Make Innovation Pay Its Way
When an organisation starts an innovation program, everything is rosy. Filled with hope, business stakeholders latch onto the innovation silver bullet that will solve all their business problems and wait for thrilling results. In the first months of an innovation team’s life, they can get away with anything.
But sooner or later, they’ll be called to account. Previously excited stakeholders will start to ask what they are getting for all the money they are committing. They will start to wonder whether they might have gotten better outcomes by investing in, for example, a Lean initiative.
This will likely happen within the first 18 months, and the innovators will be asked to justify their budgets. Though everyone will agree the team has done “valuable work”, the only justification which anyone will really consider valid is the financial one.
Ultimately, if there are other opportunities for investment that were able to justify themselves financially, and the innovation team has failed to do so, it is obvious where any rational business manager will seek to direct funding in the future. This is especially the case during a downturn, or at any other time an organisation is under stress.
So innovators need to pay their own way, if their programmes are to exist in the long term.
Of course, it is always the case that some innovations that might be considered don’t actually have financial returns. For example, online pharmacies productivity improvements resulting from information technology innovations are regularly key candidates for an innovation team. These will often add significant capabilities which make employees work better or with greater speeds, but may not result in direct financial consequences that can be measured. Obviously, there is value in doing such innovation, regardless of the c prescription drugs without hance they’ll pay.
With that in mind, then, how does an innovation team reconcile a non-financial innovation with its core driver to produce decent financial results?
The answer is that it must have a portfolio of innovations, some of which pay, and some which don’t. Generally speaking, there will need to be more of the former, of course, and the obvious implication is the innovation team would naturally de-prioritise those innovations without decent financial returns until it has paid the bills.
For more advice on creating an innovation portfolio review James Gardner’s free online innovation book.