You Failed! What’s Next?

May 24, 2010

Last week, I had 3 conversations with 3 different companies.  And each had a complaint about the same group of people: lawyers.

If you think about it, innovators and lawyers have completely opposite objectives.

Innovators want to grow the business.  They believe that risk and failure are a natural part of the innovation process. Their mantra is “expansion.”

Lawyers, on the other hand, want to guard the business.  Their objective is to minimize risk and avoid failure.  Their mantra is “protection.”

But the issue isn’t really lawyers versus innovators.  The issue is how to balance an organization’s need to protect the business while enabling it to expand at the same time.

In my previous blog entry, I discussed how to redefine failure. The model proposed was to treat everything like an experiment.  While using this mindset, failure only occurs when the experiment does not give you the feedback you require.

However, sometimes even experiences can give you false positives.  That is, the experiment tells you a new product, service or market is a good idea, yet in the end it proves to be a total flop.

In those situations, you have a good ol’ fashioned failure on your hand.  What do you do then? Beat up the people involved?

I was having a conversation with the former head of innovation for a giant retailer.  In their quest for big successes, they had some colossal failures. Instead of chastising the people involved with the failed venture, they celebrated. They held a massive funeral.  There was even a coffin in which the project (not the project team) was buried.  In my mind I can imagine a New Orleans style funeral with music.

Several years back, Intuit, decided to target a younger population by linking tax filing with hip-hop.  They made large marketing investments and created partnerships with companies like Expedia and Best Buy.  But in the end, their marketing effort proved unsuccessful.  They attracted very few new customers and killed the program.

How did they handle the failure? According to Business Week

“The team that developed the campaign documented its insights, such as the fact that Gen Yers don’t visit destination Web sites that feel too much like advertising. Then, on a stage…in front of some 200 Intuit marketers, the team received an award from Intuit Chairman Scott Cook. ‘It’s only a failure if we fail to get the learning,’ says Cook.”

Successful companies don’t punish failure.  They don’t necessarily celebrate them either.  But there should be serious consequences if…

  • You try to sweep your failure under the rug
  • You try to blame someone else for your failure
  • You don’t learn from your failure and as a result make the same mistakes again
  • You create a colossal failure without first doing enough due diligence, often in the form of experiments

The point is not to glorify failure.  Although failures can give you useful input, success can do the same, at a much lower price.  But if you do fail, be sure to deal it head on.  Learn from the experience.

Or as Reverend Lawrence G. Lovasik once said, “Any fool can try to defend his mistakes – and most fools do – but it gives one a feeling of nobility to admit one’s mistakes. By fighting, you never get enough, but by yielding, you get more than you expected.”

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Redefining Failure

May 12, 2010

I view life as a series of experiments.  When you look at it through this lens, failure means something completely different.

One definition of an experiment is: “A test or investigation, especially one planned to provide evidence for or against a hypothesis.”

The only way an experiment can fail is if you don’t get the evidence.

Even if the evidence proves your hypotheses was wrong, the experiment itself was a huge success.

When you view innovation through the lens of experimentation, it redefines failure.

When developing new ideas, the best approach (especially when there is “market” uncertainty) is to create small experiments that can be scaled over time.

The experiment can give you one of four outcomes:

  1. Our hypothesis was validated by the experiment.  Let’s make a larger investment in a larger experiment.
  2. Our original hypothesis was wrong, but we found a different direction that looks promising.  Let’s create a new experiment with the new hypothesis.
  3. Our original hypothesis was wrong and we should kill the idea.
  4. Our experiment did not give us enough data to determine whether or not the hypothesis was correct.

Of these four outcomes, only the last one is a failure.  With the other three, the experiment was successful.  It either confirmed that we are on the right path or it stopped us from making further investments.

The problem with some innovation efforts is that insufficient data is gathered throughout the process.  Experimentation is not the mantra.

When you view innovation as a series of experiments, you must make sure that the experiments don’t fail.  It is totally fine if your hypotheses are invalid, as long as you determine that early in the experimentation process.

P.S. One book I really like is “The Science of Success” by Charles Koch.  The entire book is about how experimentation made Koch Industries one of the most innovative – and successful – companies in history.

P.P.S. I just watched an excellent episode of Mythbusters where Adam Savage talks about this very topic: “Failure is ALWAYS an option.

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Measures: Will You Get What You Want?

May 10, 2010

I recently spoke with a new client who shared with me their innovation measures.  When I looked at their measurement system, I immediately saw flaws.

But before addressing these imperfections, let me first provide you my perspective on innovation measures.

In general, there are three types of measures associated with “challenge-based” innovation (be sure to read this article if you are unfamiliar with the concept of challenge-based innovation):

  1. Process Measures - These measure the activity associated with your challenges (e.g., 500 registered solvers, 40 submissions per challenge, 80 votes per challenge, etc)
  2. Solve-Rate Measures - These subjectively measure how well you solved your challenges (e.g., 82% of challenges were partially solved, 61% of challenges were completely solved, etc)
  3. Value Measures – These measure the actual value accrued (e.g., increased revenues by $25M, reduced costs by $35M, etc)

The last measure (value) is where the rubber meets the road.  This is your ultimate goal.  But sometimes, value realization can take years (or in the case of pharmaceutical companies, decades).  Therefore, the second measure (solve-rate) is a good way to monitor progress with your program.  But what about process measures?

Process measures are leading indicators that can be useful in measuring trends over time for things like community engagement, effectiveness of internal communications, and quality of challenges.

Let’s look at one common process measure: the number of ideas/solutions submitted for a given challenge.  This was one of the measures that my new client used.

Imagine that you are using crowdsourcing to find a solution to a challenge.  You post the challenge on your website or intranet.  A month later you check to see how many responses you get.  In this scenario…

Which is better:

  • getting 100 ideas/solutions?
  • getting only 2 ideas/solutions?

Most people intuitively think that 100 solutions is better than 2.  In fact, most organizations believe that more ideas equates to greater success.  The reality is, however, that 100 is not necessarily better than 2.

Let me re-frame the question…

Which is better:

  • getting 100 ideas where only 2 of them were exactly what you needed and the other 98 were duds?
  • getting 2 ideas where both were exactly what you needed?

Now the correct answer is a bit more obvious.  In this situation, the latter is probably better.  The amount of work needed to sift through the solutions is a lot less when you have only 2 submissions.  Imagine if you received 10,000 ideas of which only 2 were good.  You can see now that the effort to find the best solutions/ideas might be overwhelming.

Although activity is good, too many submissions can indicate that you have a poorly defined challenge.  Therefore the ratio of good ideas to duds might be a more interesting measure.

The key is, make sure you understand the unintended consequences of your measurement system, especially when it comes to process measures. If done properly, process measures can help you drive higher solve rates (measure #2). And often, higher solve rates lead to greater value (measure #3) in the long run.  But not always.

High solve rates with low value can also indicate problems with your innovation program:

  • Poor implementation – You are unable to convert solutions into finished products/services
  • Poor commercialization – Your solutions do not meet the needs of the market/customers and therefore do not generate revenue
  • Poor relevance – Your challenges, although solved, are not important enough to “move the needle” of the organization’s innovation efforts

Measures are important for helping tracking your innovation efforts.  And they can help diagnose potential issues.  But it is important to measure the right things.

There is an old expression: “You will get what you measure.”

But the bigger question is, “Will you get what you want?”

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