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Why Innovations Should Fail More Often

A recent Washington Post article reads: “Corporate attempts at innovation are overwhelmingly dying on the vine.” The statistics provided in this article are taken from a survey by Fahrenheit 212 and are consistent with those of the Product Development and Management Association: only about 1 out of 10 innovations succeeds. However, is this actually a bad thing?

The answer is yes, it is bad that 9 out of 10 innovations fail, but for another reason than you may think. The innovation failure rate is too low. You need many more innovations to ensure success in the marketplace. We are focusing on the wrong metric.

What is being measured?

The metric used here is the number of projects that enter the innovation pipeline versus those that make it to the marketplace and succeed. Over the years, the “best” companies have become very effective in trimming down the number of projects they develop in the early stages. However, what remains very difficult to predict is which projects to keep and which to discard. The chances of throwing out the baby with the bathwater are significant.

Predicting success

We only know for sure whether an idea is successful after it has been implemented in the marketplace—implying that all along the innovation journey, we can only try to predict success. Predicting complex, uncertain outcomes, like innovation success, is like gambling. Daniel Kahneman won the Nobel Prize for proving that even experts are not good at predicting such outcomes. In spite of having made great strides in improving the management of the innovation process, we are still no better at predicting the odds of success. Since experts are no help, perhaps we should consult our crystal ball!

Beating the odds

Without the ability to predict innovation outcomes any better than we can today, our only chance to improve is to beat the odds. One out of 10 ideas may be successful, yet only 1 out of 1,000 ideas is truly a blockbuster.

So if you start your innovation process with 10 ideas each year, you may have 1 profitable innovation, but only once every 100 years will your company have a breakthrough! That’s probably not enough to keep you afloat for the coming 5 years, let alone growing at a steady pace. Whereas if 1,000 ideas entered your innovation process each year, one of them is likely to be a blockbuster, placing your firm among the top innovators in the world!

Success likelyhood of InnovationSuccess distribution of Innovation

Starting with 1,000 ideas means that you have to discard at least 900, or even as many as 999 along the way. Such numbers will not improve your innovation failure rate! To become a better innovator, the focus should therefore not be to improve your innovation failure rate, i.e., the ratio of projects going into your portfolio versus those successful in the marketplace. Instead, you should aim to increase the number of projects going into your innovation pipeline, as that will improve your chance of success.

By taking this approach, you will have to accept that you will have more than 900 non-successful attempts as well, making the process similar to searching for a needle in a haystack. You need to start with more ideas to increase your chances of success, yet doing this increases the challenge of finding the blockbuster among these many ideas. It also makes it extremely important that you are smart about eliminating the ones that won’t work.

The next blog explains how to avoid throwing the baby out with the bathwater— in other words, how to identify the 900 non-successful ideas, so you can focus on the 100 successful ones, including your 1 blockbuster.

For more information on how to organize for innovation, visit us at Organizing4Innovation.com, or contact us at info “at” organizing4innovation “dot” com.

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References:

Corporate attempts at innovation are overwhelmingly dying on the vine

Gladwell, Outliers, 2008

Kahneman, Thinking fast and slow, 2011

PDMA comparative performance assessment study 2013