Innovation Risks Bring Rewards
Suppose we told you that you could spend $185,000 and turn it into $25 million or more in a few years. You would accuse us of phishing, an investment scam, or dismiss the proposition as foolhardy. Yet, these are the types of returns we see from clients and those in the world who invest in breakthrough innovation at their companies.
Whether it is a product firm, a service organization, or a business-to-business company, these types of return on investment take on nominal risk and garner a large reward. This risk: an unblinking willingness to do something outside of your current operating and business models, and a small amount of capital and talent.
To explore, take one half of an internal resource and tell them to choose an innovation firm for a vexing challenge the organization has not been able to solve to date. The innovation firm will cost between an estimated $75,000 and $125,000 for the entire challenge. Then, recruit a variety of internal people to serve on the project team, giving them about 20 to 25 percent of their time and a small travel budget, if needed.
Design an eight- to 12-week innovation sprint. During the first week, the devoted internal resource and the innovation firm will create a project plan, kick off the project team, and immerse themselves in the value-creating journey.
The first step is to design the challenge carefully – the devoted half resource and Innovation Firm can handle this task. Then, take the project team into the field to actually talk with those for whom they will design a solution. Call this the Empathy phase. This deep qualitative work, done by a mix of roles (managers, sales, RnD, IT, etc.) helps in several, key ways: breaking the deadlock of rushing to product development with someone’s pet idea and also understanding how the organization’s creations impact the real lives of people. This is human-to-human business. After many interviews are collected, the team debriefs the interviews and develops themes.
Next, the problem is defined.
A portfolio of ideas will be generated, vetted, refined, and tested again. In this process, the testing cycles cost less than large batches of quantitative modeling, and are typically more on target. After a portfolio of concepts has been through this cycle three or four times, you can spend the remaining time writing a business case.
From Swiffer to the Spin toothbrush to the Dirt Devil to children’s CT scanning devices to better treatment at the Cleveland Clinic, this radical investment story is similar. But it comes with a warning.
If you are not allocating a tiny portion of your overall spending on innovation, your competition probably is. With their additional $25 million, they will be able to buy you at the fire sale.
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Michael Graber is the cofounder and managing partner at Southern Growth Studio, a Memphis, Tennessee-based firm that specializes in growth strategy and innovation. A published poet and musician, Graber is the creative force that complements the analytical side of the house. He speaks and publishes frequently on best practices in design thinking, business strategy, and innovation and earned an MFA from the University of Memphis.
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