5 quick tips on successful innovation

Some food for thought on ways to improve your odds of success

Quick summary:

• Brainstorming from employees can lead to great ideas, but must be directed

• Ideation is merely the first step in innovation; too often efforts end here

• Innovation is a discipline that should follow a flexible process

• Innovation should incubate ideas while seeking to minimize risk

• Traditional ROI is insufficient for measuring success; use ROLO instead

Steps to help you achieve success in innovation

In keeping with July’s theme focusing on successful innovation, for the next two editions of Forestview, I wanted to share some quick-hitting concepts that I have had success with in my career when promoting innovation. To start, here are 5 quick items that I have found to be important for organizations seeking to boost their innovation efforts.

1. Differentiate between the ideas submitted by your employees

A common approach at many organizations is the equivalent of what I call the “digital suggestion box”. This is an online system that invites employees (and sometimes customers) to submit ideas to be considered for future innovation projects. LEGO has a system for suggesting themes for their products; customers can submit ideas and vote on them, and the most popular ones are explored by the company and a select few result in brand-new LEGO sets.

I’m all for these types of systems, but in my experience most of the suggestions from employees aren’t really innovative. The ideas submitted usually come in three flavors: 1) suggestions for improving the work environment, like more options in the cafeteria; 2) suggestions for improving the productivity of employees, mostly better equipment or software; and 3) suggestions for process improvements. All three of these categories can become popular with employees and receive a high number of votes and endorsements, but rarely are employee ideas targeted towards serving customers, increasing revenue, or entering new markets.

If possible, I recommend that firms put in some types of routing systems where HR or IT receives appropriate suggestions for their respective areas of domain expertise. Process improvements can often be reviewed by the leaders of a particular function or department along with IT partners. For ideas that are truly innovative, it is usually best to create a series of business challenges that identify areas your organization is struggling with or seeking to grow, then ask employees to submit ideas that solve the challenge. Put the onus on employees to do some research as well to show the viability of their concept: ask for financial projections, estimated costs, etc. These should not be required in order to submit an idea, but employees should be encouraged to submit as complete an idea as possible. The more homework has been done prior to submitting an idea, the easier it is to evaluate and the higher the likelihood it warrants serious consideration.

2. Innovation should not end with ideation

When soliciting numerous ideas, it is no wonder that most end up not moving forward. It can be highly manual and time consuming to perform a rigorous review of each individual idea that is submitted. Usually there are overlaps and usually many ideas can quickly be discarded for one reason or another. However, too often organizations see the collection of ideas as “innovation”; in fact, soliciting ideas is the easy part and simply the first step in one process of developing potential candidates for development. Ideation can be fun: it can be tied to team building exercises, hackathons, and/or rewards. These can hold value, but the subsequent sifting through, categorization, and prioritization of which concepts to actively pursue are all equally important steps.

Feedback should be given to the community who is submitting ideas on whether or not they are being pursued; if not, a brief explanation should be given, even if the answer is not a hard no but merely “not at this time”. Knowing that someone has “listened” to your idea and evaluated it, even if not pursued, is valuable feedback and motivational. By not providing feedback of any kind, ideas appear to go into a giant “black hole” never to be seen or talked about again and can be quite de-motivational.

3. Innovation is a discipline and should follow a flexible process

Ideation is a fun task for many of us. It challenges people to go beyond your day-to-day routine to think creativity with little to no boundaries or hard obstacles: those come later when seeking to actively implement an idea. The loosening or elimination of constraints, whether real or self-imposed, is valuable during these exercises. However, in order to achieve innovation at scale and of significance, you will face obstacles and challenges. That’s why innovation is a discipline: there are best practices that have been established on how to go from ideation to implementation.

A corollary to this is that your innovation efforts should follow a process, with steps in between and decision points along the way. The key is that your process needs to be flexible and scale with the size of the idea: quick wins need a quick process, otherwise they will be “slow wins”. Larger ideas will likely take significant time and/or cost: putting in stage gates along the way to start small and evaluate along the way can significantly de-risk a project. If your process isn’t flexible, then either it will not be rigorous enough to avoid expensive mistakes for large ideas or will be too rigid to achieve small successes and build momentum for your larger efforts.

