Senior managers are moving with speed to reduce expenses for short-term survival. While the shape of the recovery is unknown – long or short, deep or shallow – there will be a recovery. The likelihood for your business to not only survive, but thrive, depends on decisions today about the medium and long-term. Thriving in the future means protecting today’s business while continuing to explore for the future.
How are you deciding about which innovation projects to keep and which to terminate?
Google canceled its Smart Cities project. GM cancelled its two-year rideshare effort. Did they need a pandemic to stop these projects? We advise our clients to cancel innovation projects all the time. The reality is that many senior managers struggle to do so.
We’ve observed two pathologies that get in the way of thriving in the future: stopping innovation based on fear or letting innovation proliferate.
Fear-based decision making
In any crisis, emotions run high. When you are in the midst of a crisis, there is a significant risk that decisions will be made based on fear versus fact. Long term investments in innovation are often viewed with suspicion by senior managers responsible for running the core business. These fears may be well-founded, especially when the innovation poses a threat to the prevailing business model. The competition for resources usually gets resolved in favor of the established business.
We refer to this pathology as the Innovation Zoo. Corporations invested heavily in innovation in the last decade, but often let projects continue rather than decisively exit. One reason is the sunk cost bias – we are likely to continue projects to justify what we have already invested in terms of time, effort and resources. Another reason is a lack of transparency. Projects continue un-noticed because they are allowed to exist outside the purview of senior management.
Here is what you can do:
Embrace the contradictory demands. There is a natural tension between how the business operates today and how it might operate in the future. Avoid getting stuck in a debate about which is more important and instead, moderate that tension by anchoring decision makers and influencers with a clear ambition. Engage them on how the decisions today to build resilience for what’s next.
Identify your mission critical innovation projects. The VC world is still doing deals, but more slowly and selectively. The key is to actively manage your innovation portfolio. Inventory what exists and evaluate the extent to which the projects have clearly defined success and failure metrics. Ideally this should be done at the outset of the project. Review the hypotheses. Good reasons to cancel an innovation project is when the commercial hypotheses are not validated or when the project does not fit with the overarching ambition.
How is your business making decisions about innovation investments? What are the pathologies that get in the way of investing in the future?
Kristin von Donop