The Three R’s of Innovation – Risk, Reward, and Resources
Is it innovation or continuous improvement or is it innovation? Is it regular innovation or disruptive innovation? Is it new enough or too new? These questions are worse than meaningless as they suck emotional energy from the organization and divert emotional energy from the business objective.
With every initiative, there are risks, rewards, and resources. Risk generally tracks with newness, reward usually tracks with incremental customer goodness and resources are governed by the work. Risk is about the probability of tackling the newness, reward is about the size of the prize and resources are about how the work is done. There is no best amount of risk as sometimes the right amount is none and other times it’s more than everyone prefers. And there’s no best amount of reward as it depends on the company’s goals. And there’s no right amount of resources because there’s no right scope. For all three – risk, reward and resources – the right amount depends on the context.
For bottom line projects, it’s about maintaining product functionality while eliminating waste. And while there’s no right amount of risk, reward and resources, three filters (people, process, tools) can help get everyone on the same page.
Here are the escalating categories for people – no new people, move people from group A to group B, hire more people like the ones we have, hire new people with skills we don’t have. And for categories for process – no new processes, eliminate steps of existing processes, add steps to existing processes, create a process that’s new to the facility, create a process that’s new to the company, create process that’s new to the industry, create a process that’s new to the world. And for tools – no new tools, modify existing tools, buy new tools, create new tools from scratch.
There are no right answers, but if you’ve got to hire people you’ve never hired, create processes that are new-to-world, and invent new tools, it’s clear to everyone the project is pushing the envelope. And if the reward is significant and resources are plentiful, it could be a good way to go. And if there are no new hires, no new processes, and no new tools, don’t expect extravagant rewards. It’s not an exact science, but categorizing the newness in people, process, and tools and then comparing with the reward (payoff) makes clear any mismatches. And when mismatches are clear they can be managed. Resources can be added, the scope can be reduced and reward can be revisited.
For top line projects, it’s about providing novel usefulness to customers at a reasonable cost. And while risk, reward, and resources must be balanced, the filters are different. For top line, the filters are breadth of applicability, competition, is/isn’t.
Here are the escalating categories for breadth of applicability – same customer in the same application, same customers in a new application, new customers in a new market, new customers in different industry, new customers in an industry created by the project. For competition – many competitors in the same industry, fewer competitors in the same industry, fewer competitors in a different industry, no competitors (compete with no one). And for is/isn’t – improve what is, radically improve what is, create what isn’t.
Again, no right answers. But the plan is to sell to the same customers into markets with the same powerful competitors with only a slight improvement to the existing product, don’t expect radical rewards and don’t run a project that consumes significant resources. And, if the plan is to create a whole new industry where there are no competitors and it requires an entirely new service that doesn’t yet exist, the potential reward should be spectacular, expect to allocate a boatload of resources and prepare for the project to take longer than expected or to be cancelled before completion.
Balancing risk, reward and resources is not an exact science. And the only way to get good at it is to calibrate new projects based on previous projects. To start the calibration process, try the process on your most recent completed projects. Categorize the projects with the relevant filters and define the resources consumed and the realized rewards. And when planning the next project, categorize with the filters and define the resource plan and planned rewards and see how they compare with the completed projects. And if there are mismatches, reconcile them with the realities of the previous projects.
Image credit – Ian Sane
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