were dispersed and difficult to serve, and the business couldn't amount to more than $10M a year if everything went well. While $10M in revenue sounds like a lot to a small business, to a larger business starting up a new product or business that can't exceed $10M in revenue at its peak isn't interesting. It is a distraction.
Aligning innovation to strategy
Perhaps the first mistake that executives and innovators make when it comes to innovation is imagining that the exploration and discovery that is encouraged in the early stages of innovation will be recognized and scaled in the latter stages. Most executives are more than happy to encourage some amount of fiddling around the edges of a business, exploring adjacencies and seeking out "white space". That exploration is relatively inexpensive and may produce insight or knowledge to form future decisions. The fact that innovation teams are allowed to conduct that exploration does not mean that any ideas created are going to become new products.
Significant investments in new products or services will be made as those new products or services fit squarely within a strategic direction or goal. Exploration is useful and reasonable when the costs are relatively low. Investments in new products and services are expensive, and must be carefully aligned to strategic needs and imperatives. Innovation teams need to understand this. Innovation teams must understand their remit: discover and explore some interesting spaces, and give the executive team more insight and knowledge, and/or create some compelling new products based on that insight. Ask yourself: what is your executive buying from you? Insight, or new products? Scaling a new product is a risky investment, so many innovation activities may only be intended to produce insight. Understanding that from the start is very important.
Minimum Viable Threshold
I think I'll coin a new acronym today: the Minimum Viable Threshold or MVT. The MVT is simply the size that a new business must achieve to be interesting to the existing business. In a small business, generating $10M of new revenue may be very interesting and important. At GE, Jeff Immelt set the MVT at $100M. Understanding what the minimum viable threshold of revenue, profit, margin or other metrics is exceptionally important. Even if you can dominate a market, even if there is no other competition, even if your new innovation is head and shoulders above the other competitive offerings, if you can't achieve the company's MVT within a few years the innovation simply won't get funded.
Understanding the MVT seems obvious, right? But it is one of those informal metrics that some people understand but are rarely discussed. Innovators can fall in love with their ideas, not recognizing that executives have yardsticks and metrics they'll use to measure new innovations. Some of those metrics may be overt or obvious, others, like MVT probably won't be. As an innovation team leader, your job is to know what the MVT is, or at least understand its parameters. If you cannot achieve the MVT, rescope the innovation or rethink your focus.
Recognize that small investments to discover new insights may be all that your executive team wants from your innovation activity, and understand the difference between dominating a $10M market and owning 10% of a $1B market if you hope to convert your ideas into new products or services.
As we dissected the opportunity and the outcome, two issues became clear. First, while the customer need was undeniable, eventually it proved to be outside of corporate direction and strategy. The need was just far enough outside the bounds of what the company defined as its scope that he struggled to get executives to buy in. While they had been happy to explore the market and need, they weren't convinced enough to enlarge their offerings. That decision was probably influenced by the second issue: while the need was easily defined, the customers were dispersed and difficult to serve, and the business couldn't amount to more than $10M a year if everything went well. While $10M in revenue sounds like a lot to a small business, to a larger business starting up a new product or business that can't exceed $10M in revenue at its peak isn't interesting. It is a distraction.
Aligning innovation to strategy
Perhaps the first mistake that executives and innovators make when it comes to innovation is imagining that the exploration and discovery that is encouraged in the early stages of innovation will be recognized and scaled in the latter stages. Most executives are more than happy to encourage some amount of fiddling around the edges of a business, exploring adjacencies and seeking out "white space". That exploration is relatively inexpensive and may produce insight or knowledge to form future decisions. The fact that innovation teams are allowed to conduct that exploration does not mean that any ideas created are going to become new products.
Significant investments in new products or services will be made as those new products or services fit squarely within a strategic direction or goal. Exploration is useful and reasonable when the costs are relatively low. Investments in new products and services are expensive, and must be carefully aligned to strategic needs and imperatives. Innovation teams need to understand this. Innovation teams must understand their remit: discover and explore some interesting spaces, and give the executive team more insight and knowledge, and/or create some compelling new products based on that insight. Ask yourself: what is your executive buying from you? Insight, or new products? Scaling a new product is a risky investment, so many innovation activities may only be intended to produce insight. Understanding that from the start is very important.
Minimum Viable Threshold
I think I'll coin a new acronym today: the Minimum Viable Threshold or MVT. The MVT is simply the size that a new business must achieve to be interesting to the existing business. In a small business, generating $10M of new revenue may be very interesting and important. At GE, Jeff Immelt set the MVT at $100M. Understanding what the minimum viable threshold of revenue, profit, margin or other metrics is exceptionally important. Even if you can dominate a market, even if there is no other competition, even if your new innovation is head and shoulders above the other competitive offerings, if you can't achieve the company's MVT within a few years the innovation simply won't get funded.
Understanding the MVT seems obvious, right? But it is one of those informal metrics that some people understand but are rarely discussed. Innovators can fall in love with their ideas, not recognizing that executives have yardsticks and metrics they'll use to measure new innovations. Some of those metrics may be overt or obvious, others, like MVT probably won't be. As an innovation team leader, your job is to know what the MVT is, or at least understand its parameters. If you cannot achieve the MVT, rescope the innovation or rethink your focus.
Recognize that small investments to discover new insights may be all that your executive team wants from your innovation activity, and understand the difference between dominating a $10M market and owning 10% of a $1B market if you hope to convert your ideas into new products or services.
Voted 2nd best innovation blogger two years in a row!
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