PART 1: MANAGING INNOVATION?
Management routines often stand in the way of innovation. How can we continuously innovate in an environment where, especially now, a culture of control and risk avoidance dominates?
Top-5 Management Routines that are Killing Innovation:
- Indecisive Decision-making
- Unlucky Internal Timing
- Unfavorable Risk Perception
- Misused Market Research
- Uncreative Business Models
Decision-making is a big elimination race. In most organizations it consists of numerous meetings during which new reasons come up all the time why it’s not such a good idea after all. A good idea is easily rejected during one of these sessions. If an idea is actually approved there continue to be a lot of small go/no go’s during the project management, forming a constant threat for a successful introduction. Often innovation projects fail halfway through because the 'plug is pulled' based on a micro no go. Stopping the project based on a relatively insignificant, minor issue is not justified based on the overall attractiveness and all the more painful and frustrating because a lot of time, money and energy have already been invested. This will compromise future success due to lack of motivation among the innovators involved.
Unlucky Internal Timing
In a lot of companies there’s only one moment or a short period each year were a new idea can be easily incorporated. If an idea is pitched after the ‘appropriate’ management team session or after the business planning period it’s often too late. The budget has already been allocated to other activities. Unfortunately good ideas have the tendency to arise at any given moment instead of having fiscal years and budget planning as main source of inspiration… Therefore they often arise at a ‘bad time’ because the budget has already been allocated or spent and people are already committed to other projects.
Unfavorable Risk Perception
Innovation is often perceived as very risky. Why should we allocate people and resources for an ‘idea’ while the running business already demands a lot of attention? On top of that, it’s rather difficult to create a solid sales forecast. Furthermore in the chain of distributors, agents and retailers usually want to see the final product first and try it, before actually ordering. This leads to a high-perceived risk among management. It makes it difficult to even invest a moderate amount in a project that probably will not generate profit in this running quarter or fiscal year.
Misused Market Research
New ideas are difficult to verify based on traditional market research. If it does not exist yet the value of initial feedback is relative. The problem is that consumers can’t easily confirm (objectively!) that they really will buy a product they don’t really know yet. Falsification of new ideas is often easier: there can be very good reasons why it will not work. Rather than asking the market sometimes the opinion of a top manager or management team is promoted to ‘consumer insight’. This makes it easy to simply discard an idea as a failure (“As I/we already expected no one is interested…”).
Uncreative Business Models
A dominant calculation model in business is the cost-up method applied to the existing value chain. By allocating regular margins to the regular value chain partners a retail price arises that rarely has anything to do with customer value. If the cost-up retail price is tested and considered to be too high, the project is in danger. Either the cost can’t easily be lowered or the margins are considered unattractive if the retail price has to be adjusted downwards. In many companies the (financial) people involved lack sufficient creativity to consider value chain innovations, retail price down calculations and simplifying the concept based on market feedback and business model scenarios.
Do you recognize these in your daily practice or do you encounter other management routines that are killing innovation? Please share them!
Part 2 includes recommendations How to manage innovation successfully:
The original article (including a case) was published in Dutch on 30 March 2009 by Serge van Dam & Guido Kerkhof on ManagementSite: