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How Do You Judge Innovation: Guilty or Innocent?

How Do You Judge Innovation: Guilty or Innocent?

by | Sep 18, 2022 | Innovation, Leadership

Several months ago, a colleague sent me a link to Roger Martin’s latest article, “The Presumption of Guilt: The Hidden Logical Barrier to Innovation.”  Even though the article was authored by one of the preeminent thinkers in the field of innovation and strategy (in 2017, Thinkers50 voted him the #1 most influential management thinker in the world), I didn’t have too much hope that I would read something new or interesting. After all, I read A LOT of articles, and 99 times out of 100, I’m disappointed (80 times out of 100, I roll my eyes so hard I give myself a headache).

This one blew my mind.

With just a few sentences and applying a well-known analogy, Martin explained a phenomenon that plagues every organization and kills most innovation.

Presumed Innocence is a fundamental human right

Martin begins by pointing out that in the legal systems of modern democracies, all citizens are presumed innocent until proven guilty beyond a reasonable doubt. In 1948, the United Nations extended this concept to all nations (not just democracies) in Article 11.1 of their Declaration of Human Rights.

The presumption of innocence is so important because “the presumption of guilt (or even neutrality) puts an almost impossible burden on the defendant. The State is strong and has resources far beyond that of the individual.”

Presumed Innocence is not a fundamental innovation right

Now let’s apply this analogy and the lens of presumption of innocence or guilt to business, arguably a field where we spend much more time and make far more judgments.

You, and your fellow decision-makers, are judges and jury.

It is up to you to determine whether the projects in front of you are innocent (worthy of additional investment) or guilty (not worthy).

If you presume all defendants are guilty, you place the burden of proof on them. They must prove beyond a reasonable doubt that they will succeed and are, therefore, worthy of investment.

If you presume all defendants are innocent, you place the burden of proof on yourself (or the business as a whole). You must prove beyond a reasonable doubt that they will fail.

What type of judge are you? What kind of decision-making system do you preside over? Do you presume guilt or innocence? 

In most boardrooms, projects are presumed guilty.

Presumptions in practice

Let’s consider the two “defendants” (types of projects) that appear before you – core business projects and innovation projects.

Each defendant has a team of advocates. The core business typically has a large team with ample resources and a history of success. Innovation has a much smaller team with far fewer resources and few, if any, “in-market” successes.

To be fair, you ask the same questions of both defendants – questions about market growth, performance versus competitors, and what the P&L looks like.

The team advocating for the core business produces data-filled slides, reports from reputable third parties, and financials blessed by Finance. In the deluge of facts, you forget that all the data is about the past, and you’re making decisions about the future. You find the evidence compelling (or at least reassuring), determine that the team met their burden of proof, declare the Core Business innocent, and allocate additional funds and people.

Innovation’s team also comes with slides, reports, and financials, but it’s not nearly as compelling as what you just saw from the current business team. But you are a fair judge, so you ask most questions like

  • We believe we can get X% of a Total Addressable Market estimated to be Y
  • There are no direct competitors, but consumers rated this better than current solutions
  • We don’t have a 5-year NPV or P&L for this business at scale because we’re not asking for permission to launch. We’re asking for $100,000 to continue testing.

Believe? We need to know!

No direct competitors? Perhaps there’s a reason for that! 

No P&L? I’m not going to throw scarce money away!  

“Guilty!” you declare, “no more resources for you! Try again!”

This example illustrates what Roger Martin considers corporate innovation’s fatal flaw. In his article, he argues,

“the status quo must play the role of the prosecutor and prove that the innovation is guilty beyond a reasonable doubt. The innovation asserts its case, laying out the future that it imagines is plausible and explains the logic that buttresses the plausibility. The onus is on the status quo to demonstrate beyond a reasonable doubt that the innovation’s logic is flawed — e.g., the proposed economics are unrealistic, customers haven’t shown a hint of caring about the unique selling features of the innovation, competitors already have a lead on us in the proposed area, etc.

If the status quo can do so, then the innovation is guilty. If it can’t, then the innovation is not guilty, and the organization should invest.”

As much as I love the idea of requiring the status quo (managers? Executives? Stockholders?) to prove that investments should not be made (i.e., the default answer is “Yes” to all requests), it’s just not a practical solution.

Burden of proof as barrier

There’s another fundamental principle in our legal system that Martin doesn’t touch on: the burden of proof shifts as the stakes increase.

Specifically, the State’s burden of proof increases from warrant to arraignment to grand jury to trial. For example, the State must provide probable cause based on direct or other reliable information to get a warrant. But the State must prove guilt beyond a reasonable doubt when the defendant goes to trial and risks losing their freedom or even their life.

But in the example above, the questions (proof required) remained the same. 

The questions were appropriate for the Current Business because it’s already in the market, consuming massive resources, and its failure would have a catastrophic impact on the company.

But the questions aren’t appropriate for innovation in its early days. In fact, they were the business equivalent of demanding proof of guilt beyond a reasonable doubt to get a search warrant. Instead, a judge evaluating a project in the early Design phase should ask for probable cause based on direct or other reliable information – observed consumer behavior, small-scale research findings, or simple prototypes.

The Verdict is In

I love the concept of Presumed Guilty vs. Presumed Innocent. I see it all the time in my work, and it is painfully prevalent in Innovation Council meetings and other boardrooms where managers sit as judge and jury over a project’s (ad a team’s) fate.

I want to flip the paradigm – To make “yes” the default instead of “No” and to require managers, the keepers of the status quo, to prove beyond a reasonable doubt that a project will fail.

But I don’t think it’s possible (if I’m wrong, PLEASE tell me!).

Instead, our best bet for true innovation justice is not to shift who bears the burden of proof but rather how heavy that burden is at various points. From probable cause when the stakes are low to beyond a reasonable doubt when they’re high. And certainly more than a ham sandwich at any point

5 ways to Build Your Innovation Muscles in the New Year

5 ways to Build Your Innovation Muscles in the New Year

by | Dec 30, 2020 | Innovation, Tips, Tricks, & Tools

According to a 2018 survey by NPR and The Marist Poll, the most common New Year’s resolution is to exercise more.  Not surprisingly, losing weight and eating a more healthy diet ranked third and further, respectively (“stop smoking” was #2, in case you’re curious).

Hitting the gym to drop weight and build muscle is a great habit to build, but don’t forget about the regular work needed to build other muscles.

Specifically, your innovation muscles.

Innovation mindsets, skills, and behaviors can be learned but if you don’t continuously use them, like muscles, they can weaken and atrophy.  That’s why it’s important to create opportunities to flex them.

One of the tools I use with clients who are committed to building innovation as a capability, rather than scheduling it as an event, is QMWD – the Quarterly-Monthly-Weekly-Daily practices required to build and sustain innovation as a habit.

 

QUARTERLY

Leave the office and talk to at least 3 of your customers

It’s tempting to rely on survey results, research reports, and listening in on customer service calls as a means to understand what your customers truly think and feel.  But there’s incredible (and unintended) bias in those results.

Take, for example, this story from former P&G CEO AG Lafley:

One very quick story; I will never forget this. We used to do annual research in the laundry detergent business, and every year consumers would rate the Tide powder cardboard package as excellent; excellent to shop; excellent for opening; excellent in use–on, on, on.

 

So, probably 27 or 30 years ago, I’m in basements in Tennessee, in Kentucky, doing loads of laundry with women, and after three or four or five of these one-on-one sessions, I’ve realized that not a single woman has opened a box of Tide with her hand. Why not? You’ll break your fingernails!

 

So, how did they open the box? They had nail files; they had screwdrivers; they had all kinds of things sitting down on the shelf over their washing machine, and yet they thought our package was excellent. And we thought our package was excellent because they were telling us our package was excellent. We had to see it and experience it.

