The Whole System is Rigged Against Innovation

by Michael Graber

The Whole System is Rigged Against Innovation

Work in innovation for more than a decade you see familiar patterns. One of the most damning, yet predictable ones is relying on the core business units to commercialize innovations outside of their core.

This tendency bruises an innovation effort beyond recognition, undermines the credibility of the professions who did the initial discovery, front-end work in the organizations, and threatens the mortality of concepts that can bring significant new strategic and real value to life.

In other words, this pattern wastes the money and resources invested in innovation. Some data-driven experiments claim that unless new concepts incubate outside of a traditional business unit, they will fail to launch 75-80% of the time.

Here’s the scary part. These are market-tested concepts that largely fall inside the core business. Ones that are outside the core have a much slimmer fighting chance of surviving the internal obstacle course on the path to launching. They do not get the resources and attention to make it onto the product or service roadmap. All of the option value created never meets the market. This too predictable pattern gets lampooned as Innovation Theater. A good show, but nothing tangible comes of it.

The simple reason is that the whole system is rigged against innovation. Since Frederick Taylor first consulted the first manufacturing plants, we have geared our enterprises on reducing risks, systematizing the core into a predictable algorithm. All of our Corporate systems thinking is about reducing the margin of error: Six Sigma, TQM, etc.

Therefore, when a Business Unit is weighing decisions about what to launch, it will make the safest bet, even if it means only slightly incremental growth. It will also judge all concepts through the lens of Legal, Brand, Finance departments and existing sales and distribution channels. This Top Down approach usually includes bloated Business Cases, fully thought-out programs that forecasts likely scenarios, and months of expensive Market Research that reinforce the argument.

Some Large Companies—DuPont and Altria among them—found this cycle to cripple their value creation efforts. To encourage new business concepts and new business models, they have adopted a Duel Engine structure. One engine is the core business—and that goal is efficient management. Typically business metrics apply to the core engine. The other engine is innovation—and the metric it is judged upon is potential. It is responsible for generating net new products, services, and streams of new revenue. They not only conceive of innovation, but test the concepts in the market, commercializing them much differently than the core business would—and without all of the enterprise bloat and inertia.

Most organizations are reluctant to move to a Duel Engine model, especially if the core business is not under immediate threats of disruption. These types of entities would do well to make a modest investment, allowing non-core innovation concepts to find alternative paths of market testing, stealthy and scrappy piloting, and experimenting in new channels and with new business model. Remember the old rule: no risk, no reward.

 
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Michael GraberMichael Graber is the managing partner of the Southern Growth Studio, an innovation and strategic growth firm based in Memphis, TN and the author of Going Electric. Visit www.southerngrowthstudio.com to learn more.

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