"No Risk It, No Biscuit" -- Risk, Experimentation, and Bruce Arians
Do We Develop a System for Growth & Innovation, or Just Have Hope?
The Digital Leader Newsletter — Strategies and Techniques for Change Agents, Strategists, and Innovators.
Ironically, in a changing world, playing it safe is one of the riskiest things you can do— Reid Hoffman
How great was week 1 of the NFL? So many great stories from the offseason, every team starting with “hope” at the start of a new year, and so many dreams already dashed (sorry Cowboy fans!). Watching the national anthem played with tributes to 9/11 was chilling.
I enjoy any sport done at an expert level. I appreciate the competition and the “thrill of victory and the agony of defeat.” For an athlete, just getting to training camp represents incredible talent, dedication, perseverance, and dreams.
Like an elite athlete taking the field and hearing the national anthem played, every business and leadership team desires “championship moments” in their businesses. They seek to consistently deliver outstanding business results in terms of revenue growth, increasing profitability, and defensible differentiation from the competition — they want to win.
But do they really want to go through the work, the everyday challenges, the “failures,” and the risk of perhaps not attaining the “championship moments”?
My thesis to you (and I could be wrong) is that most leaders are intimidated by the prospect of “failure”, so they play the game safe, too safe, and don’t risk enough on growth and innovation. Their career has typically been built on “predictable successes,” and the culture of the company rewards “consistency.” But at what point do we confuse what “success” is and actually create a reality we are blind to until it is too late — slowing growth, lack of differentiation, margin compression, inability to attract and retain A+ talent, loss of market leadership?
In the immortal words of Super Bowl Winning Coach Bruce Arens, “no risk it, no biscuit.” As companies, we have to learn to harness “experimentation risk” to avoid the REAL risk in our business —> irrelevance.
(watch this highly entertaining ten-minute film on Youtube HERE)
Do they have a long-term system for growth & innovation, or is “hope” the real plan for innovation?
It’s an existential question. A system of growth & innovation requires training — you have to go to the “sweaty gym” every day, build fitness and form and suffer defeat to become better, just to have the chance at glory.
A Set of Questions to Ponder???
To help answer the “one” question to answer, here’s a diagnostic, a way to thoughtfully and honestly consider this question. You could do this as a survey as input to a strategic conversation on innovation in your business. I recommend you circulate these questions to your leadership team and have a conversation.
Do we have a deliberate, repeatable, measured approach for seeking and reviewing new ideas in the business?
Do we only or primarily select “ideas” that we understand well and have high confidence in their success (low-risk concepts)?
Do we have a one-size-fits-all approach for approving and managing projects?
Do risky ideas ( or “bets”) employ an agile and MVP (minimally viable product) approach, seeking early customer participation and feedback?
Do we have written processes, funding, and dedicated leadership focused on growth & innovation across different horizons?
Do we have a portfolio management philosophy for our innovation investments?
Do we have a system of record to collect, manage, develop, evaluate, iterate, incubate, approve, resource, and track our bets?
Does the business have a balanced scorecard of metrics on innovation & growth, including both innovation output metrics (such as % of revenue from products launched within the past two years or customer adoption of new business models) and innovation input metrics (such as the number of horizon two and horizon three ideas proceeding through experimentation)?
Does senior leadership (including the board) have an agenda focused on innovation and include key input and output metrics from a sustained innovation system?
Discuss these questions, and you’ll know the honest answer to “do I have a system for innovation?”
Key Elements of a System for Innovation
There are many “right” answers for the end-state system of innovation to which a business might aspire, as well as multiple paths to get there. The specific plan needs to be tailored to the current context of the business, the culture, and the ambition. But there is a set of three innovation elements that must be in place for innovation to become systematic.
Innovation Element #1 — Think in Bets
A “bet” is an idea believed to have impactful future potential to gain customers and deliver a financial return, but you can’t prove it. It’s a hypothesis for a new concept. There are many aspects or factors of the idea yet to be proven, and if any of them should fail, the idea will likely fail also. For example, while the concept of the particular customer experience may sound great, we don’t understand what the unit costs might be or how to predict adoption. These types of ideas are “bets,” and it’s important to recognize that these types of ideas are the critical input to the rest of your system for innovation.
"Think in Bets” infers that ideas need to be captured. Ideas need to be vetted. Decisions need to be made about which ideas are carried forward into the next key element.
Innovation Element #2 — Experiment
In whatever form or methodology of “agile” development and minimally viable product approach you choose, the key is “speed in experimenting”. Speed to testing, speed to learning, speed in making decisions on how to interpret the results and how to proceed. When it comes to innovation, the cost of delay should be considered the most important cost to manage, yet it’s regularly ignored.
But companies are typically good at one thing which negatively impacts the Experiment element — they slow ideas down. Companies slow down ideas because of the processes which must be followed, because of how resources are allocated, because of how other initiatives are planned, and in making experimentation a true priority for executives. The real challenge here is finding deliberate approaches and strategies to counteract this natural orientation and to put in place catalysts for creating speed in experimentation.
Innovation Element #3 — Build a Portfolio Strategy
Much like a VC firm, if the bets and associated incremental investments are small and fast, the job is to both manage the portfolio and make the best decisions about each bet at the right time. The portfolio can be evaluated based on horizons (h1, h2, h3), risk & reward, adjacencies, problem types, and many other criteria. The key is to realize that there is a portfolio and that the portfolio needs to be aligned with other aspects of corporate strategy.
For larger organizations, the task at the corporate level becomes more like that of an endowment manager, overseeing a “portfolio of portfolios.” There may be multiple individuals in the organization accountable for managing the performance of their portfolios of bets, with room for an enterprise role in managing bets across portfolios. This approach enables more decentralized decision-making and avoids turning portfolio management into a decision-making bottleneck by funneling all bets through a small number of time-constrained decision-makers.
Innovation Element #4 — A System for Your “System of Innovation”
One might argue that your innovation bets are the most valuable IP in your organization. They are the future of the business.
Your “system of innovation” needs a fit-for-purpose application enabling process, collaboration, progress, decision-making, and tracking. This system of innovation enables scaling and is the backbone for the collaboration and priority needed to go from “idea” to “value.”
I’m partnering with Brightidea to give a 30-day trial. Connect with them to demo how a “system of innovation” can harness the power of collaboration across your enterprise and ecosystem!
Back to Your Key Decision
Hope is not a strategy. Luck is not a factor. Fear is not an option.
— Director James Cameron.
The power of one committed decision should not be underestimated. Do we optimize for this quarter’s profitability or long-term growth? Are we willing to “fail” in our experiments, or do we only allow for only successful outcomes, in effect prioritizing only incremental improvements and safe ideas? Are ad-hoc approaches for evaluating and launching new products and business models going to satisfy our growth ambition?
Maybe this entire topic can be boiled down to this one question —
Do we create a system for innovation, or just hope that innovation happens?
What’s your answer?
Onward!
John
About The Digital Leader Newsletter
This is a newsletter for change agents, strategists, and innovators. The Digital Leader Newsletter is a weekly coaching session with a focus on customer-centricity, innovation, and strategy. We deliver practical theory, examples, tools, and techniques to help you build better strategies, better plans, better solutions — but most of all to think and communicate better.