4. Innovation efforts are special: they should be designed to reduce risk

One of my common sayings is that “innovation is novel; not new”. What do I mean by that? In my experience leading innovation teams and working with them, I often found that operational teams would inevitably identify a better software package or system or new equipment that would allow them to be faster and/or provide better quality or service. The challenge was they did not have the money in their budget to make the purchase, and they turned to the innovation team as a source of funding to support them.

If your organization doesn’t have better opportunities to use innovation funds, it’s OK to support your teammates and help them improve. However, this should be a rare exception, not the rule. Why? Because their efforts, no matter how much better it will make your organization, are simply new. There is little risk: the team has thoroughly vetted the new thing and can say with confidence it is superior. Operational areas should be able to make a straightforward business case to justify getting the funding needed to make the purchase or investment. If they do not receive it, it’s likely because the return wasn’t great enough compared with other similar opportunities across the enterprise.

Innovation efforts in my view should be treated differently: they should be reserved for initiatives that are novel, different, out of the box. By daring to do something different, your organization is intentionally decided to go against its instincts and make a bet on going a new direction. There are a lot more unknowns and risk involved, which is why you should adopt a formal evaluation process: to set milestones and invest a small amount of money and time to help answer questions and reduce risk. If it turns out this new path isn’t fruitful, that’s OK - as long as you don’t spend so many time and money that it has a meaningful negative impact on your business. Investments in innovation efforts should contain an element of risk; if the project does not or the risk is low, then it is likely not truly innovative but rather simply new and can be appropriately managed through your standard project process.

5. Use return on learning objectives (ROLO) as success criteria

A corollary to the last section about innovation efforts being defined in part by how risky they are is that innovation ideas do not neatly conform to the standard cost-benefit analysis (CBA) used to justify most traditional investments in projects. Why? Because there are too many unknowns to properly measure a CBA with any degree of confidence. With any CBA, there are assumptions built in: the best CBAs contain a range of key assumptions so that different scenarios and what-if analysis can be performed to stress-test the project and ensure it will likely be successful under a range of different conditions. With truly innovative ideas, it’s hard to even begin to formulate a reasonable CBA, which in turn means you cannot calculate a reasonable return on investment (ROI).

I’m not saying that ROI is irrelevant for innovation ideas. These ideas must either be incremental where a CBA can be roughly calculated or large enough that, if they hit, will provide an outsized return measured by multiples like 2x, 5x, or 10x rather than 10%, 15%, or 20%. Looking at factors such as total addressable market (TAM) and similar metrics can be a helpful guide here to persuade your organization the idea is worth pursuing. Once the innovation process is in flight, however, it is critically important that each stage in the process help bring clarity to whether this investment is ultimately worth seeing through to implementation. There are key questions that should be answered to allow you to formulate more precise estimates and expectations. Answering these questions is therefore the purpose of following an innovation process, and a set of learning objectives should be documented to gauge success.

Once a stage is complete, the evaluation process for success should be focus on the return on learning objectives (ROLO): that is, did you definitely answer the questions you set out to during this phase? If the answer is yes, even if those answers were not what you were hoping for and the decision is made not to proceed farther, this is a success: your organization has limited the time and money spent on pursuing a promising idea that did not turn out to be worthwhile. If the answer is no or undetermined, then it is difficult to decide whether to proceed forward or not because key questions remain unanswered. This can happen for a variety of reasons, often in poorly defined objectives or experiment design. Over time, as you gain more experience with a formal innovation process, you should also get better at establishing the right ROLO.

Does innovation go beyond ideation in your organization? Do you have a formal process with stages to evaluate innovation ideas? How do you measure the success of innovation efforts? Are innovation efforts distinguishable from standard projects? How is this determination made? How are the project management processes different? Are there any additional keys to innovation success that you’d like to add?