 

Here’s the problem–consumers cannot really tell us what they want. They can tell you why they like it or why they don’t like it, but they cannot tell you what they want.

Schedule a day each quarter to get out of the office and meet your customers.  Ask them what they like and what they don’t.  More importantly, watch them use your products and then share what you heard and saw with your colleagues.

 

MONTHLY

Share with your team a mistake you made and what you learned from it

Silicon Valley mantras like “fail fast” and “fail often” make for great office décor but, let’s be honest, no one likes to fail and very few companies reward it.

Instead of repeating these slogans, reframe them to “learn fast and learn often” and role model the behavior by sharing what you learned from things you did that didn’t go as expected.  You’ll build a culture of psychological safety, make smart risks acceptable, and increase your team’s resilience.  All things required to innovate in a sustainable, repeatable, and predictable manner.

 

Do 1 thing just for the fun of it.

In the research that fed into their book, The Innovator’s DNA, professors Jeff Dyer, Hal Gregersen, and Clayton Christensen, found that the most common characteristic amongst the great innovators of our time was their ability to associate – “to make surprising connections across areas of knowledge, industries, even geographies” (page 41).  Importantly, their associative thinking skills were fed by one or more “Discovery Skills” – questioning (asking “why,” “why not,” and “what if”), observing, experimenting, and networking.

Fuel your associative thinking ability by doing something NOT related to your job or other obligations.  Do something simply because it interests you.  You might be surprised where it takes you.  After all, Steve Jobs studied calligraphy, meditation, and car design and used all of those experiences in his “day job.”

 

WEEKLY

Make 1 small change for 1 day

Innovation requires change and, if you’re an innovator, that’s the exciting part.  But most people struggle with change, a fact that can be frustrating for change agents.

In order to lead people through change, you need to empathize with them and their struggles which is why you need to create regular moments of change in your work and life.  One day each week, make a conscious change – sit on the other side of the conference room table, take a different route to the bathroom, use a black pen instead of a blue one.  Even small changes like this can be a bit annoying and they’ll remind you that change isn’t always the fun adventure you think it is.

 

DAILY

Ask “How can we do this better?”

Innovation is something different that creates value.  Which is good news because that means that all it takes to be an Innovator is to DO something DIFFERENT and create VALUE.  The easiest way to do that is to find opportunities for improvement.

The next time you’re frustrated with or confused by a process, ask “how can we do this better?”  Better can be more simply, faster, cheaper, or even in a way that is more enjoyable but, whatever it means, the answer will point the way to creating value for you, your team, and maybe even your company.

 

In closing…

Block time on your calendar for these quarterly, monthly, weekly, and daily habits.  After all, the best reflection of your priorities are the things in your calendar.  And, if you stick with this, you’ll be among the 8% who achieve their New Year’s goals.

 

Originally published on December 5, 2019 on Forbes.com

How to Get Corporate Executives to Walk Their Innovation Talk

How to Get Corporate Executives to Walk Their Innovation Talk

by | Oct 21, 2020 | Innovation, Tips, Tricks, & Tools

Things we know we should do because they’re good for us:

  1. Eat 5 servings of fruits and vegetables each day
  2. Floss twice a day
  3. Get 10,000 steps a day
  4. Buy insurance
  5. Consistently invest in innovation

Let’s be honest, the above list could also be titled, “Things we know we should do but don’t.”

Why?  Why do we choose not to do things that years of research prove are good for us and for which solutions are readily available?

Because they’re inconvenient, uncomfortable, expensive, and, most of all, because we have not yet been burned by not doing them.

Experience is a better motivator of change and driver of behavior than knowledge. We don’t floss until we’ve had one (or more) painful and bloody dentist appointments.  We don’t buy insurance until we have to deal with a break-in.  We don’t invest in innovation until we’re desperate for revenue, profit, or growth.

The good news is that, at least when it comes to innovation, we don’t have to wait to be desperate or to get burned before we do what we know we should.  We can create experiences that motivate change.

