Investing in innovation isn’t paying off for most companies. 93% of companies feel innovation is important, but only 18% believe it’s effective. That is the conclusion from a recent report from Accenture titled “Why Low Risk Innovation is Costly.” This isn’t surprising. 96% of all innovation investments don’t pay off. Of course, we’d love to flip that number and see our innovation efforts succeed 96% of the time. But, that will never be the case. It is something we have to accept.
I’m not being pessimistic. Luck plays a huge role in innovation. No matter how much expertise you’ve accumulated along the way, the simple act of doing things differently will make that expertise irrelevant. Accept it. Make peace with it. You have to expect and plan for the possibility of failure. There is a reason why we don’t see game-changing innovations. They are rare. For example, Google is a rare company that is betting on moonshots. Even so, with that intent, pundits are already saying that Google Glass and Google’s driver-less car will fail. Yet, most of us have yet to have contact with either product. When breakthroughs are attempted, skepticism is common.
Before setting out to innovate, we must remember a few things:
- There are many types of innovation. Which one are you pursuing? Most likely, you are pursuing some type of incremental improvement on what you already have.
- Innovation is about changing behavior, not just releasing products. And, it is not an innovation until people adopt it.
With that said, Accenture’s study isn’t that surprising. Whether or not they are thinking about it, most companies pursue innovation for profits and growth. Achieving profit and growth goals only happens if enough people adopt your new product or service immediately. Also, it is imperative to be aware and understand that innovation efforts fail for a number internal and external reasons.
Why innovation efforts fail
- Failure to solve real pain. The word “problem” is singular, not plural. Many companies try to do many things instead of focusing on solving one real problem better than anyone. This is especially true when instant revenue is staring at you. And, although your product or service may be the first to market, that doesn’t mean you’ve innovated. Remember, it isn’t about being first. It’s about being right.
- Timing. Related to the point above, your firm, your value chain and the market might not be ready for your new product or service. This is a challenge for both startups and established companies.
- No inspiration. Are you inspired by maintaining what you have, or are you inspired about helping your customers win?
- No experimentation. There is no innovation without experimentation.
- Leaders don’t walk the talk. I think this is the big one because where there is complete failure there is lack of leadership. Where there is leadership, there is innovation. It isn’t about telling your organization to innovate, it is about walking the talk yourself.
These aren’t the only ones.
This study also highlights an ongoing issue with innovation: a common definition.
Innovation has become a buzzword. One that is taking on hundreds of definitions. This, is an issue because people assume whatever it is that others are saying. I recommend that companies come up with their own definition of innovation. Ask yourself: what does innovation mean for us?
Innovation has to serve a purpose other than just making profits. If executives see innovation as a profit making outcome, then they have it all wrong. Innovation is about a value creating outcome for people first. If it significantly improves the customer’s outcomes, then it may result in profit for the firm. The key word in that last sentence is “may”.
Learning precedes innovation
Executives are aware of the importance of innovation. But awareness doesn’t equal commitment. Here’s a question: do you play to win or not to lose?
Examine each part of the question and you get different answers. To play to win means you are on the constant attack, to play to lose means you settle on playing defense. Even the best defense in the world can’t win a game if the offense doesn’t put some points on the scoreboard.
Also, risk isn’t going to disappear anytime soon. The real risk is not doing nothing and staying in the same place. Therefore, the best piece of advice I can give you is this: keep trying.
The bottom line
This study raises more questions than it actually provides useful information. What is meant by “not paying off”? If you measure successful innovation only by a new, game-changing product, then the failure % is even higher. Failure is part of innovation. How to measure it and learn from it, is the real ROI an organization can achieve with innovation.