02 Nov Are you rich enough not to innovate?
In my role as an innovation management consultant, I’ve had the privilege of hearing firsthand feedback on why companies are reluctant to invest in setting up their innovation management practice.
“We don’t have time”, “It’s not our priority”, “Our focus is elsewhere”, “There is no budget”, “We’re not mature enough”, “We’re not the right company for innovation”, are some of the responses I encountered in the wild. I started wondering how come the perception of innovation and innovation management was so different for me than for the people I was talking to.
Is it the term?
It is safe to say that the term “innovation” is among the most used (dare I say – abused?) buzzwords in the world. It’s been so watered down that it’s just about lost all meaning. It turns out that everything is innovation – and this is not entirely wrong!
Couple of days ago I encountered a beautifully written piece of LinkedIn promo content. I was 100% sure it came from a new competitor and naturally I wanted to see what they do. To my great surprise, the company does PVC windows and doors assembly. Nothing to do with innovation management! Don’t get me wrong – I have no intention to belittle their innovation, and I have no doubt that they successfully innovated their product or service or some other aspect of their business. It does illustrate my point though – the term “innovation” has become so overused that it means everything and nothing at the same time.
Could this be the reason behind the slower adoption of innovation management?
Is it the value?
It’s also possible that the problem is not with the term, but rather with the value. Every company in the world is facing some kind of a challenge. For some it’s acquiring customers or growing revenue. For others it’s ensuring quality or increasing customer satisfaction. From their perspective, it’s easy to imagine that their short-term priorities are simply too important to be set aside a bit to make time to deal with innovation. They simply consider the value of innovation to be comparably lower than the value of dealing with their day-to-day challenges. Again, without the intention to belittle anyone’s problems, I do consider the short-term focus to be the result of short-term thinking – a perfectly valid and necessary approach, but usually not viable for long-term success.
So, what needs to be done to bring us all on the same page? How do we “prove” that managing innovation is a necessity? As always, the answer is data.
How much is the cost of doing nothing?
In an attempt to put a number on the value of innovation, I tried to use data and math. And I had to make some assumptions in the process!
I extracted the relevant data from 17 publicly available case studies and success stories of companies that successfully implemented innovation management. Suffice to say, not everyone measured success in the same way, but I managed to find enough common information to extract some interesting insights:
- It turns out that on average a company can expect only one in every 20 employees to share an idea that might improve the business. Honestly, I wasn’t expecting this number to be so low, and it certainly is not what I personally experienced, but this is what the data says.
- An idea on average generates 6.53 USD of value per day. I don’t really have an empirical benchmark on this, since it varies a lot depending on what the desired innovation outcomes are and how (and more importantly when!) they are measured. Again, the number seems low, but let’s trust the data.
It’s important to understand the assumptions used in this calculation, as changing and/or validating them makes all the difference in the world. I assumed the employee count doesn’t matter, but in my experience the ideas are shared more frequently in smaller companies. I assumed the industry segment doesn’t matter, but in my experience service industries yield more value per idea. I assumed the number of years doing innovation doesn’t matter, but in my experience the innovation value becomes more predictable over the years.
There are many more – too many to explain in a blog post. Nevertheless, I did manage to come up with a way to calculate the cost of “We don’t have time for innovation”. Take the number of your employees, divide it by 20 and multiply it by 6.53 USD. That’s how much value you DID NOT realize for every day that you didn’t innovate. Multiply that by the number of days since you (or someone at your company) said one of the famous sentences from the beginning of the post. That’s your Cost of Doing Nothing.
Need an example?
Here’s a good example. I started talking to a potential customer (and a customer with a lot of potential) about 14 months ago. Back then they opted not to go ahead with setting up their innovation practice because they had a bad year and didn’t think they could secure the budget. According to the above formula, their 440 employees should’ve generated 22 ideas, which should’ve generated almost 60,000 USD of value in the past 14 months. Is that a lot? Is it not enough? Let me put things in perspective: that was almost as much as their net profit for 2019.! What if they came up with a hundred ideas? What if it was a thousand?!?
At this point, everyone should ask themselves a simple question: “Wait to innovate? Can we really afford that?”
If you’re interested in data source details, calculations, assumptions, industry-specific numbers, or if you just want to talk about innovation, feel free to drop me an email at email@example.com.