So if we strip back the hyperbole and distortion, what do we see of how large companies really approach the innovation problem? Exactly what is it that is really happening when large companies embark on revolutionary projects today?
What follows is a piecing together of our joint experiences at working with, or for, businesses both large and small in identifying, developing and launching products to market.
Yes, it’s a bit of a litany of errors, any one of which would be enough to seriously derail anyone’s confidence to nurture new business propositions. However, it is not our intention to gather together the worst, or even most amusing, war stories. Instead, we hope to represent fairly what is normal in business today with a depiction most will be able to readily identify with.
This shouldn’t be about blame. The reason we’ve written this book, and indeed the reason we set up our company, is that we’re hoping to find ways to avoid some of the mistakes we’ve observed (and made ourselves) in the past, and to find new (and more successful) ways of doing new things in the future.
Typically, these mistakes are not a result of employing incompetent people but rather they have been a product of good people stuck in impossible processes with badly mismatched expectations from those above them.
Of course, the mistakes we describe here often didn’t appear obvious or silly at the time. For the most part, the teams we have been part of have been full of well-intentioned and bright individuals with good ideas and a well-thumbed management handbook. Neither would we interpret the actions of the senior executive teams described here as being Luddite, out of touch, only interested in short-term returns, and so on. Of course, the people who make up the boards of FTSE 500 companies are rarely any of these things, although they are very often under a great deal of pressure to deliver short-term results.
In our experience, senior executives have been — almost without exception — engaged, intelligent, thoughtful and deeply driven by the future success of the businesses they work for.
Ours is not a push for different people to be involved in the innovation process but rather for companies to approach these projects differently.
4.1 Where do ideas come from?
As we mentioned earlier, the ideas themselves are not the hard part. If you hold a workshop, you will come up with as many ideas as you have people. In fact, you’ll probably have ten times as many ideas as participants.
This book certainly isn’t about how to generate ideas.
Nevertheless, the actual source of an idea will typically impact significantly on the idea-development process itself. Ideas come with strings attached. Which strings will depend on where the idea came from. There tend to be three sources:
- Competitor. The company may have been spurred on by the activities of a rival business or a similar company from a slightly different industry. In the case of a startup, the desire to improve on an existing product or a poorly-serviced market may be the key motivating factors.
- Executive. Alternatively, you may have been directed to take an idea from a senior executive and develop it.
- An idea-harvesting process. Finally, the company may have an ongoing programme of generating ideas and developing / investigating them.
4.1.1 Ideas from competitors and other companies
If the idea comes from a competitor (often disparagingly called the ‘me too’ idea), then it will come with a reasonable weight of expectation derived from the presumed success of the competitor. Since most companies favour publicising their successes rather than their travails and failures, information about the competitor’s development process, commercial and user success is likely to be incomplete.
A good example of this is the trend for customisable home pages started by Google in 2005 and the BBC in 2007, following on from companies including Facebook and Pageflakes.
Clearly, it was not likely that these organisations would promote their new products in a lukewarm or negative way, suggesting that their products were in fact experimental and based on trends they had observed in other sites. Instead, both products were trumpeted as a revolution in the way web design should be implemented. And so many other large companies embarked on building on this presumed success. We’d regularly hear in design briefings that the Google and BBC examples should be followed in our own work. No further evidence would be given for this suggested approach.
The brands that followed this route, however, discovered that customers neither understood nor enjoyed customising their web experiences. The feature — like so many others — was rarely or never used, whilst having the unfortunate distinction of being extremely expensive to implement. Perhaps it was a feature which worked only for the super-brands of the web. Or perhaps it didn’t work for anyone. Within a few years both BBC and Google had withdrawn the feature, with a lot less fanfare than accompanied its introduction.
There is also often a misconception that the competitor’s success at innovation has created an entire category in which products can be launched and that if a new product can merely be created in time, it is guaranteed to be successful. Products such as Microsoft’s Zune and Bing, Bebo, Google+ and others lead us to question the assumption that a large market size necessarily implies the room for multiple competitors. Another way to look at this is to question whether the competitor’s product is really in the same market or solves the same customer problems, even if it has similar features.