Borrow relevant experiences

Experiencing success, even if it’s vicariously, is key to getting people to do what they know they should.  One way to do this is to find proof that the change is possible and do-able.  To do this you need to find relevant and recent examples (i.e. not a field trip to Silicon Valley and not stories about Steve Jobs). 

Find a company in your industry (or a similar one) that has successfully achieved the goal you’ve set.  Tell their story to people within your organization.  Set-up a conversation between a current or former member of their team and a key stakeholder in your organization.  Buy their product and display it as evidence that success is possible.

Create experiences of success

Innovation takes time, especially if you’re working on something breakthrough.  But people lose interest and faith quickly, especially in organizations that are judged by quarterly numbers.  As a result, the worst thing you can do is to go into “stealth mode” and try to “fly under the radar” until you have a huge, earth-shattering success to announce.

Instead, spend time learning about your decision-makers’ and stakeholders’ doubts at the same time you’re learning about your customers’ problems.  Then, when you prove those doubts wrong, celebrate the win…politely, and publicly.

Does your boss think Legal will never approve your idea?  Work with Legal, ask them what it would take to get an approval, and when you do that and get the Yes, tell your boss.  Does Finance think no one will ever pay the price for your solution?  Open a “lemonade stand” to sell the product and then take Finance out for drinks, using your first dollars of revenue to pay for the first round.

Small and steady wins give people experience with success and buy you the time, resources, and support you need to achieve the earth-shattering ones.

Immerse everyone in the experience

While borrowing and creating experiences can be powerful, nothing is as convincing or compelling as actively engaging people in achieving success.

Involve innovation leaders, decision-makers, and key stakeholders in the hard work of customer discovery, solution design, and business testing.  Make them listen in live to customer interviews, hand them the sharpie (or the mouse) during ideation sessions, and “hire” them to staff your “lemonade stand.”

By making people lean in, roll up their sleeves and do the work, they’ll experience how hard innovation is and why it takes longer than they think.  They’ll be invested in your work and your results.  They’ll feel the rush of the small successes.

Innovation is a Head, Heart, Guts endeavor

People decide what to do with their hearts, justify their decisions with their heads, but it takes guts to take action.  Knowledge feeds the head, but it takes experience to have guts. 

3 Things Leaders Must Do to Drive Innovation Success

3 Things Leaders Must Do to Drive Innovation Success

by | Oct 13, 2020 | Leadership

Dear Corporate Executive,

Congratulations! You’ve taken action to make innovation happen. You created an innovation team, you gave them all the Design Thinking, Lean Innovation, and Disruptive Innovation books and articles, and you left them alone to make sure that they aren’t infected by the corporate antibodies that plague those working on the day-to-day business.

But nothing is happening.

Or maybe something is happening but it’s not what you need or want.

You are frustrated.

Your team is frustrated.

This is not going well and if the team doesn’t turn things around, you’re shutting it all down. After all, you have a business that needs your attention and management and if you don’t keep your eye on that ball, there won’t be a future for the business.

I understand. I’ve been there. Lots of leaders have been there.

And you’re right, something does need to change.

YOU need to change.

As a leader in an organization, there are 3 thing YOU must do in order to have a chance at innovation success.

YOU need to do these things because only you have the organizational authority, influence, and power to make these decisions and support and defend the actions required to deliver on them.  Note that I use the word “chance.” Doing these 3 things is not a guarantee of success but, I promise you, NOT doing them does guarantee failure.

Talk about what Innovation will enable, not just why it’s important

Your innovation team knows that innovation is important, they desperately want to do it, and they’re working hard on it. But they need direction and the rest of the organization needs to know why the team is doing what it’s doing and why you’re giving them the resources.

Doing this requires that you go beyond explaining why innovation is important. We all know that innovation is essential to an organization’s long-term success. We also know that we should eat 5 servings of vegetables a day and floss twice daily. Knowing that something is important isn’t the same as doing something that is important.

