Are you an innovation gambler?

Would you take a punt on something which has a 200:1 chance of making you money? Unfortunately, businesses are regularly taking that bet.

Presenting at this year’s Myriad festival in Brisbane, Impact Innovation Group’s Brian Ruddle said businesses were essentially gambling on innovation being some sort of silver bullet.

“We’ve got organisations big and small that are essentially gambling,” he said. “They’re working on the basis that the more money they put into innovation the better.

“What they want to do is hit the jackpot in terms of finding some disruptive technology or idea that’s going to transform their organisation.”

He said the missing piece of the puzzle was generating a return on investment for innovation.

At the core of the issue, is the fact that companies can fall in love with ideas.

In love with an idea

Ruddle said businesses big and small fell in love with the ideation stage of innovation.

“They’re running idea identification activities such as hackathons, setting up accelerators, doing ad-hoc activities but they don’t have a set vision, a strategy, and they don’t have detailed plans,” said Ruddle.

“They’re focusing on the easy stuff which is finding ideas and running hackathons. The hard part is the implementation and driving the return on investment they’re making on it all.”

He said at least part of the issue was that firms tended to hire in-house innovation managers who had a big passion for innovation – but not so much for following the ideation stage through to return on investment.

“The first thing they [innovation managers] do is run idea workshops and end up generating a whole bunch of ideas,” said Ruddle.

“Then the CFO gets involved and wants to see a return.

“They [the innovation manager] justify it by saying that they came up with 200 ideas, but they only implemented two – and maybe they didn’t come off.

“I wish I could say that this is unusual, but it’s not.”

The issue

Innovation, done well, has the potential to transform economies and unleash a whole wave of creative capital into the system.

However, innovation which doesn’t generate a return on investment has the potential to do more harm than good.

If a company’s attempt at running innovation fails, then there’s the chance that they could lose faith in innovation altogether.

“What we tend to hear is that those organisations which ran an idea identification workshop and struck it lucky…everybody else thinks that by following them they’ll strike it lucky by gambling as well,” said Ruddle.

“We don’t hear the stories of how much they lost. At the moment…we’ve created a system of gambling when it comes to innovation.”

He also said it didn’t matter whether the organisation was large or small – both ran the risk of falling head over heels for innovation.

“As an organisation we’re really concerned – we deal with some very large ASX-listed companies and some of those discussions are quite scary.”

So how do you gear your company to make sure your innovation activities don’t amount to a bit of a punt?

READ: Six steps to a rapid innovation cycle

Innovation systems

He says the key is for organisations to adopt an innovation system, a framework around which innovation activities can be measured.

“[Organisations] have been sucked into believing that you can’t predict the outcomes of running innovation within an organisation,” said Ruddle.

He advocates building a structure around five broad areas:

Leadership and governance

• Innovation incorporated in organisational strategy
• Innovation plan detailing resource allocation
• Plan revised annually
• Innovation success measures included in KPIs of senior managers

Idea identification

• Clear communication on which type of ideas are being sought
• Use of innovation management software to collect ideas
• More than five structured innovation activities per year
• Ideas collected from internal and external sources

Idea curation

• Staff understand what is required to submit an idea
• Allocated financial resources for proof-of-concept
• Well-defined and tested assessment process at stage-gate decision point
• Actively collaborate with other companies for proof-of-concept activities

Stakeholder engagement

• Communicate innovation program to whole organisation via multiple channels
• All staff being aware of the innovation program,
• More than 80 percent of staff being actively involved
• All staff understanding the innovation process – how ideas are assessed and their value to the organisation

Read this next: How to work with business stakeholders

Outcomes

• Staff understand how innovation success is measured
• Success criteria is clearly defined and progress reported monthly to senior management
• Regularly review, update, and report
• A minimum 15 percent of successfully progressed ideas generating revenue or cost savings

By having a system around innovation, you may not win with every idea but you can shorten the odds considerably.

“Sure, you can’t predict it, but you can manage it and that’s where innovation systems come into play,” said Ruddle.