To survive the coronavirus crisis, you must adapt to the new normal. To thrive, you will need to create new opportunities that address the new normal. You probably know this. Yet, it is so hard to do. In a moment of crisis like this, you cannot afford to spend money on risky bets. Therefore, it seems safer not to innovate at all. However, that gives you the worst outcomes long term. You can create a winning new offering with limited risks by creating innovation options, even when business is as unusual and uncertain as it currently is.
The odds are not in your favor
Innovation typically is a risky business. Similar to the success rate of early-stage investors, an innovation process with a 1:10 success rate is considered to be really good. That is one successful outcome for every 10 projects undertaken.
Differently stated, it means that under normal circumstances you have a 90% chance of failure when executing an innovation project. During the coronavirus crisis uncertainty has gone up, so these odds are even less favorable at the moment.
If this is your innovation process, you would need to place 10 bets on innovation initiatives at a minimum, to be guaranteed the one win you need to make your business thrive. That is unaffordable for most firms.
Place innovation options instead
What if you could place 10 innovation options on innovation projects instead of 10 bets? Ten options that would not cost you much and enable you to play your two best bets, that both have a high likelihood of winning.
That is in theory what early stage-development is for. However, placing options on innovation projects is not about exploring 10 ideas and then selecting the best pitch. As such pitches are typically won by the team with the best story.
Unfortunately, the ability to tell a great story has no predictive value on the future performance of an innovation team.
The ability to tell a great story has no predictive value on the future performance of an innovation team.
Because your odds have not really changed by exploring 10 opportunities this way, this is not how you should go about selecting and prioritizing early-stage teams.
And then I am not even considering that with social distancing, giving and evaluating pitches have become a significant challenge.
Creating innovation options
To make it worthwhile to invest in an innovation option, the creation of these options needs to reduce your investment risks. As explained above, a pitch won't reduce your risks.
It is what the team does in the early stages that reduces your investment risks. For example, are your early-stage teams:
- Collecting data
- Listening to clients
- Stating their assumptions
- Putting in the work
- Working together as a team
- Testing assumptions
- Executing experiments
- Interpreting (unexpected) findings
- Iterating their way to awesomeness
- Producing high-quality work
- Meeting project milestones
- Creating tangible outcomes (Brown-bag meetings, client workshops, project description, business case, minimum viable solution, first client, scalable offering, etc)
This is the kind of information you should be tracking on all your innovation teams. however, it is not the kind of information that a team would reveal in their pitch. There is no time for that if you just have 3 minutes or even 10 minutes to tell your story.
In the business model canvas, there is no room for this information either.
However, information on the quality and the learning ability of a team, is information that will tell you a lot about their potential and future performance. As Ed Catmull, the CEO of Pixar said "“If you give a good idea to a mediocre team, they will screw it up. If you give a mediocre idea to a brilliant team, they will either fix it or throw it away and come up with something better.”
That means, that during the innovation process, you need to start collecting data on what the team does, learns, and delivers. That way, you don't have to wait for their pitch to evaluate their performance. By tracking their current performance, you can tell within 2 or 3 weeks if a team is performing and going to be successful.
And that is how you create innovation options that will help you to make safe innovation investments.
Innovation is a process of learning and reducing uncertainties. That is why the speed at which teams learn is a much better way to guide your innovation process and monitor your innovation project pipeline and portfolio. Innovation options allow you to play safer bets and invest in innovation opportunities that have a high likelihood of success.