The One Big Thing Successful Innovators Do Differently
By Tom Agan
“Why do we keep making the same mistakes?” laments the CEO of a large global company about their low innovation success rate, a common complaint of leaders everywhere.
When companies do poorly at innovation, and most do, they tend to throw every idea out in the market hoping something works. It becomes a game of quantity not quality, and it usually backfires. According to Nielsen, in recent years the average sales of new consumer packaged goods products are actually less than the products they replace.
The fallout from these misfires can be demoralizing, straining internal relationships and too often destroying careers. Indeed, I commonly work with new product development teams where few people have ever experienced a major success. As a result, many people lack the experience, judgment and conviction to know when it’s time to push a big new idea hard during its development or to keep investing in a product or service when it’s off to less than stellar start in the market.
To turn around this cycle of failed innovation, CEOs need to get their organizations to stop churning and start learning. And taking a long hard look at past mistakes is undoubtedly the best way to learn. In fact, an innovation best practices study I spearheaded while at Nielsen showed that organizations holding formal debriefs conservatively doubled revenue from new products compared to those that don’t. Yet only about 20 percent take this straightforward step. What’s holding organizations back? Debriefs require time and discipline—both a challenge in today’s fast-paced and multi-tasking world. But there are even bigger hurdles.
A debrief of a failed new product will often expose mistakes people, teams or departments made. If done properly, they can reveal systemic problems. For example it may become very clear that the marketing team develops poor advertising, the finance team makes lousy forecasts, the sales force is not hitting their distribution goals, or the product development team failed to incorporate key elements. Threatened by these often painful revelations that invariably threaten careers, people if not entire departments will—quite logically out of self-interest—fight back.
One company had invented a groundbreaking new type of software. But competitors came in and made it better. The company tried and tried over many years to release new updated versions but never caught up. Even with great resources, brilliant people and plenty of money, they just could not get there. Many working within the company understood the organizational problems that were getting in the way such as product development teams not cooperating and consistently poor senior executive decisions. But there was no mechanism to uncover those insights and act upon them. The company continues to release new versions and struggle to catch up.
There are similar examples from every industry and it’s the way many companies operate. But all is not hopeless; it is possible to change your innovation fate.
One retailer, a major European supermarket chain, had tried three times to launch a small-format store and failed. The new CEO asked the firm’s internal strategy and finance teams to find out why. Their assessment showed that prior efforts had simply shrunk the supermarket into a much smaller space.
Given the low average margin of supermarket products, the resulting low margins of the smaller store were not offsetting its higher operating costs. Once the reasons for failure were understood, the teams were able to rethink the concept making critical changes that led to a major success.
It’s this self-reflection and willingness to act upon it that’s the real key to innovation. CEOs must create a safe harbor for discussion so that participants can get to the truth without putting their careers at risk. Leaders also need to rethink how they evaluate performance. Rather than simply looking at new product launches as a means to determine bonuses and career trajectories, they need to judge individuals on how effective they and their teams are gleaning knowledge from the past and applying it in the future.