Feedback's Impact on Innovation: A Key Tradeoff

Harvard Business School Professor Daniel Gross has a very intriguing new product development research article forthcoming in the Rand Journal of Economics.   Gross studied the impact of feedback on innovation efforts.  Specifically, he collected data from over 4,000 commercial logo design contests from an online platform.  Gross tried to understand the impact of feedback on the quality of subsequent submissions.  However, he also studied whether feedback might discourage some applicants from submitting additional designs in future rounds of the competition.  

What did Gross discover?    First, not surprisingly, feedback does improve the quality of subsequent work.   However, feedback also discourages future participation.  People who receive low ratings in the initial round are less likely to continue in the contest.   "A majority of players (69.5%) whose first rating is the lowest possible rating will subsequently stop investing in the contest."  That's not necessarily a bad thing.  Weeding out low performers can be efficient.  However, Gross finds that the detrimental impact on participation is NOT exclusive to individuals who receive negative feedback initially.  He also finds that, "Feedback can simultaneously reduce incentives for high-performers to participate, relative to incentives in a state of ignorance, by revealing or enabling high quality competitors."   Yikes!  We can actually discourage good people from continuing by being critical of their early work.  We should not be surprised by this finding.  Let's face it.  We all have a hard time receiving critical feedback at times.  

Thus, a tradeoff exists.   Quality improves, but participation suffers, when we provide critical feedback.  There's good news here though.  What's the net effect?  Gross argues that, "Feedback significantly increases high-quality output, with gains in quality far outweighing the costs to participation."  Moreover, he argues that, "Making feedback private yields modest incremental benefits by shrouding information on competitors' performance, which in turn reduces attrition."   In sum, we will have to live with some attrition when we provide critical feedback, but the net effect is positive in the innovation process.