Published on March 21, 2019
By Nick Rappolt
As published in Forbes, March 21, 2019
Nothing says, “we need to innovate,” like a big financial loss. When things aren’t going well, it’s not unusual to see companies turning to outside counsel for ideas. Bringing new perspectives in-house for creative collaboration and partnership can pay dividends. But the companies that are reaping the benefits of innovation are those who see it as a long-term strategy and invest in it regardless of profit and loss.
Twenty-three percent of CMOs have the right idea, with annual innovation budgets taking priority over ad-hoc innovation spending. Random acts of innovation and short-term engagements with consultants aren’t going to yield the results you want. Sustained, persistent acts of innovation will. Partnering with specialists can help you build innovation into your business from the inside out.
It’s Not About What You Spend, It’s How You Spend It
Since 2005, Strategy&, a business unit within PricewaterhouseCoopers, has published an annual report of the top 1,000 most innovative companies in the world. In that time, they have yet to find a statistically significant link between research and development (i.e., innovation) spending and sustained financial performance. They did, however, find an interesting trend across all of the annual reports: The top 10 most innovative companies are rarely the top 10 research and development (R&D) spenders.
So what is the real cost of innovation? When it’s outsourced to short-term consultants, you’ll pay the price — and it won’t appear as a line item on your invoice. You miss the real learning moments: the failures. They’re likely glossed over, hidden away, hushed up, bumped to the graveyard of the deck. That’s why so many companies are putting more emphasis on building innovation from within, rather than buying it from outside.
You’ll Get The Most Value From Your Failures
Failure might feel like something you want to shy away from — something you want to cover up and never think about again. It’s tempting to hand it off to someone else, leaving you to focus on the end result.
Failure is inevitable, and it’s also valuable. That’s why Facebook subscribed to the “move fast and break things” ethos for a long time. Amazon CEO Jeff Bezos used his 2017 stakeholder letter to note how important it is to “experiment patiently” and “accept failures.” And Google even has an official process in place for learning from failure. (Full disclosure: My company, Beyond, has worked with Facebook and Google in the past.)
What do all these companies have in common? They’re keeping their successes close and their failures closer. One begets the other. By losing sight of the innovation process through short-term consultancy work, companies miss the most valuable moments of testing and learning. It’s important to be comfortable with making mistakes. If something hasn’t worked, exploring the failure will help to inform and validate the work going forward. Longer-term investment in testing, failing and iterating based on the learnings will help to build lasting innovation.
Don’t Buy Into Shiny New Tech
Too many companies are dazzled by the constant stream of new market trends and technologies. This can result in them making blind bets on emerging tech without taking a moment to assess their worth.
There’s no value in innovation for the sake of innovation. Don’t pursue avenues you know will yield results just to have something to show for it. Take time, push boundaries and deviate from the expected route. If everyone else is doing things a certain way, it’s clear that it works. But could something else work better?
There’s the safety zone, where other companies have already tested and validated ideas for you. There’s the blind luck zone, where brands are firing shots and hoping one lands. You want to be in the sweet spot in between. Innovating — taking new ideas, testing, breaking and building on them before you make a move. The majority of companies should be aiming for this sweet spot.
You Can’t Put A Price Tag On Innovation, But It Will Cost You To Outsource It
We’re seeing more and more companies insourcing their innovation, embedding teams of experts to shape and drive their innovation strategy and using outside counsel to enhance their existing teams. It’s these kinds of relationships that see brands consistently building innovation, not just blindly searching for it when something goes wrong.
Brands are discovering how important it is to be part of the process, building with and learning from their partners. By testing, learning, breaking, failing and collaborating, partners are working with, not for, brands to build new behaviors and habits, which will create better working practices. Innovation should no longer be invoiced. Innovation should be business as usual.