The Quagmire of a Positive Innovation Culture
Innovation is interesting. You must create something and win in a market to declare your work a true innovation.
You seldom hear managers call an innovation bad. By definition, an innovation is successful. Someone paid money for it. And it fulfills a need. This is all good. Except it’s not all good when a culture embraces all things innovation as positive.
Innovation is Different
The challenge arises because innovation is unique. It differs from other business topics. For example, its value isn’t based on how much you invest. Sure, the investment matters. But the innovation itself is the biggest influence, not the amount you invest.
Consider a team of five people working on an innovation. Their result might be a new product that produces a $5 million per year net cash flow. Compare that to the same five people working on a different innovation. This product, though, yields $250 million in annual cash flow.
The difference, you’d agree, is the underlying innovation. It’s not the investment, and it’s not the people.
And you’ll also find that B2B and B2C innovations are different even though many writers lump them together. It turns out finance and economics push decisions differently. In B2C, the retailer will remove an innovation if it doesn’t sell in large enough volumes. When sales fall off, continued marketing becomes hard to justify. Success and failure in B2C markets play out clearly.
But B2B judgments are less clear. Companies continue to sell B2B innovations as long as their variable cost is lower than their price. Plus, you’ll see the original investment doesn’t matter. The thinking is that sunk costs, those that precede any decision, are irrelevant. Just look to the future.
B2B judgments appear smart until they don’t. Unfortunately, marginal innovations add to indirect costs. And these costs can grow like cancer. The results get ugly. It turns out innovations that seem good can marginalize a company to death. But a positive culture can make this seem correct.
Culture Can Mask Problems
The innovation projects you work on matters. The challenge is to find big innovations likely to succeed. The task isn’t to search randomly. And it’s not to accept marginal projects.
Yet the approach companies take can create big problems. It’s by nurturing a culture of positivity. Whether $5 million or $250 million, the innovation is celebrated. And those innovations that fall short are tagged “learning experiences.” The reinforcing message is to fail fast, so you learn quickly. It’s terrific news how most companies have learned a lot.
Add to this knowledge the help academics offer. They’ve contributed deep study of innovations and product development. It’s because of their work we know to avoid many reasons that lead to failure. The top of the list is matching the potential innovation to customer needs. And while we still get tripped up by the challenge, we’re worlds beyond the common “build it and they will come” approach.
But today there’s a new problem plaguing innovators. It’s not about avoiding failure. Rather, it’s when companies chase innovations that may deliver a positive cash flow but don’t help strategically. You may declare them successful, but they’re misdirected or marginal at best.
Sure, managers might judge their innovations successful. It works and somebody bought it. But at what cost? What opportunities were lost to its success? Should we smile about the successful $5 million innovation when we didn’t see the $250 million opportunity?
In a positive innovation culture, it’s verboten to bemoan how a team lost nearly a quarter billion dollars. Instead, the positive culture says let’s celebrate their $5 million success. It’s an Austin Powers’ logic arguing ‘who needs to be a billionaire when you could be a millionaire!’
Many companies have worked through a first response to having too many small innovation projects. They can thank portfolio management. Here, the solution is to kill several small projects and shift resources to better projects. But killing projects does nothing to find new, big opportunities. That task falls outside of portfolio management’s role.
When an innovation culture joins a dominating B2B sales culture, things get even more challenging. Who’s to argue with the sales vice president who says ‘my top customer wants this innovation’?
But just because the big customer wants the innovation doesn’t mean others will pay for it. Big customer’s don’t always represent a market or a market segment. Yet the innovation culture steps into action. And too often the result is a misdirected or marginal innovation. The good news is it keeps the customer and the sales team happy.
Big customers aren’t the only reason for misguided innovations. You’ll also see them when top manager support “open” techniques. This work purposely stretches perspectives. And it demands freedom from norms and assumptions.
Internal support will allow teams to forgo testing an innovation’s fit to the business. At least not until it closes in on launch. Why? Because testing the fit conjures a negative force. This is a force the culture purposely seeks to offset. The problem is that non-fit innovations only matter to a business when they’re notably large. Large enough to start complete new product lines and business units. And yes, when they’re large, this is good stuff.
More likely, though, the openness that leverages a company’s knowledge won’t lead to complete new businesses. Instead, it leads to contributions that must alter existing products and approaches to be successful. These potential innovations tend not to be tailored to drive changes to a product line. And the change is neither thought-through nor well-planned. They are not based in a strategy.
Positivity Without Strategy
The problem is that companies chase too many misdirected or marginal innovations. And the problem worsens with feel-good innovation cultures.
The most serious challenge is for innovators to build and renew platform-levers. These innovations cut across a product line. They’re not one-off new products. Instead, they’re rooted in strategy, both for product lines and a business. A few may lead to a product line’s renewal.
But others can lead to major pivots or business transformation.
This is important. Without strong platform-levers, companies must deal with weak product lines with poor strategies. The common response is to push harder on one-off developments. And the result is more marginal innovations. This isn’t helpful.
A positive innovation culture can cause much damage without a strong strategy footing. This is a strategy that works to improve the existing lines. It’s also one that seeks to create and drive whole product lines. Good strategies based on smart insights will guide innovators to avoid misdirected and marginal innovations.
Smart platform-levers are key to good product line strategies. And a good product line strategy is fundamental to a good business strategy. Without platform-levers, strategies are limp, and one-off developments become costly.
There’s much to a smart product line strategy. And once in place, it’s much easier for a productive culture to support it. Culture-driven behaviors and decision-making are key to great performance. But only when the performance fulfills a smart strategy.
Directed Innovation Works Better
Don’t confuse well-embraced innovation culture with a good product line strategy. They’re different. It may feel correct to embrace a positive culture. But if you do so while ignoring a product line strategy and its parts, you’re bound to marginalize your work and fall short of your goals. Ironically, the positive culture will encourage you to revel in your marginalized success.
Innovation cultures must allow product lines to flourish. This doesn’t mean innovations outside existing lines are wrong. Rather, innovations should drive current lines or create new lines with their own strategies. But the new lines must be purposeful within a full business strategy.
The goal is to create a major impact with revenue, customer satisfaction, and beating competition. These are hallmarks of a stellar strategy.
If you can’t say “no,” you don’t have a strategy. But saying “no” shouldn’t be a negative force. Instead, it should help guide teams to avoid marginal innovations.
A culture’s job is to help people embrace smart directions and revel in good decisions. It’s not to support innovation blindly.
To create a productive culture, innovators and leaders must understand what makes a product line strategy good. And they must put the knowledge to work.
To learn more about product line strategy and its relation to innovation culture, please consider several Adept Group venues.
Consider purchasing and reading my book, The Profound Impact of Product Line Strategy. Or consider my in-depth Masterclass. This 1-day class enables deep discussion specific to different product lines and organizations. You may also find our customized Seminar, held on-site at your offices, a perfect fit to your needs and your product lines.
Whitepaper– Good Product Line Strategy Matters.