| Paying for Innovation |
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| Written by James A Gardner |
| Friday, 19 March 2010 15:27 |
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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. Quite quickly, however, the innovation team will get called to account for their results or (more likely) the lack of them. All those excited stakeholders will begin to wonder if they might have gotten better returns on their money by investing in something different, such as, for example, a Lean initiative. Invariably, this will happen within the first 18 months, and budgets will be called into question. Whilst everyone will likely agree that the team has done "valuable work", the only justification which anyone really considers valid will be any financial returns the team has generated. 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. Innovation teams need to find ways to pay their own way if they want to continue with a mandate in the longer term. Of course, it is always the case that some innovations that might be considered don't actually have financial returns. For example, 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 chance they'll pay. How then, does an innovation team reconcile non-financial projects with its (necessary) core drive to make real money? The answer is it must adopt a portfolio strategy for innovation, where some projects pay and some don't. As a rule, there will typically be many more of the former, and the obvious implication is the team would as a matter of course de-prioritise those innovations without decent returns until it has successfully met its financial objectives. About the Author: For more information on starting an innovation portfolio read James Gardner's free online innovation book. |