Innovation: Four flawed assumptions to avoid

Flawed assumptions to avoid when innovating – the premise of this article is pretty self-explanatory, it’s about helping you avoid costly mistakes when setting innovation strategy.

That you learn more from failure than you do from success is a much-overused statement. Learning from other people’s failures could be even better!

Anyone with wits and common sense can be empowered to cut through the noise and make things happen without repeating too many mistakes of the past.

Flawed assumption #1 – Startups have all the answers

There are hundreds of thousands of startups that get some money, incorporate but fail before they register on the radar. Therefore, trying to mimic startup businesses’ successes may be more fateful and disastrous than simply mimicking their fashion style and taste for office interiors.

It’s not like this by accident. The dynamics of the venture capital funded startup ecosystem have in the past meant that failure is, to some extent, a necessity. Such innovations need investment to reach any sort of proof point, and huge amounts of money to go beyond. For investors to focus their funds on backing the winners, many of the weaker candidates need to be allowed to fail early on. And this has had profound effects on how people approach early stage innovation – even on some of its core definitions.

The truth about startups – once you factor out the ones that never develop scalable revenues – is that so many are not like the ‘ones on the television’. A mechanic going into business for the first time taking with her a handful of clients is a startup. So is a newly qualified accountant offering their services as a freelancer. With software, some of the world’s most brilliant products have been incubated within successful trading businesses – big and small.

Learning from the funded startup ecosystem

Two alternatives to the flawed logic that you might want to ‘be more like a startup’ are:

Can you copy the VCs instead?

Does your business really need to get ROI on capital, or is the purpose of your innovation to create products and services that allow you to retain or grow market share? In the case of the latter, you could just do what later stage investors do and simply wait to see the winners emerge.

Recognise the role of luck

Don’t be fooled by the numbers. The true failure rates of startups – defined as those that have incorporated and issued share capital – is more than 99%. In startups, as in life, you only tend to see the winners – and not the sheer volume of failures. The ‘fund and fail fast’ mindset might have been terribly inefficient even for investors – it’s certainly questionable for entrepreneurs. Whatever anyone says, luck is by far the most dominant factor.

Flawed assumption #2 – You can consult your way to success

The big tech and management consultancies all seemed to arrive at the same place at the same time and spotted that the translation of strategy into business results was dependent on design. As a result, most of the major ones added design and innovation capabilities.

The big consultancy firms have so much to offer, but if ‘Big’ innovation is what’s going to drive your business forward for the next ten years, are you really safe outsourcing it? If you’re going to devolve responsibility, be extremely clear which part of the process you’re outsourcing, and be realistic.

Things outsourced parties might and might not be able to help with

• Dragging you out of the office to look at yourselves (enabling ‘Small’ innovation) but not necessarily helping you do it when you get back.
• Finding potential partners to work with (but remember most entrepreneurs have finessed their ability to make their ideas sound good so they’ll inevitably pick the ones that have generated the most noise, not necessarily the best products).
• Advising on the future of a market (although don’t just buy your own wishes – one former senior analyst recounts how they lost a major electronics client in the early 2000s because they forecast that online music downloads would reach 2% of the market in the forthcoming two years, whereas another major consultancy firm said 30%… it ended up being 1.7% and they were re-hired).
• Helping you work out the implications on your business if you succeed in ‘Big’ innovation (but again, not necessarily being able to help you do it).

Interviewed for our Innovation Best Practice Guide in 2017, Mike Baxter, founder of Goal Atlas, said, “There has been too much emphasis on trying to outsource the problem.”

“I think the more you separate innovation from business as usual, the more likely you are to get into high stakes and high failure rate innovation. When they strike big, it might be very big. But they could be beavering away for a long time before they strike anything at all.

“The challenge is much more to do with how organisations can make innovation an embedded part of their culture. How they can make it more visible within the organisation so that it is normalised and seen as something that people are allowed to do (and permitted to fail at!), not something someone else does.”

Flawed assumption #3 – Domain expertise matters

Truly the most important asset you and your company has – when it comes to innovation – is your guts. The domain expertise that used to dominate industry has been undermined by market entrants taking off with little or no prior knowledge of the sector but explosive capability to recruit customers. The expertise that comes in the form of judgement from years working in business, in a particular sector, knowing the moving parts but being frank about the restrictions, the limitations and the barriers, is the perfect combination. The best way to develop is to reflect on how they work, and continuously seek to improve what you do.

Flawed assumption #4 – Activity leads to results

People tend to get over-excited about the word ‘strategy’. But a strategy is simply a plan for achieving a goal, and having a strategy for innovation is no different.

But some strategies can be well executed, simply because people are going through the motions. Fire drills, for example! With innovation, all that really matters in the end is the outcome.