Thursday, July 2, 2009

Innovation is a Risky Business

I have heard many, many senior executives talk about failure. "We have to become more tolerant of failure", they say, or "we have to learn to fail" or "fail often, fail early". And yet, when things do go wrong their first questions are often "who is responsible for this? Who's accountable? Who is to blame?". Well intentioned project post-mortems turn into blamestorming sessions.

And I don't blame them!

It's human to think like this. My first reaction when things go wrong is to blame myself. I've tried telling myself that I should be more tolerant of my own failings but somehow I don't listen to myself.

Nowhere is this struggle more intense than in innovation. You must try new ideas out to see if they work. Sometimes, despite all the research, you only know that the idea will work after launching. Innovation is a risky business.

I don't think we have to learn how to fail. I think we have to learn how to understand risk and how to mitigate it, how to manage it.

Here's an example. Some years ago I was working with someone from Accenture. His previous assignment had been as a Product Manager with (if my memory serves me correctly) Vodafone. He had headed a new product development that upon launch was not as successful as had been hoped and was discontinued soon afterwards.

Vodafone had been very clever. They had assessed the risk of this particular idea and decided that it was high. Too high to risk assigning one of their own Product Manager's to lead the development. If it was unsuccessful then it would be highly career-limiting for that person. In their company culture, a track record of success was important for building a career. So they hired a contractor instead.

It turns out this was the normal practice for their product development group. Risky new projects were handled by contractors. Less risky ones by their own staff. If a risky product ended up being successful they either hired the contractor or replaced them with one of their own staff to take it forward in the life cycle.

This was how they managed innovation risk. It seems to me to be a lot easier than trying to change their passion-for-winning culture.


  1. Its an interesting idea to outsource the execution of innovation projects to the 3d parties. If the idea fails, there is someone outside the company to be blamed for, if its becomes a success, there is someone within the company who will claim it, right? Well, this might sound sceptical, however I do agree, in a company that lacks innovative culture, this is how the risk of becoming extinct can be mitigated.

    It is however the key to preserve and nature the competitive advantage of the company, which is a capability of innovative thinking. I tend to think that lessons learned throughout the execution phase can be leveraged to stimulate innovative thinking. From this perspective, letting the 3d party to execute innovative projects, especially with some probably utterly radical elements (that why they are considered high risk) is forgoing an opportunity to leverage this learning experience. And this might poses a risk to be mitigated.

    Speaking of risk mitigating in innovation, what is your view on this subject with regard to HS new product development? ;-)

  2. Thanks for the comment.

    I imagine Vodafone reasoned that the risk of lost learning was balanced by the risk of limiting promising careers.

    You could perhaps mitigate the lost learning risk by having more junior internal people working closely with the Product Manager.

  3. This is great discussion especially in these cautious times. We could also consider trial pilots, extended trials and launching to test markets...these can be set up with little or no cost (risk) as all parties are aware of the testing nature of the innovation. I think the loss of learning from failure is important to consider if 3rd parties are involved. I like the idea of having more junior internal people involved, this could bring fresh perspective and less inhibition brought by the idea of failure/risk......especially product development within the elearning environment. Product (content) could at first be integrated with key parties existing systems before new development commences(?).