How to Keep The Innovation Boom From Going Bust

Ask any business executive what is hot these days and they will sum it up in a word - "innovation." Innovation is the recognized force behind the new technology powering the stock market to all-time highs.

We are fortunate to live in a special innovation era where Apple is the most valuable company in the world, Google and Facebook have a user base in the billions, and tech startups are all in competition for billion dollar valuations. Even old school industries like autos are being shaken up by innovative ideas.

But is this really such a different time? Several observers have noted innovation typically follows a boom-bust cycle. In the early 1980s, innovation was one of the top five priorities of surveyed executives. By the late 1980s, it wasn't on the list.

The Boom-Bust Cycle of Innovation

The same trend happened in the 1990s, innovation was a low priority in the early part of the decade and hot again in the late 90s with the internet boom. One Harvard Business school professor noted this boom-bust pattern was repeated in the 1960s as well.

Part of this is understandable - companies would be foolish to not change or alter priorities based on changing market conditions. The one truism that doesn't change is companies that spend money recklessly go out of business. Following this rule, innovation that doesn't provide an adequate return should be scrapped.

The challenge is having the patience to realize the investment gains. Most innovation initiatives in companies last, on average, three or four years. However a study of innovation over a 35 year period at Xerox showed its most successful spin-offs took an average of 7.5 years to generate an acceptable return on investment. Based on these numbers, the average company puts in half the work necessary and gives up.

The problem is when boom goes bust and innovation budgets get cut, the good ideas can get lumped together with the bad and thrown out. Imagine, for example, the world's loss if both Google and Pets.com, both incorporated in 1998, were lumped together and tossed aside in the dot-com meltdown.

How To Overcome This

Is there a way to avoid the cycle? A mindset one can achieve to power through the setbacks and downturns and bring good ideas to fruition? Here are three things to keep in mind:

1. Think Small - Most gains from innovation are realized through "small wins." To use a baseball analogy, swing for singles and doubles, not for the home run. Many enter innovation programs with the intention of creating the next Google or Facebook. These companies are once-in-a-lifetime creations, extraordinarily rare and it's almost inevitable one will strike out.

Instead go for the small innovations and gains. Toyota became the number one automaker through "continuous improvement" on small scale - building tool racks in easy reach of assembly line workers, making special mats for their knees, and other incremental changes. These small improvements in processes are cumulative and compound to create enormous enterprises.

These small wins have the dual purpose of keeping employees motivated. When the rank-and-file have a hand in improving operations, they are that much more likely to contribute more ideas.

2. Encourage The Open Collaboration of Ideas - The image of the lone genius creator is a myth. Edison is remembered as one of the world's greatest inventors. The truth is his single greatest creation was an enormous lab filled with talented scientists working in close collaboration with one another.

As Apple has shown, good ideas flourish when they exist in the open and conflict with one another. When thinking is siloed, it becomes stagnant and runs the risk of devolving into "groupthink." New employees are often ignored but can produce great ideas with their outsider perspective when managed effectively.

Companies are well served by creating a culture where new thinking is encouraged and presented openly. If they don’t exist already, platforms should be put in place to encourage new ideas to be presented to the group.

3. Challenges and Rewards - People love a challenge and will rise to it when given the opportunity. Doing so makes them feel like a contributor and active participant in the company's success. Likewise, recognition and rewards are powerful motivators. As Napoleon once noted, "A soldier will fight long and hard for a bit of colored ribbon."

When managers show they are listening and value their employee contributions, workers are motivated to produce results. Having a system to communicate these challenges throughout the organization and a way to distribute rewards and recognition can go a long way.

While innovation programs are often presented with great fanfare, it can lead to "home run thinking" - where anything that isn't Google is deemed a failure. Business leaders are better served by looking at the small ideas and showing great patience in seeing them grow, little by little, bit by bit. Every oak tree starts out as an acorn the size of a person's hand. Slow and steady growth is the key to its success.

And if you are ready to help grow your company’s success, it’s time to contact the Vocoli team at 888.919.5300.