In essence, the risk here is that the business will feel that its version of an idea or product need not be validated with the market. In addition, the business may struggle to develop the idea to create differentiation because it is so attached to the definition given to the product by the competitor. Did the Zune player need to have a circular method of interface control and a large colour screen? If Microsoft had instead decided it would make the smallest personal music player, could it have better stayed in the marketplace? Of course the answer is somewhere in the middle. Competitor-based ideas can certainly succeed. There are numerous examples (the Apple iPhone and then the Samsung Galaxy, Friendster and then Facebook) of companies bringing products to market second or third and taking huge market share. But many of the ‘common-sense’ ideas about what can be learnt from competitors should be thoroughly questioned.
If, alternatively, senior executives advance an idea (even if the idea came from elsewhere) then there is a different sort of catch. They are unlikely to have recent hands-on experience with product development. Plus — owing to their position in the business — they may not be used to hearing the word ‘no’, or even ‘perhaps’. This creates an issue for the team tasked with developing the product, and limits the scope they have for adjusting and advancing the idea.
Direct executive sponsorship of this sort can also lead to odd financial rules for the project at stake. Typically, it means that initial budgets are over-generous when a project starts but any extensions to that budget can be almost impossible to come by.
In terms of planning, we’ve often been surprised by how thin, yet confident in their predictions, early funding cases from senior executives can be. Empirical research has almost never been carried out. Financial modelling is often extremely simplistic and optimistic, if it is done at all. And yet these early funding cases typically come with promises attached of money that will be easily earned back in time.
By the time the brief arrives with the new product development (NPD) team there are two important but hidden constraints: the executives’ spoken and unspoken expectation for the product (including what they have told other board members), and a financial promise which is built on the assumption that sufficient money has already been signed off to get the product to market. Even when NPD teams are firmly told that no such cost or revenue prediction exists, it will often lurk behind the scenes to be discovered later.
4.1.3 An innovation process
In many ways, the simplest starting point for a new product is when a team has been set up with an open remit of innovation. That’s not to say it is easy being in one of these teams, or managing one. They come with their own unique challenges. New product development and innovation teams need to work extremely hard to maintain the respect of the rest of the business and avoid the stereotype of being seen as arrogant Post-it note-toting layabouts.
Typically, such innovation processes are either run in individual departments, perhaps with some central facilitation, or they are run by an R&D group, operating independently. As we’ll see later, the nature of such teams, whether temporary or permanent, makes it almost impossible for them to be subject to ‘management by results’ or even ‘management by exception’. This can make the teams seem simultaneously detached from the values of the business and unaccountable for their actions, which is not fertile ground for building trust and respect.
Innovation teams that do not have the support of the rest of the business will find that their ideas have a mysteriously short life and suffer a far higher rate of boardroom muggings and late-night murders than is usual.
There is also the risk that an innovation team will stray too far from the front line of the business they are in, and simply lose touch with the world that is moving ahead around them. An unnamed, but well-known, example exists amongst (at least one of ) the UK terrestrial broadcasters. In order to compete in the context of rapidly- changing media markets, one such business set up its own innovation team. After many months locked in their top-floor innovation sanctum — replete with bean bags, table football and so on — the innovation team emerged with beards grown to tell the world about the bright shiny future they had envisaged, only to find that their vision had already become the somewhat faded past for many of their competitors.
And these risks go for any idea handed to them by anyone, anywhere in the business, whose concept then gets wrapped up in the politics and stereotypes surrounding the innovation team itself.
4.2 Money and politics
Another lesson from The West Wing. While Josh is trying to explain his role as Deputy Chief of Staff, he says: ‘There are only two things that ever stop the government from doing anything: money and politics.’ (Series 2, Episode 10: ‘Noël’.)
The same may well be true in business. But the mechanism of how it works is subtly different.
Let’s look at money first.
At this stage we have the idea, with certain strings attached. We must decide how to develop it, how to move it forward. In the absence of any other options, many businesses will default to whatever process feels familiar for the allocation of resources.
Let’s imagine that I am the manager of a company that produces chocolate biscuits in a factory. I become aware that I can improve output by streamlining the production process. A new biscuit-packing machine will allow me to cut the jobs of five staff and — in the process — improve both the number of biscuit packs that can be produced and the reliability of the entire operation.
In this sort of circumstance, I may allocate a small amount of budget to an initial feasibility study, ahead of a larger investment to actually install the machine and update processes so the machine will work. During this feasibility stage, I will also work out how long it will take for this combined investment to pay off. If the return on the investment is reasonable — two years, say — then I should proceed.
