Just because you can doesn’t mean you should.
That is one of the very few pieces of advice that seems to apply to everything, including spandex workout clothes, movie tickets, and bank fees.
Just because you can invest in innovation doesn’t mean you should.
Yes, I know this is borderline blasphemy in a VUCA world. It’s also downright shocking from someone who spends every day trying to help companies innovate.
But it’s true.
And the state of corporate innovation would be infinitely better if executives stopped spending on innovation simply because they can and started exploring if they should.
You can start that exploration with these 5 questions:
1. What is the current state of the business?
If the business fundamentals aren’t solid – you’re hemorrhaging cash, customers are abandoning you like a sinking ship, and you can’t make or deliver a quality solution to save your life – DO NOT INNOVATE! Do not spend $1 or 1 minute on anything other than fixing your fundamentals.
While innovation theory is very clear about the importance of building your core business and creating new ones, it does not apply in this situation because, in this situation, you won’t be in business long enough to reap the rewards of your innovation investment. Instead, invest in re-building your business into a viable and sustainable enterprise. Then invest in innovation.
If your fundamentals are solid, go to the next question.
2. Why is innovation important?
There is no wrong answer to this question. But your answer has massive implications on what you do next and the results you should expect.
If innovation is important because it enables or accelerates a strategic priority, creates or reclaims a competitive advantage, or fundamentally alters the basis of competition in your industry, then invest in it like the Mission Critical endeavor it is and expect game-changing results.
If innovation is important because it builds your reputation as an innovator while helping you attract and retain customers, employees, and investors, then it’s a marketing or PR tactic. Invest in it as you would other marketing and PR tactics and measure success in awareness, trial, and loyalty.
If innovation is important because investors are demanding it, take time to understand why. The answer is probably one of the two reasons above.
3. What does it need to deliver, and by when?
What gets measured gets managed. If it’s measured, it’s important. If it’s not measured, it’s a hobby.
You would never enter a new market, invest in a new plant, or launch a new product without success metrics and KPIs. You start with a plan for measuring success because these investments are important.
If innovation is truly important, you need to do the same thing – determine what you will measure (how we will quantify success), how (specific metrics and tools), and how often (monthly, quarterly, annually). And then do the work of measuring (and managing).
4. How much are we willing to invest before we get ROI?
Innovation takes time to generate meaningful results, but very few executives have the patience to wait years for results, mainly because they know that every dollar or person they allocate to innovation is a dollar or person not generating (almost) guaranteed results this year.
Be honest about when you expect meaningful results and whether you’re willing to continue to invest money and hire people for that long before you get results. If there’s a gap, close it by moving the time to results in (and adjusting expectations) or moving your investment horizon out.
I want to hear from you.
What’s a question that you wished leadership asked before investing in innovation?
Drop your suggestion in the Comments, and I promise to respond (plus others will thank you)!
Should we invest in developing a new product or market segment or improve our core business first?
Great question! So often companies think that “innovation” is only something new to the world. But as you point out, “new” can be a new product that first within the existing product lines, new market segments adjacent to the ones you currently serve. Plus, whether you call it continuous improvement or core innovation, improving the core business is also worthy of investment. Thanks for the great addition, Andrew!