Saturday, December 20, 2014

"Prove it!" - Two Words that Kill Innovation

Roger Martin, former Dean of the University of Toronto's business school, has a terrific new HBR blog post about innovation.  In this piece, Martin argues that two little words kill innovation in many companies:  "Prove it."  Here's an excerpt:

The great irony is that the managers who give this instruction — prove it before I agree to do it — think that they are simply being rigorous managers. They are sure that any innovation problem has nothing to do with them. Rather, it’s the people they’re managing who aren’t executing properly on their innovation program.  They are oblivious to the fact that they are setting a standard that’s impossible to meet. They will complain about their organizations failing to come up with ‘compelling innovations.’ They will hire innovation consultants to bring ‘new thinking’ to the organization — but later declare that the consultants haven’t brought any “winning concepts.”

Why do these two words kill innovation, specifically the truly creative, disruptive innovations that firms seek to bring to market?  In many cases, the early days of such innovation represent what some scholars and practitioners call the "fuzzy front end."  In those days, innovators find it very difficult to quantify the costs and benefits of a new innovation.   They cannot accurate estimate the size of the market or the revenues that a firm might capture.  However, a large organization's mindset often focuses on rigorous quantitative analysis of investment opportunities.  Proof means producing a very detailed spreadsheet with a return on investment calculation.   Small, incremental innovations sometimes can be approved through this type of process.   A manager can produce the kind of proof required, because the technology is established, the market opportunity well-known, and the historical data is available.   Breakthrough innovations stumble though, as managers cannot build upon existing datasets to produce the proof that is required.   

1 comment:

Joe Feula said...

Companies that are risk averse will be reward challenged. Investments that firms make in truly innovative and disruptive technology will naturally incur risk. How can one confidently market and sell something that has never been marketed or sold before? Certainly a business case must be presented with some sort of financial backing to the investment. The underlying issue is the extent in which large firms drill into the details of the business case for disruptive technology. You must balance risk with the tradeoffs that exist with managers requiring a comprehensive understanding of the business case and how detailed the business case has grown to be with large firms. This will take time. Certainly a more agile competitor at a smaller firm will have an advantage compared to a slow moving larger firm.