For most companies, a common element of their innovation strategy is installing software or a tool to capture and manage ideas from employees. Evaluating which software you’ll buy takes a tremendous time, and many of the vendors oversell their software’s ability to create significant value.
When I talked to software vendors, I found that there wasn’t much quantifiable proof about how innovation management tools actually help you to develop new products and services that generate significant revenue. There just wasn’t a strong return-on-investment case to be made. I also interviewed several other Chief Innovation Officers, and what they told me is that these tools are great for operational improvement, like finding a new component that will make your next smartphone smaller, or making some internal process more efficient. So they can be helpful in driving continuous improvement, because you’re getting ideas from front-line workers who know ways that they can do their jobs better, or design something smarter.
But today, CEOs are asking for game-changing growth from innovation, not 0.2 percent this year and 0.3 percent next year. And most companies are still having a hard time identifying where that revenue growth is going to come from.
When you run innovation competitions and have calls for open ideas, you get too many ideas and they soak up a lot of resources to screen and evaluate, even with the support of these innovation management tools. Before someone makes an open call to all employees for ideas, they should ask themselves what their goal is — is it simply to hear the voice of the employees, or to get meaningful revenue upside? You also have to understand that the signal-to-noise ratio will be low, and be willing to make risky investments if and when high-potential ideas surface.
The limitation with the idea management process as a primary mechanism to drive innovation is that you will likely miss the truly disruptive ideas, the ones that come from people from different domains and with very different approaches to delivering value to the company’s customers.
How do you overcome that? One thing we find interesting is establishing partnerships with startups. They can help you quickly test an idea that may be far out, and something that not enough people at the company would take seriously.
But the biggest revenue growth is going to come from developing entirely new business models and taking on big, bold bets — with the matching bold investments.
With regard to engaging employees, one way we’re trying to get better results is by setting up challenges, and offering prizes of $500 or $1000. It’s a lot of work to set up and structure a challenge, as opposed to just shouting, “Give us your ideas.” You need to find people in the business units to craft a challenge that will be meaningful. One question to consider: “What is the one thing your division needs to do, needs to get right, if you want to be thriving in ten years?” It’s about picking a point to focus on. You need to give people materials or data sets to work with. You need to explain how the submissions will be judged. And you need to have a judging process, and a way to support the winners afterward and help them with execution. We have a pool of funding that supports challenge winners as they continue to develop their ideas, for example. (See below for an example of a challenge we’ve run. You can click it to enlarge the image.)
The next test for us, and for every big established company, is that even with that continued funding, you might still have something that looks like small potatoes to someone running a billion-dollar business unit. The impulse is to kill a lot of these small ideas that take up time and resources, and sometimes seem like they aren’t going to have much impact. But every good idea looks like garbage for the first year or two.
In the startup world, entrepreneurs and their investors tolerate that. They expect a slow start, and a “pivot” or change of direction after you get early customer feedback. Participants in the start-up ecosystem are risk-takers, and they are biased toward the big, bold bets that will achieve significant revenue over time. They also have patience, and they think about building things over the course of years, rather than quarters. It is incredibly hard for big companies to let big, bold ideas survive long enough to prove their worth. That’s why you see so many companies waiting to see a startup do something innovative and disruptive, and then laying out hundreds of millions or a few billion dollars to buy it.