A friend of mine named Hank, a pilot at a major airline, flies his company's largest airplane from the city where we live in the Southeast to Shanghai and back. We were recently talking about the "and back" part how one actually flies around the planet and returns to the same spot. Hank said that you don't really fly to Shanghai; you simply fly to the next waypoint. A waypoint is an invisible marker, a set of coordinates that identifies a point in physical space. On a long flight, the pilot flies to the next waypoint, and so on and so on, until he gets where he's going. Flying to Shanghai from the East coast of the United States in a straight line without a pre-planned route at the right speed and altitude would be very difficult. It also would result in a highly unpredictable journey. However, flying 200 miles in a line to the next waypoint is pretty straightforward.
As it turns out, flying to Shanghai and making money out of a new idea share some similarities.
Let's start with a basic premise: Ideas are inherently unprofitable. Until a company can figure out how to turn an idea into profit, the process of innovation is expensive and a net-negative-profit proposition. Companies that are not profitable innovators which includes most companies try to fly from here to Shanghai in a straight line, so to speak. Ideas are launched and left to fly at their own course and speed, and they don't land so much as crash, often long overdue and out of gas. It's kind of like flying without the tools a pilot uses on his dashboard to help him know how much fuel he has and whether he needs to make a stop.
Profitable innovators understand that the journey from idea to profit must be carved up into waypoints, which can be used to rigorously measure short term progress and incorporate input from customers and suppliers at regular intervals. Ideas that simply don't fly can be identified just as quickly and put in mothballs, minimizing risk and expense. Ideas that gain momentum with customers and should be accelerated can then get increased investment and management attention.
This is all accomplished by organizations learning the skills of driving successful pilot projects quick ramp up, testing/development, incorporation of feedback and then ultimately a go/no decision. Developing the skills to innovate by piloting getting your "pilot's license" is one of the most important capabilities a successfully innovating organization can build.
Over dependence on technology, or the use of technology for technology's sake, can actually become an obstacle to effective innovation, and piloting. Pilots can make the wrong decisions based on information made available through their technology. Pilot judgment is required, as it is in the air. This happens in business when heavy stage-gate process software over-burdens management with information, drains resources and creates a bureaucracy that can shift the focus away from what really matters in innovation. Ideation software can leave companies with a false sense of being innovative (remember: ideas are inherently unprofitable) without really helping to attain desired objectives, such as generating an actual profit.
Another problem with the innovation process, as undertaken by many companies, is what might be called "failure to launch." Companies undertake examinations of feasibility, market potential, and many other elements of a successful product launch. Unfortunately, however, when it's time to get airborne to test the idea with a pilot program too many companies remain on the ground. They spend too much time on development and adjustment and not enough time "in the air" with pilot programs. The success rate for student aviators who don't spend time in the air is zero, and the success rate for innovations that don't go through pilot programs isn't much higher. Pilot programs provide an effective way of getting innovation on track, and companies need to learn how to get pilot programs up and running quickly.
While an over-reliance on technology can undermine innovation, a dashboard that focuses on just the right factors can provide management with a clear view of the innovation pipeline help them get air borne and navigate to destination X the go-no go decision that determines the direction for any new innovation. Technology that provides too much information or information that is inconsistent or dated can overload and have a negative impact on a pilot.
The reality is an innovation pilot requires a set of high fidelity, real-time data to fly the "plane" both when plotting the original course and making required adjustments as conditions change. Management can make better decisions about pilots when they have invested in building a cockpit of pilot gauges that incorporate a dashboard, a service oriented architecture and reporting technologies to collect, normalize and aggregate data buried in an innovation engine's various software and data sources. The information it gives to management helps to inform pilot decisions, much as my airline pilot friend uses gauges to navigate from point A to point B.
So how do companies earn their "pilot's license" in successful innovation? The first step is to recognize that, in many cases, the current product development model is broken. Companies are spending more on formal innovation programs but the return on such investments remains low. Too often, the process takes on a life of its own, with marginal or incremental ideas receiving attention and funding while potentially game-changing new concepts lack support. Products that get to the field often consume manufacturing capacity, marketing budgets and distribution muscle that would be better used on high-potential initiatives.
To increase the success rate and ROI for innovation, companies should keep four basic principles in mind:
1. Measuring is not the same as succeeding. Many companies have sophisticated software systems to track expenditures and progress in the innovation process. Fewer companies, however, have clearly established criteria for what constitutes success in innovation. There is very little benefit to be obtained from measuring stuff that doesn't generate profit.
2. Responsibility is different from blame celebrate killing ideas quickly. No one wants to be associated with an unsuccessful attempt at innovation, so there is a tendency to keep projects alive that might be better off dead. One of the benefits of getting to a pilot program quickly is that the pilot can provide an immediate indicator of feasibility. Killing off low-potential projects helps conserve and concentrate resources for the potential winners.
3. There are multiple flight paths. Just as it is possible to reach a destination using different routes, it is possible to innovate successfully using different approaches. Some companies concentrate on commercializing others' inventions, while others focus on invention and license their ideas to companies with stronger commercial skills. It is vital to determine which approach is right for the specific idea.
4. Discipline and rigor support creativity. Innovation must be managed with as much discipline as any other part of the business. Strong leadership often at the CEO level and a single point of accountability can help make innovation a reliable capability rather than a hit-or-miss proposition.
The most effective innovation processes combine both short-term and long-term thinking. Ideally, companies should be looking at market areas in which they expect growth and, of course, in which they have the capabilities to compete and win. There should be some balance in the innovation portfolio and a mix of incremental and platform innovations as well as some potential breakthroughs.
When an attractive idea is identified, however, companies must focus on getting the skills to pilot ideas - - moving to market launch quickly and effectively, with a clear plan for commercial success once the idea is aloft. Profitable growth from innovation, after all, is what keeps the company flying.
Matthew Reilly is a senior executive in Accenture's Management Consulting practice, and helps companies achieve operational excellence. Soren Kristensen, an executive in the Accenture Process & Innovation Performance service line, contributed to this article.