Innovators Must Pay Their Way PDF Print E-mail
Written by James A Gardner   
Sunday, 21 March 2010 11:25
When an innovation program is started by an organisation, everything is rosy and exciting. Filled with hope, business stakeholders attach themselves to the silver bullet that is innovation (and which they hope will solve all their problems), and wait for exciting results to arrive. In the first months of the team's existence, they can get away with anything.
by JamesAGardner


When an innovation program is started by an organisation, everything is rosy and exciting. Filled with hope, business stakeholders attach themselves to the silver bullet that is innovation (and which they hope will solve all their problems), and wait for exciting results to arrive. In the first months of the team's existence, they can get away with anything.

Sooner or later, though, they will be called to account for their results (or the lack of them). All those excited stakeholders will start to ask what they are getting in return for all the money they invested. They will start to wonder if they might have gotten better outcomes by investing in other things, for example, a Lean initiative.

Most of the time, this happens inside 18 months, and the team's budget gets scrutinised very carefully. While everyone will probably agree the team has done "valuable work", the only justification they really care about is financial returns that the innovation team may have generated.

Ultimately, if there are other opportunities for investment that were able to justify themselves financially, and the innovation team has failed to do so, it is obvious where any rational business manager will seek to direct funding in the future. This is especially the case during a downturn, or at any other time an organisation is under stress.

So innovators need to pay their own way, if their programmes are to exist in the long term.

Some innovations, of course, do not have financial returns. For example, there are a whole raft of productivity improvements that innovators might advance, particularly those based on information technology. Generally, these add significant new capabilities, or make existing employees capable of doing more, but don't result in any direct new revenue or cost savings. Obviously, there's a lot of value in doing these things, and a sophisticated innovation programme will certainly pursue them, regardless of the likelihood of getting them to pay.

Given this, then, how does an innovation team reconcile its financial obligations with non-financial innovation activity?

The answer is it must adopt a portfolio strategy for innovation, where some projects pay and some don't. As a rule, there will typically be many more of the former, and the obvious implication is the team would as a matter of course de-prioritise those innovations without decent returns until it has successfully met its financial objectives.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

For more information on building an innovation portfolio read James Gardner's online, free innovation book.