Making Innovation Pay

When an innovation team is created by an organisation, everything is exciting and rosy at the start. Filled with hope for the future, sponsors attach themselves to their new silver bullet which will solve all their problems and wait for exciting results to arrive. In the first few months after they are created, the team can get away with practically anything.

Sooner or later, though, they will be called to account for their results (or the lack of them). All those excited stakeholders will start to ask what they are getting in return for all the money they invested. They will start to wonder if they might have gotten better outcomes by investing in other things, for example, a Lean initiative.

Most of the time, this happens inside 18 months, and the team’s budget gets scrutinised very carefully. While everyone will probably agree the team has done “valuable work”, the only justification they really care about is financial returns that the innovation team may have generated.

In the end, if there are alternative investments that have proved financially successful, and the innovation team has not proved itself similarly, it is obvious where a rational business manager will seek to direct funding in the future. This is especially true during a downturn, or whenever else an organisation is under stress.

Innovators need to pay their own way if they want to continue having a mandate in the long term.

Now, it is always the case that some innovations don’t actually have financial returns. For example, productivity improvements driven by information technology are often key candidates for an innovation team. These will often add significant new capabilities which make employees work better or more quickly, but may not result in a direct financial benefit. Clearly, there’s value in doing such things, and a sophisticated innovation team will certainly pursue them, regardless of the chance they’ll pay.

With that in mind, then, how does an innovation team reconcile a non-financial innovation with its core driver to produce decent financial results?

The answer is that it must have a portfolio of innovations, some of which pay, and some which don’t. Generally speaking, there will need to be more of the former, of course, and the obvious implication is the innovation team would naturally de-prioritise those innovations without decent financial returns until it has paid the bills.