Portfolio Innovation

3 Core Principles Every Innovation Leader Should Follow

Leverage these rules of thumb to make confident decisions as an innovation leader and drive real ROI faster.

I had a friend in the manufacturing industry who almost made chicken breast packaging 10x better. But he had to pull the plug on his idea just as he was getting traction, all because of his company’s linear approach to innovation management. Here’s what happened.

While analyzing the chicken breast trays manufactured by his company, he noticed that each package contained a styrofoam pad. Those pads did a good job of absorbing the juices from the chicken breast, but they created a messy, gag-inducing experience for the end user. He saw an opportunity to replace the soggy, padded styrofoam with double-layered plastic packaging that would collect juice in a cleaner, less cumbersome way.

When it came time to innovate, he followed his company’s standard waterfall procedure for improving existing products. But he ran into a problem. Since the plastic version of the packaging made the units taller when stacked, the shipping costs increased — and, as a result, his leadership team dropped the project altogether. If he had known the desired outcomes of the project upfront (e.g. shipping X units of chicken breast in absorbent packaging within Y budget), he would have saved himself weeks of effort, not to mention a boatload of frustration.

You may be wondering: what does chicken packaging have to do with innovation strategy?

More than you might think! Innovation programs are different from day-to-day business projects — yet all too often, leadership teams manage them the same way. If you really want to lead a successful innovation program, you need to move from a project management mindset to an outcomes management mindset. It’s easier said than done, but a few guiding principles can help. In this article, I walk through three core principles you should follow if you want to make confident decisions as an innovation leader and drive real ROI faster. Let’s get started.

Principle #1: Assume wrong.

What "assume wrong" means:

Instead of overhyping — and overinvesting in — any given idea, assume most of your innovation projects will fall flat.

Why "assuming wrong" matters:

Putting all your eggs in one basket and holding onto untested opinions is a risky move! When you’re operating in unfamiliar territory, failure is likely — and it could be costly if you don’t hedge your bets. According to Clayton Christensen, up to 95% of new product innovations fail. With odds like that, you need to spread risk across multiple ideas if you want your innovation program to weather the storm. Author and innovation advisor Barry O’Reilly calls this “optimizing to be wrong, not right.” By making small investments in a variety of bets — rather than getting attached to one or two projects — you’ll gather enough information to find a winning solution that offsets your failures.

Source: "Optimize to be Wrong, Not Right" by Barry O'Reilly, adapted from Antifragile by Nassim Nicholas Taleb

How to "assume wrong":

▶ Invest small in a lot of early-stage ideas. Then, increase your investment as ideas prove themselves. 

▶ Set up portfolio stages to help track the step-by-step development of your innovation projects — all the way from new concepts to viable solutions to scale.

▶ Ditch project management tools and use outcomes management software instead. Project management tools encourage you to organize your work as if you have all the answers from the get-go. But outcomes management ensures you’re assuming wrong. By building activities like concept validation and market testing directly into your innovation process, you can manage uncertainty as you go and keep the cost of failure to a minimum.

Principle #2: Start with the end in mind.

What "start with the end in mind" means:

Instead of asking your employees to “just go innovate” or “submit their best ideas,” tell them what you’re trying to accomplish first. What impact are you aiming for?

Why "starting with the end in mind" matters:

Establishing desired outcomes gives everyone a target. Once you know the outcome you’re heading towards, you’ll not only collect higher quality ideas, but you’ll also have an easier time measuring progress — and avoiding waste. In the chicken packaging example, my friend was surprised to learn about his leadership team’s expectations midway through his innovation process. If he had known their desired outcomes and success criteria early on, he could’ve designed his solution accordingly and made the most of his time.

How to "start with the end in mind":

▶ Evangelize your vision and make your outcomes known! Show innovators what success looks like so you can remove all guesswork and keep your innovation program operating efficiently. After all, why would you want to spend time and money bending innovation projects to meet your expectations when you could be setting those projects on the right course from the start? This is the same way venture capitalists work. In VC, there’s a standard set of outcomes associated with each stage of funding — so standard, in fact, that widely available pitch deck templates (like Guy Kawakasi’s) have helped an incredible number of startups grow. How? They knew what they needed to be able to demonstrate at what time to be successful.

▶ Be transparent about how you’ll make decisions! In Productable, we use stage-level decision criteria and standardized reporting to keep leaders and innovators on the same page. Let’s say the first two stages in your innovation pipeline are (1) Problem Value (Demonstrate the value of the problem you’re solving) and (2) Concept Validation (Test the feasibility of your solution). Here are some sample prompts that innovators could report on to show that they’re ready for Stage 2:

Is the problem costly? 
Does the problem affect a large number of people?
What quantitative and qualitative evidence do you have to support your answers?

Principle #3: The whole is greater than the parts.

What "the whole is greater than the parts" means:

Instead of focusing on the success of individual projects, consider the health of your entire portfolio of bets.

Why "the whole is greater than the parts" matters:

Just as your 401k isn’t about the success of one single stock, the overall performance of your innovation portfolio is more important than the success or failure of any individual project.

How to put "the whole is greater than the parts" into practice:

▶ Create success metrics at the portfolio level that align with your desired outcomes. For example, if you’re a manufacturing company, you might look at average turnaround time to see if your portfolio is helping you achieve your desired outcomes. Let’s say your company makes computers, and it takes 2 weeks from beginning to end to produce each one. You might aim to reduce turnaround time from 14 days to 12 days.

▶ Keep your portfolio healthy by using decision criteria to kill ideas that aren’t working. Note: you may need to adapt your decision criteria as your portfolio grows. But once you’ve defined what success looks like at each stage of your innovation portfolio, there’s no need to hold onto projects that don’t meet your expectations. You can always add new early-stage ideas to your pipeline — but you can’t get back the time you waste on underperforming projects.

Final thoughts

Being a strategic innovation leader isn’t about being right all the time. It’s about creating a repeatable process for moving through uncharted territory towards your desired outcomes. Remember to always (1) assume wrong, (2) start with the end in mind, and (3) focus on the whole over the parts, and you’ll be on your way to building an innovation program you’re proud of.

Want to learn more about how you can build a winning innovation process for your organization? Let’s talk.

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Author: Rachel Kuhr Conn

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