This approach, with little or no modification, is also commonly used for the development of new propositions. Perhaps not surprisingly, this is where the wheels start to fall off the wagon of large companies doing genuinely new things. Think about a typical scenario. In the first stage, a team will be assigned a small budget to generate ideas. A further budget is then granted to develop the ideas to a more complete proposal (with a business case) and then the team may be asked to report back monthly during the product’s development.
At any stage, the management team may decide the project is not going according to plan and ask for changes or call the whole thing to a halt. Usually, however, the criteria for success or failure, at any given stage, are pretty unclear, leaving the project team to set their own criteria for continuation of the project.
In order of magnitude the first phase may be around a week, the second a month and the third from six months to a year. Anyone who has been involved in a genuinely new product development or ‘revolutionary’ development will see the challenge here instantly. Market knowledge and domain knowledge are both at their scarcest when the majority of the prediction is being carried out. Indeed, depending on the nature of the development, the market for which predictions are being made at this stage may not even be properly defined.
Particularly for more disruptive innovation, it’s not just returns that are hard to predict. Costs are too. Faced with a total lack of clarity about what will be included in the project and even who will execute it, the project leader is incentivised at this early stage to maximise the budget they request to complete it. In order to secure the maximum amount of funding, the project leader will also, therefore, be forced to increase their predictions of likely return.
The mere act of identifying costs can also have a subtle reinforcing effect on the project leader’s assumptions about the project. In order to get those costs, he or she will typically need to be able to brief internal and external parties on what the product itself will be. This has two effects. The first is to cement the detail of solution, at least in the mind of the project leader as he or she travels from meeting to meeting with an increasingly well-worn PowerPoint presentation. The internal or external development partner will be asked to both review the initial project assumptions and add their own input. Note also that in response to the prospect of lots of new potential work, they will always broadly say ‘we think it’s a great idea’. Both these factors add false validation to the plan; validation that is particularly unreliable given the intrinsic motivation of the development partner to want the project to go ahead, and to go ahead with the largest and least cautious scope possible.
We’ve had experience of this. When we’ve given honest feedback to potential clients that there are certain things that will have to be fleshed out or validated in order for their idea to succeed, we’ve consistently not been awarded the work, and are told that an alternative supplier or partner had ‘more enthusiasm’ for the idea or that they ‘really got it’ when we didn’t.
So, the corporate process of validating investment strongly encourages teams to provide excessively positive forecasts for the product’s success, and to fix important details of the product and proposition early, at the stage of the project where their understanding of the product is minimal. It puts them in a position where commitments to both delivery and return have been made for a project that barely exists. Perhaps most dangerously, it creates a negative and adversarial relationship between the executive and the team doing the product development before the project even starts.
Early-stage ideas are exciting to work on — at least in part because they are liberated from the weight of expectation. In judging ideas in this way, businesses virtually force their innovation teams into lying to them, inflating estimates of return, deflating estimates of costs and creating the illusion of certainty where little exists.
The product owner can tell themselves that they are doing the right thing for the business, essentially bypassing a dysfunctional system by making positive forecasts and projections. In their defence, it is so unreasonable to ask for forecasts at this stage that the project leader can scarcely be blamed for their excessive confidence in any numbers they do produce. Management, for their part, may tacitly understand that the projections are fiction; but know that they can chose to ignore this should it suit their purpose further down the line.
Faced with the sheer backwardness of the approval process, the manager of the innovation process is incentivised to trade bigger budgets for larger promises. Since they typically will have no idea what they’re going to do (but don’t want to admit this), bigger budgets give them the impression that they’ll have the time and autonomy required to firm up the unknowns in private and make some tangible progress before having to report back. However, at the same time, the project leader is robbing themselves of the freedom to revise their plans, and to learn about the market or potential market from which they hope returns will come whilst committing to deliver something before they really understand the game. This will come back to haunt them.
By securing larger budgets early on, the manager now feels under intense pressure to produce results, whether that’s a shippable product, positive feedback, customer orders, or actual financial returns. Their next move will, therefore, be an attempt to create a plan which can deliver results as early as possible.
