Four Ways To Improve Your Innovation Success Rate
By now, it’s treated as an established fact: large companies can’t innovate, small companies can.
But that’s not exactly true. The innovation divide isn’t based on company size – it’s based on whether a company is new or established. Small companies aren’t particularly innovative – new companies are. A company that is just starting out, and still searching for the right business model, will be driven to innovate. New companies are hungry, willing to do radical things to create a new product or service. And they need to be innovative to compete with established players.
But once they have an established business model – and that business model is working – small companies face the same challenges as larger ones. Employees have expertise in the established business model, but not in any new ones. Investments in the established business model have a clear ROI, but investments in new ventures don’t. And if you have a clear growth runway in your existing business, why would you invest time and money trying to create something new?
We have faced these challenges in our own company, Peak Support, and with one of our clients, West Wing Writers, a communications consulting firm. I also spent four years as an innovation consultant with Innosight, the consulting firm founded by innovation guru Clay Christensen. Based on these experiences, we’ve identified four strategies for established companies – of any size, and any age – to improve their innovation success rate.
Got an idea? Hire someone to run with it.
You run a growing business. You don’t have time to launch a new one, and neither does anyone on your team. You didn’t build your existing business working part-time, and the new one can’t be built that way, either. If you try, it will fail the second you have to put out a fire in the core business. So hire someone – a full-time hire, a contractor, or a firm, depending on the idea and your level of confidence in it.
When West Wing Writers had the initial idea for a new software product, Amplify, they thought they’d be able to manage it internally. Amplify is a subscription service that enables entrepreneurs and executives to find speaking opportunities at events. Peak Support built the product to a beta stage, planning to turn it over to the West Wing team. But the West Wing partners were too busy with their core business to devote time and energy to a completely new product. As a result, they are now seeking a full-time hire.
Make small bets – but not too small
We all know about lean startup principles – experiment, learn and pivot. It’s a great way to validate an idea before investing tons of money in it. But at a certain point, you’ll have to invest a decent chunk of money, and that point may come sooner than you think.
West Wing faced this challenge with Amplify. The West Wing partners invested a modest amount to build a database of more than 3,000 events around the world, and tested demand by selling custom event lists to its existing clients. This significantly increased their confidence in the value of the idea. Eventually, however, they saw that they would have to spend or raise a more significant amount of money to build and market a working software product.
We’ve faced this challenge as well. Peak Support is a customer service outsourcing company, and we needed grammar training for our team members. We didn’t find what we needed in the market, so we spent months developing a comprehensive 12-module series covering the most important topics in English grammar. We think there’s broader demand for this product, and spent a couple hundred dollars testing online marketing. We learned nothing. We’ve realized we may need to invest $10,000 or more to truly understand if this is something we can sell.
Set a budget for new ventures
How can you avoid the trap of spending too little money on a new venture? If you have new opportunities you want to explore, make innovation a line item in your 2019 budget. Otherwise, you’ll constantly be negotiating to pull a few dollars from other departments. Setting a budget also forces you to think about how much it will really cost to build a new venture.
Overweight the value of diversification
New opportunities often look unattractive compared with your existing business. Subscriptions to Amplify cost much less than West Wing’s core consulting services. We might sell our grammar trainings for $5, $10 or $25 per module. We’d have to sell thousands to make the opportunity worthwhile – while our current business model would be successful even if we had just a few clients.
So when you’re calculating ROI, overweight the value of diversification. The grammar training opportunity might seem tiny, but it could start to protect us from the forces disrupting the customer service outsourcing industry.