Every so often we ask our community to sound off on popular topics in innovation and share their best tips, tricks, and advice in hopes that their answers may inspire others in the field. We’ve gathered these insights by email, over phone calls, at events and roundtables, and catching up with clients and colleagues.
Innovation is inherently risky. Yet, it is also widely understood that with risk comes reward. For this reason, most organizations already have a slush fund or established line item in the operational budget to pay for pilot programs and experiments. But exactly how much an organization is willing to gamble on innovation varies greatly.
For incremental innovations, it’s possible to account for a fair amount of risk through financial metrics, stage gates, and other well-understood management tools. But breakthrough innovation is different - because there is inherent uncertainty. In other words, you can’t even be sure why a disruptive project might be risky.
In such cases, it’s worth looking beyond just dollars and cents. Teams should focus on the methods and decision-making models they use to evaluate their innovation risks. When there are more proposed projects than available funds, teams need to be selective about their experiments. Understanding how to make calculated bets is key for true growth.
In this Pulse of Innovation, we’ve asked: how do you foster a culture of risk-taking while containing said risk? Here’s what we learned:
Assign Budget at Milestones - Partially funded projects can still get off the ground. When identifying emerging technologies or opportunities adjacent to your core business, set investment limits for both financial and time commitments. If a project fails, fail quickly and move to the next thing. If a program can prove it has legs by a set deadline, then it can be fully funded.
Apply Pressure - Frame investments as long term savings. If leaders face pushback from other internal stakeholders, they should encourage their colleagues to look at the big picture. Is this solving a problem with an existing business line now or in the future? What happens if we don’t act now? Do our competitors have the same opportunities? Timing is everything and resolving issues early on can save serious money in the end.
Make a Deal - Incentivize employees to ensure buy-in. Balance long term and short term goals, so there is no confusion over where to dedicate time and resources. Encourage employees with specific expertise to lean into projects by offering leadership opportunities within these initiatives. Financial incentives can convert even the most skeptical into believers. If employees know they can only be rewarded, not penalized, for their work, they will be aligned with the goals of the team.
Set Ideas into Orbit - Find partnerships to help develop your technology portfolio and outside funding to finance moonshot projects. Organizations that are vocal about their mission will find others that believe in it too - and serious investors will prove it by supplying the capital. External backers will pay for projects of special interest and/or need.
Kick Start Experiments - Launch an internal program to vet ideas and delegate discretionary funds. Submissions should include a high-level overview of the project’s goals and deliverables with an estimated timeline and budget for each stage. Let everyone vote or set up a committee to decide which projects should move to the next round of evaluation and funding.
Design or Adopt Forecasting Tools - Consider the known variables and anticipate the uncertain challenges. Are you bringing existing technology to a new market? Do you need a new business model? If successful, will this project have a significant impact on the business? What level of commitment is necessary to get the project going? Who should lead this initiative? Where is the budget coming from? A simple matrix can help identify the right strategy for innovation and facilitate decision-making.
It is the level of risk that separates breakthrough from incremental innovation. Gradual changes and supplementary improvements are necessary to sustain or add value to the business; there is little risk in relying on established business models and technologies. Innovation becomes increasingly more unpredictable the further you stray from known strategies/structure and capabilities, but it is the only way to achieve disruption. Within any truly innovative organization, there must be a balance that allows for both to occur.
Did we miss anything? Let us know in the comments below. For more tips, check out our growing collection of Pulse of Innovation posts!