Saturday, May 10, 2014

Delivering Breakthrough Innovation: Buy-in & Investment challenge

The last post dealt with execution challenge of an innovative idea. For execution, management buy-in and investment are required. The selection process for investment is a formalized process in many companies. And there lies the risk. Many innovative ideas slip through the cracks when they start their journey down this formalized process. It happens because the investment process is focused on delivering certainty. Innovative ideas are by nature have uncertainty associated with them. They struggle against the "certainty and no-risk" seeking comments like the following: 

Show me the money!: Revenues, cost estimates, business case, profitability, IRR are common in investment and capital budgeting decisions. Answering above questions is easy for a sustaining project which is based on existing technology, business model and market. But a disruptive idea can be different on all the three areas. Since there is no precedence, much of the time is lost in collecting data and figures. Due to uncertainty and non-precedence, the numbers are easy to challenge and hence more data is demanded. Instead of working to mature the idea, the team is caught is spiral of more data, more questions, hence more data. Some good ideas just die a slow death on a PowerPoint presentation.

My customers never mentioned about this problem!: Many companies institute a discipline of "listen to your customers". Customers are asked about their problems, a list is made based on the feedback and circulated to relevant internal departments for further action. If the innovative idea does not answer any problem in the list, then there is a slim chance of any support for the idea. One forgets that the list is just explicit needs of customers. Innovative ideas generally cater to implicit needs, or an unexplored opportunity.

It does not match with my yearly performance targets!: The investment process in general requires commitment from an internal customer who would industrialize/market the idea. An innovative idea will get blocked if it does not fit with the performance targets of the internal customer. In spite of obvious long term potential of an idea, the yearly targets influence the investment decisions. 

Not sure if it can work in real conditions!: As part of the formalized process, the experts will be called in, and questions will be raised on how a solution/idea would perform in actual operational conditions. And as one would expect, the disruptive idea/solution will not have all the answers. The formalized process in general do not provide room for "we will resolve the issues as we go along". Every issue needs to be resolved today! If not, come back with more information for the next meeting.

Formalized process for investment are important in an organisation to ensure that capital is efficiently allocated. Unfortunately, an organisation tend to use this formalized process as a single hammer for every type of nail.

Some organisations have woke up to the need of providing alternate channels for innovative and disruptive ideas, keeping them separate from the sustaining projects.

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