Their priority shifts subtly from definition to doing. Essentially, the innovation leader is ‘hoist by their own petard’, a victim of their own design to escape scrutiny. In order to secure funding, the manager has been incentivised to conceal both the risk of the project and to gloss over its essential lack of definition or clarity. They have risen to the management taunt of ‘don’t you know what you are doing?’ and agreed to play the game of intuitive prediction.
Politics is everywhere. But of course its impact can be incredibly subtle. The best professional politicians are those who can exert their influence invisibly when they need to and who can manipulate situations to their own advantage. Even in the glare of media scrutiny, the behaviour of Westminster and Washington politicians is complex and hard to understand.
Yet corporate politicians rarely face any scrutiny at all. Politics in this context is focused on the building of personal reputations and empires, gaining promotions, increasing pay and getting higher status inside and outside of the organisation, often at the expense of colleagues.
In these battles, the victor will be the one who can convince that their vision, focus and abilities are more likely to result in the successful delivery of a company strategy. Thus the successful corporate politician is adept at translating corporate strategy and the motivations of their audience to support their actions and intentions. All companies bear witness to many such competing or partially competing agendas, all dressed up in the language of corporate strategy.
Don’t like it? Well, you’re going to have to live with it. We’ve never found a company (or indeed club, society or political party) that is any different, because these behaviours are driven by very basic human motivations.
220.127.116.11 Jam tomorrow
A point strongly made by Clayton Christensen in his book The Innovator’s Dilemma is that established firms have a strong understanding of the dynamics of the market for existing products. They know the customers, they know the supply chain, and they know of the complex interplay between competitors and suppliers that make up any market ecosystem.
In addition, the different parts of their company’s own ecosystem have a consistent bias in believing that the needs of these customers, suppliers, partners and distribution networks must be foremost to the exclusion of all else.
Innovative products therefore become, in Lewis Carroll’s words, ‘always jam tomorrow, never today’, as they have to fight the status quo in order to be delivered.
Innovation might always be the right answer, but it is still trumped by the customer is always right which is always always right. In other words, today’s business and today’s customers quash the ability of an organisation to think seriously about new or emerging customers if their needs, market behaviours or economics are different to the here and now.
We’ve discussed the need for employees to be able to justify their behaviours clearly in terms of what is best for their employer. At no point do they believe that their employer will ever accept that today’s customer was sacrificed to secure a more profitable future.
No matter how much energy is originally devoted to innovation, unless the executive is convinced that it can deliver jam today, it won’t ever succeed.
18.104.22.168 Sociopaths, clueless, losers
The legendary American cartoonist, Hugh MacLeod of Gaping Void fame (who was kind enough to design the cover for this book), famously sketched the following picture of company hierarchy.
Taking Hugh’s extreme perspective, the top tier of the company is the most likely to suffer from (mild) sociopathic tendencies, has absolute faith in its convictions, is relentlessly determined to achieve their objectives and couldn’t care less who gets in the way.
These labels could be how each group would describe each other, perhaps they are merely the meanest interpretation of each group’s faults, or they could simply be an example of Hugh’s wicked humour and sense of perspective. The genius of the cartoon though, is that we instantly understand the idea and are then faced with the prospect of deciding which group we are in. The good news is that even if we can’t make up our minds, we’re really glad we’re not in the other two!
At the bottom of the pile are the losers, another extreme label to possibly describe those who work to live rather than live to work, but who are lambasted for this positive attitude and dismissed as wage slaves. For a while in America, this group might have been described as holding McJobs.
In the middle tier are the clueless, the somewhat hopeless salaried careerists, neither brutal enough for the top flight nor carefree enough for the bottom tier. This group of middle managers believes the dream they are sold by their sociopathic bosses and devote substantial energy to moving the business forward, even though they are in fact relatively inconsequential in the broad picture.
Our innovation managers, one has to assume, are drawn from the ranks of the clueless and the sociopaths, with the latter, sadly, more likely to succeed.
How true this picture really is of most businesses we leave to the reader, but it certainly hints at the complexity any of us faces when attempting to get existing businesses to do new things. The sociopaths will get on board (perhaps) if they can see how the move will benefit them. The clueless, often those in fact tasked with making the numbers work, resource allocation and so on, are likely to be more conservative and concerned about the immediate impact on their status or what their sociopathic leaders will do if they get it wrong. The losers will be concerned about any potential change to the status quo, seeing change and new ‘opportunities’ as euphemisms for disruption, risk and an increase in effort required.
