Get Shift Done: Management
Failure is only one of the risks that innovators face
Businesses have always pushed for innovation, but traditionally most of the focus was on improving existing products. In recent years however, that’s changed as more companies have launch “radical” innovation projects — ones that leap outside the box. The result? Failure is no longer the greatest risk of innovation.
The Big Failure In The Room
In 2015 I collaborated with some of my management peers to propose an “lab” of sorts within our organization. Due to the high chance of failure, company leadership was reluctant to commit resources to the project. In response, we developed a system of checks and balances to ensure the project had the highest chance of success.
But our leaders, and even my own cohort, were wrong in assuming that failure was the biggest challenge we faced. To get your organization to buy into an innovation project, you need to prove you’ve thought about more than just falling flat on your face.
Risk is More than Failure
Outside of failure, there are a few risks that innovators face:
Opportunity Cost
Aside from consuming resources — time, money, and human capital — an innovation project has an opportunity cost. Allocating existing resources to the project means that they cannot be allocated to less risky innovation projects such as improving or fixing existing products.
Being Late to Market
If you’ve thought of an innovation, there’s a decent chance your competitors have as well. When you work on something new, you court the risk that your competitor is building it, and is already further along than you are. In fact, they may be better suited to bringing the innovation to market. If they beat you, your innovation will just be an “also ran.”
Unintended Market Cannibalization
What happens if you develop and release a new product and it’s a hit? In fact, it’s such a hit that customers stop buying your existing products. If this happens you haven’t extended your reach with something new, you’ve sacrificed an existing product on the alter of your innovation.
Coping With These Risks
Innovators can cope with these risks in different ways.
First, there are a number of management models that can be applied to innovation projects to lower the level of ongoing risk. For instance, when we proposed our labs idea, we used a modified stage-gate model. This puts a series of checks in place, enabling you examine the project at milestones and understand how it stands up at various points in the development life cycle. If the project does not pass a gate, it’s terminated, ending the risk of pouring more resources into a failure.
Not all models are created equal, and some risk management models will fit your organization better than others. Understand where the limitations of a model are before you decide to adopt it.
Next, here’s how to deal with the three risks listed above:
Coping with the opportunity cost risk is more about changing your mindset. Companies need to see that time spent on a failed innovation project is not 100% wasted time. People who work on those projects are learning new skills and gaining new insights into how to do things. They are likely more engaged, making them 202% more productive than employees who are not engaged.
Being later to market is not a death blow when it comes to innovation. In fact, it can benefit you if your competitor rushed their product, or released too early. If that’s a concern, make sure your model takes into account a complete understanding of your user’s needs as part of the process. You might reach the market after your competitor, but chances are you’ll have a better product. Remember: Betamax was released a year before VHS.
As far as market cannibalization, you should examine your new product against your old. Is it trying to solve the same problem? Do your existing products simply need updating? Or do users outside of your existing market really need something you don’t already offer? This exercise requires both an understanding of your customers and the involvement of stakeholders like marketing.
Bottom-Line
The risk of innovation will be easier for leadership to swallow if they know you’ve worked to address as many potential risks as possible. By getting into the right mindset about risk, and then adapting an appropriate risk management model for your project, you’ll mitigate the worst of the risks and increase your chances of maximizing your gains.
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