Innovation is a concept that engenders both universal alignment and universal confusion. We all agree that innovation is necessary but can’t agree on the right way to get there. We share concerns that we must continue to evolve our business but are equally concerned to execute on new ideas because of the downside risk. When we put innovative ideas through a SWOT analysis it seems that the weaknesses and threats weigh more heavily than their counterparts.
“To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.” – Steve Jobs
Innovation shouldn’t be an aspiration, it should be a goal. However, the challenge of setting it as a goal is figuring out a plan to achieve it. We are living during a time where a pandemic has forced businesses around the world to evaluate their value proposition, discover new ways of earning revenue and at the very least weather the financial difficulties. Articles that espouse the need for innovation today are preaching to the choir. The focus becomes how brands can take that first step. So how can it be done?
There are many ways to be innovative. This article is not about listing all the ways a brand can innovate. Original ideas are not cookie cutter, and I’ll defer to the more capable people who understand their particular brand’s challenges to come up with better ideas than I ever could. What this article hopes to achieve is to help brands set a framework to properly test and execute against innovative ideas. It may be an oversimplification to some. But to others, it could be a good starting point to integrate into their strategic planning.
The 90/10 Approach
It’s ok to be conservative when it comes to innovation. If there’s no proof of concept, no case study or no historic success to learn from, it’s completely justified to want to take a conservative approach. This is where the 90/10 approach fits in.
Make the 90 Work Like 100
Brands should actively find ways to set aside 10 percent of any investment to solely focus on innovation. The thought process behind this is that as long as the 90 percent is being managed properly, you can achieve near similar or the same results. So the very first step is to optimize and refine the 90 to work as if it were 100. Can you limit cost? Can you refine process? Can you discover new efficiencies that streamline operations?
Creating a conservative foundation is important because it still maintains control of the existing needs of the business while creating a designated space for originality. 90/10 is a starting point. Is the downside risk on 10 percent too high? Brands should consider what acceptable downside risk they are willing to take. It could be 5 percent, it could be lower, but it should never be zero. If a brand is closer to zero, it should be an indicator that the current initiatives, programs and investments should be working harder and better.
Be Aggressive and Accept Failure
A brand should be as aggressive as possible in that designated space when determining the overall structure. Failure should be an acceptable outcome. The beauty in innovation is that it only takes a few ideas (or maybe just one), executed properly, to change a business. It is a continuous test and fail approach until that idea comes to fruition. When failure becomes simply part of the process, a brand creates and fosters an environment of creativity. Experimentation becomes the part of the norm. Creativity plus experimentation equals innovation.
Incorporate the Downside Risk
This comes down to matter of perception, but the 10 percent a brand sets aside for innovation should always be incorporated as a downside in the overall performance outcome or analysis. That carveout never contributed to the main business objective and therefore should be shown as a downside.
Why does this matter? When innovation budgets are looked at in isolation, the ROI isn’t going to be great. Innovation is essentially a system designed around failure, so it’s never going to look great on its own. Nested into the greater objectives of the business however, innovation is the acceptable downside brand should have originally carved out and accepted.
If this seems to be trivial, ask those brands and business that cut R&D budgets the reasons behind why they did it. When brands significantly reduce their investment in innovation, it reflects a set of unrealistic expectations originally set forth.
Build a Pipeline To Play the Long Game
Innovation is never about going after low hanging fruit. It is a continuous investment over time testing idea after idea to future-proof a brand’s business. Sometimes it takes years for a brand to discover an innovation that evolves their business.
In order to play the long game, brands should look to build of pipeline of new ideas from every possible source—from their own employees, their competition, or what they may read about in their industry. All ideas should be considered. Sometimes it will take 100 bad ideas to uncover that one great idea. Having no idea is the worst-case scenario. As long as an idea is technically feasible and financially affordable, it should be evaluated and put into the pipeline to experiment.
Last but not least, dream big. Innovation in and of itself is rooted in unadulterated ambition. It is achieved by making the impractical become realistic, making the impossible become achievable. It is meant to change the world, so to accept any less of a standard than that limits its potential. Set lofty goals and fail over and over again until it is achieved. Once an idea comes to fruition, no one will remember all of the failures. If the outcome prompts significant capital, the payoff will further validate the journey.