Much has been written about innovation in large companies. Broadly speaking, there are two dominant themes:
- Who’s better at innovation or does more innovating: startups or large companies?
- How can large companies become more innovative?
A lot of what’s written focuses on agility and tolerance for risk, along with arguing about what the word innovation means. But there’s a phenomenon I’ve seen in many companies, even relatively small ones that would normally be considered reasonably agile and not particularly risk averse. I call it the Un-Innovation Trap, and it’s something that companies inadvertently fall into gradually over a period of months or years.
How can you tell if you’ve fallen into the Un-Innovation Trap? Here are some questions to ask:
- Look at the list of new products, features, or enhancements planned by your software team. Do you suspect that few of them are going to make a significant difference to your business? Is there a complete absence of anything that might redefine you as a business and/or relative to your competition?
- Is there frequent or continuous heated debate in your company about big initiatives you should be pursuing, but nothing ever happens?
If you answered “yes” to either question, you may be in the Un-Innovation Trap.
Ironically, what’s usually at fault is something that is ordinarily considered to be a best practice: prioritizing projects by ROI (return on investment). On the surface, this seems like a great idea: more resources towards projects that generate greater revenue.
The problem is, in practice this tends to over-weight projects that generate short-term revenue (3-18 months). Certain types of projects don’t look as attractive:
- Long term initiatives that might fail completely (0% ROI) or succeed spectacularly (10x-plus ROI)
- Improved user experience, e.g. more interactivity/fewer page views using AJAX, improved usability, new user interface / site navigation
- Investments in new platforms such as mobile, iPad/iPhone, or Android
- Core platform investments to improve scalability, efficiency, reliability, maintainability
- Investments to reduce risk (e.g. privacy, security, disaster recovery/failover, etc.)
Why? Simply put, it’s harder to make the business case for these types of projects compared to revenue-producing projects which often show, on paper at least, ROI of 100-400%. Here are some things I’ve seen—and done myself—do any of them sound familiar?
- Resorting to scare tactics or tortured logic, such as estimating percentage likelihood of a disaster
- Requiring people to suspend disbelief: “Eliminating 4 page views will increase conversion by 15%!” or “This new product will generate $100M in new revenue in 2 years!”
- Sometimes not even bothering to make the case for otherwise-compelling engineering-centric or user-experience investments because they percentage ROI < 30%
The problem is, we’re comparing apples to oranges. Obviously generating revenue is important. But what about the others? It either is or isn’t important to your company to make long-term bets with uncertain payoff, innovate on new devices/platforms, or to offer a modern user experience. Those are the types of investments that are much more likely to be labeled innovation…in hindsight.
Escaping the Un-Innovation Trap starts with defining your business objectives more broadly than generating short-term revenue.
I discuss a specific way of doing this in Assessing Business Impact…Simply.
The takeaway? Prioritizing projects by expected ROI sounds like a good idea. But if that’s all you do, you will eventually end up in a place you probably don’t want to be.
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