Instead you need to set the vision for what things will look like in the future, after the innovation has taken hold. You need to show everyone how things will be better in the future because of the changes being made today. You need to give everyone something to believe in and work towards.

Man driving a floor scrubbing machine

Tennant T15 Floor Scrubber Operator Training

Consider Tennant, maker of the small bluish-green Zamboni like machines you see cleaning floors in office buildings and airports. They were founded in 1870 as a supplier of hardwood floors and invented floor scrubbers in the 1930s. For over 120 years, they worked to fulfill their mission “to become the preeminent company in residential floor maintenance equipment, floor coatings, and related products” and they enjoyed a nice steady business as a result.

Then, in 1999, Janet Dolan was named CEO, becoming the first non-family member to run the company. As a long-time member of the Board, Ms. Dolan knew the company well and she also knew that it was facing increasing competition and price pressure. So, with the support of the Board and her executive team, a year after she took the reigns, Ms. Dolan announced a new mission for Tennant: “To bring to market sustainable cleaning innovations that empower others to create a cleaner, safer, healthier world.”

That’s a pretty big change from floor maintenance, coatings, and related products.

And way more inspiring.

So what happened?

Revenue decreased from 2000 to 2001. Then it plateaued from 2001 to 2002. So far not so good, right?

In 2002, Tennant launched 2 new products — one that cleaned floors with 70% less water and 90% less detergent but resulted in significantly lower labor costs, and a carpet cleaning scrubber that used less water and detergent but which decreased drying time from 18 hours to 30 minutes.

Neither of these innovation would have been possible under the old mission because it defined Tennant as a company that made (and sold) “floor coatings, and related products.” But both were spot-on with the new one mission, one that defined the company as an enabler of a “cleaner, safer, healthier world.”

The result? A steady upward climb in revenue from approximately $400M in 2002 to $701M in 2008

Yes, Tennant did many other things (restructuring, altering their manufacturing process and supply chain) during that time period that also contributed to their growth. But you can’t cut your way to a nearly 10% CAGR. You innovate your way there. And Tennant’s new mission made that possible.*

Quantify what Innovation must deliver

“Money talks, bullsh*t walks.”

– Some guy in my 12th grade French class (I have no idea why this was said in the context of a French class but I do remember it better than most of the French I learned).

Yes, innovation is fun. But innovation for the purpose of having fun is a hobby. You’re innovating because you need to grow your business. So treat innovation like a business and give it a target.

Mind The Gap written in LEGO on the floor

LEGO Shop: “Mind the Gap” from TripAdvisor

That target is known as the Growth Gap.

The Growth Gap is a concept which, as far as I can tell, was introduced in Robert B. Tucker’s 2002 book Driving Growth Through Innovation: How leading firms are transforming their future and is one of the most important and simple innovation tools I’ve seen used.

In fact, you’ve probably already calculated your Growth Gap. You just do’t know it. Yet.

Start with your future revenue goal (you probably set this during your annual strategic planning process as the goal for 3–5 years from now). Now subtract your current revenue. Then, subtract the expected revenue of everything else in your pipeline. What’s left is your Growth Gap, aka the amount of revenue that innovation (i.e. stuff you don’t yet have funded or in the pipeline) needs to deliver.

NOTE: there are far more precise and complicated ways to calculate the Growth Gap but this was is quick and will get you to an answer that is more right than wrong.

Several years ago, I worked with a global athletic company that was already well known for its innovations but which was trying to become more systematic in their efforts and more diligent about investing in Breakthrough and Disruptive innovation. The team and its C-Suite sponsors knew that additional investment was required to fund Breakthrough and Disruptive innovation but senior leaders were hesitant to allocate the cash.

So we calculated the growth gap.**

At the time, the company had $25B in revenue and the stated goal of growing to $50B in revenue in 7 years. According to their strategic plan, they had line of sight to an additional $15B in net revenue (new revenue from new launches less revenue losses from declining and discontinued products) resulting in an estimated $40B revenue in 7 years. From there, the math is pretty easy $50B promised minus $40B predicted equals $10B Growth Gap.