In order to get our companies to do new things, we will need to think about how each of these groups — although we may use more politically correct and real-world descriptions of them — is (or is not) utilised to best effect and how their ability to derail the process because of personal agendas can be minimised.
4.3 Funding, politics and the alpha male
By the time we reach the development phase of the traditional process, the project leader will be fully embroiled in both money and politics, whether they like it or not.
In order to navigate the corporate approval process — which is put in place to prevent potential losses in shareholder value — they will likely have made a solemn promise about returns which is strongly predictive. They will also have embroiled themselves in politics, albeit unwittingly, and their financial promises are strongly linked to their status in the organisation.
Of course, no one could reasonably expect the individual to be able to deliver on these promises given the context of why and how they had to make them. But that boat has sailed: the process which got us to this point has been wildly inappropriate, inversely matching knowledge to the requirement to make promises.
Because of the bias of a typical project leader towards alpha behaviour — the defending of their position at all costs — they will often feel that they need to go along with the projections and early guesses they have been forced to make. However, as a consequence, from this stage onwards the appetite for finding out more is typically very low, in case it upsets the apple cart on which this project now finds itself. This is a shame, as this is precisely the time where learning is most likely to occur, and most beneficial.
Even at this relatively early stage, the project leader may have already set themselves on a course of no return, and they will continue to be required to pass formal and informal approval points which further narrow their options for change and learning. The leader is very likely to cherry-pick any evidence that points to the project being a success, of having a long-term market and likely high returns. Why? Because if the project continues to run, uncertainty in their own career will be reduced, as will the likelihood of previous reckless decision making being uncovered.
And what happens when doubts arise as to whether the project will be successful? From our own experience, on many occasions with very large financial investments, it’s likely that new knowledge about a product or innovation’s marketability, feasibility or viability will be dismissed. If it has come from outside the project team, it will be seen as politics; if from within, it will often simply be concealed to prevent the need to pass potentially bad news up the chain.
Again, we do not want to portray project leaders or their executives as frauds. They could each scarcely act any differently given the structures they are required to follow by their companies. This is why we will talk later about how to encourage new business leaders to behave more responsibly and, ultimately, more in their own interests, through creating a less adversarial, and more honest and open product development environment.
4.4 The heroic leader
We already touched on the personality types responsible for new product development in large companies — but, in a way, the skills possessed (or not) by these individuals, and their style of working, shouldn’t surprise us. They are, after all, a product of corporate natural selection. Often, in order to be the sort of person who is chosen to lead a product development inside an enterprise you need to be:
- Someone who has been with the company a number of years and who has shown themselves to be a safe pair of hands in managing some aspect of the business
- Seen as a self-starter
- Perceived as confident and self-promoting
What we are describing here is an alpha personality. This will be someone who, in simple anthropological terms, is highly status- conscious and has achieved their status through either combative or deal-making behaviours.
Under pressure, such a leader is likely to feel that it is permissible to break rules in order to protect their pack (the team and initiative they are working on). Since the executive boards of most companies are made up of men and women with similar personalities, they will condone this rule-breaking as the best way to make things happen and perpetuate their own self-portraits of courageous or heroic leaders.
The risk here is that this sort of self-imagined heroism tends to ride roughshod over both the valued learnings of others as well as the rumblings of the political machine. But to be impervious to the views of others is to potentially miss out on important information that could make a radical difference to the product. Feedback that is viewed as being based on rivalry and jealousy could just as easily come from genuine customer intimacy and common sense.
The big heroic personalities of such leaders seem to encourage bigger risks to be taken, even when they are unnecessary. Board rooms are full of this sort of language: take big bets, double down, play your hand and so on. But when it comes to innovation, why do bets have to be big? Because they need to match the ego of the person taking them? If we can find a way to reduce the size of the bet, shouldn’t we?
By removing emotional, political and financial attachment to ideas, we stand a greater chance of spotting the good ideas and their potentially great applications. It should go without saying that we need to work hard, be ambitious for our projects and conscientious in our approach, but those should not be excuses for the bloody-minded pursuit of projects whose very existence says more about their past than their future.
4.4.1 Leaving the pack
In accepting the job of working on new product development, the heroic leader may at first be under the impression that they have been promoted. This impression will soon change, however, when they realise they are destined to take on a much smaller team and carry out unfamiliar and uncertain tasks. In these circumstances, innovation will no longer feel like a fast-track to the top and, indeed, the more traditional routes via operations and finance will be almost enticing.
