How do large companies pursue radical innovation? You know, the kind of new product that changes or creates a market. In my first blog I summarized the 6Ps, a template that I believe could help to increase the output of game-changing innovation. Since then I’ve covered PERSPECTIVE, POTENTIAL, PROTOTYPES and PARTITION. This blog addresses the fifth “P”, PERSISTENCE.
Making project decisions on incremental innovation is relatively straightforward. These projects usually start with a well-defined target specification, often supported by market research with users that has outlined the opportunity, need and job to be done. The objective of product development is then to meet that specification within the allotted time and budget. If the work doesn’t proceed as planned, or market events change the revenue potential, it’s a relatively easy decision to close the project down.
Radical innovation presents tougher challenges and demands greater persistence in both development and market acceptance. The project starts with different criteria and more uncertainty. It’s consequently tougher to make good calls on project progress. It may well be that the objective still makes sense, but you need to follow a different route. Alternatively a project may truly be doomed to failure. How can you tell?
Clearly a lot of judgment will come from industry and company knowledge, and deep experience in both. This can be a double-edged sword, as a lot of this judgment will come from the existing paradigm that is under challenge from the radical innovation project. So the first recommendation is to approach it from a stretched perspective (remember the first “P”), not the certainty of today’s situation; and in a sense to apply Bayesian principles to your target and project evaluation. In other words, the learning you gain from, for example, iterative prototyping, should be used to reassess the objective and the route.
The next consideration is your people. If you can’t find anybody with passion for the radical project, it will never succeed. If you have a group of people, including a senior sponsor, who all believe strongly in what they’re doing, it’s likely to have a much better chance of succeeding as long as the technical approach is feasible. The large company should persist with support for such people.
Next, don’t bet all your radical innovation money on one or two projects. That’s what startups do, and large companies have a big advantage here. They can take a portfolio approach and establish a range of options in which to invest. However you prioritize your radical innovation projects is up to you, but I strongly recommend that different criteria be used to those which allow you to prioritize incremental projects. Then it is easier to apply resources to the most attractive projects and persist with them; and cut those with the least chance of making it. This makes it a comparative approach, not absolute.
Ironically large companies should have another big advantage over startups when it comes to radical innovation. The financial model for early stage small companies has three important parts – cash, cash and cash. Once the cash runs out, no matter how good the idea, the company will fold. Large companies have greater financial reserves, albeit segmented into budgets, so they always have the option to continue funding radical innovation projects beyond the point where smaller companies would have to give in.
Rosabeth Moss Kanter recently suggested a list of guidelines to help companies decide whether or not to proceed with tough projects. These should be taken in the context and mindset of radical innovation, which operates in an area of greater uncertainty when compared to incremental innovation.
Once you get your radical innovation to market, the really tough work starts. If the route to market is different to the rest of your business it could take much longer to establish a critical mass. Remember the example of Nespresso, which took nine years to break even but is now a highly successful multi-billion pound business. Of course there may be other industries where success or failure is more quickly apparent. The need to sustain a loss-making business through to profitability is the stage where most persistence is needed to make radical innovation succeed. Again, radical innovation should have different rules to incremental.
Finally, don’t give up until you’ve exhausted all the viable options. That doesn’t mean you carry on regardless, there is of course a fine line between persistence and blind stubbornness. Each large company must determine the point at which stubbornness has taken over. But they must also be sure to follow the courage of their convictions.
In summary, persistence can help large companies execute more radical innovation through:
- Adjusting targets and criteria as you learn during the project;
- Maintaining support for passionate people;
- Using portfolio management to prioritize projects and kill the least attractive;
- Persisting with project funding for the portfolio;
- Not pulling the plug on new business in the early, unprofitable stages;
- Not giving up until you’ve exhausted all the viable options.
In the next blog, I’ll discuss why people are the biggest differentiating factor for the success of radical innovation.