This means that management had to believe that they could create and scale 2 new Facebooks (based on Facebook’s revenue at the time) in the next 7 years.

With the need for innovation quantified, the coffers opened and innovation investment, activity, and results sky-rocketed.

Get involved in the work

Yes, you have a lot on your plate. No, that does not give you the right to delegate innovation.

If you have set a vision for what the business looks like as a result of innovation and you’ve quantified what innovation needs to deliver for your business then your innovation team IS a business and you need to be involved

But you do have a lot on your plate.

And you’re probably already involved in innovation governance processes like sitting on an Innovation Council, reviewing learnings from innovation projects, making small investments to get to the next learning stage, asking different questions in innovation meetings than you do in your regular business review meetings, and celebrating “failures” instead of brushing them under the rug.

Good for you! (no really, I mean that).

But are you getting your hands dirty? Are you leaving the office to see innovation at work? Are you going into the market to talk to the people you want to serve?

How much of your time are you spending on innovation? If, like the executives in the above example, you expect 26% of your future revenue to come from innovation, are you spending 25% of your time with the innovation team? 10% (i.e. 4 hours per week or 2 days per month?) 2.5% (1 hour per week or a half-day a month)?

Spending time outside of meetings and inside the work of innovation can make all the difference. In one case, it made a nearly $1B+ difference

Welcome to Cedar Rapids Iowa sign

Liz Martin/ The Gazette

I started my career at P&G working on a product code-named DD-1.

In my first year at P&G, we launched DD-1 into test markets in Cedar Rapids, Iowa and Pittsfield, Massachusetts. And those test markets went extremely well. So well in fact, that we experienced product shortages and the emergence of a strange gray-market of DD-1 products.

At the same time, we were working with IRI to run DD-1 through a BASES test, a standard modeling exercise that sought to forecast initial and on-going revenue for new products and a standard step in the process for securing launch approval.

Since the test markets were going so well, we were confident that the BASES results would be equally strong and moved forward with putting together a launch recommendation for the new brand. We even scheduled a meeting with the CEO and COO to get their signatures on the launch approval document

Then the BASES results came back. And they were bad. Historically bad. Perhaps the worst results in the history of P&G.

But we were not deterred. We had the real-world results from our test markets and we confidently and optimistically plowed ahead.

DD-1’s leadership team presented the launch reco, including BASES results, to the CEO and COO. They explained that we did not believe that the BASES results were accurate because they used the re-purchase cycle of canned aerosol dusting sprays as an analog to the re-purchase cycle of DD-1 cloths and data from the test market (real world data! real usage data!) told a very different story. They asked for approval to launch.

The CEO said no.

The CEO believed the BASES results. BASES had always been accurate for all previous launches (keep in mind 99% of previous launches were incremental improvements to existing brands). The launch was cancelled.

Then, the COO spoke up. He believed the test market results and agreed that there was a flaw in the BASES methodology. He believed DD-1 should launch. He would take responsibility for its launch and its results.

The CEO acquiesced.

Swiffer was launched in 1999

Today, it is closing in on the coveted $1B Brand status.

Why, when presented with the same launch recommendation, did the CEO and COO make two different decisions? The COO spent a few hours one day in Cedar Rapids Iowa. He saw the test market results playing out live, he spoke to the people who drove from store to store to find refill cloths. He experienced the innovation instead of just reading about it.

So, my corporate executive friend, do not give up. Step up and lead (yes, even more than you have). Paint the picture of how innovation will shape your business’ future. Quantify what it must deliver so that you can make informed (and realistic) investment decisions. Get your hands dirty because even a few hours of working in innovation, alongside your team, can make all the difference.

Success is possible. You must lead the way.

*This story is based on two case studies by HBS professor, Lynda Applegate: Tennant Company (February 2010, revised January 2014) and Tennant Company: Innovating Within and Beyond the Core (June 2010, revised August 2011)

** Numbers have been changed to preserve confidentiality