The tacit challenge for any such leader is the question of whether (and where) they will be allowed to rejoin the pack. If their project is a success, it may feel like the inception of a whole new business, with the heroic leader at the top. If the project fails, perhaps they will be allowed to take up normal duties once more. Or maybe they will need to find a new pack (project) either inside or outside the business, on which to focus.
Emphasising this separation, businesses often praise the loner qualities these leaders need to possess such as entrepreneurialism or the ability to be maverick. Leaders are encouraged to ‘do what it takes’, ‘break all the rules’ and so on to get the idea off the ground.
Of course, no one really wants these things. Were the project leader to genuinely start acting in a maverick manner with their superiors, they would be rapidly quashed.
How though, does it go down when these loner behaviours are exhibited with peers?
Here’s really where the conceptual incentive for the heroic leader is a double-edged sword. At some stage in the development of the product in question (even if it is only the final stage when it must be test-marketed or researched), the innovator will need to seek support from their colleagues from the normal business. Now the leader’s former colleagues feel much more like competitors (or even enemies) rather than supporters. Whilst they may not be overtly hostile to the new product, they could make it very hard for it to thrive in the real world. This will not be about challenging the product on rational grounds — how could it be when the product is in such early stages and typically lacks any firm test of its desirability? Rather, the business will begin to express negative sentiment because it feels the need to assert its expertise and experience — even though that experience is of today’s market and company, not the one in which the new product will thrive.
Before you know it, the general consensus is that the product can’t succeed. You will hear ‘customers won’t like it’ or ‘it will be hard to operate’ before it has ever been introduced to a customer or anyone has made a concerted attempt to design the operational processes required to make it work.
How do businesses and new product leaders tend to respond to such premature negative sentiment? Far too often, these stresses result in the need to set more targets and constraints for the project. And now the heroic leader has fallen into the trap, attempting to defend a revolutionary project with the language and metrics used for reporting the progress of a normal project or other business-as-usual activity.
4.5 Jumping the gun
What is it that drives projects to get into the expensive building and delivery phase so early?
When we worked at a large technology firm some time ago, we would petition for a period of investigation and reflection before we started building the product in question. Typically, this phase would be known as discovery or definition, and in it we would seek to validate that we were doing the right thing, bring some shape to the idea so that customers could understand it, check whether the business case assumptions were reasonable, and try to answer some big questions about how the product might come to life and about the audience at which it was aimed.
We would regard two months of such work before development started in earnest to be a major victory, with clients sometimes wanting to reduce this time to just a couple of weeks or even days. The reason given for such expediency was typically the urgency of delivering the end product and quite often a cry of ‘we’ve already done all that, just trust us’.
Of course, four to eight weeks is barely enough time to write down what the client might want and to create the most obvious of requirements for the project. And so it would be that we would commence extremely expensive projects with absolutely no evidence that the project was likely to be successful — but a really long list of what someone thinks should be in it based on little or no understanding of the customer, product or marketplace.
Just as surprising, we would often kick off projects of this sort knowing that the politics and approval process of the company we were working for would almost certainly doom the project to failure — either because the expectations already set were so out of sync with likely outcomes, or because the vested interests in the organisation would strangle the infant project before it could possibly prosper. Hardly the most fertile ground on which to succeed.
What was astounding in such projects was the way project-critical decisions were often taken with very little thought, or indeed barely taken at all, with innovation managers preferring to take default market choices rather than risk challenging established norms. Again, the thinking here seems to be that by following what others in the market are doing, risk is reduced and, more specifically, the risk that the manager will be blamed for making bad choices is lower.
On one project, for example, a new charging model for a major consumer platform was being considered. The person responsible for the project eventually reverted to a charging model similar to that of a market leader after a senior executive suggested the new, and innovative, model was hard to understand.
The team was informed that the first proposed model was ‘non- standard’ and, therefore, too complex for a consumer to understand, thus proving too much of a risk. This was in a market where no other competitor had made the old model work.
After that, we would regularly be in a position where our entire design and development team thought the product they were developing was of questionable end-user value and would be unlikely to succeed. By necessity, our teams ended up believing in the client’s confidence that the product would succeed in spite of this. However, that confidence was based on hubris alone, and the conviction that simply forging ahead would make it all work out in the end.
