One of the most sensitive conversations to have with leaders is when I try to convince them that they cannot pick the winning ideas on day one. At one workshop, a regional leader kept insisting that the innovation teams need to bring her some ‘10X’ ideas. What she meant was that the team should only bring her ideas that will produce over ten times return on investment. My question to her was how she or any innovation team would know that an idea is a ‘10X’ idea on day one.
It was difficult for the divisional leader to give me a clear answer to that question. The reason for the lack of clarity is because it is actually not possible for any leader to pick a winning idea on day one. During the early stages of transformative or disruptive innovation, good ideas and bad ideas are indistinguishable. The best way to find good ideas is to make small bets in multiple ideas and then over time increase investment in those ideas that are showing traction.
So what happens to those ideas that do not get further investment? Those ideas have to be killed. They cannot be allowed to continue to exist in a zombie state. That is why it is important for companies to build the capability to kill ideas. A good kill rate is an essential part of a good innovation ecosystem. This is because having a good kill rate is an indicator that leaders are willing to accept that some innovative ideas will fail. Accepting failure is an essential ingredient for successful innovation.
Condemned To Succeed
When leaders think they can pick the winning ideas on day one, they condemn those teams to succeed. Those teams do not have the option to fail. From my experience with corporate innovation, I have learned that one of the worst things that can happen to an innovation team is to become the CEO’s pet project. Those teams always find it difficult to be honest with leadership about what they are learning from the market. It is hard to tell the CEO that their baby is ugly. So the teams will keep pushing towards the launch date. By the time the company learns that the idea will not work, they will have spent millions.
Another consequence of company leaders not accepting failure is that teams will avoid taking risks. Innovation efforts will gravitate towards improving the core business because this is where the likelihood of success is high. As such, if leaders want their teams to work on transformative or disruptive innovations, they have to be willing to accept a certain level of failure. This is why we ask leaders how good their companies are at killing ideas.
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Killing Before Testing
Let’s just say your company does have a good kill rate for innovation ideas. How do you know whether you should be celebrating this? Well, before we start celebrating our kill rate, let’s just take a moment to consider an important point. It is not just the killing of ideas we celebrate, it is also how we kill those ideas. Some companies are good at killing ideas before they have even had a chance to breathe.
Before I coach an innovation board, I often sit in on some of their meetings just to observe how they make decisions on investing in new ideas. In one such innovation board meeting that I observed, teams with new ideas were torn to shreds by leaders with unrealistic expectations. Leaders were asking for clear execution roadmaps and confirmation of revenues by the third year. Any teams with unclear answers for these questions had their ideas killed.
This practice might produce an apparently good kill rate, but it is simply the other side of the coin of leaders thinking they can pick the winning ideas on day one. If you think you can pick the winner, you also think you can spot the loser. Such a kill rate is not to be celebrated. We want teams to first test their ideas, then we use the evidence they generate to make decisions about whether an idea has a chance to succeed.
Testing Before Killing
Successful innovation leaders manage their portfolios like a funnel. They make many small bets with the expectation that those teams will go out and quickly test their ideas. In exchange for a small investment, leaders can ask teams to produce evidence that customers have the need, that the value proposition resonates or that customers are willing to pay. Innovation teams can run experiments to gather this evidence and present it to leaders.
The moment that teams start presenting evidence, leaders can now make informed decisions. All decisions to kill ideas should be based on evidence and the learnings that teams are documenting. No ideas should survive this process because it is the CEO’s pet project. In the best corporate innovation portfolios that I have seen, over 70% of ideas are killed. Only 2-3 ideas out of every 10 ideas make it to the final launch. So the question for you is; how good is your company at killing ideas?