Corporate innovation is not a numbers game

This is the fourth myth in our series on innovation myths that tackles the notion that the more ideas and possibilities we generate, the more likely it is that we will have one that turns into a scaled venture. Click here to view the series or download the Busting the Myths of Corporate Innovation eBook now.

This article was previously published in Fast Company, and is reprinted with permission.

Myth #4 in my series on innovation myths tackles the notion that the more ideas and possibilities we generate, the more likely it is that we will have one that turns into a scaled venture.

Several years ago, I was at a Harvard Business School conference on innovation listening to a professor teach a case on open innovation. The “so what” of the case was that “innovation is a numbers game”—the more ideas you generate, the higher the probability of finding an idea with the potential to be a breakthrough. This is an orthodoxy for many managers, academics and advisers, and in my view, one of the greatest myths of corporate innovation.

Innovation is about great ideas that have impact. The problem with the increase-the-supply-of-ideas logic is that it pays no attention to organizational reality, where a high volume of ideas actually reduces the chances of success of corporate innovation. Why is this? There are several reasons.

High-participation approaches to idea generation, like contests, hackathons, and crowdsourcing, provide opportunities for large and diverse populations to generate new ideas. This energizes employees and can breathe new life into the company culture. However, it can also lead to the Innovation Zoo, a place where many small projects get started, but few go to scale.

The problem is that saying “no” is hard in many corporate cultures. You need leaders who can spend enough time understanding an idea to give a genuine answer, and they need to be ready to select a small subset of ideas to fund. There is social pressure to encourage people with new ideas. That means ideas get funded not because they fulfill a strategy, but because it is demotivating to stop them. This drives up the number of mediocre ideas, making it more difficult for the best ideas to get attention. They also get a “weak yes” that lacks the strength of commitment to sustain funding over the long term. It sounds sensible to have lots of ideas, but it squanders attention and valuable resources across a wide number of possibilities.

Some firms have structured processes to help manage this problem. For instance, one large technology firm elicits new business proposals from engineers and takes them through a series of decision-making rounds, releasing increasing funds to develop the idea at each stage. However, they find that at the end of the process, there are no business unit leaders ready to fund the ventures inside the corporation. The problem is that the ideas do not relate to any problem or opportunity that interests the leaders of the business who make the investment decisions.

The fix to these challenges is to narrow the aperture. Instead of seeking a volume of ideas, put boundaries on your innovation efforts to focus on areas where there is some motivation to invest. That means choosing Hunting Zones. These are market areas where you see a potential opportunity, megatrends are favorable, and you have a reason you can win.

At Nvidia, CEO Jensen Huang set an ambition to put the company at the center of artificial intelligence and issued an invitation to anyone in the organization who wanted to join him on the journey. He wanted to excite his engineers and get them to turn their collective genius toward this innovation challenge. However, just as Huang invited creativity, he also defined boundaries.

He challenged his team to search for problems that could be solved in four specific hunting zones: gaming, automotive, enterprise computing, and scientific computing. These were new end markets for the company, which had previously sold directly to makers of personal computers.

Over a decade later, Nvidia’s share price has increased by 7000%. It failed in gaming devices, but succeeded handsomely in the other areas, creating a software ecosystem for artificial intelligence around its computer hardware solutions.

Focusing on Hunting Zones does not mean idea generation is unimportant. It is one of the three critical innovation disciplines—ideation, incubation, and scaling. We need breakthrough insights that solve high-value customer problems to build new sources of revenue. Idea programs can also connect employees more directly with the work of delivering value to customers. This work needs to happen within boundaries that ensure it is more tightly aligned with the firm’s strategic intent, resources, and core competencies. That allows a wide diversity of ideas to emerge, but in more focused swim lanes.

This disconnect between innovation activity and strategic investment priorities is one of the root causes of the failure of corporate innovation in many organizations. I advise my clients to start by fixing this problem before they move to increase the supply of new ideas. If you do not have agreed Hunting Zones, it is likely the senior team has not come to an agreement on what those zones should be. That means no matter how many great ideas you come up with, they will still not attract funding.

This leaves you with a choice: give up, or try to fix the problem by getting the attention of one or more senior leaders to the threat or opportunity of disruptive innovation. Threat cannot just be a vague homily on the dangers of living in a “VUCA” world. It needs to be a fact-based threat assessment of the erosion of revenue, profits, and customer loyalty because of specific disruptors, using parallels from other industries to calculate the risk.

Engaging senior leaders with opportunity needs to be about far more than one great new idea. It means offering an assessment of the options for building ventures in an emerging market area, with some logic for why the firm’s assets give it a right to win. Have a scale of ambition that matters to the enterprise.

Moving the needle on corporate innovation means getting alignment on investment priorities with whomever holds the purse strings. Only then can you convert great ideas into high-impact innovation.

This is the fourth myth in our series on innovation myths. Download the Busting the Myths of Corporate Innovation eBook now >>