4.6 My CEO got an iPad for Christmas
Early predictions of failure — let’s call it ‘ambient negative sentiment’ — can create obvious problems for a new product programme. We’ve also seen the risk at the other end of the spectrum, where programmes become overburdened early on by the weight of positive expectations.
In early 2011, we had numerous meetings at big companies that started with the onerous phrase: ‘My CEO got an iPad for Christmas.’ What they went on to say is that their CEO’s expectations for all sorts of products and initiatives had now been reset by a casual conversation about how great it would be if their products were more like this.
And this has been a curse of innovation programmes for many years. A senior executive will look at work in progress and make an offhand comment: ‘It would be great if it could do x’ — or ‘I imagine it’s a bit like y’, without ever having tested this suggestion, providing any evidence of its likely success, and without the innovation manager even agreeing to it. We suddenly have an expectation that will now proliferate across the entire business whenever that stakeholder discusses what the innovation team is up to.
Now the innovating team needs to build in the desired feature or behaviour into the product roadmap or enter a period of tedious politicking and negotiation to have the feature removed from the expectations of the executive. Without warning, the product goes from being a customer-centred solution to having a roadmap set by the wider business. Ideas don’t need roadmaps until they’re on the road. Once ideas are validated and proven and heading towards being a real product, that’s when we consider the scope of the first release product, and how to structure the features that come after into a clear roadmap. However, many innovation leaders feel the need to anchor their programmes in the artefacts and planning that’s used elsewhere in the operational business. Often the team can set itself up for this problem by sharing internal documents without giving sufficient context. Vision visuals or early prototypes, for example, may feel like a great way to inspire the rest of the business and secure budget. However, the risk is that stakeholders can become excessively attached to a particular execution, feature or style, and then suddenly you have another target to meet, regardless of what you learn about the actual desirability of such a feature with real customers.
So be careful what you trade to build enthusiasm, or you could find your ambition to build a product customers want has been abandoned in favour of building a product which matches executives’ expectations. The phrase ‘I would have expected…’ is toxic to all innovation initiatives, especially speculative new business development. It is an outright symbol, if any is needed, that stakeholders have not been managed effectively and underlines a lack of understanding of how shaping and validation differs from execution.
4.7 Our heroic leader fails
In attempting to do the impossible, product owners have broken all the rules, twisted the truth and made many projections. Occasionally they will succeed. And if this happens, they will be perceived as superheroes, reinforcing the belief that maverick behaviour is the only way to achieve change in the organisation.
If they fail (which is statistically much more likely, as only one in ten new product development projects succeeds), the reasons for failure may never be well understood. Since so much has been invested, projects that fail often take many months or years to be successfully wound down. Their history is not written by the victors, since there are none. Instead various politically motivated accounts of failure will arise, and others will be discouraged from trying new things. Senior management, anxious to avoid further costly mistakes, may decide that greater (not different) governance is required for future projects.
Let’s put all these process and cultural factors together:
- A framework for success which is inherently biased to today’s business
- Staff who are looking to protect their positions by taking safe bets
- Resource allocation which may follow more traditional and conservative strategies than the owners of the business themselves intend
- Attempts to manage innovation projects based on predictability when these projects are inherently unpredictable
- The career trajectory of innovation managers being based on the outcomes of their projects
Given this, it should surprise us that innovation ever occurs in large firms at all.
If we were to go on to fill these pages with dozens of examples of how companies have failed to get their innovation programmes off the ground, the point of this diatribe wouldn’t be to criticise or embarrass but, rather, it would be to marvel at the companies that have managed to overcome these processes and achieve breakthrough innovations in spite of them. It’s these processes and conditions that make the innovation or new product area, potentially the most exciting part of any business, seem like way too much effort to bother with for the majority of staff.
4.8 Tough on innovation; tough on the causes of innovation
The upshot of the processes we’ve described above is that innovation can quickly become the poisoned chalice of a business. For all its initial appeal — ‘It will be exciting’, ‘You will get to make your mark’ and so on — it often quickly descends into an awkward trap where even the innovation team itself can seem uncertain about what value they are adding to the business, and can feel unable to explain this to the rest of the company.
