ROI or ROI? 'Return on Investment' or 'Return on Innovation'?

What percentage of your revenues in 2012 will come from products and services that are less than 18 months old? Are you constantly defending your business, and your offerings against new and improved competitive offerings? Do you find yourself defending the status quo and unwittingly discriminating against the future? Or are you constantly experimenting and innovating in order to bring new ideas and improved offerings to market?

Why are some companies spectacularly successful innovators while others are highly unsuccessful at innovation? Recently I read a Forbes article “The Seven Habits of Highly Unsuccessful Executives” and I was amazed to discover Habit #7: “They stubbornly rely on what worked for them in the past.” In other words they are prisoners of the past. They have fallen in love with the status quo.

At the other end of the spectrum we find those companies that are highly innovative and thrive on change. Consider IDEO a silicon valley based innovation factory specializing in innovation and design. IDEO’s many clients include companies that have recognized that they lack the ability to innovate in house.

“Failing early to learn quickly.”Tom Kelley, General Manager at IDEO

‘Return on Investment’ thinking seeks certainty and fixed outcomes. Both are highly desirable to be sure but usually at the expense of creativity and innovation.

‘Return on Innovation’ thinking requires a prototyping mindset. Requiring the acceptance of failure as being a measure of progress along the path to success.

A Return on Innovation mindset requires J-curve thinking. ie. the courage to go negative before the possibility of going positive and the courage to make asymmetric bets. Investing in those areas that don’t show a return today at the expense of investing in those areas that are delivering the lion’s share of revenue today.

A culture of knowing or a culture of learning:

Your job is to create a Culture of Innovation: Why is asking for ideas a bad idea? Don’t think outside the box, find a better box. Failure is always an option. Expertise is the enemy of innovation. The difference between a pipeline and a sewer is what flows through it.

Recommendation: Invest massively in innovation, but invest even more massively in your capacity to innovate, as this will ultimately determine your sustainable long-term competitive advantage.

View: Entrepreneurial Leadership by David Ednie, posted on slideshare

Read: The Ten Faces of Innovation: IDEO’s Strategies for Defeating the Devil’s Advocate and Driving Creativity Throughout Your Organization by Tom Kelley

Make it happen: lead first, manage second.

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