Invest Less To Innovate More

Check your assumptions about the costs of innovation

Generating ideas from insights that improve a business, or create value for its customers, might be the most important thing your business does. Such innovation makes an organization more competitive and more efficient, often translating to more success and bigger profits, or in other cases — survival.

Investing in those ideas comes at a cost, of course, including the risk that failure could leave you in a worse position than had you done nothing at all.

Fortunately, advances in technology aimed at empowering business users have fundamentally redefined what’s achievable and, at the same time, has improved the probability weighted outcomes of business improvement initiatives.

As a result, the assumptions that business leaders have traditionally used to calculate the costs of innovation – whether “back-of-the-napkin” or comprehensive models – are no longer valid.

In fact, I contend that the “risk” of innovation has never been lower.

When business leaders have evaluated “innovation” opportunities for things such as process improvement, deeper customer engagement, or enhanced decisioning, they’ve generally considered six factors:

  • Potential benefits, financial or otherwise
  • Financial capital required to fund project
  • Human capital required to deliver project
  • Opportunity cost of pursuit
  • Time required to realize benefit
  • Risk of partial realization or outright failure

But by reducing three key factors – cost, time, and resources required – business user driven work management technologies can also minimize the risk of outright failure.

That means business leaders should recalibrate their assumptions about technology-based investment decisions, by increasing the probability of success. 

Higher probabilities combined with higher throughput of projects executed upon, can result in superior overall returns.

Technology unleashes the power of innovation

The driver is the ongoing infusion of technology tools, which has reduced real and perceived costs which were previously assumed to be too high to justify an initiative or process improvement. These tools include a range of work execution applications and services, and the automation and integration of work processes that wasn't easily attainable just a few years ago.

Those technologies make many ideas and innovations feasible without the costs traditionally associated with calling in scores of consultants or trying to climb up the consideration list of heavily taxed IT departments.

This enables waves of new experimentation – more quickly and with less risk. Projects that used to take years or months to mobilize, can now take months or weeks, including change management and training - a big win from the absolute standpoint of time savings, but an even bigger win in a relative sense.

In addition, powerful new “no-code” software allows business users – those closest to the opportunities for innovation – to deploy and configure systems themselves, with minimal dependence on technical resources.

That allows companies to maximize their innovation “at bats” by investing in more ideas that come from employees at all levels and across all divisions of their organization.

Empowering a broad range of knowledge workers to engage with their work in a richer, deeper, more meaningful way – and thereby transform their great ideas into innovative action – will feel like uncharted territory to leadership teams not accustomed to seeing business teams applying advanced technology.

Embrace the benefits: unleashing the opportunity for innovation across an organization will lead to more base hits. I’ve watched as many business-driven innovations have, together, made a significant and positive impact on the business I lead and the people with whom I work.

While all those base hits are great, technology is also helping drive more home runs than ever. Knowledge workers, empowered with tools to pursue more ideas at lower cost, can increasingly swing for the fences. And the innovative new companies they work for are increasingly rising up to challenge established businesses and even entire industries.

Consider Uber, for example. Less than 10 years after its founding, it has disrupted taxi services in hundreds of cities worldwide. The company’s reported recent confidential filing for an initial public offering could give it a stunning valuation of as much as $120 billion. That’s more than the entire U.S. auto industry. Meanwhile, the price of a New York City taxi medallion has plunged from about $1 million in 2013, to about $200,000 today. And that actually demonstrates a new kind of risk – the risk of not facilitating innovation at all levels and missing out on new opportunities.

The fact is that technology is lowering barriers for everyone.

That means not just your current competition, but also companies that don’t even exist yet. And that’s what makes a company like Gillette vulnerable to Dollar Shave Club, and established cable providers vulnerable to Netflix.

New technology isn’t always a zero-sum game, with winners driving losers out of business. Sometimes it creates entire new industries and opportunities, like digital home security systems, wearable tech like the Apple Watch, or digital assistants from Amazon, Google and others. Many of those opportunities haven’t even been identified yet.

But we can say who will take advantage of them. 

It will be the more agile companies that empower their employees to innovate and iterate at a rapid pace. 

It will be the companies that continually adopt new technologies and experiment with them, with an eye toward creating value, not protecting it.

Reconsidering the cost calculus and the evolving nature of risk are essential for businesses to find the best way forward in the era of disruptive technology.

Every business leader, IT decision maker, and knowledge worker needs to recalibrate their assumptions about the costs and risks of business innovation.    

Data source: Forbes