All of a sudden this team feels like it is swimming upstream. It has inadvertently signed up to unachievable goals, become burdened by the expectations and assumptions of others, and senses the ever- looming deadline of the money running out. The team is no longer about coming up with something new that provides a long-term future for the business, but rather come up with something… anything… that will make money — and quickly. Even if this was not the intention of the initiative’s sponsors and executive, it is an unavoidable outcome of the way the project is being managed. And products that make money (especially products that make money straight away) are much more likely to be closely related to the firm’s current product line and based on an existing and well-proven business model of the company or its competitors. Not so much innovation as renovation.
And so, the business, by hook or by crook, appears to drive innovation from the breakthrough and potentially revolutionary outpost back into the ‘normal’ camp. What might have started out as interesting and market-changing ends up a compromise — a me too idea lacking differentiation, or a product extension of an existing line that is interesting, but won’t be differentiating in the long term.
Now, perhaps, is a good time to look back at Kuhn. What is it that generates the right conditions for revolutionary science to outflank normal science?
In the world of science, it is a question of the evidence for change being overwhelming and a bright innovator suddenly being able to see things from an alternative perspective.
This would, indeed, be heartening in the corporate world. Bring on the visionaries! Do remember though; companies don’t need to survive for an industry to continue. Revolutionary products can just as easily come from competitors — new or established — as from your company. Many of the best visionaries leave their companies because they are frustrated at their inability to innovate. Many of them go to innovate elsewhere, and often — sometimes many years later — come back to seriously challenge their former employers.
In the metaphor, the firms are the scientists, not the science itself — that’s the market, or consumer area that they operate in. Failure to ride the revolutionary wave transforms a scientist to a footnote in the history books, rather than a leader in their field. Failure to ride a revolutionary wave in business has just the same effect, as so many firms have found.
As Clayton Christensen argues in The Innovator’s Dilemma: ‘Because an organisation’s structure and how its groups work together may have been established to facilitate the design of its dominant product, the direction of causality may ultimately reverse itself: The organisation’s structure and the way its groups learn to work together can then affect the way it can and cannot design new products.
The reason is that good management itself was the root cause. Managers played the game the way it was supposed to be played. The very decision-making and resource allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening carefully to customers; tracking competitors’ actions carefully; and investing resources to design and build higher-performance, higher-quality products that will yield a greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technological change.’
Successful companies want their resources to be focused on activities that address customers’ needs, that promise higher profits, that are technologically feasible and that help them play in substantial markets. Yet, to expect the processes that accomplish these things to also nurture disruptive technologies — to focus resources on proposals that customers would reject today, that today offer lower profit, that underperform existing technologies and can only be sold in insignificant scale — is akin to flapping one’s arms with homemade wings strapped to them in an attempt to fly. You just won’t get the idea off the ground.
4.9 A new entrant does the ‘impossible’
The end to this story, when things do go wrong, is that a new firm will enter the market and do what feels impossible to the (now embattled) new product development team working in the same area at the existing business.
However, let’s not blame them for this thinking, because there are at least five things working dramatically in favour of the new entrant:
- They do not have to support the cost structures of the existing business.
- They are not pre-programmed to think in terms of one commercial They are prepared to invest time and effort in a project that may make relatively low returns as they may well translate into higher overall returns in the longer term.
- Very often, the new firm will be set up based on the strong belief in the innovation in Often the staff of the new firm is made up of former employees of the old business who felt their ideas could never come to fruition in that environment.
- New companies have no customers by whom they can be led Customer focus is the defining feature of many of the world’s most successful businesses but it is not always the best way to come up with something new.
- Finally — but most importantly — It may feel like a startup is a lone force fighting against an established business, but in fact it is part of an army. Any established company has a practically infinite range of competitors. And it is history that will judge which of these competitors is strongest. Again, this is an example of selection bias, as we described it earlier, with the incumbent Goliath slain by not one David but an army of Davids, each with their own bizarre version of a slingshot.
And what does the post-match analysis at the big company reveal? Why do the Goliaths believe they were so easily beaten? The politically minded will make sure that they use the failure to their own personal benefit. The accountants may push for more strenuous approval processes for new products. Still others may suggest more innovation is required. It is unlikely we will hear senior managers suggest that they were unable to manage the process successfully; neither will the alpha project leaders declare that they were too self-assured or that their magic powers of prediction were not up to the game.